United States v. Cantwell

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
MAY 15 2002
TENTH CIRCUIT
PATRICK FISHER
Clerk
UNITED STATES OF AMERICA,
Plaintiff - Appellee, No. 01-4171
v. (D. Utah)
RODNEY DUANE CANTWELL, (D.C. No. 2:98-CR-104-B)
Defendant - Appellant.
ORDER AND JUDGMENT *
Before HENRY , PORFILIO , and ANDERSON , Circuit Judges.
Rodney Cantwell appeals his conviction by a jury on one count of mail
fraud in violation of 18 U.S.C. § 1341, one count of wire fraud in violation of 18
U.S.C. § 1343, and aiding and abetting, in violation of 18 U.S.C. § 2. We affirm.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
BACKGROUND
Cantwell was the founder and president of Eagle Resources, a business
located in Salt Lake City, Utah. Christie Cantwell, Rodney Cantwell’s wife,
testified that he “was in charge of [the] operation . . . [f]rom top to bottom[] . . .
[d]ay in and day out[.]” Appellant’s App. I at 237. Cantwell and Eagle
Resources used videotapes and brochures to solicit participation in its program
(“Program”), which it called “ The Business Opportunity of the 21st Century.”
Appellant’s App. II at 543.
The Program offered two options: the Basic Program and the Premier
Business Development Program. Participants in the Basic Program paid a $220
fee and, in turn, received registration in the program, valued at $25; the Basic
Development Package, valued at $50; and five Silver Eagle Coins, valued at
$145. 1 The Basic Program included fifty postcards, five brochures, and an Eagle
Resources Opportunity Video. It also offered a 30-day money back guarantee for
the coin purchase.
The Premier Business Development Program required a $715 fee. This
program provided additional marketing materials, including 500 fold-out mailers,
1
The brochures which Eagle Resources sent to prospective participants in
its Program stated that the coins “are the same coins sold wholesale at $6-$8 and
retail for $25-$35.” Appellant’s App. II at 532. There was similar testimony at
the trial concerning the value of the coins.
-2-
five brochures and the Eagle Resources Opportunity Video. The Premier Program
contained a “6 month 100% Money Back Performance Guarantee!” Id. at 547.
A brochure describing the Program to prospective participants described
how Cantwell had “spent years developing a revolutionary, unparalleled and
ingenious marketing plan he called THE LINEAR PAY PROGRAM.” Id. at 543.
The brochure further stated that participants could receive a total of $27,080 after
thirty weeks, 2
and stated that, if they joined the Program, they would “work less,
and accumulate significantly more cash and silver coins without having to talk to
anyone!” Id. at 547. The brochure stated that the Eagle Resources Program
enabled participants to “duplicat[e] [their] efforts” by “making money by
multiplying [their] time with the time of others.” Id. at 543. Another brochure
sent by Cantwell to a participant described the Eagle Resource Program as
requiring “[n]o individual selling. . . . Your Business Growth is realized from
your Bonuses and the Bonuses of your Customers. This is the tripling effect of
Eagle Resources.” Id. at 531 (original emphasis omitted). It further stated,
“Immediately upon receipt of your $50 we will mail FIFTY POSTCARDS with
your name as sponsor. The customers generated by this mailer will build your
income.” Id. at 532 (original emphasis omitted).
The 30-week total of $27,080 contained a disclaimer that “[t]he income[]
2
shown above [is] not guaranteed. Your income depends upon your own efforts
and the actual response to your mailings.” Appellant’s App. II at 544.
-3-
The Eagle Resources Opportunity Video consisted of Cantwell explaining
how the “Linear Pay Program” worked. A brochure described it as follows:
You begin by simply purchasing five (5) one-ounce
uncirculated American Eagle Silver Bullion Coins from EAGLE
RESOURCES for only $145. Upon receipt of the $145 and the
enclosed application form, you will be entered into our LINEAR
PAY PROGRAM.™ The 5 Silver Eagles will be shipped to you
within 7 days from our receipt of your purchase agreement.
....
For each Direct Sale of 5 Silver Eagle coins, a commission of
$18 will be paid plus 1 Credit given. For each 2nd Generation Direct
Sale, a commission of $6 will be paid plus 1 Credit given. For each
3rd and 4th Generation sale, a commission of $3 will be paid with no
Credits given.
When you accumulate twelve (12) Credits, the LINEAR PAY
PROGRAM™ will pay you a Bonus Commission of fifteen (15)
Silver Eagle coins, which represents three new entries on the line.
Every time anyone on any of your 4 Generations earns 12
Credits and receives a Bonus Commission, you earn a commission.
You earn $54 on your 1st Generation, $18 on your 2nd Generation,
and $9 on your 3rd and 4th Generations–all automatically!
Id. at 534.
Counts V and VI of the indictment against Cantwell involved Carlo
Pessalano, a resident of Jacksonville, Florida. He first learned of Eagle
Resources in 1993 after receiving a letter from a Program participant.
Appellant’s App. I at 105; Appellant’s App. II at 603-04. He subsequently
received a letter dated June 10, 1993, from Rodney Cantwell, enclosing a
brochure describing the Linear Pay Program. Pessalano then mailed to Eagle
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Resources a check dated June 24, 1993, in the amount of $195, as payment for the
Basic Program. Appellant’s App. II at 606.
Cantwell sent Pessalano a welcome letter dated July 7, 1993, enclosing five
Silver Eagle coins, brochures and marketing materials, and the Eagle Resources
Opportunity Video. Id. at 607-08. On September 8, 1993, Eagle Resources sent
to Pessalano additional promotional materials, including a brochure. Pessalano
testified that the representations in the brochure persuaded him to join the Premier
Business Development Program. Appellant’s App. I at 123-24. He testified that
he was particularly influenced by the representation that he could make more
money in a month than most people make in a year and that he could make money
without talking to anyone. On September 16, 1993, Pessalano sent another check
by certified mail to Eagle Resources, in the amount of $715. Appellant’s App. II
at 611.
Pessalano subsequently received another letter from Cantwell, along with
five more Silver Eagle coins, 500 Eagle Resources mailers, and additional
marketing materials. One of the enclosed materials indicated that Pessalano could
request supplemental mailings in the event he received five or fewer responses to
his mailers. Id. at 561, Appellant’s App. I at 116. Pessalano requested such
supplemental mailings, but never received them. Appellant’s App. I at 117.
-5-
In December 1993, Pessalano called Eagle Resources’ toll-free number and
spoke to a woman named Felicia about obtaining a refund for his Premier
Business Development Program package. Appellant’s App. II at 616. Felicia told
Pessalano to return all the materials he had received from Eagle Resources and
she would immediately send him a refund. Pessalano mailed his refund request
on March 23, 1994. Id. at 552, 613. He then received from Eagle Resources a
letter dated March 23, 1994, which listed the names of people who had contacted
Eagle Resources in response to Pessalano’s mailings. Id. at 555, 615. When
Pessalano again called Eagle Resources’ toll-free number, he was told that the
government had seized Eagle Resources’ records and the company could therefore
not act upon his refund request. Pessalano never received a refund.
In total, approximately 6100 people participated in the Eagle Resources
Program between September 1990 and January 1994. Appellant’s App. I at 211,
221. During this time period, approximately $2 million was received by Eagle
Resources. Id. at 191.
On February 27, 1998, the government indicted Cantwell on seven counts
of mail fraud and seven counts of wire fraud. Five of the fourteen counts were
dismissed during the course of the trial. Appellant’s App. II at 623. 3
After a five
Four of the counts dismissed related to two witnesses who did not appear.
3
The fifth involved a person who lived in Utah and never spoke by phone with
(continued...)
-6-
day trial, the jury found that Cantwell had used the United States mail and
interstate wire communications to defraud Pessalano, and accordingly found
Cantwell guilty of counts V and VI. The jury found Cantwell not guilty on the
remaining seven counts. He was sentenced to 37 months imprisonment, followed
by 36 months of supervised relief. This appeal followed.
DISCUSSION
Cantwell raises four issues on appeal: (1) whether the district court erred
in failing to dismiss the entire jury panel for cause based on responses made by
some members of the panel during voir dire; (2) whether the district court erred in
allowing expert testimony as to the nature of a pyramid scheme, even though
Cantwell was not charged in the indictment with operating a pyramid scheme;
(3) whether there was sufficient evidence supporting the guilty verdict beyond a
reasonable doubt; and (4) whether the district court erred in giving an Allen
charge to the jury when it informed the court that it could not reach a verdict.
(...continued)
3
Cantwell or any other Eagle Resources person, and for whom the interstate
communication element of the wire fraud count was apparently not satisfied.
-7-
I. Voir Dire
During jury voir dire, three prospective jurors indicated they had heard
previously of Cantwell and Eagle Resources. The first prospective juror, Mr.
Mooy, an attorney, stated that when he worked at the Utah Attorney General’s
office in 1992 or 1993, “part of the work [he] did . . . involved some state
examination of the activities that are alleged.” Appellant’s App. I at 56. When
asked how he “would feel sitting in judgment here of the facts as a juror in this
case,” id. at 57, Mooy responded, “I believe I can distinguish what I learned or
the information that I can recall from that time to what would be presented in the
court today. I believe I would be able to do that.” Id. The court then inquired,
“Do you think you would be able to be impartial and weigh this evidence here
fairly and impartially without having a preconceived notion of whether the
defendant’s activities were criminal or not?” Id. Mooy responded, “[t]hat may be
difficult from what I recall.” Id. The court then moved on to question the other
two prospective jurors who indicated some familiarity with Cantwell and Eagle
Resources.
The second such prospective juror, Mr. Jensen, described what he had
heard about the case as follows: “Oh, just friends of mine had just heard of Eagle
Resources from back in ‘92 and just synonymous with pyramid organizations.
Sorry, but we kind of made fun of it.” Id. The court promptly dismissed Jensen.
-8-
The final prospective juror was Ms. Scott, who stated, “We had several
friends and acquaintances approach us about this pyramid business. We did not
get involved with it, but they did and they did lose money.” Id. at 58. When
asked how that experience affected her, and whether she had “form[ed] a negative
opinion or a positive opinion about this company based on your exposure to it
through [her] friends,” Scott responded, “I can’t say that I formed an opinion
either way. I just know that they were very bitter and we heard some real
negative stuff from [our friends].” Id. at 59. The court also promptly dismissed
Scott from the jury pool.
After jury voir dire was completed, and out of the presence of the jury, the
court dismissed Mooy. Cantwell’s defense counsel thereupon moved to excuse
the entire jury panel for cause based upon the comments of Mooy, Jensen, and
Scott. Id. at 89. The court denied the motion, id. at 90, explaining as follows:
I don’t think from what we have heard here that there is anything that
is going to so obviously taint the jury as to require us to start over
again. Any comments that were made were extremely limited and
were cut off before they went into any detail that I felt was going to
prejudice the defendant. The fact that a few of the prospective jurors
had heard something about this and mentioned what they did during
the voir dire process was just not sufficient in my view to even come
close to declaring a mistrial and excusing this panel and starting over
again. I will give [a] limiting instruction, however. . . .
Id. at 90-91. The court accordingly gave the following limiting instruction to the
entire voir dire panel:
-9-
I also want to make sure that you all understand one thing. Some
comments were made during this voir dire process we call it, this
selection process, about things that people had heard and people had
learned about the defendant and more particularly the defendant’s
business. Some of the things that were said may have been slightly
negative in tone, and there were some suggestions that maybe some
money was lost and people were not happy about it. I want all of you
to know, and some of you will be on the jury, that those comments
may not be used or taken into account in any way by the jury in this
case. They were stated in response to questions by the Court during
the selection process and they are not to be used in deliberating on
this case anymore than anything else that you may have seen or heard
that did not come in through the evidentiary process that we will
employ as soon as we start this case.
Id. at 93-94.
Cantwell argues the district court erred in denying his motion to excuse the
entire voir dire panel for cause based upon the comments of Mooy, Jensen and
Scott. We disagree.
“The trial court has broad discretion in conducting the voir dire
examination.” United States v. Gibbons , 607 F.2d 1320, 1330 (10th Cir. 1979);
see also United States v. Garcia-Flores , 246 F.3d 451, 458 (5th Cir. 2001). “The
ruling on a motion to dismiss or for a mistrial based on improper statements
during voir dire is within the sound judicial discretion of the trial court . . . [and]
will not be disturbed, absent a clear showing of abuse of that discretion.”
Gibbons , 607 F.2d at 1330; see also United States v. Wacker , 72 F.3d 1453, 1467
(10th Cir. 1995) (“When juror impartiality is questioned, the trial court has wide
- 10 -
discretion in evaluating the competency of a juror to sit, and its decision will not
be interfered with except for a clear abuse of discretion.”).
Cantwell argues that the comments made by the three prospective jurors
tainted the remainder of the jury pool. “When improper or prejudicial remarks are
made by one venireperson and heard by other venirepersons during the jury
selection process, we have held that ‘the test of juror impartiality is whether the
juror can lay aside his impression or opinion and render a verdict based on the
evidence presented in court.’” United States v. Lacey , 86 F.3d 956, 969 (10th
Cir. 1996) (quoting Wacker , 72 F.3d at 1467) (further quotation omitted).
Further, “the partiality of the . . . jury is evaluated in light of those persons
ultimately empaneled and sworn, not those who are excused.” Id.
We find no error in the district court’s denial of Cantwell’s motion to
dismiss the remainder of the jury pool. The three prospective jurors’ remarks
were brief and quickly terminated by the district court, and the court gave a clear
curative instruction to the entire voir dire panel, reminding them that nothing they
heard during the voir dire process could be considered by those who ultimately
served as jurors. “Because the district court is in the best position to judge the
effect of improper statements on a jury . . . its assessment is entitled to great
weight.” Wacker , 72 F.3d at 1467-68; see also Garcia-Flores , 246 F.3d at 458
(“The district judge was in the best position to evaluate the reaction of the jury
- 11 -
panel to the prospective juror’s comments and the affect of his curative
instruction.”). The lack of taint is additionally demonstrated by the fact that the
jury ultimately empaneled acquitted Cantwell on seven of the nine counts
presented to it. See Gibbons , 607 F.2d at 1331 (“[W]e note that the jury’s ability
to render a fair verdict is indicated by its acquittal of the appellant on the
conspiracy count.”). The district court did not abuse its discretion in refusing to
dismiss the entire voir dire panel.
II. Expert Testimony
Cantwell made a motion in limine to exclude the testimony of the
government’s proposed expert, Alan Funk, on pyramid schemes because Cantwell
had not been charged with operating a pyramid scheme and the admission of such
testimony would violate Fed. R. Evid. 404 and 403. Appellant’s App. II at 256.
The government indicated that Funk would only testify as to the structure of
pyramid schemes. The court permitted Funk to testify. Id. at 257-58. Cantwell
made several objections at various times during Funk’s testimony.
Funk testified that he was a certified fraud examiner based upon his
“experience and education.” Id. at 261. He further testified as to his experience
in investigating pyramid schemes. Id. at 272-73. The court found him qualified
- 12 -
“to discuss [pyramid schemes and their ability to deceive] based on his experience
and his training and his certification as a fraud examiner.” Id. at 274-75.
Funk testified as to what a pyramid scheme is, opining that it “is a sales
device that the focus of which is compensating individuals through the
recruitment of others as opposed to a straight up economic transaction where
there is a sale of goods or services that makes sense.” Id. at 268. Funk also
testified as to the economics of pyramid schemes and why they can be deceptive.
When Funk was asked whether, in his opinion, Eagle Resources was a deceptive
pyramid scheme, Cantwell objected on the basis of Fed. R. Evid. 702 and 704(b).
Id. at 277. 4
After the district court informed the government that it should limit its
questions to “whether the information in [the Eagle Resources Program] has
characteristics which in his experience and information are like a Ponzi scheme,”
id. at 279, thereby eliminating any 704(b) problem, Funk went on to explain how
the Eagle Resources Program functioned economically. He stated that if all 6100
participants in the Program were to earn $417 in a month, 494,000 participants
would be required, and if all 6100 were to earn $8,686 per month, a suggested
4
Although Cantwell’s attorney did not articulate the precise grounds of his
objection, presumably the objection was that Funk was not qualified and/or that
his testimony would not assist the jury in understanding the evidence under Rule
702, and that Funk’s testimony would violate Rule 704(b)’s prohibition of an
expert’s expression of an opinion on an ultimate issue in the case.
- 13 -
possibility in one of the Eagle Resources brochures, 11,303,000 new participants
would be required in that month. Id. at 294-95. Funk testified that, “[w]ith
respect to Eagle Resources, each new transaction is a recruitment. The sales
make no economic sense whatsoever. For those . . . who wish to earn the
suggested earnings eventually there is a saturation effect that results in the
pyramid being destroyed.” Id. at 298.
As indicated, Cantwell objected to Funk’s testimony under Fed. R. Evid.
402, 403, 702 and 704(b). We review a district court’s decision to admit or
exclude evidence, including expert testimony, for an abuse of discretion. United
States v. Velarde , 214 F.3d 1204, 1208 (10th Cir. 2000). Fed. R. Evid. 702,
which governs the admission of expert testimony, provided at the time of
Cantwell’s trial as follows:
If scientific, technical, or other specialized knowledge will assist the
trier of fact to understand the evidence or to determine a fact in
issue, a witness qualified as an expert by knowledge, skill,
experience, training, or education, may testify thereto in the form of
an opinion or otherwise.
Fed. R. Evid. 702. 5
This rule “‘imposes a special gatekeeping obligation on the
trial judge to ensure that an opinion offered by an expert is reliable.’” Velarde ,
214 F.3d at 1208 (quoting United States v. Charley , 189 F.3d 1251, 1266 (10th
Cir. 1999)). The trial judge has very broad discretion, however, “in both deciding
5
Effective December 1, 2000, Rule 702 was amended.
- 14 -
how to assess an expert’s reliability, including what procedures to utilize in
making that assessment, as well as in making the ultimate determination of
reliability.” Id. at 1208-09. See generally Kumho Tire Co. v. Carmichael , 526
U.S. 137 (1999); Daubert v. Merrell Dow Pharmaceuticals, Inc. , 509 U.S. 579
(1993).
Cantwell argues the district court failed to go through any specific steps to
determine the reliability of Funk’s testimony. We disagree. Funk testified to his
education, training and experience. 6
He testified he had worked on approximately
300 different investigations, a fourth to a third of which were fraud related,
including some twenty investigations specifically involving pyramid schemes.
Appellant’s App. II at 261, 265. He testified that he lectures at universities and
for professional societies, and that he spends forty hours per year in continuing
education. Id. at 261-62. While the court did not conduct a separate proceeding
to determine Funk’s qualifications, we are satisfied the record reveals that the
district court adequately established Funk’s qualifications to testify as an expert
regarding pyramid schemes and their characteristics, and that it did not abuse its
discretion in admitting his testimony. 7
Funk testified he received a B.S. degree in accounting, and was a certified
6
public accountant and a certified fraud examiner. Appellant’s App. II at 260-61.
We have held that the court is afforded wide latitude in determining how
7
to establish expert qualifications, and it need not conduct a separate proceeding.
(continued...)
- 15 -
Cantwell also argues the district court erred in determining that such
testimony was relevant under Rule 402 and not prejudicial under Rule 403.
Because he was not charged with operating a pyramid scheme, Cantwell asserts,
testimony as to such schemes was irrelevant under Rule 402. Relevant evidence
is defined as that which has “any tendency to make the existence of any fact that
is of consequence to the determination of the action more probable or less
probable than it would be without the evidence.” Fed. R. Evid. 401. He thus
argues that testimony about pyramid schemes was irrelevant to the wire and mail
fraud counts for which he was on trial. He further alleges it was prejudicial under
Rule 403.
As the government states in reply to this argument, Funk’s testimony about
pyramid schemes was relevant to the issue of whether Cantwell’s Eagle Resources
Program constituted a scheme to defraud, an element of the wire and mail fraud
charges against him. Thus, it was highly relevant, and not unfairly prejudicial.
We hold that the district court did not abuse its discretion in concluding that
Funk’s testimony was relevant, not unduly prejudicial, and therefore admissible.
7
(...continued)
See Charley, 189 F.3d at 1266 (“The trial judge is granted great latitude in
deciding which factors to use in evaluating the reliability of expert testimony, and
in deciding whether to hold a formal hearing.”).
- 16 -
III. Sufficiency of the Evidence
Cantwell moved for judgment of acquittal following the government’s
presentation of its case, and the court ultimately denied the motion. Cantwell
argues there is insufficient evidence supporting the jury verdict of guilty on the
two counts involving Pessalano.
“The sufficiency of the evidence to support a criminal conviction is a
question of law to be reviewed de novo . In doing so, however, we view the
evidence and all reasonable inferences therefrom in the light most favorable to the
jury verdict[].” United States v. Higgins , 282 F.3d 1261, 1274 (10th Cir. 2002).
We reverse a conviction only if we conclude that no reasonable jury could have
found the defendant guilty beyond a reasonable doubt. United States v.
Williamson , 53 F.3d 1500, 1514 (10th Cir. 1995). “We do not weigh conflicting
evidence or consider the credibility of witnesses.” United States v. Janusz , 135
F.3d 1319, 1323 (10th Cir. 1998). Thus, the evidence is sufficient if, taken in the
light most favorable to the government, the jury “could find guilt beyond a
reasonable doubt, based on the direct and circumstantial evidence, together with
the reasonable inferences therefrom.” United States v. Smith , 133 F.3d 737, 741-
42 (10th Cir. 1997).
Cantwell was convicted of mail and wire fraud. As charged in count five,
mail fraud required proof of three elements: “‘(1) the devising of a scheme or
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artifice . . . to defraud . . ., (2) the specific intent to defraud, and (3) the use of the
United States mails to execute the scheme.’” United States v. Haber , 251 F.3d
881, 887 (10th Cir. 2001) (quoting United States v. Kennedy , 64 F.3d 1465, 1475
(10th Cir. 1995)); 18 U.S.C. §1341. As charged in count six, “[t]o establish wire
fraud under 18 U.S.C. § 1343, the government must prove (1) a scheme or artifice
to defraud and (2) use of interstate wire communications to facilitate that
scheme.” Janusz , 135 F.3d at 1323; 18 U.S.C. § 1343. A scheme to defraud
requires proof of “‘conduct intended or reasonably calculated to deceive persons
of ordinary prudence or comprehension.’” Id. (quoting United States v. Hanson ,
41 F.3d 580, 583 (10th Cir. 1994)). “Evidence of the ‘schemer’s indifference to
the truth of statements can amount to [evidence of] fraudulent intent.’” United
States v. Trammell , 133 F.3d 1343, 1352 (10th Cir. 1998) (quoting United States
v. Reddeck , 22 F.3d 1504, 1507 (10th Cir. 1994)). We have explained that “the
central focus of the first element is the existence of a scheme. It is not the
making of the false pretenses, representations, or promises that constitutes the
first element of the offense, . . . [i]t is the devising or intending to devise the
scheme.” Kennedy , 64 F.3d at 1475 (internal quotation omitted).
Cantwell argues that “the government failed to establish that he devised any
scheme or artifice to defraud, or that he intended to deceive Pessalano in any of
the conduct that he undertook as a part of the Eagle Resources business.”
- 18 -
Appellant’s Br. at 32. He argues, in essence, that Pessalano received all the
materials he was told he would receive, that the value of the coins was revealed,
that participants in the Program did not simply recruit others, but rather sold an
actual product (the coins), and there was no evidence that Pessalano did not
receive any commission or bonus to which he was entitled or which he had been
told he would receive.
We hold that there was sufficient evidence from which a reasonable jury
could find Cantwell guilty beyond a reasonable doubt of the two counts of mail
and wire fraud and aiding and abetting in such fraud. 8
As the government argues,
despite Cantwell’s efforts to characterize his “linear pay program” otherwise,
expert witness testimony established that it had critical elements of a pyramid
scheme, in that participants’ profits depended on recruiting new participants and
the program faced a serious saturation problem. Although Cantwell asserts that
there was “contradictory evidence presented on that point,” id. at 33, it is within
the jury’s province to evaluate any conflicting evidence. Pyramid schemes
constitute schemes to defraud under the mail and wire fraud statutes. See United
States v. Gold Unlimited, Inc. , 177 F.3d 472, 484 (6th Cir. 1999)
(“Unquestionably, an illegal pyramid scheme constitutes a scheme to defraud.”);
With respect to the mail fraud count, Cantwell does not dispute that the
8
government established the element of use of the United States mails.
- 19 -
Webster v. Omnitrition Int’l, Inc. , 79 F.3d 776, 786 n.7 (9th Cir. 1996) (“An
inherently fraudulent pyramid scheme that meets the Koscot factors would fall
within the[] broad definitions of fraud [contained in the mail and wire fraud
statutes].”). 9
We agree with the government that it “established that Cantwell
developed and managed the pyramid scheme and was responsible for the content
of the marketing materials distributed to potential participants,” including
Pessalano. Appellee’s Br. at 40.
With respect to count six, the wire fraud count, Cantwell argues “there was
insufficient evidence of any wire communication made for the purpose to
defraud.” Appellant’s Br. at 35. He asserts that the only evidence of a wire
communication involving Pessalano is the telephone call to Felicia to request a
In In re Koscot Interplanetary, Inc., 86 F.T.C. 1106 (1975), aff’d mem. sub
9
nom., Turner v. F.T.C., 580 F.2d 701 (D.C. Cir. 1978) the Federal Trade
Commission established a definition for pyramid schemes as devices which:
are characterized by the payment by participants of money to the
company in return for which they receive (1) the right to sell a
product and (2) the right to receive in return for recruiting other
participants into the program rewards which are unrelated to sale of
the product to ultimate users. . . . .
As is apparent, the presence of this second element,
recruitment with rewards unrelated to product sales, is nothing more
than an elaborate chain letter device in which individuals who pay a
valuable consideration with the expectation of recouping it to some
degree via recruitment are bound to be disappointed.
Id. at 1181.
- 20 -
refund. As the government responds, to support the wire fraud conviction, it had
to prove the existence of a scheme to defraud and the use of interstate wire
communications to facilitate that scheme. The government established that
Cantwell set up a toll-free number to recruit and maintain participants. Moreover,
specifically with respect to Pessalano, he testified that he called that toll-free
number to ask for a refund, and was told he would receive one promptly once he
returned all his materials. The government did not need to prove that any specific
false representation was made to Pessalano in that call, only that the telephone
call furthered the scheme to defraud. See Kennedy , 64 F.3d at 1476 (“[S]chemes
to defraud need not even contemplate the use of affirmative misrepresentations.”).
It was entirely reasonable for the jury to conclude that that telephone call did just
that. 10
In sum, there was sufficient evidence from which the jury could find,
beyond a reasonable doubt, the elements of mail fraud and wire fraud and aiding
and abetting such fraud.
As the government argues, the assurance of a refund, like a “lulling letter”
10
in a mail fraud scheme, could be considered to further the scheme to defraud. See
Trammell, 133 F.3d at 1352-53 (noting that “[t]he Supreme Court has defined a
‘lulling letter’ as a mailing that is ‘designed to lull the victims into a false sense
of security, postpone their ultimate complaint to the authorities, and therefore
make the apprehension of the defendant [] less likely”) (quoting United States v.
Maze, 414 U.S. 395, 403 (1974)).
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IV. Allen Charge
Finally, Cantwell argues the district court erred in giving an Allen charge to
the jury after it informed the court it could not reach a unanimous verdict. At the
conclusion of the trial, the jury deliberated until 9:45 p.m., when it sent a note to
the court indicating it could not reach a unanimous verdict. The court proposed
an Allen charge, to which Cantwell objected. 11
The court overruled the objection
and instructed the jury as follows:
In a large proportion of the cases and perhaps strictly speaking
in all cases absolute certainty cannot be obtained nor can it be
expected. Although the verdict to which a juror agrees must of
course be his own verdict or her own verdict, the result of his or her
own convictions, and not a mere acquiescence in the conclusions of
his or her fellow jurors. Yet in order to bring 12 minds to a
unanimous result, you must examine the questions submitted to you
with candor and with the proper regard and deference to the opinion
of each other.
You should consider that you’re selected in the same manner
and from the same source from which any future jury must be
selected. There is no reason to suppose that this case will ever be
submitted to 12 men and women who are more intelligent, more
impartial or more competent to decide it, or that more or clearer
evidence will be produced on one side or the other. And with this
view it is your duty to decide the case if you can consciously do so
without violence to your individual judgment.
11
Cantwell’s attorney objected on the ground that the Allen charge might
“tend to lead jurors to disregard their duty.” Appellant’s App. II at 515. He did
not object, however, to the language of the particular Allen charge the court
proposed to give and did, in fact, give.
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In the event that you cannot so decide a jury has a right to fail
to agree. In order to make a decision more practical the law imposes
a burden of proof on one party or the other in all cases. The high
burden of proof which must be sustained by the prosecution has not
changed. In the present case the burden of proof is on the
government to establish with respect to each count each essential
element of the offense and to establish that essential element beyond
a reasonable doubt. And if with respect to any element of any count
you are left in reasonable doubt the defendant is entitled to the
benefit of such doubt and must be acquitted.
But in conferring together you ought to pay proper respect to
each other’s opinions, and you ought to listen with the disposition to
being convinced to each other’s arguments. Thus where there is a
disagreement jurors favoring acquittal should consider whether a
doubt in their own mind is a reasonable one, when it makes no
impression on the minds of the other equally honest and equally
intelligent who have heard the same evidence, and with the same
degree of attention and with an equal desire to arrive at the truth and
under the sanction of the same oath.
On the other hand, jurors for conviction ought seriously to ask
themselves whether they should doubt the correctness of a judgment
which is not concurred in by others with whom they are associated
and distrust the weight of sufficiency of that evidence which fails to
carry conviction in the minds of their fellow jurors.
Finally, not only should jurors in the minority reexamine their
positions, but jurors in the majority should also do so to see whether
they have given careful consideration and sufficient weight to the
evidence which has favorably impressed the person in disagreement
with them. That, of course, assumes there is a majority. For all I
know you are split six and six. If you are, please consider those
comments.
Incidentally, if you are unable to reach a unanimous verdict as
to all counts you are free to return a verdict on those counts, if any,
to which all of you do agree. I am instructing you now to go back
and resume your deliberations. And by asking you that I don’t mean
to force you at all to work longer than you want. I am just asking
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you now to go back and give it another try. If you’re too tired to go
on you can come back in the morning, or you can after trying tell me
that you cannot reach a unanimous verdict and that is okay. Or after
maybe pausing and considering some of the statements made in this
final instruction it may cause you to come to a unanimous verdict.
I don’t mean to press you to work longer than you want to
tonight. I would encourage you not to work much longer than
another hour at the most. It is 10:00 now. I would give it another
good try if you will, please. You have been here all day and you
have worked a hard, long day and it has not been easy I am sure. It
is not an easy task especially when there is not easy agreement. I do
want you to know how much we appreciate it. If the case ends in
what we call a hung jury with you’re not agreeing I will declare a
mistrial and it is up to the prosecution whether the case is prosecuted
again. It may be and, therefore, the comments in this instruction
about another jury being selected just the same way you were from
the same jury panel in the District of Utah, and if it were tried again
it would be presented to a different group of 12.
So that is why I think it is in our best interest and in the
criminal justice system’s best interest to ask you to give it another
good conscientious effort. Okay. All right. I am not suggesting an
hour is magical. If it goes a little beyond that and you think you can
reach a verdict, and I take it, Mr. Dean, you are the foreperson?
MR. DEAN: Yes.
THE COURT: You monitor this and if there comes a point
where you have a verdict let us know and if you want to go home let
us know, or if you are just hopelessly deadlocked let us know.
Appellant’s App. II at 517-20.
At 11:30 p.m., the jury sent the court another note indicating the jury would
like to leave for the evening and resume deliberations in the morning. The jury
asked permission to resume deliberations at 9:00 a.m. the following morning. The
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court informed them that, because of a funeral, he would be unavailable to accept
a verdict until 2:00 p.m. 12
The jury resumed deliberation the following morning
and returned a guilty verdict on counts five and six. 13
Cantwell argues the language used in the Allen charge had a “coercive
effect in urging the jury to reach a decision, informing them that if they did not, a
mistrial would be declared.” Appellant’s Br. at 38. He also argues the judge’s
statement that he could not take a verdict until 2:00 p.m. coerced the jury by
impermissibly imposing a particular time frame for reaching a verdict. Cantwell
also asserts that the charge was coercive because it was given only after the jury
informed the court that it could not reach a unanimous verdict, rather than in
conjunction with all the other jury instructions.
We have recently thoroughly explored Allen charges and the considerations
which may lead to the conclusion that a particular Allen charge is or is not unduly
coercive. “With respect to the coerciveness of the charge actually given, this
circuit has adopted a case-by-case approach, . . . considering such factors as ‘(1)
[t]he language of the instruction[;] (2) its incorporation with other instructions;
and (3) the timing of the instruction.’” United States v. McElhiney , 275 F.3d 928,
In fact, because the funeral was for the wife of a fellow district court
12
judge, no judge would have been available to accept a verdict until 2:00 p.m.
13
There is no evidence in the record as to exactly when the jury returned its
verdict.
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940 (10th Cir. 2001) (quoting United States v. Porter , 881 F.2d 878, 888 (10th
Cir. 1989)) (further citations omitted). The “ultimate question” always is
“whether the Allen instruction was ‘impermissibly coercive in a way that
undermined the integrity of the deliberation process.’” Id. (quoting Porter , 881
F.2d at 889) (footnote omitted).
Cantwell first challenges the timing of the Allen instruction given in this
case, arguing that it should have been given along with all the other jury
instructions, and that it was unduly coercive because it was given only after the
jury announced it could not reach a unanimous verdict. While we have noted that
it is preferable to give an Allen instruction along with all other jury instructions,
we have specifically approved such instructions given after the jury has reached
an impasse. See McElhiney , 275 F.3d at 942 (“We hasten to note that this
positioning of the instruction [after the jury has reached an impasse] does not by
itself establish coercion.”); United States v. Arney , 248 F.3d 984, 988-89 (10th
Cir. 2001) (“Although this court has stated that the preferred practice is to issue
an Allen charge prior to jury deliberations along with other jury instructions, we
have found on numerous occasions that Allen charges given to a jury during its
deliberations were not unduly coercive.”) (internal citation omitted). Thus, we
have no per se rule that an Allen charge given after the jury has announced it is
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deadlocked is necessarily coercive. Rather, we examine the language of the
instruction and other factors to assess coerciveness.
The charge given in this case was what we have described as a “‘modified’
Allen charge, differing from a traditional Allen charge by asking each juror,
rather than only those in the minority, to carefully reconsider the evidence.”
Arney , 248 F.3d at 988. Such charges reduce the possibility of coercion. Id.
Considering our prior case law, the Allen charge given in this case was not
coercive. It contained the cautionary language that “no juror should surrender his
or her conscientiously held convictions and that the burden of proof belonged to
the government, not the defendant.” McElhiney , 275 F.3d at 943. Moreover, the
instruction did not unduly emphasize either the desirability of a verdict and/or the
court’s desire for a verdict, nor did it emphasize the expense and/or difficulty of a
retrial should the jury remain deadlocked. Cf. id. 275 F.3d at 944 (noting that
instruction was problematic because of two embellishments–emphasizing
desirability of reaching verdict and statement about expense and danger involved
in retrial).
Finally, Cantwell suggests that the court implicitly placed a deadline on the
jury’s deliberations by informing the jury that he could not accept a verdict until
2:00 p.m. of the day following the giving of the Allen instruction. We disagree.
The judge simply informed the jury of the fact that any verdict could not formally
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be accepted until at least 2:00 p.m. Nothing in his instruction or dialogue with
the jury in any way suggested that there was any particular deadline. In fact, he
stated that it was completely acceptable for the jury to not reach a verdict.
In sum, we conclude that the very thorough and lengthy Allen charge given
in this case was not unduly coercive. Indeed, it was a virtual model in
thoroughness and balance, omitting none of the language which we have
emphasized should be included in a proper Allen charge, while avoiding language
we have found troublesome.
CONCLUSION
For the foregoing reasons, we AFFIRM Cantwell’s conviction and
sentence.
ENTERED FOR THE COURT
Stephen H. Anderson
Circuit Judge
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