United States v. Manuel Rodriguez

Case: 11-15911 Date Filed: 10/16/2013 Page: 1 of 18
CORRECTED OPINION
[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 11-15911
________________________
D.C. Docket No. 0:11-cr-60062-WPD-1
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
MANUEL RODRIGUEZ,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(October 16, 2013)
Before HULL and MARTIN, Circuit Judges, and BOWEN, * District Judge.
*
Honorable Dudley H. Bowen Jr., United States District Judge for the Southern District of
Georgia, sitting by designation.
Case: 11-15911 Date Filed: 10/16/2013 Page: 2 of 18
MARTIN, Circuit Judge:
Manuel Rodriguez appeals his convictions and 120-month sentence of
imprisonment for conspiracy to commit wire fraud, in violation of 18 U.S.C.
§ 1349, and wire fraud, in violation of 18 U.S.C. § 1343. On appeal, Mr.
Rodriguez raises two issues. First, Mr. Rodriguez argues that there was not
sufficient evidence at trial to support his convictions. Second, Mr. Rodriguez says
that the record did not establish that his offense involved more than 50 victims, so
the District Court erred when it applied a 4-level sentence enhancement under
United States Sentencing Guidelines (USSG) § 2B1.1(b)(2)(B).
We affirm Mr. Rodriguez’s convictions because there was sufficient
evidence for a reasonable trier of fact to find Mr. Rodriguez guilty beyond a
reasonable doubt. However, because the record does not support a finding that his
offense involved more than 50 victims, we vacate Mr. Rodriguez’s sentence and
remand to the District Court for resentencing with a 2-level enhancement under
USSG § 2B1.1(b)(2)(A) rather than a 4-level enhancement under
§ 2B1.1(b)(2)(B).
I.
On March 24, 2011, a federal grand jury sitting in the Southern District of
Florida returned a nine-count indictment against Mr. Rodriguez. The indictment
charged Mr. Rodriguez with one count of conspiracy to commit wire fraud, in
2
Case: 11-15911 Date Filed: 10/16/2013 Page: 3 of 18
violation of 18 U.S.C. § 1349, and eight counts of wire fraud, in violation of 18
U.S.C. § 1343. Before trial, the District Court dismissed one count of wire fraud
(Count 4). Mr. Rodriguez proceeded to trial on the remaining counts on September
12, 2011.
A.
The evidence at trial showed that between 2003 and 2007, Mr. Rodriguez
owned, operated, and participated in four different companies that sold coffee
machines and other vending machines to the public. Mr. Rodriguez’s companies
tried to generate sales by posting ads on the Internet seeking investors who were
looking to own and operate their own small businesses. When a possible investor
responded to an ad, one of Mr. Rodriguez’s associates would contact them and
inform them about their golden opportunity to invest in a new coffee machine,
vending machine, or drinking water machine.
In order to induce prospective customers to buy his products, Mr. Rodriguez
and his associates gave a number of guarantees, both over the phone and in
promotional materials created by Mr. Rodriguez. For example, sales people would
routinely guarantee the amount of money that customers would make each day and
how quickly they could recoup their investment. The companies also promised
that they would provide experienced professional location specialists who would
use advanced market analytics and demographic research to secure high-end
3
Case: 11-15911 Date Filed: 10/16/2013 Page: 4 of 18
locations where the machines would have lots of potential patrons. The companies
promised that if the customers were to encounter any problems, they would be
provided with technical support and assistance. Best of all, the customers were
told that if they were not satisfied with their purchase, they could return the
machines and receive a full refund.
Mr. Rodriguez’s customers found out the hard way that these guarantees
were too good to be true. After sending their money to Mr. Rodriguez, customers
were told that they could expect to have their businesses up and running in weeks.
But in fact, many waited for months for their machines to arrive, if they ever
arrived at all. When the machines did finally arrive, many customers found that
they did not work or that they cost more to operate than had been advertised.
Mr. Rodriguez’s customers were also disappointed by the locations secured
by the professional location specialists. Instead of having their machines placed at
high-end venues where they could sell hundreds of items each day, customers were
forced to settle for remote locations where they could barely cover their
operational costs. Many customers testified that the machines generated zero
profits or substantial losses. This, in the face of the 300-700% profit they had been
promised. None of the customers said they had been able to recoup the cost of
their initial investment.
4
Case: 11-15911 Date Filed: 10/16/2013 Page: 5 of 18
Unsurprisingly, customers became frustrated and asked Mr. Rodriguez for
help. Most of these customers, however, discovered that the technical support and
assistance they had been promised was nowhere to be found. When they asked for
a change in location, it didn’t happen. And when customers asked for refunds, Mr.
Rodriguez almost never honored his money-back guarantee.
Finally, the evidence at trial also showed that Mr. Rodriguez knew that all of
this was happening, yet he continued to sell his machines to customers and
guarantee profit figures which he knew were not real. Despite the number of
complaints that Mr. Rodriguez received, new customers were told that failure was
not a possibility. When prospective customers asked to speak to current investors,
Mr. Rodriguez routinely supplied fake references. Sometimes Mr. Rodriguez even
falsely stated that he owned the machines himself and that they were profiting and
doing well for him. Beyond that, even after Mr. Rodriguez was served a cease and
desist order from the Maryland Attorney General and told his customers that he
was closing his company due to bankruptcy, Mr. Rodriguez simply created new
companies selling different machines. In the Articles of Incorporation for one of
his later companies, Mr. Rodriguez named his mother the President and CEO so
that prospective customers could not tie the troubles of his earlier companies back
to him. Mr. Rodriguez also drafted disclosure documents without mention of prior
5
Case: 11-15911 Date Filed: 10/16/2013 Page: 6 of 18
litigation, prior sanctions, or bankruptcies, and sent them to his prospective
customers.
At the close of the government’s case, the District Court dismissed an
additional wire fraud count. On September 28, 2011, the jury returned its verdict,
convicting Mr. Rodriguez of all remaining counts.
B.
Mr. Rodriguez was sentenced on December 7, 2011. The government
sought a 4-level sentence enhancement under USSG § 2B1.1(b)(2)(B), arguing that
Mr. Rodriguez’s offense involved 50 or more victims. In support of this
enhancement, the government submitted 42 affidavits from victims who sustained
a loss after buying Mr. Rodriguez’s machines, as well as a summary chart
indicating a total of 238 victims. Mr. Rodriguez objected and argued that there
was insufficient evidence in the record to show that the offense involved more than
50 victims. Nevertheless, the District Court reasoned that out of 238 customers
who bought machines from Mr. Rodriguez, there must have been at least 50
victims. As a result, the District Court applied a 4-level sentence enhancement
under USSG § 2B1.1(b)(2)(B).
II.
A.
6
Case: 11-15911 Date Filed: 10/16/2013 Page: 7 of 18
Mr. Rodriguez first argues that there was not sufficient evidence to support
his convictions. He suggests that the government’s evidence at most establishes
that he engaged in “mere puffery” in connection with the sale of his business
opportunities, but not fraud. This is especially true, he claims, because he told all
of his customers up front that there was substantial risk involved in purchasing one
of his machines.
We review de novo a district court’s denial of judgment of acquittal on
sufficiency of evidence grounds. United States v. Browne, 505 F.3d 1229, 1253
(11th Cir. 2007). In reviewing a sufficiency of the evidence challenge, we
consider the evidence in the light most favorable to the government, drawing all
reasonable inferences and credibility choices in the government’s favor. Id. A
jury’s verdict cannot be overturned if any reasonable construction of the evidence
would have allowed the jury to find the defendant guilty beyond a reasonable
doubt. United States v. Herrera, 931 F.2d 761, 762 (11th Cir. 1991). The evidence
need not be inconsistent with every reasonable hypothesis except guilt, and the jury
is free to choose between or among the reasonable conclusions to be drawn from
the evidence presented at trial. United States v. Poole, 878 F.2d 1389, 1391 (11th
Cir. 1989) (per curiam). But when the government relies on circumstantial
evidence, the conviction must be supported by reasonable inferences, not mere
7
Case: 11-15911 Date Filed: 10/16/2013 Page: 8 of 18
speculation. United States v. Friske, 640 F.3d 1288, 1291 (11th Cir. 2011)
(quotation marks omitted).
We have held that in order to support a conviction for wire fraud, the
evidence at trial must show that a defendant (1) intentionally participated in a
scheme or artifice to defraud another of money or property, and (2) used or caused
the use of wires for the purpose of executing the scheme or artifice. United States
v. Ward, 486 F.3d 1212, 1222 (11th Cir. 2007). Similarly, in order to sustain a
conviction for conspiracy to commit wire fraud, the government must prove that
the defendant “knew of and willfully joined in the unlawful scheme to defraud.”
United States v. Maxwell, 579 F.3d 1282, 1299 (11th Cir. 2009).
It is true that “puffing” or “sellers’ talk” is not a crime under federal fraud
statutes. See United States v. Martinelli, 454 F.3d 1300, 1317 (11th Cir. 2006); see
also United States v. Brown, 79 F.3d 1550, 1557 (11th Cir. 1997) (quoting with
approval United States v. Pearlstein, 576 F.2d 531, 540 n. 3 (3d Cir. 1978) for
proposition that statements that a company is “nationally known” and that the
product is “among the finest . . . in the world” are not cognizable under the federal
mail fraud statute) (overruled on other grounds by United States v. Svete, 556 F.3d
1157 (11th Cir. 2009)). Instead, fraud requires proof of a “material
misrepresentation, or the omission or concealment of a material fact calculated to
deceive another out of money or property.” Maxwell, 579 F.3d at 1299.
8
Case: 11-15911 Date Filed: 10/16/2013 Page: 9 of 18
We affirm Mr. Rodriguez’s convictions because a reasonable jury could
have found that his misrepresentations to his customers surpassed mere puffery or
“sellers’ talk.” The evidence at trial showed that Mr. Rodriguez did not simply
puff up the profitability of his machines to prospective customers. Rather, he made
material misrepresentations of fact in the course of an ongoing scheme to defraud
them. See United States v. Majors, 196 F.3d 1206, 1211 (11th Cir. 1999)
(defendant surpassed puffing or sellers’ talk by serving as an officer of fraudulent
corporations, signing newsletters and corporate literature with false statements,
attending meetings, and knowingly and voluntarily participating in scheme to
defraud investors).
For example, Mr. Rodriguez’s customers did not testify that they were
simply given an opinion or an assurance that their investments were going to be
successful. Rather, Mr. Rodriguez guaranteed specific profit figures and provided
a definitive time frame for when his customers would recoup their investments.
He did this even though he knew his representations were completely unfounded.
Mr. Rodriguez’s sales associates also promised expert location specialists who
would use advanced research analytics to secure profitable locations for the
machines. Mr. Rodriguez knew all the while, however, that his locators used
absolutely no research and placed his customers’ machines haphazardly in
unprofitable locations. On top of all this, even though a number of customers
9
Case: 11-15911 Date Filed: 10/16/2013 Page: 10 of 18
asked for refunds and received nothing, Mr. Rodriguez continued to promise
prospective customers that if they were not satisfied with their machines, they
could get a full refund and all their money back. The jury could reasonably infer
that these patently false promises far surpassed “sellers’ talk” or “mere puffery.”
The evidence at trial also showed that Mr. Rodriguez was not just
overstating the facts to sell his products to customers. He was also actively
concealing relevant information from potential customers as part of his scheme to
defraud. When prospective customers asked to speak to current investors, Mr.
Rodriguez frequently gave fake references or falsely stated that he owned the
machines himself. And even after the Maryland Attorney General ordered him to
cease and desist from selling his products and telling his customers that he was
filing for bankruptcy, Mr. Rodriguez simply formed a new company—naming his
mother as CEO—so that he could continue his scheme. Because a reasonable jury
could find that these types of concealments surpassed “sellers’ talk” or “mere
puffery,” we conclude that there was sufficient evidence to support Mr.
Rodriguez’s convictions.
B.
In fraud cases, the Sentencing Guidelines provide for certain enhancements
to the base offense level depending on the number of victims. If there are 10 or
more victims, there is a 2-level enhancement; if there are 50 or more victims, there
10
Case: 11-15911 Date Filed: 10/16/2013 Page: 11 of 18
is a 4-level enhancement; and for 250 or more victims, there is a 6-level
enhancement. See USSG § 2B1.1(b)(2)(A)–(C). Before the sentencing hearing,
Mr. Rodriguez filed written objections to the 4-level enhancement recommended in
the Presentence Investigation Report. Mr. Rodriguez’s objection argued that the
government had proved only 10 victims and that therefore the offense level should
only be raised by two levels.
Mr. Rodriguez argues that the District Court clearly erred when it found that
his offense involved more than 50 victims. Although he acknowledges that the
government presented 42 affidavits of victims who suffered a loss and a summary
chart indicating that there were 238 victims total, he points out that the
government provided no witnesses or underlying data to authenticate the
government’s summary chart. For this reason, Mr. Rodriguez argues that the
District Court’s finding is not supported by reliable and specific evidence. We
agree.
This Court reviews de novo the interpretation and application of the
Guidelines, and reviews underlying factual findings, including the District Court’s
calculation of the number of victims, for clear error. United States v. Foley, 508
F.3d 627, 632 (11th Cir. 2007); United States v. Lee, 427 F.3d 881, 892, 894–95
(11th Cir. 2005) (applying clear error review to the District Court’s determination
of number of victims). “Although review for clear error is deferential, a finding of
11
Case: 11-15911 Date Filed: 10/16/2013 Page: 12 of 18
fact must be supported by substantial evidence.” United States v. Robertson, 493
F.3d 1322, 1330 (11th Cir. 2007).
“When a defendant challenges one of the factual bases of his sentence . . .
the Government has the burden of establishing the disputed fact by a
preponderance of the evidence.” United States v. Lawrence, 47 F.3d 1559, 1566
(11th Cir. 1995). “It is the district court’s duty to ensure that the Government
carries this burden by presenting reliable and specific evidence.” Id. While
estimates are permissible, courts “must not speculate concerning the existence of a
fact which would permit a more severe sentence under the guidelines.” United
States v. Sepulveda, 115 F.3d 882, 890 (11th Cir. 1997) (quotation marks omitted).
Additionally, “the law of this Circuit clearly provides that reliable hearsay can be
considered during sentencing.” United States v. Zlatogur, 271 F.3d 1025, 1031
(11th Cir. 2001); United States v. Wilson, 183 F.3d 1291, 1301 (11th Cir. 1999)
(“A court may consider any information (including hearsay), regardless of its
admissibility at trial, in determining whether factors exist that would enhance a
defendant’s sentence, provided that the information is sufficiently reliable.”).
Absent a stipulation or agreement between the parties, however, an attorney’s
factual assertions alone do not constitute evidence that a District Court can rely on.
United States v. Washington, 714 F.3d 1358, 1361 (11th Cir. 2013).
12
Case: 11-15911 Date Filed: 10/16/2013 Page: 13 of 18
The District Court clearly erred when it found that Mr. Rodriguez’s offense
involved more than 50 victims. The only evidence presented to the Court
suggesting that there were more than 50 victims was the summary chart proffered
by the government. The prosecution presented no witnesses to authenticate what
the chart represented, how it was prepared, or by whom. While the district court
could consider trial evidence, there was no testimony or evidence tying the
summary chart to any of the trial evidence either. Neither did the prosecution
present any witnesses or evidence to verify that the information in the chart was
correct. In essence, the summary chart amounted to little more than an allegation
by the government on a piece of paper that Mr. Rodriguez’s offense involved more
than 50 victims. See Washington, 714 F.3d at 1361 (representations by the
government at sentencing that there were more than 250 victims were insufficient);
United States v. Lawrence, 47 F.3d 1559, 1568 (11th Cir. 1995) (holding that
“perfunctory summaries of the evidence that the Government stood ready to
present” were not evidence). The government failed to present any evidence to
establish that Mr. Rodriguez’s offense involved more than 50 victims. See
Sepulveda, 115 F.3d at 890. Therefore, Mr. Rodriguez’s sentence should not have
been enhanced by four levels based on such a finding. 1
1
We reject the government’s argument that Mr. Rodriguez waived his objection to the summary
chart as evidence of the number of victims. When the government proffered the chart to the
13
Case: 11-15911 Date Filed: 10/16/2013 Page: 14 of 18
III.
We affirm Mr. Rodriguez’s convictions. However, the 4-level enhancement
under USSG § 2B1.1(b)(2)(B) is set aside, and the case is remanded for
resentencing without that enhancement. The District Court should impose a 2-
level enhancement under USSG § 2B1.1(b)(2)(A) because Mr. Rodriguez has
conceded on appeal that there were 10 or more victims of his conduct.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED
district court, counsel for Mr. Rodriguez expressly objected to the chart as an improper way to
prove the amount of victims.
14
Case: 11-15911 Date Filed: 10/16/2013 Page: 15 of 18
BOWEN, Senior District Judge, specially concurring:
I concur in the opinion in full. I write specially to comment on the
Government’s treatment of the sentencing proceedings.
This is another case wherein the Government has failed to come forward
with evidence at a critical time. Unfortunately, important objections made by a
defendant at a sentencing hearing are often dealt with as an afterthought. The
Government’s cavalier disregard for the need of further evidence, specific
references to a trial transcript, or another basis upon which the district court may
make sustainable findings is all too typical. In this case, after a laboriously
conducted two-week trial, resulting in a conviction we readily affirm, the
Government’s willingness to allow the matter to conclude resting upon
extrapolation, conjecture, and innuendo left the district court stranded with a well-
prepared Presentence Investigation Report, some commentary, and little else.
A district court’s factual findings at a sentencing hearing are reviewed using
the deferential standard of “clear error.” United States v. Foley, 508 F.3d 627, 632
(11th Cir. 2007). Here, as a consequence of the Government’s lackadaisical
approach, we are ultimately “left with the definite and firm conviction that a
mistake has been committed.” United States v. McDaniel, 631 F.3d 1204, 1209
(11th Cir. 2011). The Government’s inaction encouraged the district court to
speculate as to the amount of loss and the number of victims. Why the Executive
15
Case: 11-15911 Date Filed: 10/16/2013 Page: 16 of 18
Branch would expend its resources in extensive, indeed intricate, investigation and
prosecution of this case, only to approach its culmination (the sentencing event)
with such laxity, is a mystery.
It is true that a sentencing proceeding is more flexible and less formalized
than a trial to a jury. See, e.g., Foley, 508 F.3d at 633 (“[T]he [Sentencing]
Guidelines require a district court to take into account not merely the charged
conduct, but rather all relevant conduct, in calculating a defendant’s offense
level.”) (citation and internal quotation marks omitted); United States v. Zlatogur,
271 F.3d 1025, 1031 (11th Cir. 2005) (observing that a district court may consider
“reliable hearsay” during sentencing). During sentencing, The Government need
only establish a disputed fact by a preponderance of the evidence. United States v.
Lawrence, 47 F.3d 1559, 1566 (11th Cir. 1995). Further, the district court can rely
upon its recollection of the evidence of the trial to make its findings. United States
v. Hamaker, 455 F.3d 1316, 1338 (11th Cir. 2006) (“The district court’s factual
findings for purposes of sentencing may be based on, among other things, evidence
heard during trial, undisputed statements in the [Presentence Investigation Report],
or evidence presented during the sentencing hearing.”) (citation and internal
quotation marks omitted).
I fear that the latitude allowed in sentencing proceedings often lulls the
Government’s lawyers into a species of spectator. However, the lower standard of
16
Case: 11-15911 Date Filed: 10/16/2013 Page: 17 of 18
proof, the district court’s wide discretion, and the degree of informality in no way
lessen the importance or the due process implications of the event. See United
States v. Gupta, 572 F.3d 878, 887-88 (11th Cir. 2009) (observing that “the
Government[‘s] burden of establishing the disputed fact by a preponderance of the
evidence . . . must be satisfied with reliable and specific evidence” and that “a
district court must make factual findings sufficient to support the government’s
claim . . . .”) (emphasis added) (citations and internal quotation marks omitted).
Thus, the significance of the Government’s participation continues from the
commencement of the case to its conclusion.
In fairness to the district court, findings made at a sentencing hearing are
often entered months after a trial, following other trials, adversary proceedings,
contested matters, and numerous matters in litigation. The United States Probation
officers correctly concentrate on the preparation of a Presentence Investigation
Report, which may include evidentiary matters, opinions, conclusions, and
recommendations based on subjective criteria. When facts in the Presentence
Investigation Report are disputed, however, the district court needs more. No one
is better positioned than trial counsel for the Government to anticipate and satisfy
the need for articulation, protection, and supplementation of the record with the
testimony of witnesses, necessary exhibits, or other evidence. Too often,
energetic, successful prosecutors approach what is arguably the most important
17
Case: 11-15911 Date Filed: 10/16/2013 Page: 18 of 18
part of the case with a surprising level of inexactitude. Responsible advocacy
demands more.
18