United States v. Lester Woods , 653 F. App'x 193 ( 2016 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-4195
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
LESTER L. WOODS,
Defendant - Appellant.
No. 15-4196
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
MICHAEL L. JOHNSON,
Defendant - Appellant.
Appeals from the United States District Court for the District
of South Carolina, at Columbia. Terry L. Wooten, Chief District
Judge. (3:14-cr-00093-TLW-1; 3:14-cr-00093-TLW-2)
Argued: May 12, 2016 Decided: June 28, 2016
Before KEENAN and FLOYD, Circuit Judges, and DAVIS, Senior
Circuit Judge.
Affirmed by unpublished per curiam opinion.
ARGUED: Beattie Balentine Ashmore, BEATTIE B. ASHMORE, PA,
Greenville, South Carolina; Kimberly Harvey Albro, OFFICE OF THE
FEDERAL PUBLIC DEFENDER, Columbia, South Carolina, for
Appellants. Winston David Holliday, Jr., OFFICE OF THE UNITED
STATES ATTORNEY, Columbia, South Carolina, for Appellee. ON
BRIEF: William N. Nettles, United States Attorney, OFFICE OF THE
UNITED STATES ATTORNEY, Columbia, South Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
A jury in the District of South Carolina convicted
Appellants Lester Woods and Michael Johnson of conspiracy to
commit wire fraud in violation of 18 U.S.C. § 1349. On appeal,
Appellants present several issues for our review, most
importantly, whether the conduct for which they were indicted
and convicted is prohibited by the wire fraud statute.
I.
A.
We begin by providing a bit of background about the
participants in this case and the credit reporting and credit
repair businesses involved. At the time of the events giving
rise to this case, Johnson served as the sheriff of Williamsburg
County, South Carolina. Woods ran a credit repair organization.
A “credit repair organization” is “any person who . . . sell[s],
provide[s], or perform[s] . . . any service, in return for the
payment of money or other valuable consideration, for the . . .
purpose of . . . improving any consumer’s credit record, credit
history, or credit rating.” 15 U.S.C. § 1679a(3). In short,
Woods’s business purported to improve consumers’ credit in
return for the payment of fees.
Equifax is a consumer reporting agency. A “consumer
reporting agency” is “any person which, for monetary fees . . .
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regularly engages . . . in the practice of assembling or
evaluating consumer credit information or other information on
consumers for the purpose of furnishing consumer reports to
third parties.” 15 U.S.C. § 1681a(f).
As a consumer reporting agency, Equifax receives
information from various data furnishers such as banks and
others who make consumer credit loans. Equifax aggregates that
data, identifies which consumer it belongs to, and packages it
in a format friendly to consumers and Equifax’s paying
customers. This package—a credit report—is marketed to
companies evaluating the credit worthiness of a given consumer.
Equifax also has a quality assurance department that reviews the
raw data from data furnishers and attempts to validate it.
Customers of Equifax pay for the service Equifax provides in
aggregating, packaging, and attempting to verify the data.
When a consumer or other entity notifies Equifax of
potential identity theft, Equifax places a fraud alert on the
consumer’s report. The fraud alert warns any potential lender
that the lender needs to verify the identity of the consumer and
the legitimacy of the transaction the lender proposes to
undertake with that consumer. When Equifax flags particular
items on a credit report arising from identity theft, Equifax
deletes those items from the consumer’s report. Subsequent
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potential lenders who order that consumer’s credit report see a
cleaned file without the deleted transactions.
With this background in mind, we turn to the particular
scheme to defraud at issue in this appeal.
B.
A grand jury indicted Woods and Johnson on February 19,
2014 for conspiracy to commit wire fraud. In the alleged
conspiracy, Woods provided Johnson the personal identification
information—such as names, addresses, and social security
numbers—of Woods’s credit repair clients. Johnson then prepared
police incident reports from the Williamsburg County Sheriff’s
Office that falsely listed Woods’s clients as victims of
identity theft. Johnson returned these false police reports to
Woods, and Woods submitted them to Equifax.
Woods intended to cause Equifax to remove various items,
especially non-performing loans, from the clients’ credit
reports, thereby improving the clients’ credit scores. The
indictment alleges that this scheme falsely and fraudulently
improved the credit histories and scores of over 130 of Woods’s
clients. Woods typically charged his clients several hundred to
a few thousand dollars each to have their credit improved. The
false police incident reports induced Equifax to suppress
information from the credit reports of Woods’s clients. This
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suppression allegedly impaired the “integrity and availability”
of the data and information that Equifax provided to its own
customers, generally third parties seeking to evaluate the
credit risk a consumer poses. J.A. 31.
C.
A five-day jury trial was held between September 15, 2014
and September 19, 2014. At trial, witnesses from Equifax
testified about the impact of placing an incorrect fraud alert
on a consumer’s file, as Equifax did in response to the police
incident reports Woods received from Johnson. When an incorrect
fraud alert is placed on a consumer’s report, or when items are
incorrectly deleted from a report, the information Equifax
presents to its customers is less accurate. Equifax considers
such information “to be corrupted because it [is] no longer an
accurate credit file.” J.A. 323. Inaccuracies in a credit
report “raise concerns for people that are buying information
from [Equifax],” J.A. 188, and may, by extension, reduce the
value of the credit reporting services Equifax provides. In
this case, Equifax suppressed information about loans totaling
$11.8 million from the credit reports of Woods’s clients because
of the identity theft incident reports generated by Johnson at
the Williamsburg County Sheriff’s Office.
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The government elicited testimony from thirteen people who
paid Woods a total of $31,750 to have their credit “improved.”
This improvement was due, unbeknownst to the clients, to the
production of false identity theft incident reports at the
Williamsburg County Sheriff’s Office. The improvement was only
temporary; Equifax intends to restore the wrongfully deleted
items to the credit reports. Thus, Woods’s clients paid for
temporary, illusory improvements in their credit scores, which
Woods achieved by submitting false police reports to Equifax.
Most of the witnesses testified that they never filed an
identity theft incident report with the Williamsburg County
Sheriff’s Office and never authorized anyone to file such a
report on their behalf.
The FBI case agent also testified at trial. During his
investigation, the agent interviewed Johnson on multiple
occasions. On one occasion, Johnson indicated that he had
received the information that he included in the incident
reports from Woods. Before the beginning of trial, Woods sought
to exclude this testimony as violative of the Confrontation
Clause because Johnson would not be subject to cross-examination
about the statement if he elected not to testify. After
briefing and a lengthy hearing, the district court permitted
testimony about Johnson’s statement but ordered that any mention
of “Woods” be replaced with the words “someone else.” In
7
keeping with this ruling, the agent testified during trial on
direct examination that Johnson told him “the information [in
the incident reports] was actually provided to [Johnson] by
someone else.” J.A. 1001. The agent testified that Johnson
originally stated that the supposed victims of identity theft
had called, faxed, and visited Johnson to make their complaints;
however, “in a later interview [Johnson] retracted that and said
that he had been provided that information by someone else.”
J.A. 1045.
Evidence showed that Johnson and Woods met when Johnson
sought to repair his own credit. After this introduction, the
two exchanged a number of faxes and hundreds of calls and text
messages between March 2012 and February 2013. An investigation
of IP addresses linked computers at the Williamsburg County
Sheriff’s Office, including Johnson’s, to Woods’s computer and
to the submission of the false reports to Equifax. Johnson
authored 276 false identity theft incident reports, 104 of which
were linked to him through his computer and the other 172 of
which were linked to him through his departmental username.
During the presentation of the defense’s case, Woods
testified on his own behalf and denied the allegations against
him. Woods testified that he never paid Johnson anything to
prepare police reports. Johnson did not testify, but presented
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two witnesses who testified to his character for honesty, hard
work, and trustworthiness.
The jury returned a verdict of guilty as to both Appellants
on September 19, 2014.
D.
The district court held a sentencing hearing on March 25,
2015. At sentencing, the court characterized those who paid
Woods for credit repair services as victims of the fraud. The
court found that at least 245 consumers were victims of the
conspiracy and that they suffered pecuniary losses of at least
$31,750. The court sentenced Woods to thirty-three months’
imprisonment and ordered payment of a $100 special assessment
and $15,875 in restitution. The court sentenced Johnson to
thirty months’ imprisonment and ordered payment of a $100
special assessment and $15,875 in restitution. The restitution
payments were to be made to Woods’s clients, not to Equifax.
Woods and Johnson appealed their convictions.
II.
On appeal, Woods and Johnson raise four issues: (1) whether
Equifax was deprived of property as required by the wire fraud
statute; (2) whether the district court constructively amended
the indictment at sentencing by naming the credit repair
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clients, instead of Equifax, as the fraud’s victims; (3) whether
the motions for acquittal should have been granted on the
grounds that the government failed to show that Equifax was
deprived of property; and (4) whether the evidence was
sufficient to support the convictions for conspiracy. Woods
also contends that his Confrontation Clause rights were violated
when the investigating FBI agent testified about Johnson’s out-
of-court statement implicating Woods.
A.
Woods and Johnson assert that Equifax has no property
interest cognizable under the federal wire fraud statute in the
accuracy and integrity of its information. The parties dedicate
significant portions of their briefs to this question. We,
however, see no need to reach that issue. The evidence
introduced at trial makes clear that Woods and Johnson were
properly convicted of conspiracy to commit wire fraud because
they defrauded Woods’s clients of the money the clients paid
Woods to secure a legitimate improvement in their credit scores.
The federal wire fraud statute criminalizes the use of the
wires to execute “any scheme or artifice to defraud, or for
obtaining money or property by means of false or fraudulent
pretenses, representations, or promises.” 18 U.S.C. § 1343; see
also id. § 1349 (criminalizing conspiracy to attempt § 1343 wire
10
fraud). “[T]o convict a person of mail fraud or wire fraud, the
government must show that the defendant (1) devised or intended
to devise a scheme to defraud and (2) used the mail or wire
communications in furtherance of the scheme.” United States v.
Wynn, 684 F.3d 473, 477 (4th Cir. 2012). “[T]he mail fraud and
wire fraud statutes have as an element the specific intent to
deprive one of something of value through a misrepresentation or
other similar dishonest method, which indeed would cause him
harm.” Id. at 478.
As noted above, the evidence showed that Woods and Johnson
devised a scheme in which they (1) obtained money from clients
seeking to improve their credit scores; 1 (2) created fraudulent
police incident reports listing the clients as victims of
identity theft; (3) used the wires, including fax and the
internet, to submit the false police reports to Equifax; and (4)
thereby temporarily and without justification improved the
clients’ credit scores, even though such improvements were
ultimately of no value to the clients. The clients paid for
legitimate, lasting improvements to their credit, but received
only illegitimate, temporary improvements. The government’s
1
Although the evidence reflects that Johnson, unlike Woods,
did not obtain or intend to obtain any money or property as a
result of his participation in the fraudulent scheme, see J.A.
1147–48, 1180–81, 1190, Johnson was nonetheless subject to co-
conspirator liability for his role in the scheme.
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focus on Equifax as “the primary victim of [the] fraud” at trial
notwithstanding, see J.A. 152, the evidence showed that Woods
and Johnson conspired to deprive Woods’s clients of money
through misrepresentations and used the wires to communicate
with Equifax in furtherance of the scheme. 2 This conduct
violates the wire fraud statute.
Because it does, and because the evidence demonstrates that
property—the money paid to Woods—was obtained from victims of
the fraud, we need not decide whether Equifax had a property
2
“Primary,” of course, is not synonymous with “only.” In
its opening statement, the government also identified Woods’s
clients as victims of the scheme to defraud:
[W]hen [the clients] went to him, this is
costing anywhere from 800 to $1500 for him
to do that. So if you think about it, when
these people hired Lester Woods in a
legitimate way to clean up their credit,
he’s doing this in an illegitimate way,
taking their money, hundreds if not over a
thousand dollars per person, and really
causing them more headaches.
. . . .
[I]t matters to the people that are actually
trying to do something about their credit
because they are paying good money to try to
get themselves back on their feet thinking
that Lester Woods is doing them some good
when actually he’s compounded their
problems.
J.A. 157-58. From the very start of trial, then, the government
indicated that it believed the consumers to be victims of the
scheme.
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interest cognizable under the wire fraud statute in the accuracy
and integrity of its information.
B.
At sentencing, the district court took the same view of the
evidence as we do today and identified Woods’s clients as the
victims of the scheme to defraud. The district court ordered
Woods and Johnson to pay restitution to the credit repair
clients, not to Equifax. Woods and Johnson complain that the
statements by the district court at sentencing wrought a
constructive amendment of the indictment because, they argue,
the indictment discussed only Equifax as a victim and the jury
heard evidence pertaining only to Equifax. 3 We disagree.
We review de novo the question of whether the indictment
was constructively amended. United States v. Whitfield, 695
F.3d 288, 306 (4th Cir. 2012). “A constructive amendment to an
indictment occurs when either the government (usually during its
presentation of evidence and/or its argument), the court
(usually through its instructions to the jury), or both,
3 Appellants concede that we have never before recognized a
constructive amendment challenge based on sentencing
proceedings. We assume without deciding that such a challenge
is cognizable.
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broadens the possible bases for conviction beyond those
presented by the grand jury.” United States v. Floresca, 38
F.3d 706, 710 (4th Cir. 1994) (en banc). “[A] constructive
amendment of the indictment constitutes error per se.” Id. at
711. A constructive amendment “destroy[s] the defendant’s
substantial right to be tried only on charges presented in an
indictment returned by a grand jury.” Stirone v. United States,
361 U.S. 212, 217 (1960). A constructive amendment occurs most
often when the court instructs the jury about an offense not
indicted. 4
To be sure, Equifax plays a prominent part in the
indictment; however, mention of Woods’s clients is pervasive.
The following excerpts from the indictment illustrate the point:
• Paragraph 10 of the indictment charges as follows:
“Lester L. Woods and Michael L. Johnson engaged in a
scheme to falsely and fraudulently improve the credit
histories and credit scores of over 130 consumers.
The consumers were typically charged several hundred
to a few thousand dollars to have their credit
improved.” J.A. 30.
• Paragraph 11 elaborates on the scheme: “In
furtherance of the scheme to defraud, . . . [Woods and
Johnson] . . . furnished to Equifax information
falsely and fraudulently indicating that the consumers
had been victims of Identity Fraud or Identity Theft.
[Woods and Johnson] conveyed this [information]
knowing that the consumers had not been victims of
Identity Fraud or Identity Theft. . . . These false
4
We note that the jury instructions did not require the
jury to find that Equifax was the victim of the fraud.
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and fraudulent Incident Reports and documents provided
Equifax with consumer personal identity information
. . . .” J.A. 30.
• Paragraph 12 alleges that the furnishing of the false
police incident reports “falsely and fraudulent
improved [over 130 consumers’] credit histories and
scores.” J.A. 31
• The indictment further provides the dates and various
incident report numbers of false identity theft police
reports and provides the initials of the consumer
victim associated with each false report. See J.A.
32-36.
Whatever else the indictment may allege about Equifax, at a
minimum the indictment alleges that Woods and Johnson conspired
to obtain money from consumer victims who paid the conspirators
money to improve their credit histories and scores but who,
instead, received only false and fraudulent improvements. We
conclude that there was no constructive amendment of the
indictment in this case.
Even if the indictment did not fully cover the context and
particulars of the crime, what occurred here would at most
constitute a variance rather than a constructive amendment. We
have explained:
A variance occurs when the facts proven at
trial support a finding that the defendant
committed the indicted crime, but the
circumstances alleged in the indictment to
have formed the context of the defendant’s
actions differ in some way nonessential to
the conclusion that the crime must have been
committed. Once a reviewing court
determines that the facts incorrectly noted
in the indictment do not concern an issue
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that is essential or material to a finding
of guilt, the focus is properly upon whether
the indictment provided the defendant with
adequate notice to defend the charges
against him.
Floresca, 38 F.3d at 709-10 (footnotes omitted). “Any variance
between indictment and proof which does not modify the elements
of the crime charged will not invalidate a conviction unless it
prejudices the defendant.” United States v. Odom, 736 F.2d 104,
118 (4th Cir. 1984) (citation omitted).
Although “the victim is important in a case of wire fraud,”
the specific identity of the victim is not an element of the
offense. United States v. Strothman, 892 F.2d 1042, 1989 WL
156906, at *5 (4th Cir. 1989) (unpublished) (per curiam). This
is because “the emphasis of the statute is that a property or
monetary loss was incurred by the victim . . . . Thus, the
victim is incorporated into the ‘scheme to defraud’ element of
the statute.” Id. (citing United States v. Mandel, 862 F.2d
1067 (4th Cir. 1988); McNally v. United States, 483 U.S. 350(1987)).
Given the numerous allegations in the indictment concerning
Woods’s clients, there can be no doubt that Woods and Johnson
were on notice of the proof the government intended to offer
about how their scheme operated and who it affected. Further,
given the detail of the indictment, Appellants could not be
subject to a later prosecution for the violations of the wire
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fraud statute that were the subject of this conviction. Thus,
we find that there was no prejudice to Appellants to the extent
there was a variance between the indictment and the government’s
arguments raised at sentencing
In light of the detailed contents of the indictment and the
structure of the wire fraud statute, we conclude that
Appellants’ constructive amendment argument is without merit.
C.
Appellants argue that the district court erred when it
denied their motions for acquittal. “We review de novo the
district court’s denial of a motion for judgment of acquittal
pursuant to Rule 29 of the Federal Rules of Criminal Procedure.”
United States v. Green, 599 F.3d 360, 367 (4th Cir. 2010).
“[W]e view the evidence in the light most favorable to the
prosecution, and inquire whether a rational trier of fact could
have found the essential elements of the charged offense beyond
a reasonable doubt.” United States v. Singh, 518 F.3d 236, 246
(4th Cir. 2008).
Woods and Johnson argue that their motions for acquittal
should have been granted because, in their view, the government
presented no evidence at trial that Equifax was harmed by the
fraudulent reports. This argument is a natural corollary of
Appellants’ contention that Equifax was not deprived of
17
property. However, as noted above, the evidence, taken in the
light most favorable to the government, is clear that Woods and
Johnson obtained money from the credit repair clients, and the
clients were harmed by the scheme because they paid money to
have their credit improved when, in fact, it was not improved.
We conclude that the district court properly denied the motions
for acquittal.
D.
Woods and Johnson also contend that there was insufficient
evidence to support their convictions because the record lacks
evidence of: (1) an agreement for an unlawful purpose, (2)
intent to knowingly do something unlawful, and (3) specific
intent to deprive Equifax of something of value. “We must
sustain a guilty verdict that, viewing the evidence in the light
most favorable to the prosecution, is supported by substantial
evidence.” United States v. Brooks, 524 F.3d 549, 563 (4th Cir.
2008) (internal quotations and citation omitted). “Substantial
evidence” is “evidence that a reasonable finder of fact could
accept as adequate and sufficient to support a conclusion of a
defendant’s guilt beyond a reasonable doubt.” Id. (citation
omitted). “[A] reviewing court is not entitled to assess the
credibility of witnesses, but rather must assume that the jury
resolved all contradictions . . . in favor of the Government.”
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Id. (second alteration in original) (internal quotations and
citation omitted).
In this case, substantial evidence supports the conspiracy
convictions. The evidence showed the links between Woods and
Johnson whereby Woods used Johnson to make out false identity
theft incident reports to submit to Equifax. Various clients of
Woods who were the subjects of the incident reports testified
that they were not in fact victims of identity theft. Evidence
showed that Woods and Johnson exchanged a large number of faxes
and hundreds of calls and text messages between March 2012 and
February 2013. An investigation of IP addresses linked
computers at the Williamsburg County Sheriff’s Office, including
Johnson’s, to Woods’s computer and the submission to Equifax of
the false reports. Johnson authored 276 false incident reports,
104 of which were linked to him through his computer while the
other 172 were linked to him through his departmental username.
Together, these communications provide sufficient circumstantial
evidence of an agreement between Johnson and Woods.
The evidence, again taken in the light most favorable to
the government, shows a sophisticated scheme involving the
exchange of client information, the drafting of false incident
reports by Johnson, the return of those false reports to Woods,
and the submission to Equifax of the reports by email or fax.
Substantial evidence supports Appellants’ convictions for
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engaging in a conspiracy to commit wire fraud in which
Appellants conspired to deprive Woods’s clients of money by
offering to legitimately improve their credit scores, when in
fact, the two fraudulently improved the scores by submitting
false identity theft police reports to Equifax over the wires. 5
III.
Finally, Woods argues that his Confrontation Clause rights
were violated when the FBI investigating agent testified about
Johnson’s out-of-court statement that implicated Woods. In
response to an objection, the district court ordered the agent
to use the phrase “someone else” instead of “Woods” whenever he
testified about Johnson’s confession in a manner that implicated
Woods.
A co-defendant’s confession directly implicating another
defendant is inadmissible when the confessing co-defendant is
not available for cross-examination. See Bruton v. United
States, 391 U.S. 123, 137 (1968). A prosecutor cannot
circumvent this bar by simply replacing the defendant’s name
5 Because we consider the evidence about the consumer
victims sufficient to support a wire fraud conviction, we need
not address Appellants’ argument regarding proof of Appellants’
specific intent to deprive Equifax of something of value. The
evidence shows that they intended to deprive, and succeeded in
depriving, the consumer victims of something of value, namely
their money.
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with a blank, the word “deleted,” or other similar words or
phrases because these are too “obvious indication of alteration
. . . [that] leave statements that, considered as a class, so
closely resemble Bruton’s unredacted statements [as to violate
the Constitution].” Gray v. Maryland, 523 U.S. 185, 192 (1998).
Other types of alterations, however, may avoid a Bruton defect.
See Richardson v. Marsh, 481 U.S. 200, 211 (1987) (approving
admission of a confession redacted to eliminate a defendant’s
name or any reference to her existence).
Two controlling cases approve the procedure the district
court adopted in this case. First, the Supreme Court in Gray
suggested that a modification of the type made in this case
would raise no constitutional concerns. The Gray Court noted:
Consider as an example a portion of the
confession before us: The witness who read
the confession told the jury that the
confession (among other things) said,
Question: Who was in the group that beat
Stacey?
Answer: Me, deleted, deleted, and a few
other guys.”
Why could the witnesses not, instead, have
said:
Question: Who was in the group that beat
Stacey?
Answer: Me and a few other guys.
523 U.S. at 196 (internal quotations and citations omitted).
Second, we previously approved a procedure almost identical to
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the one used here. In United States v. Akinkoye we approved the
admission of a confession where “the prosecutor had the
confessions retyped, and replaced the defendants’ respective
names with the phrase ‘another person’ or ‘another individual.’”
185 F.3d 192, 198 (4th Cir. 1999). Because of “the neutral
phrases used in the statements[,] the defendants were not
prejudiced in any way.” Id.The use in this case of “someone else” is no different from
the use in Akinkoye of “another person” or “another individual.”
We conclude that there was no violation of Woods’s Confrontation
Clause rights when the investigating FBI agent testified about
Johnson’s confession.
IV.
Appellants’ convictions are hereby affirmed.
AFFIRMED
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