United States v. Moore ( 1994 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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No. 94-40195 and No. 94-40196
Summary Calendar
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UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
WARREN N. MOORE and THOMAS L. ARNOLD,
Defendants-Appellants.
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Appeals from the United States District Court
for the Western District of Louisiana
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(October 24, 1994)
Before, SMITH, EMILIO M. GARZA, and PARKER, Circuit Judges.
ROBERT M. PARKER, Circuit Judge:
Warren N. Moore (Moore), and Thomas L. Arnold (Arnold) pleaded
guilty to one count of mail fraud in violation of 18 U.S.C. § 1341.
Moore and Arnold moved to withdraw their guilty plea, which the
district judge denied. The district judge also denied Moore and
Arnold's motion for reconsideration of the plea-withdrawal motion.
Each defendant received a five year term of probation and a $50,000
fine. The defendants raise identical arguments in this
consolidated appeal, challenging their convictions and fines. We
affirm the convictions, vacate the sentences, and remand for
resentencing.
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FACTS
On September 29, 1992, the defendants pleaded guilty to Count
12 of a fourteen count bill of information, pursuant to a written
plea agreement with the government. A written factual basis for
the plea was filed into the record. It provided in pertinent part:
In 1986, defendants, d/b/a A Associates, Inc.,
purchased a tract of land in Caddo Parish, Louisiana,
from Phillip and Daniel Henderson and developed it into
a mobile home subdivision named Colworth Place.
Defendants gave a first mortgage on the property to the
Hendersons, but failed to tell mobile home lot purchasers
Donald and Sheila Rogers of the outstanding first
mortgage.
In September 1990, mobile home lot purchasers Donald
and Sheila Rogers, without notice of the outstanding
first mortgage, sent their $132.02 mortgage payment by
U.S. mail to defendants at P. O. Box 8431, Shreveport,
Louisiana.
Defendants intended to have the Rogers believe that
when the mortgage was paid to defendants, the Rogers
owned the property outright, i.e., the Rogers were
unaware that their mobile home lot was still encumbered
by the first mortgage to the Hendersons.
The pleadings and exhibits filed by the parties concerning the
motion to withdraw the guilty pleas fleshed out the facts and
circumstances surrounding the mail fraud charges. Defendants
characterize Colworth Place as a low-income housing development,
where purchasers could move in with a $500.00 down payment. The
Rogers, as well as the other purchasers, were not represented
during the purchase of the property or at closing. Defendants
provided a warranty deed to the Rogers at closing which made no
mention of an outstanding mortgage on the property. The Rogers
signed the document at closing, but defendants did not. When the
Rogers received their certified copy of that warranty deed from the
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Caddo Parish clerk, language regarding the outstanding mortgage had
been added to the deed, without the knowledge or consent of the
purchasers.
The Credit Sale Deed that memorialized the mortgage from
defendants to the Hendersons was recorded in the public records of
Caddo Parish, which would have allowed purchasers to discover the
mortgage had they searched the public record before purchasing the
property. Further, there is no evidence that defendants
affirmatively misrepresented to the Rogers that they held title to
the property free of mortgages.
The defendants later traded the Rogers' note, along with the
notes of approximately nine other mobile home lot owners, to the
president of a bank. That individual pledged the notes to secure
his own indebtedness to the bank, and when the bank failed the lot
purchasers' notes were obtained by the FDIC. The note to the
Hendersons was not kept current during this time, and foreclosure
procedures were initiated against the lot purchasers.
DO THE FACTS CONSTITUTE A FEDERAL OFFENSE?
Appellants' first point of error alleges that the district
court erred in denying their motions to withdraw their guilty pleas
because there was no factual basis to support a conviction for mail
fraud. A district court may permit a defendant to withdraw a
guilty plea at any time prior to sentencing upon a showing of a
"fair and just" reason. FED. R. CRIM. P. 32(d). However, Rule 32
does not provide an absolute right to withdraw a plea. The
defendant has the burden of proving that withdrawal is justified,
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and we will reverse the district court's determination only upon
concluding that it has abused its discretion. United States v.
Daniel, 866 F.2d 749 (5th Cir. 1989).
A district court must consider several factors in ruling on a
motion to withdraw a plea:
(1) whether the defendant has asserted his innocence; (2)
whether withdrawal would prejudice the Government; (3)
whether the defendant delayed in filing the motion, and
if so, the reason for the delay; (4) whether withdrawal
would substantially inconvenience the court; (5) whether
close assistance of counsel was available to the
defendant; (6) whether the plea was knowing and
voluntary; and (7) whether withdrawal would waste
judicial resources.
United States v. Hurtado, 846 F.2d 995, 997 (5th Cir. 1988).
Defendants claim only that the Government's proof did not establish
the mens rea required for conviction of the charged offense,
asserting innocence under the first factor. Because this claim
fails and no other factors are addressed by the appellants, we find
no merit in this point of error.
The federal mail fraud statute under which appellants were
charged, 18 U.S.C. § 1341, requires proof of a knowing and willful
scheme or artifice to defraud another of property or money and a
subsequent mailing to execute the purpose of the scheme.
Appellants allege that there was a complete lack of evidence to
establish the mental element, the essence of which is fraud and
deceit. The record does not bear out the defendants' position.
Both defendants signed the written factual basis filed with the
court and testified at the plea hearing that they had read it and
agreed that it accurately reflected what had occurred. The factual
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basis states that the defendants "intended to have the Rogers
believe that when the mortgage was paid to the defendants, the
Rogers owned the property outright, i.e., the Rogers were unaware
that their mobile home lot was still encumbered by the first
mortgage to the Hendersons."
In a related argument, Moore and Arnold assert that they had
no duty to disclose the existence of a prior mortgage under
Louisiana law. Because the first mortgage was recorded in the
public records of Caddo Parish, and the defendants did not
affirmatively misrepresent its existence, defendants contend that
the Rogers had constructive knowledge of the mortgage, citing
Thomas v. Lewis, 475 So. 2d 52 (La. App. 2nd Cir. 1985).
Therefore, they reason, their conduct could not constitute mail
fraud under federal law. They contend that the information failed
to allege a criminal offense and that the factual basis to which
they admitted likewise established no crime.
"The federal mail fraud statute prohibits use of postal
services in the furtherance of fraudulent schemes, whether or not
prohibited by state law." United States v. Foshee, 606 F.2d 111,
113 (5th Cir. 1979). Defendants contention that they had no duty
under Louisiana law to disclose the first mortgage to the Rogers is
therefore irrelevant to the question before this Court. The
evidence before the court at the plea hearing established that
defendants intended to deceive the Rogers concerning the existence
of the mortgage, and thereby to induce them to buy real estate they
might not otherwise have purchased.
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We therefore hold that the district court did not abuse its
discretion in denying defendants' motion to withdraw their guilty
pleas.
WAIVER OF INDICTMENT
Moore and Arnold contend that the district judge did not
personally advise them of their rights before accepting their
waiver of indictment and that the record does not demonstrate that
they waived indictment in open court. They assert that their
waivers of indictment are therefore invalid.
An offense which may be punished by imprisonment for a
term exceeding one year or at hard labor may be
prosecuted by information if the defendant, after having
been advised of the nature of the charge and of the
rights of the defendant, waives in open court prosecution
by indictment.
FED. R. CRIM. P. 7(b). Mail fraud, the offense to which Moore and
Arnold pleaded guilty, carries a maximum five-year term of
imprisonment. 18 U.S.C. § 1341. Their waiver of indictment is
therefore governed by Rule 7(b).
Unless there is a valid waiver, the lack of an indictment
in a federal felony case is a defect going to the
jurisdiction of the court. Rule 7(b) provides the waiver
must be made in open court after the defendant has been
advised of the nature of the charge and his rights. The
court must be satisfied the waiver was knowingly,
understandingly, and voluntarily made. A waiver of
indictment, being merely a waiver of a finding of
probable cause by a grand jury, is of relatively less
consequence as compared with a waiver of trial, and thus
does not call for all of the protections surrounding
entry of guilty pleas.
United States v. Montgomery, 628 F.2d 414, 416 (5th Cir. 1980)
(internal quotations and citations omitted). The Fifth Circuit has
never prescribed a particular procedure that must be followed to
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comply with Rule 7(b) requirements.
The record indicates that when court opened on September 29,
1992 for plea hearing some documents were being signed. The
prosecutor then tendered to the court the original signed waiver of
indictment, along with the affidavit of understanding of maximum
penalty and constitutional rights.
The court inquired of the parties, "No objection to the
filings?"
Defendants' counsel responded, "No objection."
Defendants raise no complaints about the form or content of
their written waivers of indictment. The question before us is
whether or not the procedure followed by the district court
complied with the requirement that waiver be made in open court
after the defendants are informed of the nature of the charge and
their rights. We hold that it did. Although the record is
ambiguous concerning whether the defendants signed the waiver
before or after court began, the document was filed in open court,
and the court specifically asked if the defendants had any
objection to the filing, which they did not. Further, the document
itself recites that the indictment was waived in open court on
September 29, 1992. Defendants' acquiescence in the filing of
their signed waiver amounted to a waiver of indictment in open
court. Rule 7(b) requires that the defendants be informed of the
nature of the charge and their rights, but does not impose on the
court an obligation to do anything. A defendant's waiver of
indictment must of course be knowing and voluntary. But there is
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no reason why the requisite advice cannot come from defense
counsel, as it did in this case. See United States v. Liboro, 10
F.3d 861 (D.C.Cir. 1993). The affidavit of understanding of
maximum penalty and constitutional rights along with the written
factual basis, signed by Moore and Arnold and filed with the court,
establish that the appellants were informed of the nature of the
charge and their rights in accordance with Rule 7(b).
CONFLICT-FREE COUNSEL
Moore and Arnold were represented by the same attorney. At
the beginning of the plea hearing the court inquired whether the
situation amounted to a conflict of interest. The prosecutor
responded that the question had been discussed with the defendants
and the defense counsel and that there was no conflict. The court
addressed the defendants, explaining that it is possible that their
attorney could have a conflict of interest, and advised the
defendants that they were entitled to waive their right to
conflict-free counsel if they chose. Both defendants told the
judge that they wanted to waive that right. Defendants now contend
that the trial judge's explanation and inquiry was not sufficient
to establish that they knowingly, intelligently and voluntarily
waived their right to conflict-free counsel.
We review the district court's acceptance of defendants'
waiver of conflict-free counsel for simple error. United States v.
Snyder, 707 F.2d 139, 144 (5th Cir. 1983).
Under the Sixth Amendment, the right to counsel includes the
right to conflict-free counsel. Wood v. Georgia, 450 U.S. 261,
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271, 101 S. Ct. 1097, 1103, 67 L. Ed. 2d 220 (1981). A conflict
exists when defense counsel places himself in a position conducive
to divided loyalties. United States v. Carpenter, 769 F.2d 258,
263 (5th Cir. 1985).
United States v. Garcia, 517 F.2d 272, 278 (5th Cir. 1975),
sets out instructions for district courts to follow in determining
whether a defendant has knowingly, intelligently, and voluntarily
waived his right to a conflict free attorney:
[W]e instruct the district court to follow a procedure
akin to that promulgated in F. R. CRIM. P. 11 whereby the
defendant's voluntariness and knowledge of the
consequences of a guilty plea will be manifest on the
face of the record. As in Rule 11 procedures, the
district court should address each defendant personally
and forthrightly advise him of the potential dangers of
representation by counsel with a conflict of interest.
The defendant must be at liberty to question the district
court as to the nature and consequences of his legal
representation. Most significantly, the court should
seek to elicit a narrative response from each defendant
that he has been advised of his right to effective
representation, that he understands the details of his
attorney's possible conflict of interest and the
potential perils of such a conflict, that he has
discussed the matter with his attorney or if he wishes
with outside counsel, and that he voluntarily waives his
Sixth Amendment protections...Mere assent in response to
a series of questions from the bench may in some
circumstances constitute an adequate waiver, but the
court should nonetheless endeavor to have each defendant
personally articulate in detail his intent to forego this
significant constitutional protection. (Internal
citations omitted.)
The Garcia hearing at issue was cursory, falling short of the
ideal of eliciting a narrative response from each defendant.
However, the record clearly establishes that both Moore and Arnold
waived their right to a conflict-free attorney, after being
adequately informed of the dangers encountered when two
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codefendants are represented by the same attorney. The court did
not err in accepting the defendants' waiver of conflict-free
attorneys.
UPWARD DEPARTURE
The district court departed upward from the guideline
sentencing range in imposing a $50,000.00 fine on each defendant.
Defendants contend that the court erred in failing to give the
defendants reasonable notice of the grounds for upward departure,
and thereby deprived them of the opportunity to comment on the
departure prior to sentencing. We agree.
FED. R. CRIM. P. 32(a)(1) provides that the parties be given "an
opportunity to comment upon the probation officer's determination
and on other matters relating to the appropriate sentence." The
Supreme Court has held that Rule 32 requires that the district
court give the parties reasonable notice that it is contemplating
an upward departure, which notice must specifically identify the
grounds for the departure. Burns v. United States, 501 U.S. 129,
111 S. Ct. 2182, 2187, 115 L. Ed. 2d 123 (1991).
The district court, in pronouncing the sentence, stated that
the basis for upward departure on the fine was that the defendants
preyed on the weak and uneducated as part of their offense. This
basis had not been mentioned previously in the record. The court
stated earlier in the hearing, "As you recall, Mr. Keene, I gave
you and your clients notice on November 30 that I was considering
an upward departure from the guideline fine range so I would like
you to at this time also discuss in addition to what you already
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told me your comment on the departure upwards." The notice
referred to by the court is not memorialized in the record, so that
it is impossible to tell if the proposed basis for departure was
included in that notice. We hold that the district court erred by
failing to give the defendants reasonable notice of the basis for
its upward departure on the fines.
CONCLUSION
Therefore, we AFFIRM the convictions, VACATE the sentences and
REMAND the cases for resentencing.
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