U.S. v. McConnell ( 1993 )

UNITED STATES COURT OF APPEALS
for the Fifth Circuit
No. 92-4028
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
VERSUS
GUSSIE L. McCONNELL and
WILLIE R. McCONNELL,
Defendants-Appellants.
Appeal from the United States District Court
for the Western District of Louisiana
(April 5, 1993)
Before WISDOM and DUHÉ, Circuit Judges, and DOHERTY1, District
Judge.
PER CURIAM:
Gussie L. McConnell and Willie R. McConnell appeal their
conviction for conspiracy to commit mail fraud and mail fraud in
furtherance of that conspiracy in violation of 18 U.S.C. §§ 371,
1341. The McConnells argue the trial court erroneously admitted a
1
District Judge of the Western District of Louisiana,
sitting by designation.
hearsay statement and evidence of coconspirators' illegal
activities, as well as arguing there was insufficient evidence to
support their conviction. Finding that the court below erred in
admitting the challenged testimony, we REVERSE the convictions.
Appellants were indicted in May, l988, along with twenty-two
(22) other individuals, for mail fraud and conspiracy to commit
mail fraud. The indictment alleged the twenty-four (24) Defendants
conspired to use the United States mail for the purpose of
defrauding various insurance companies "by means of false and
fraudulent pretenses, representations and promises." Indictment of
May 12, l988, at 2. The indictment alleged that the essential
feature of the scheme to defraud the insurance companies was that
the conspirators caused their own admission into hospitals for
injuries which they knew did not require hospitalization, were
incurred as a result of accidents which were staged, or never
occurred at all. Id. After alleging the facts regarding the
conspiracy itself, the indictment went on to list the
hospitalizations of all twenty-four (24) Defendants, identifying
them as the "overt acts" undertaken by Defendants in furtherance of
the conspiracy. Finally, the indictment proceeded to list the
documents received by the Defendants through the United States
mail.
All of the Defendants named in the indictment either pled
guilty or were convicted after trial. Appellants were tried
2
separately from the other Defendants who chose not to plead guilty.
Trial of Appellants was had in October, l991 and they were
convicted on all counts with which they had been charged.2
The Evidence
The government presented four (4) witnesses at Appellants'
trial. The first two witnesses, Evelyn Hassen and Michael
McFarland, were alleged coconspirators of Appellants; the second
two were F.B.I. agents who had participated in the investigation
which led to the indictment.
Ms. Evelyn Hassen had pled guilty to participating in the
conspiracy and testified primarily concerning her and her husband's
acts in furtherance of the conspiracy. Of vital importance to this
appeal, Ms. Hassen also testified that her husband, Grady Hassen -
who is related to both Appellants - had once mentioned to her that
Gussie McConnell "was just in the insurance and he had helped her
out with a couple of policies." (Tr. at 8.) This was the only
direct evidence produced by the government at trial of a link
between Appellants and the conspiracy alleged in the indictment.
Counsel for both Appellants objected to admission of the statement
as hearsay. The trial court overruled the objection conditioned
upon a proper predicate being laid, but the record does not reflect
2
At trial, the government acknowledged it lacked evidence
in connection with Count 352 of the indictment and therefore
moved for and was granted dismissal of that count.
3
the Court's revisiting the issue thereafter for a determination of
whether the predicate had been met. The only subsequent reference
to the hearsay statement made by the Court was in connection with
deliberations on whether the government had proven sufficient
connection between Appellants and the conspiracy to make the
coconspirators' illegal activities relevant at this trial.3
The second witness, Michael McFarland, testified exclusively
about the conspiracy: how it was run and by whom, as well as his
knowledge regarding Grady Hassen's connection to the conspiracy.
Mr. McFarland had been convicted of participating in the conspiracy
of which Appellants were alleged to be a part. He testified that
he did not know the Appellants or whether they were connected to
the conspiracy. Mr. McFarland testified that he had seen Grady
Hassen conversing with the leader of the conspiracy, Sammy Duncan.
He testified that they had been discussing the insurance business.
This provided the connection between Grady Hassen and the
conspiracy which, in combination with Evelyn Hassen's testimony
that Grady Hassen had once mentioned Gussie McConnell, provided the
link between the Duncan conspiracy and Appellants.
Mr. McFarland then went on to explain the way that the
conspiracy worked. He testified that he took instructions from
Sammy Duncan, who would direct him regarding the type of accidents
3
The Court: "Ms. Hassen, if her testimony is believed by
the jury, firmly ties in the defendants with Mr. Hassen." (Tr.
at 238.)
4
to claim and to which hospitals and doctors to present himself for
admission. Duncan also did the paperwork necessary to obtain
insurance coverage for McFarland and, at times, completed the
necessary papers to make claims to the insurance companies.
Further, Mr. McFarland would endorse the insurance checks over to
Duncan, who would cash them and return some part of the money to
Mr. McFarland.
The third witness who testified for the government was F.B.I.
agent Kenneth R. Klocke, who participated in the investigation of
the Duncan conspiracy. Agent Klocke testified to the mileage
distances between Appellants' home and the various hospitals to
which they presented themselves for admission during the course of
their alleged association with the Duncan conspiracy. The closest
hospital was Jackson Parish Hospital, 8.2 miles from Appellants'
home; the farthest hospital was LaSalle General Hospital in Jena,
Louisiana, 73.8 miles from Appellants' home.
The fourth and final witness who testified at Appellants'
trial on the government's behalf was F.B.I. agent Jerry L.
Richardson, who investigated the conspiracy in connection with the
indictment. Agent Richardson's testimony was by far the longest at
trial. Agent Richardson was the only witness who testified
regarding acts of Appellants themselves and his testimony consisted
of information about the insurance applications and claim forms
which the government contended were filed by Appellants with false
5
and/or incomplete information.
Mr. Richardson testified that Willie McConnell had been in the
hospital twice; once after a claimed motor vehicle accident and
once 18 months later when he claimed to have fallen in the attic of
his home. Both hospitalizations were for contusions and sprains,
both at the Jackson Parish Hospital eight (8) miles from his home.
Six insurance companies paid on the hospital indemnity policies for
the first accident and eleven (ll) insurance companies paid on
policies for the second accident. Payments on the claims had been
mailed to Willie McConnell after both claims. Agent Richardson
testified that many of the claim forms were incomplete because they
did not acknowledge that Mr. McConnell had ever suffered any
similar condition before and because they did not acknowledge the
existence of other insurance policies. Mr. Richardson gave no
testimony that Willie McConnell knew or coordinated his activities
with Duncan or anyone involved in the conspiracy.
Mr. Richardson testified that Gussie McConnell had been in the
hospital seven times between April, l980 and May, l984. Agent
Richardson testified that Gussie McConnell was hospitalized for
lumbar injury and gastritis, for contusions to her left shoulder
and rib cage, for lumbar and sacroiliac strain, for trauma to her
right hip, for trauma to her right shoulder, for acute lumbar
strain, and, finally, for injury to her low back, right leg, and
hip. Claims under multiple indemnity insurance policies were made
6
in connection with each of these hospitalizations: three policies
for the first hospitalization and an increasing number for
subsequent hospitalizations culminating with 18 policies for the
seventh hospitalization. Mr. Richardson testified that claims made
in connection with each hospitalization were incomplete for failure
to reference the existence of other insurance policies in nearly
every instance and, in many instances, for failure to reference
previous similar injuries and/or physical conditions.
Finally, Agent Richardson testified regarding applications for
many of these insurance policies which Appellants owned during the
relevant time period. Again, many applications did not acknowledge
that Appellants owned other insurance policies, indemnity or
otherwise, and some applications did not acknowledge prior
treatment for certain specified injuries or illnesses or prior
hospitalizations within a particular time frame.
The government's theory of this case is as follows. The
Duncan conspiracy, the workings of which Mr. McFarland and Ms.
Hassen described, was proven to have existed. Mr. McFarland
testified to the connection of Grady Hassen to the conspiracy. Ms.
Hassen testified to the connection between Grady Hassen and Gussie
McConnell. Gussie McConnell was married to Willie McConnell and
Gussie and Willie McConnell were both related to Grady Hassen. The
similarity in the pattern of types of accidents, types of injuries,
and travel to distant hospitals, between the McConnells' behavior
7
and that of the admitted or convicted conspirators, the government
contends, along with the proven connection between the conspiracy
and the McConnells, proves the Appellants' guilt of participation
in the conspiracy.
Hearsay
Appellants' first challenge is to the trial court's ruling
allowing into evidence Evelyn Hassen's testimony regarding her
husband's out-of-court statement.4 Appellants argue the statement
is inadmissible hearsay. The government contends the statement is
by a coconspirator and, therefore, an exception to the hearsay
definition under FRE 801(d)(2)(E).
Admission and exclusion of evidence by a trial court is
reviewed for abuse of discretion. United States v. Moody, 903 F.2d
321, 326 (5th Cir. l990). "'Hearsay' is a statement, other than
one made by the declarant while testifying at the trial or hearing,
offered in evidence to prove the truth of the matter asserted."
FRE 80l(c). Rule 80l goes on, however, to list certain types of
statements which are not hearsay. One type of statement which is
not hearsay is that made "by a coconspirator of a party during the
course and in furtherance of the conspiracy." FRE 801(d)(2)(E).
As argued by Appellants - and not challenged by the prosecution -
4
Ms. Hassen testified that Mr. Hassen had told her Gussie
was in the insurance and that he had helped Gussie out with a
couple of policies.
8
the statement at issue herein, that Gussie was in the insurance,
clearly falls within the definition of hearsay, i.e., an out of
court statement offered to prove the truth of the matter asserted,
unless the conditions of the coconspirator exception are met.
In order to fit the coconspirator exception, a statement must
have been made (l) by a coconspirator of a party, (2) during the
course of the conspiracy, and (3) in furtherance of the conspiracy.
Appellants challenge whether the government proved the first and
third elements of the test. Because we find that the government
did not prove the statement had been made in furtherance of the
conspiracy, this Court will not address whether the coconspirator
element was proven.
"A statement is made in furtherance of the conspiracy if it
advances the ultimate objectives of the conspiracy." United States
v. Snyder, 930 F.2d 1090, 1095 (5th Cir.), cert. denied, 112 S. Ct.
380 (l991). Mere conversation between conspirators is not
admissible under the exception. United States v. James, 510 F.2d
546, 549 (5th Cir. l975) (en banc). The determination of whether
a statement was made in furtherance of a conspiracy can, in the
appropriate circumstances, be made by reference to the statement
alone. In this case, however, Grady Hassen's purpose in making
this statement is not obvious from the statement itself. The
government's appeal brief suggests two possible reasons for Grady
Hassen's statement; several other possibilities were suggested by
9
Appellants in their brief and at oral argument. None of these
suppositions can be proven by reference to the statement itself
without an understanding of the context in which the statement was
made. As the prosecution failed to present any evidence whatsoever
concerning the context in which this statement was made, it is not
possible for this Court to determine the basis for the trial
court's implicit finding that the statement was made in furtherance
of the conspiracy.
Ms. Hassen testified to the statement at the beginning of the
trial. (Tr. at 8.) Defense counsel objected that no predicate had
been laid at that point. (Tr. at 7.) The government attorney
asserted that he would lay the proper foundation. Id. The trial
court allowed the testimony to go forward conditioned on the
predicate being laid. (Tr. at 7-8.) However, the question of
whether the proper foundation had been laid was not revisited by
the Court. No testimony was elicited regarding the context in
which the statement was made by Grady Hassen to Evelyn Hassen.
There is no evidence in the record which suggests the purpose for
which the statement was made. As the context in which the
statement was made is not obvious from the statement itself, and no
testimony regarding the context was elicited by the government,
there was no basis for the trial court to find that the statement
had been made in furtherance of the conspiracy. Indeed, the record
does not reflect the trial court made any finding other than that
conditioned upon the government's laying the proper foundation; the
10
government did not do so. Without a finding that the proper
predicate had been laid, the trial court did not have discretion to
allow the statement into evidence. We find that the trial court
abused its discretion in admitting Grady Hassen's statement without
the government having laid the proper foundation that the statement
had been made in furtherance of the conspiracy.
Conspirators' Activities
Appellants next challenged the trial court's ruling on their
objection to the testimony regarding the activities of convicted
and/or admitted members of the Duncan conspiracy. Appellants argue
insufficient evidence of a connection between them and the
conspiracy was presented by the government at trial. The
prosecution contends, on the other hand, the trial court's ruling
was correct.
Again, review of evidentiary determinations is for abuse of
discretion. United States v. Moody, 903 F.2d at 326. In order for
the evidence of the conspirators' illegal acts to have been
relevant, the government must have provided evidence of a
connection between Appellants and the conspiracy of which they were
accused of being a part. See Lutwak v. United States, 344 U.S.
604, 608 (l953). The introduction of inadmissible evidence of
criminal acts of Defendants' associates runs the risk of a finding
of guilt by association. This Court has repeatedly noted the
11
highly prejudicial effect of the introduction of evidence which
suggests guilt by association. See e.g., United States v. Romo,
669 F.2d 285, 288 (5th Cir. l982), cert. denied, 459 U.S. 1021
(l982); United States v. Singleterry, 646 F.2d 1014, 1018 (5th Cir.
l981); United States v. Labarbera, 581 F.2d 107, 109 (5th Cir.
l978).
Considerable testimony concerning the Duncan conspiracy, its
innerworkings, and the acts committed by Mr. McFarland and Mr. and
Ms. Hassen in connection with the conspiracy, was admitted into
evidence. Counsel for Appellants objected to the testimony,
arguing that the government had not laid a proper foundation upon
which to find the activities of the conspirators relevant to the
case against Mr. and Mrs. McConnell. The Court heard arguments at
several points in the trial on the admissibility of the
conspirators' activities. (Tr. at 5, ll, 26-27, 166-74, 233-40.)
It was not until the government had rested, however, that the court
directly addressed the question of the admissibility of the
evidence, in the context of a motion for mistrial by Appellants.
The trial court denied the motion for mistrial, reasoning that
sufficient connection between Appellants and the conspiracy had
been presented to support a finding that the testimony of Mr.
McFarland and Ms. Hassen was relevant at the trial. (Tr. at 238-
40.) The court reasoned as follows: Mr. McFarland testified about
his own connection to Duncan and the conspiracy; Mr. McFarland's
testimony established that Duncan and Grady Hassen knew one another
12
and discussed insurance business; Ms. Hassen's testimony
established a connection between Grady Hassen and Gussie McConnell.
With sufficient testimony in evidence to establish the chain of
connection between the conspiracy and Appellants' the Court found
that the similarity in patterns of conduct between the McConnells
and the conspirators, in combination with the government's
entitlement to all reasonable inferences in the context of a motion
for mistrial5, provided sufficient evidence of Appellants'
connection to the conspiracy to make McFarland's and Hassen's
testimony relevant.
One crucial link in the chain between Appellants and the
conspiracy upon which the trial court relied was established with
inadmissible hearsay testimony. As this Court has already found,
the statement by Grady Hassen, to which Evelyn Hassen testified,
should not have been admitted into evidence and, therefore, should
not have been considered by the Court in its determination of
whether the testimony regarding the conspirators' criminal
activities was relevant at this trial. Without evidence of a link
between Grady Hassen and Gussie McConnell, the Court's reasoning on
the relevance of the testimony regarding the criminal acts of the
conspirators fails.6 The only remaining evidence which the trial
5
The court relied upon Glasser v. United States, 315 U.S.
60 (l942).
6
Even with consideration of the statement, there is no
link between the conspiracy and Willie McConnell, inasmuch as the
Grady Hassen statement refers only to Gussie.
13
court had before it7 to use in determining the relevance of the
conspirators' activities was the similarity in patterns of conduct
between Appellants and the convicted conspirators.
We find that, as regards Willie McConnell, there was not
sufficient similarity to find the criminal activities of the
conspirators relevant at this trial. The government in oral
argument urged the multiple policies and claims as well as the non-
serious nature of his injuries, as similarities sufficient to
sustain admission of the evidence; however, the list of
dissimilarities is much longer. Both of Willie McConnell's
hospitalizations occurred at the same hospital, with the same
doctor, only eight (8) miles from home. He was hospitalized only
twice during the relevant time period. Unlike other members of the
conspiracy, there is no evidence that the McConnells received
instructions from Duncan, that Duncan obtained policies on the
McConnells' behalf, nor that Duncan shared any proceeds with them.
There is no evidence in the record the McConnells even knew or ever
spoke with Duncan, the leader of the conspiracy in which they were
allegedly involved.
7
The government makes much of the fact that Grady Hassen
is related to both appellants, thereby providing an additional
link between the conspiracy and the McConnells. However, this
Court has made very clear its opinion of prosecutors' attempts to
prove guilt by association. United States v. Romo, 669 F.2d at
288 ("That one is married to, associated with, or in the company
of a criminal does not support the inference that the person is a
criminal or shares in the criminal's guilty knowledge.")
14
The simple fact that Willie McConnell had two soft tissue
injuries and multiple indemnity insurance policies does not provide
sufficient connection between him and the conspiracy to make the
testimony regarding the conspirators' criminal activities relevant.
As the government conceded8, obtaining multiple indemnity policies
is not in and of itself illegal and one must not lose sight of the
fact the McConnells were indicted and tried for conspiracy to
commit mail fraud and mail fraud in furtherance of that conspiracy.
In order to use the illegal actions of conspirators as evidence
against the McConnells, the government must first establish a
connection between the McConnells and the conspiracy. The trial
court's analysis of the connection is based, in part, on
inadmissible evidence and, therefore, fails; without evidence of a
connection between Hassen and Gussie McConnell, we find the
testimony of Evelyn Hassen and Michael McFarland was inadmissible
as to Willie McConnell. As the trial court noted, and the
government conceded9, this evidence was so prejudicial that its
erroneous admission entitled Appellants to a mistrial. We find the
trial court was correct in its estimation of the prejudicial effect
of this testimony on the trial. The admission of this evidence
without the proper foundation is reversible error.
We find that, as regards Gussie McConnell, the similarities in
conduct between she and the members of the conspiracy were
8
(Tr. at 134-35.)
9
(Tr. at 237.)
15
sufficient to prove that they were engaged in similar conduct, but
not sufficient to prove they were engaged in the same conspiracy.
Gussie was proven to have had multiple indemnity insurance
policies, to have had multiple soft tissue injuries in a four-year
period of time, and to have traveled far distances to the same
hospitals and doctors used by at least some members of the
conspiracy. However, as is the case with Willie McConnell, there
are significant dissimilarities. Mr. McFarland admittedly, and
Grady Hassen apparently, took instructions from Duncan regarding
the type of accidents to have and to which hospitals and doctors to
present themselves for treatment, and shared proceeds with Duncan.
There is no evidence that Duncan and the McConnells even knew each
other, much less that Duncan was providing instructions on
insurance fraud. There is no evidence Duncan helped the McConnells
obtain policies or complete claim forms, as Duncan did with other
members of the conspiracy. Again, and perhaps most importantly,
the conspirators shared the proceeds of their fraud with Duncan;
there is no evidence in this record of any such sharing between the
McConnells and Duncan.
The demonstrated similarities between Gussie McConnell's
pattern of conduct and that of admitted or convicted conspirators,
although more extensive than in Willie's case, still is not
sufficient to establish a link between Gussie and the conspiracy
such as to make relevant the testimony of Mr. McFarland and Ms.
Hassen. We find the testimony of Evelyn Hassen and Michael
16
McFarland was inadmissible as to Willie McConnell. Further, we
find the trial court was correct in its estimation of the
prejudicial effect of the inadmissible testimony at trial. The
trial court abused its discretion by admitting this testimony into
evidence.
In view of our finding of reversible error, we need not
address Appellants' challenge to the sufficiency of the evidence to
convict them.
Conclusion
Gussie and Willie McConnell were indicted for participating,
along with twenty-two (22) others, in a conspiracy to defraud
insurance companies and for the mail fraud used to accomplish the
conspiracy's aim. At Appellants' trial, the government introduced
a hearsay statement without proving the statement's admissibility
and introduced conspirators' illegal activities without
establishing that their acts were relevant. Because the trial
court's rulings allowing the inadmissible evidence to be introduced
were clearly erroneous and severely prejudiced Appellants, we
REVERSE Appellants' convictions.
REVERSED.
17