United States v. Leonard ( 1995 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________
No. 93-2768 c/w
No. 93-2769
No. 93-2779
_______________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
RICHARD LEONARD,
Defendant-Appellant.
_______________________
No. 93-2769
_______________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
RHONDA KELLEY and VERONICA McCRACKEN,
Defendants-Appellants.
_______________________
No. 93-2778
_______________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
ALFRED C. GREENE, JR.,
Defendant-Appellant.
_________________________________________________________________
Appeals from the United States District Court
for the Southern District of Texas
_________________________________________________________________
(August 14, 1995)
Before KING and JONES, Circuit Judges, and KAZEN, District Judge.*
By EDITH H. JONES, Circuit Judge:
In this consolidated appeal, we reject challenges to the
convictions and sentencing of four operators and employees of a
Houston-based telemarketing scam. Alfred Greene, owner and
operator of the business, and Richard Leonard, manager of the phone
room, both entered pleas of guilty to wire and mail fraud,
conspiracy, and using a false name to further a scheme to defraud.
They waived their right to jury trial and contested the money
laundering counts at a bench trial. Greene was convicted on
several counts whereas Leonard was found not guilty on the sole
money laundering offense with which he was charged. Employees of
the operation, Kelley and McCracken, contested all the fraud and
money laundering offenses with which they were charged and,
therefore, obtained a severance from Greene and Leonard and were
tried before a jury. They were both convicted of conspiracy as
well as wire and mail fraud. Finding no error, we affirm the
convictions and sentencing decisions in every aspect.
*
District Judge of the Southern District of Texas, sitting by
designation.
2
I.
BACKGROUND
The scheme itself was simple. Callers, hired by Greene
and Leonard, used phone lines set up in a suite of small offices in
the Houston area to contact elderly citizens located across the
country and inform them that their names had been selected by a
committee to receive one of four awards. These individuals, whose
identities had been purchased from a mail order company, were read
to from a pre-designed script and told that they had already been
chosen to receive either first prize of $15,000.00 cash; second
prize consisting of a diamond and sapphire pendant; third prize
which was a large-screen Sony television; or, fourth prize
consisting of $1,000.00 cash. The pendant, the only prize ever
given out, was designated as second prize so that the victim would
think it the second-most valuable item after the $15,000.00. In
fact, a portion of the script anticipated questions as to the value
of the pendant and was designed to mislead the person to believe
that the jewelry, later appraised for $15.00, was worth between
$2,000.00 and $2,500.00. To obtain the prize, the victim was
informed that he or she had to pay $395.50. This money, the
listeners were told, was for "promotional fees," "shipping and
handling," "registration and processing," and "buying soap."* To
reduce the chances of the victim's changing his or her mind, or a
*
At this point in the phone call, when a victim was about to be hooked,
a person called a "closer" would take over from the initial caller. Closers met
alone on occasion with Leonard and Greene to receive a larger share of the victims'
money than did the callers.
3
family member's coming home and extinguishing the deal, Federal
Express was dispatched to pick up the $395.50 check shortly after
the phone call.
In fact, there was no contest, there was no drawing,
there was no committee, and the victims had not sent in entry cards
to which the script referred. The scheme also included a follow-up
letter to the victim referring to the phone call and repeating the
"good news" that a prize had been won. This letter was designed to
lull the victim into a sense of satisfaction with the contest.
Later, a box of cheap cosmetics was delivered to the victim for the
same purpose. No one ever received anything other than a $15.00
pendant. In effect, the victims each bought a $15.00 pendant for
almost $400.00. By the time the FBI executed a search warrant at
the office of Promotional Advertising Concepts, the business name
of the operation, the scheme had reeled in 497 victims and grossed
close to $200,000.00.
II.
DISCUSSION
A. Greene
Greene first contends that the district court violated
his constitutional rights by considering evidence in his bench
trial which was admitted during the jury trial of Kelley and
McCracken. Greene suggests that the district judge promised he
would not consider evidence that he had heard during the jury trial
of the severed codefendants. A fair reading of the exchange
between counsel and the court indicates, however, that what was
4
really contemplated was a "divorce" between the trials on the
merits and not a complete ban for sentencing purposes. Nothing in
the record suggests that the district court considered any evidence
from the first trial in its determination of Greene's guilt of
money laundering.
Further, at sentencing, Greene did not object to the
court's observations concerning the elderly victims who testified
at the first trial, so he must now establish "plain error." United
States v. Bullard, 13 F.3d 154, 159 (5th Cir. 1994). This he
cannot do. To resolve a dispute at sentencing, the district court
may consider non-admissible "relevant information" provided that it
"has sufficient indications of reliability." U.S.S.G. § 6A1.3(a);
United States v. Burmea, 30 F.3d 1539, 1576 (5th Cir. 1994).
Testimony under oath observed by the district court would qualify.
United States v. Smith, 13 F.3d 860 (5th Cir. 1994), is
not to the contrary. Although this court vacated a sentence where
the court considered of factual matters contained in a co-
defendant's pre-sentencing report, the Smith court premised its
concern on the defendant's lack of opportunity to "see" the PSR or
"contest [its] accuracy." Id. at 867. In contrast, once the court
reported his observations of the elderly witnesses to defendant at
the sentencing hearing, Greene could have attempted to rebut the
court's impressions, or at least asked for some time to do so.
Greene also contends the district court erred in
sentencing him under the money laundering guidelines instead of the
fraud guidelines. The crux of Greene's argument is that while
5
convicted of laundering "only" $3,638.78, compared to a fraud
scheme that grossed nearly $200,000.00 and victimized at least 497
people, he was, nevertheless, sentenced under the "stiffer" money
laundering guidelines. Indeed, a substantial disparity does exist
between the guideline range Mr. Greene would have confronted under
the fraud guidelines of § 2F1.1 and the sentence he actually
received under the money laundering terms found in U.S.S.G. §
2S1.1.**
Greene explicitly analogizes his situation to the facts
of United States v. Skinner, 946 F.2d 176, 179 (2nd Cir. 1991),
where the court vacated sentences calculated under the money
laundering guidelines for $3,320 of expenditures because the
essence of the crime was the conspiracy and distribution of
cocaine. Unfortunately for Greene, the Second Circuit remanded to
the district court for reconsideration of a downward departure.
Id. at 180 ("The financial transactions...can only be said to have
facilitated additional crimes in the most minimal sense.
Accordingly, appellants' conduct was both atypical of the conduct
described by the Sentencing Guidelines and inadequately considered
by the Sentencing Commission, thus empowering the district court to
**
In Mr. Greene's view, the laundering guideline linguistically applies,
but his conduct differs significantly from the norm. He therefore claims he is not
a "normal" money launderer within the "heartland" understanding of the term but
instead just a convicted "garden variety" telemarketer. Notably, however, Greene
failed to file a motion challenging the legal basis or sufficiency of the evidence
supporting his conviction for money laundering. Obviously not every dollar spent
in every transaction that can be traced to a specified criminal activity violates
18 U.S.C. § 1956(a)(1)(A)(i). "To so interpret the statute" would "convert the
money laundering statute into a money spending statute." United States v. Sanders,
928 F.2d 940, 944 (10th Cir.), cert. denied, 502 U.S. 845 (1991). See also Note,
A Full Laundering Cycle is Required: Placing Back the Proceeds to Carry on Crime is
the Crime under 18 U.S.C. § 1956(a)(1)(A)(i), 70 Notre Dame L. Rev. 727, 891 (1995).
6
consider a downward departure.") In the Fifth Circuit, the
decision not to depart is unreviewable on appeal. United States v.
Miro, 29 F.3d 194, 198-199 (5th Cir. 1994).3 In fact, this court
lacks jurisdiction over a district court's refusal to grant a
downward departure. United States v. DiMarco, 46 F.3d 476, 477
(5th Cir. 1995) (failure to grant discretionary downward departure
is "not subject to appellate review").4 Although, in accord with
Skinner, the district court may effectuate the "heartland" language
of the introductory chapter of the Sentencing Guidelines through
the vehicle of a downward departure, its decision not to depart
downward is conclusive.
Indeed, because of the Guideline's grouping rules, where
money laundering and fraud offenses can be properly grouped, the
imposition of the higher base offense level attached to money
laundering was required. Greene, not surprisingly, insists that
the grouping of the money laundering counts of conviction with
those of conspiracy, mail and wire fraud, and the false name counts
was error. The issue of grouping counts for sentencing purposes is
generally a question of law subject to a de novo review. United
States v. Patterson, 962 F.2d 409, 416 (5th Cir. 1992). The
sentence will be upheld if it was imposed as the result of "a
correct application of the guidelines to factual findings which are
3
We have suggested, however, "that a remand might be appropriate when
the record reveals that the sentencing judge erroneously believed that it lacked
the authority to depart." Id. at 199 n.3.
4
Interestingly, in DiMarco we noted that the Second Circuit had adopted
a similar rule. Id. at 477 (citing United States v. Adeniyi, 912 F.2d 615, 619 (2nd
Cir. 1990)). The court in Skinner did not discuss the apparent conflict.
7
not clearly erroneous." United States v. Ponce, 917 F.2d 841, 842
(5th Cir. 1990)(citing United States v. Sarasiti, 869 F.2d 805, 806
(5th Cir. 1989)).
Grouping by virtue of § 3D1.2(d) of the Sentencing
Guidelines necessitates offenses involving the same victim and
involving multiple acts tied together by a common illegal objective
or part of a common scheme. When this predicate is satisfied,
§ 3D1.2(d) explicitly provides for grouping of offenses covered by
the fraud and money laundering guidelines. Undoubtedly, this scam
did involve several transactions as part of a larger common plan.
The more difficult issue, however, is whether the fraud and money
laundering offenses involved the same victim. Greene points to
several cases in support of his argument that fraud and money
laundering do not involve the same victim. See United States v.
Johnson, 971 F.2d 562, 576 (10th Cir. 1992) (vacating grouping of
fraud and laundering counts); United States v. Lombardi, 5 F.3d
568, 570 (1st Cir. 1993)("society" is victim of money laundering);
United States v. Taylor, 984 F.2d 293, 303 (9th Cir. 1993)(vacating
grouping of fraud and laundering counts). Additionally, this court
in United States v. Gallo, 927 F.2d 815, 824 (5th Cir. 1991),
accepted the argument that laundering was a crime in which society
at large is the victim.5
5
Interestingly, in Gallo the United States "argue[d] that drug-related
offenses and the money laundering offense invoke distinct societal interests."
The government defined the harm from money laundering to be the "dispers[ion] of
capital from lawfully operating economic institutions to criminals in and out of
the country." Id. Because Gallo involved drug offenders and not fraud, the
United States avoids, technically perhaps, inconsistency in its arguments before
this court.
8
We distinguish this case from those cited by Greene
because in none of those cases did the money laundering activities
of the defendants perpetuate the underlying crimes. Here, however,
Greene's money laundering activity, regardless of its limited
extent, advanced the mail and wire fraud scheme that victimized
nearly 500 people. We follow the approach adopted in United States
v. Cusumano, 943 F.2d 305, 312-313 (3rd Cir. 1991), where the
defendant was convicted of theft and bribery from an employee
health fund as well as money laundering. The Third Circuit
considered the propriety of grouping the offenses by inquiring
whether the money laundering convictions and embezzlement offenses
harmed the same victim. It concluded that the victim of the
embezzlement offenses, as well as the laundering offenses, was "the
fund and its beneficiaries." Id. at 313. The court concluded that
these offenses were "part of one overall scheme to obtain money
from the fund and convert it to the use of Cusumano." Id.Similarly, the money laundering offense was not
"ancillary" here. There was a single, integrated scheme to obtain
money from the elderly victims and to use that money to facilitate
the continuance of the scam. The activities can not be neatly
separated as Greene would hope. By conducting financial
transactions--paying callers, purchasing leads, paying phone bills-
-with the victims' money for the purpose of bilking more people out
of $395.50 each, the group of targeted victims became the victim of
the money laundering activity as well as the fraud scheme. In this
case, the district court properly found that the money laundering
9
and fraud constituted part of the same continuing common criminal
endeavor.
Greene further attacks his sentence by alleging that the
district court, without explanation, sentenced him to sixty months
on the fraud counts whereas a proper application of the guidelines
called for a sentence of between 21 and 27 months. U.S.S.G.
§ 5G1.2(b), however, provides that in cases involving multiple
sentences, each sentence should equal the "total punishment." As
the district court was entitled to sentence pursuant to the money
laundering guidelines, the imposition of 60-months for each fraud
count is permitted. United States v. Porter, 909 F.2d 789, 797 n.3
(5th Cir. 1990)(in multiple-count sentences, to the extent possible
without exceeding statutory maximum or minimums, the sentence on
each count shall be equal to the total punishment).
Greene additionally contends that the court erred by
enhancing the offense level for his role in the scheme as an
organizer, pursuant to U.S.S.G. § 3B1.1(a), because the adjustment
applies to the fraud offenses and not the money laundering counts.
And, while Greene does not contend that the evidence is
insufficient to support the factual finding that he was the
organizer of the criminal activity involving numerous participants,
he repeats his contention that the money laundering counts cannot
be grouped with the fraud counts, and, thus, the enhancement was
improper. We are unpersuaded that the grouping was unauthorized.
With greater cogency, Greene argues the four level "role
in the offense" adjustment, which would apply as an enhancement to
10
Greene's fraud, should not have been added to the money laundering
offense level.6 The United States defends this increased sentence
on several grounds, but the most persuasive basis seems to be §
1B1.3(a)(2). The provision permits consideration of "all acts and
omissions that were part of the same course of conduct or common
scheme or plan as the offense of conviction" where grouping has
occurred. Greene's fraud and money laundering were properly
grouped, and the money laundering was an integral factor in keeping
the telemarketing scheme afloat. It was appropriate factually and
legally under this guideline to apply the fraud-related role in the
offense enhancement to the money laundering base offense level.
Greene, who was awarded a two-level decrease in his
sentence pursuant to U.S.S.G. § 3E1.1(a), over the government's
objection, argues that he was entitled to a three-level decrease.
This court reviews determinations regarding acceptance of
responsibility "for clear error but under a standard of review even
more deferential than a pure 'clearly erroneous' standard."
United States v. Gonzales, 19 F.3d 982, 983 (5th Cir. 1994).
Greene suggests that he should have received the
additional one-level reduction because he waived a jury trial and
wanted to stipulate to most of the evidence. This claim is without
merit for a couple of reasons. First, § 3E1.1(b) makes it clear
that the defendant must timely notify the government of an
intention to plead guilty, not of an intention to seek a bench
6
With a zero criminal history, the adjustment increases the midpoint of
Greene's guideline range sentence by 1/2 years.
11
trial or to stipulate to certain facts. Second, the fact that
Greene informed the government of his intention to plead guilty to
the fraud charges does not mitigate the expenditure of resources
that it required to prosecute the money laundering charges.
Gonzales, at 983-984. Accordingly, the court's refusal was proper.
B. McCracken and Kelly
Appellants McCracken and Kelley assert that the evidence
was insufficient to maintain their convictions for conspiracy and
fraud. Specifically, both insist that the evidence was
insufficient to establish the element of knowledge or intent. With
respect to the conspiracy charges, the government must prove beyond
a reasonable doubt that the defendant knowingly joined a conspiracy
and that at least one conspirator committed an overt act in
furtherance of the conspiracy. United States v. Cavin, 39 F.3d
1299, 1305 (5th Cir. 1994). A defendant's knowing involvement in
a conspiracy can be established by circumstantial evidence. United
States v. Casilla, 20 F.3d 600, 603 (5th Cir. 1994). Once a
conspiracy is established, only "slight evidence" is needed to
connect a defendant to the agreement. United States v. Duncan, 919
F.2d 981, 991 (5th Cir. 1990).
The government must prove beyond a reasonable doubt that
the defendant had a "conscious knowing intent to defraud." United
States v. Kreimer, 609 F.2d 126, 128 (5th Cir. 1980). In other
words, it must prove that the defendant contemplated or intended
some harm to the property rights of the victim. United States v.
Stouffer, 986 F.2d 916, 922 (5th Cir.), cert. denied, 114 S.Ct. 11512
(1993). If Kelley and McCracken knowingly joined the conspiracy
and scheme to defraud, they are guilty of the substantive mail and
wire fraud offenses. United States v. Basey, 816 F.2d 980, 997
(5th Cir. 1987).
It is readily apparent that these convictions are
supportable. Both Kelley and McCracken worked longer at PAC than
any other employees; they both worked as closers and helped train
the less experienced callers; and, they attended the same meetings
as the callers who realized PAC was a fraud. Particularly
persuasive are the individual comments made by the two that they
knew to be false: (1) McCracken told Mr. and Mrs. Keister that they
had won $15,000.00 and that the $395.00 was for shipping and
handling; (2) McCracken told Mr. Race that she had his entry card
in front of her, he had been selected to win $15,000.00, and she
would lose her job if he did not give his check to Federal Express;
(3) Kelley gave Ms. Russell the impression she had won $15,000.00;
(4) Kelley told Ms. Faust that she had won at least $1,000.00 and
that her prize would be identified the next day during a committee
meeting; and, (5) Kelley told Ms. Cash her name had been drawn and
the least she would win was $1,000.00. Kelley and McCracken
knowingly joined the scheme and conspiracy and were vicariously
liable for all the substantive offenses made pursuant to it.
C. All Four Appellants
All four appellants contend that the two level
enhancement of their sentences pursuant to U.S.S.G. § 3A1.1 was
improper as the victims in this case were not "vulnerable" within
13
the meaning of the guidelines. The burden is upon the government
to establish the facts necessary to support the adjustment by a
preponderance of the evidence. United States v. Kim, 963 F.2d 65,
69 (5th Cir. 1992). The finding of the district court is reviewed
under the clearly erroneous standard. United States v. Brown, 7
F.3d 1155, 1159 (5th Cir. 1993).
Here an adequate factual basis existed for determining
that the telemarketing scheme preyed upon vulnerable victims.
Noting that a group of individuals can be found to be vulnerable
under U.S.S.G. § 3A1.1, the district court concluded that PAC
specifically and intentionally targeted elderly citizens because
they were unusually vulnerable or particularly susceptible to this
type of fraud.
We cannot find clear error in concluding on this record
that these defendants intentionally selected their elderly victims
because of their perceived vulnerability. In fact, all defendants
were aware that the elderly were directly targeted by PAC. For
example:
a. Greene told a caller that they were running a "senior
citizens' contest;"
b. Leonard told callers in a morning meeting that
elderly people were the "target audience" and that they
had nothing better to do than send in puzzle contests;
c. Greene purchased the names and addresses of 1,000
women who were over the age of sixty;
d. Kelley told a caller that the victims were "old
buzzards" who did not know what to do with their money;
e. McCracken referred to the victims as "stupid old
fools;"
14
f. Questionnaires received by the FBI from 252 of the
497 victims disclosed that 75% of those responding were
over sixty, and the largest representative age group of
the respondents was between the ages of seventy and
seventy-nine.
Moreover, the evidence demonstrated that it was not a fortuitous
decision to target those elder citizens. Compare United States v.
Wilson, 913 F.2d 136, 138 (4th Cir. 1990)(randomly selected targets
for phone fraud not vulnerable).
The evidence available also supports a finding that the
elderly were unusually vulnerable or particularly susceptible to
the fraud perpetrated by the conspirators in this case and that
Greene, Leonard, Kelley, and McCracken specifically targeted them
as a group because of this characteristic. In this regard, the
district court considered Kelley's statement that, "these old
buzzards don't really know what they want to do with their money;"
Leonard's belief that getting the victims to send in their money
was, "easy cash;" and callers' testimony that the elderly were
easier to sell to than the others.7
CONCLUSION
For the foregoing reasons, we AFFIRM the convictions and
sentencing decisions in every aspect.
7
Leonard, in a pro se brief, attacks the constitutionality of the search
of his truck by one of his callers, alleging that she was actually an agent of the
government. This contention has been waived by his entry of a guilty plea. Tollett
v. Henderson, 411 U.S. 258, 267, 93 S. Ct. 1602, 1608 (1973); United States v.
Smallwood, 920 F.2d 1231, 1240 (5th Cir. 1991).
15