United States v. R. Peter Stanham

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 07-14097 ELEVENTH CIRCUIT
AUGUST 12, 2010
________________________
JOHN LEY
CLERK
D. C. Docket No. 03-20951-CR-AJ
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
ARIADNA PUERTO,
EDUARDO ORLANSKY,
HECTOR ORLANSKY,
Defendants-Appellants.
________________________
Appeals from the United States District Court
for the Southern District of Florida
_________________________
(August 12, 2010)
Before O’CONNOR,* Associate Justice Retired, CARNES and ANDERSON,
Circuit Judges.
ANDERSON, Circuit Judge:
*
Honorable Sandra Day O’Connor, Associate Justice (Retired) of the United States
Supreme Court, sitting by designation.
In this fraud and money laundering case, the three appellants challenge their
convictions and sentences. Appellants were charged with conspiracy to commit
bank and wire fraud, bank fraud, fraud by wire, conspiracy to launder money, and
money laundering.1 Appellant Hector Orlansky was also charged with making
false statements to the FDIC, in violation of 18 U.S.C § 1007.
I. FACTS AND PROCEDURAL HISTORY
Appellants Hector and Eduardo Orlansky were in the factoring business, a
legitimate financing service whereby the factor advances its client 80% of the
value of the client’s accounts receivable. The factor then tries to collect the full
amount of the accounts receivable from its client’s customer. The factor also
charges the client a fee and interest on the advance that accrues until the client’s
customer pays the account. Through related entities, the Orlansky family owned
and operated a factoring business called Bankest Capital Corporation (“BCC”) for
many years. Eduardo ran the company and Hector began working there in 1993.
Appellant Puerto worked her way up from office manager to vice president and
eventually BCC board of directors member.
1
Specifically, Appellants were indicted under 18 U.S.C. § 371, 18 U.S.C § 2, 18
U.S.C. § 1344, 18 U.S.C. § 1343, and 18 U.S.C. § 1956.
2
The fraud began as early as 1994 when Joy Athletic (“Joy”), one of BCC’s
largest clients, had a customer refuse to pay and its receivables became past due.
A BCC employee proposed altering the receivable’s due date, which Eduardo
endorsed; the altered reports were sent to Barclays, the lender to BCC at that time.
During 1994, BCC’s advances to Joy exceeded the 80% maximum required ratio
of advances to accounts receivable, and Joy began warning that it might go
bankrupt. The Orlanskys decided to advance Joy more funds based on future
invoices.
At this point, Barclays decided to end its relationship with BCC, and the
Orlanskys arranged financing from the Espirito Santo Group (“ESG”), an
international banking and finance enterprise based in Portugal, through its Miami-
based FDIC-insured bank, Espirito Santo Bank (“ES Bank”), of which Hector was
on the board of directors. ES Bank became the primary victim of the fraud.
Initially, the money from ESG flowed to the Orlansky-owned entity Bankest
Receivables Finance and Factoring Corporation (“BRFFC”). To raise funds,
BRFFC issued debentures which ES Bank marketed to international clients.
Because BRFFC offered debentures, it agreed to be audited annually.
At the time the Orlansky entities and the ESG entities entered into the
financing agreements, in 1994, BRFFC was already “out of formula” with Joy
3
(i.e., had advanced funds to Joy in excess of 80% of the accounts receivable).
This was concealed from ESG. Over time, the fraud escalated both in amount and
complexity. By 1996, over 90% of the factoring business was tied to Joy, and Joy
had been over-advanced $4 million. When Joy sought another $700,000, BCC
agreed but required Joy’s stock; after this, the Orlanskys considered themselves to
be one-third owners of Joy. Neither the over-advances nor the ownership interests
were disclosed to ESG.
The Orlanskys and other BCC executives discussed how Joy’s true
condition could be concealed from the auditors, B.D.O. Seidman. They agreed to
alter computer and other records to fool the auditors. From that point on,
Appellants continued to alter their records to make the business appear to be
solvent. ESG relied on these audits in making its decision to become BCC’s
partner in 1998. In that year, ESG and BCC created a joint venture, ES Bankest
(“Bankest”).2 Eduardo was chairman of the board of directors of Bankest, and
Hector was its president and chief executive officer. Thus, the Orlanskys ran
Bankest, while ES Bank’s role in the venture was to market Bankest debentures to
its international clients, thus providing funding for Bankest. Although Hector had
pledged to Carlos Mendez – a co-conspirator who pleaded guilty and testified for
2
ES Bank and BCC were each 50% shareholders in Bankest.
4
the Government – to run Bankest legitimately, he soon reneged and resumed
fraudulent activity.
Over time, the fraud became exceedingly complex, all designed to conceal
the true financial condition of the factoring business from the auditors and from
the lenders (the ESG entities and the debenture holders). It began by altering the
due dates on real accounts receivable. Later, Appellants and their co-conspirators
created phantom accounts receivable. Periodic collateral certifications were
falsified. Insurance reports were fabricated. The fact of unsecured advances to
Joy and other clients were concealed, as well as the Orlanskys’ equity interest in
Joy and the true financial position of Joy. This and other conflicts of interest were
concealed not only from the lenders but also from ES Bank, the 50% joint venture
partner. Computer records were altered to fool the auditors and lenders and
misrepresent the financial status of the business so as to make the business appear
to be solvent and profitable. Appellants and their co-conspirators orchestrated
complex transfers of funds between entities they controlled to hide the fact that
clients were not paying back their advances or that accounts receivable were not
being paid up. A few of the details of this extensive fraud follow.
One of the co-conspirators, Dominick Parlapiano, a key employee of the
business, brought in a new client, CD Jewelbox (“CDJ”) in 1997. In June 1999,
5
Appellants discovered that CDJ was in fact a sham company created by
Parlapiano, which had no real receivables. Almost $10 million was advanced to
CDJ, approximately $500,000 of which was lost, having been pocketed by
Parlapiano. Although the Orlanskys confronted Parlapiano, instead of revealing
this thievery to ESG or to the police, the Orlanskys and Parlapiano moved all of
the CDJ accounts to another client and fake activity was generated for that client
as a coverup. All three Appellants knew these details with regard to CDJ and
participated in the coverup, which consisted in part of moving the debt to other
accounts, such as client Enterprise Network Applications (“ENA”), a
telecommunications software producer.
The Appellants engaged in a shifting of money between entities that they
called “bicicleta,” or cycling. By moving money between BCC and Bankest, and
other entities, the Appellants created the appearance of payments on the debts. In
what they called “bicicleta II,” the Appellants wired money from BCC to a
compliant client and the client then wired a similar amount back, purporting to be
a payment from a customer.
Appellants also engaged in an extensive undertaking of creating fake
invoices and checks, falsifying letters from clients certifying the inflated accounts
receivable, altering computer records, and signing letters falsely attesting that the
6
Bankest financial statements were fair and accurate – all to pass the yearly audits.
Similarly, the documents Hector submitted to the FDIC were full of
misrepresentations.
The scheme began to unravel in Fall 2001. ES Bank had already wanted to
reduce funding to Bankest when BCC learned that client United Container had
filed for bankruptcy. The Orlanskys decided not to disclose this to ES Bank but in
February 2002, the ES Bank president learned and confronted them. Eduardo told
the president that the bankruptcy was recent; however, the president soon learned
that not only was the bankruptcy not recent but that Bankest had been involved in
the proceedings. In late February, ES Bank decided to terminate the joint venture
and offered to acquire BCC’s half interest in Bankest for $10 million. Out of fear
that the fraud would be discovered, the Orlanskys counter-offered to buy out ES
Bank’s share and the bank agreed. Using funds that were mostly Bankest’s, the
Appellants amassed the required funds; $7 million of the $10 million purchase
price was Bankest money. Because the purchase meant that the flow of money
from debentures stopped, the Orlanskys applied to ESG’s principals for
refinancing of Bankest’s debt and the parties reached a restructuring agreement in
November 2002 for the outstanding debt of $172 million. However, because
Bankest had very little business and no new funding, it stopped making payments.
7
As a result, ESG sued Bankest in July 2003, and the court appointed Lewis
Freeman as examiner. Employees Parlapiano, Mendez, Puerto, and Ambrosiani
balked at lying to the examiner while the Orlanskys assured them that these were
only “white lies.” Freeman attempted to contact the clients to collect and by the
time of the trial in 2006, he had only collected $5 million on the $220 million
receivables; Bankest owed ESG $170 million.
The Appellants were indicted in December 2003 for conspiracy to commit
bank and wire fraud, bank fraud, wire fraud, conspiracy to commit money
laundering, and money laundering; Hector was also indicted for making false
statements to the FDIC. Appellants were indicted along with Otto Ambrosiani,
Jeffrey Barnhill, Carlos Mendez, Parlapiano, and Howard Cantor, who all pled
guilty. Mendez provided extensive testimony for the Government. Appellant
Eduardo Orlansky argued that he was incompetent to stand trial and the district
court held several hearings, as discussed in detail below, before rejecting his
contention. Appellants proceeded to trial with Peter Stanham, who has not
appealed. The jury convicted the Appellants on half of the counts, finding them
guilty only of the charges that pertained to fraud that occurred after 1999. The
Orlanskys were each sentenced to 240 months’ imprisonment, Puerto was
sentenced to 84 months, and all were ordered to pay restitution in the amount of
8
$164,597,310.11.
II. DISCUSSION
A. Hector Orlansky – Sufficiency of the evidence
Hector argues that there was insufficient evidence to support his convictions
because he was just a figurehead of the company and not involved in any of the
financial transactions. Instead, he asserts, the fraud was perpetrated by members
of the middle management, specifically Parlapiano, and he knew nothing of it.
We agree with the Government that there is more than sufficient evidence to
support Hector’s convictions. First, there was testimony that Hector approved the
transfer of fake receivables, breaking his pledge to run the Bankest business
“clean.” Additionally, Mendez’s testimony directly rebuts Hector’s arguments that
he was duped; Mendez testified to many meetings where over-advances were
discussed and Hector was present. Hector also attended meetings where the
employees discussed how the Joy situation could not be disclosed to ESG. And,
he continued to represent to ESG that CDJ was a substantial asset even after he
learned that it was a sham.
Much of Hector’s argument is a credibility challenge to Mendez because it
was Mendez’s testimony that placed Hector at the key meetings and with the
9
incriminating knowledge. We will not disturb a jury’s credibility determination
unless the testimony is “incredible as a matter of law.” United States v. Flores,
572 F.3d 1254, 1263 (11th Cir. 2009) (quotation omitted). Hector has not shown
that the testimony was incredible, and there is significant documentary evidence
that Hector knew what was going on and participated. For instance, the
Government introduced into evidence Hector’s seven-page letter denouncing the
FDIC, objecting to the idea that Bankest buy more insurance, and accusing ES
Bank of violating the shareholder agreement. Additionally, ES Bank president
Balestra testified about Hector’s attendance at almost all Bankest board meetings,
his “fierce” resistence to the FDIC’s request for information, and his insistence on
using the same auditor BCC had always used for Bankest rather than Price
Waterhouse. The jury clearly rejected Hector’s argument that he unknowingly
signed whatever was put in front of him.
For the money laundering counts, the Government needed to show
concealment of funds. Concealment can be shown by evidence of unusual
structuring, structuring of transactions to avoid attention, highly irregular features
of the transaction, using third parties to conceal the real owner, or a series of
unusual financial moves cumulating in the transaction. See United States v.
Majors, 196 F.3d 1206, 1213 n.18 (11th Cir. 1999). Here, the BCC employees
10
agreed that Joy’s overadvance and the CDJ sham could not be revealed, and
numerous transactions were falsely attributed to Joy, ENA, CDJ, and others. The
transactions were designed to create the impression that there was money, when in
fact there was none. That was the sole purpose of the transactions although the
larger fraud was intended to result in personal gain. As in Majors, the Appellants
here used third parties (e.g., controlled entities, Joy and other compliant
companies) to filter the money back and forth, under the bicicleta II fraud scheme.
The Government showed Hector’s knowledge through testimony by government
financial expert Lew Sellers about the cycling and by Mendez that Hector did
more than just sign checks – e.g., he referred to the transactions as “bicicleta.”
Additionally, Hector knew that ENA had very little income and yet he approved
the transfers in ENA’s name as if it was paying remittances.3
3
To the extent that Hector argues that his conviction will not stand in light of
United States v. Santos, 553 U.S. 507, 128 S. Ct. 2020 (2008), we rejected that argument in
United States v. Demarest, 570 F.3d 1232, 1242 (11th Cir. 2009). There, we stated that “Santos
has limited precedential value. Three parts of Justice Scalia’s four-part opinion are for a plurality
of justices, and those parts do not state a rule for this case. . . . The narrow holding in Santos, at
most, was that the gross receipts of an unlicensed gambling operation were not ‘proceeds’ under
section 1956.” Id. Because Hector was not convicted of operating an unlicensed gambling
operation, Santos does not apply. See also United States v. Jennings, 599 F.3d 1241 (11th Cir.
2010) (applying Demarest’s analysis of Santos in a mail and wire fraud case).
Moreover, Hector made no such argument in the district court; therefore, his argument is
subject to plain error analysis. Even if Santos applied in a bank and wire fraud context, as here,
Hector could not satisfy the third and fourth prongs of the plain error analysis. The third prong is
“the error must have affected the appellant’s substantial rights, which in the ordinary case means
he must demonstrate that it affected the outcome of the district court’s proceedings.” Puckett v.
United States, __ U.S. __, 129 S. Ct. 1423, 1429 (2009) (internal quotations omitted). Unlike the
11
B. Hector’s Motion for Bifurcation or Mistrial
Hector’s argument regarding the motion to bifurcate and Puerto’s motion to
sever pertain to the same issue: whether Puerto’s defense was antagonistic to the
other Defendants’. In essence, Puerto’s defense was that she did not know what
was really going on and to the extent that she did, she was afraid that she would
lose her job because the Orlanskys had fired a whistleblower earlier. During
cross-examination of Mendez, when this became apparent, Eduardo’s attorney
moved for a severance; Hector adopted the motion. The court, however, denied
the motion. All of the defendants but Puerto had already completed their defenses
at this point so they moved to bifurcate the trial. They proposed proceeding to
their closing arguments and having the jury decide on their guilt or innocence, all
before Puerto’s defense. After the verdict, the same jury would then hear Puerto’s
defense and deliberate her fate. The Government opposed the proposal. After
taking a proffer of Puerto’s defense, the district court decided not to bifurcate.
The other defendants renewed their motion when Puerto elicited testimony that
situation in Santos, Hector has not shown that the transactions underlying his money laundering
convictions involved paying expenses of the fraudulent business; thus, even if Santos principles
were applicable, Hector has not shown that the transactions would not be “proceeds.” In other
words, Hector has not shown that the outcome in the district court would have been different.
And, with respect to plain error’s fourth prong, it is clear that fairness, integrity or public
reputation of the judicial proceedings would not prompt an appellate court to exercise discretion
in favor of Hector in this regard.
12
she was scared to approach the Orlansky brothers because of an earlier
whistleblower’s firing. The court again denied the motion.
The district court did not abuse its discretion. See United States v.
Knowles, 66 F.3d 1146, 1159 (11th Cir. 1995) (reciting standard of review).
First, the court gave a curative instruction regarding the statement that Puerto was
afraid of the Orlanskys. Puerto elicited from her husband while he was testifying
that she was afraid of the Orlanskys because they had fired a whistleblower and
then the Government elicited a similar statement, to which Eduardo’s attorney
objected. The court instructed the jury to
disregard Mr. Puerto’s testimony other than what he told his wife. . . .
Whatever Mr. Puerto has testified to here, which is based upon things
that Ms. Puerto said, or things he learned from someone else, for
example, the testimony he just gave, that testimony is stricken. You
are to disregard it and not consider it in any way whatsoever. The
same goes for prior testimony concerning what Ms. Puerto said she
believed might happen as a result of what she and her husband
apparently discovered.
We have held that we will only reverse a refusal to grant a mistrial when the
evidence is “so highly prejudicial as to be incurable by the trial court’s
admonition.” United States v. Perez, 30 F.3d 1407, 1410 (11th Cir. 1994). Hector
has failed to persuade us that this evidence was so highly prejudicial that it would
not be cured by this instruction.
13
Second, this court has expressed concern over bifurcation of trials;
specifically, it has worried that the jury who determines the guilt of the first
defendants may not be impartial when faced with the later-decided defendants.
See United States v. McIver, 688 F.2d 726, 729 (11th Cir. 1982). As Hector
admits, the decision of whether or not to bifurcate requires a balancing of
competing interests. Here, the district court determined that the defendants’
defenses were not antagonistic, let alone antagonistic enough to overcome the
competing interests of efficiency and concerns about prejudice to the remaining
defendant. The court found that Puerto’s defense – that the fraud was not obvious
to low-level employees – was not antagonistic to the Orlanskys’ theory of defense
that the middle-level managers Parlapiano and Mendez orchestrated the fraud and
kept the brothers in the dark. “[T]o compel severance, the defenses of
co-defendants must be more than merely antagonistic, they ‘must be antagonistic
to the point of being mutually exclusive.’” Knowles, 66 F.3d at 1159. Lack of
knowledge on the part of both the Orlanskys and the low-level employees is
certainly not antagonistic.
Third, the court rejected most of Puerto’s proffer of state of mind evidence,
allowing her only to elicit testimony about her state of mind from family members,
without getting into the nature of why she felt the way she said she felt. Any
14
evidence of her fears was brought in through her family members and did not
constitute significant testimony. Therefore, we conclude the court did not abuse
its discretion.
C. Puerto’s motion to sever
Puerto argues that the district court’s denial of the motions to sever denied
her the opportunity to introduce essential exculpatory evidence. Puerto sought to
introduce statements made to the FBI by two of her low-level co-workers to the
effect that they did not realize there was fraud occurring at the firm. This evidence
demonstrated her lack of knowledge, she argues, because these workers were the
ones that trained her and did many of the same tasks. Puerto tried to call the co-
workers but each invoked the Fifth Amendment and refused to testify. Then,
Puerto’s co-defendants each objected to the admission of the FBI statements on
the basis that the admission would violate their Confrontation Clause rights.
Puerto argues that this is a rare case of a defendant suffering prejudice simply
because of a joint trial.
We review the district court’s decision for abuse of discretion. Zafiro v.
United States, 506 U.S. 534, 541, 113 S. Ct. 933, 939 (1993). There the Court
held: “We believe that, when defendants properly have been joined under Rule
15
8(b), a district court should grant a severance under Rule 14 only if there is a
serious risk that a joint trial would compromise a specific trial right of one of the
defendants, or prevent the jury from making a reliable judgment about guilt or
innocence.” Id. at 539, 113 S. Ct. at 938.
We do not believe the district court abused its discretion when it denied
Puerto’s motion to sever because she could not have introduced the FBI statements
in a severed trial. Statements to the above effect would have been inadmissible
hearsay and did not fall under the exception for statements against penal interest
under Fed. R. Evid. 804(b)(3).4 Under that rule, hearsay statements will be
allowed into evidence if the statement inculpates the declarant. The substance of
the testimony Puerto wanted to introduce here was the opposite: it served to
exculpate the declarants because the declarants were denying any knowledge of
wrongdoing.5 Therefore, the statements would not have been admissible even in a
4
Fed.R.Evid. 804(b)(3) provides:
(3) Statement against interest. A statement which was at the time of its making so
far contrary to the declarant’s pecuniary or proprietary interest, or so far tended to
subject the declarant to civil or criminal liability, or to render invalid a claim by
the declarant against another, that a reasonable person in the declarant's position
would not have made the statement unless believing it to be true. A statement
tending to expose the declarant to criminal liability and offered to exculpate the
accused is not admissible unless corroborating circumstances clearly indicate the
trustworthiness of the statement.
5
The only exculpatory evidence to which Puerto points in her brief on appeal is the
“critical portions of their FBI statements which stated that they never thought the Orlanskys were
doing fraud.” Puerto’s Brief at 39. Thus, the only exculpatory evidence identified by Puerto was
16
separate trial.6 The district court also properly found that the evidence was
cumulative because Puerto elicited from Mendez on cross-examination that the co-
workers performed functions like Puerto’s and were not told of the fraud.
Accordingly, Puerto has not pointed to the compromise of a specific trial right, nor
has she made a persuasive case that the jury was prevented from making a reliable
judgment. We cannot conclude that the district court abused its discretion.7
D. Hector’s Sentence
Hector argues that the district court erred in assessing him a two-level
increase in his offense level for sophisticated laundering under § 2S1.1(b)(3).
Hector submits that he did not engage in the planning of the layering of
not against interest and was not properly admissible even in a separate trial.
6
We also reject Puerto’s argument that the evidence could admitted under Fed. R.
Evid. 807, the residual hearsay exception. Under that rule, hearsay evidence not fitting under
Rule 803 or 804 but “having equivalent circumstantial guarantees of trustworthiness” is
admissible. However, the statements here are not worthy of trust because of their very nature as
exculpatory statements. See Williamson v. United States, 512 U.S. 594, 600-01, 114 S. Ct.
2431, 1435 (1994) (“Self-exculpatory statements are exactly the ones which people are most
likely to make even when they are false”). Therefore, we reject Puerto’s alternative rationale for
admission of the statements.
7
To the extent that Puerto argued for the first time at oral argument that other
aspects of the FBI statements were against interest, therefore were admissible, and rose to the
level of the requisite prejudice mandating severance, we decline to address such belated
argument. Moreover, we believe any such evidence was both cumulative of evidence actually
presented to the jury and also of minimal probative value.
17
transactions that took place, and that although the jury found him guilty of various
conspiracy charges, the level of sophistication for this enhancement was entirely
attributable to another individual.
Section 2S1.1(b)(3) of the Sentencing Guidelines provides for a two-level
increase in a defendant’s offense level if he was convicted under 18 U.S.C. § 1956and “the offense involved sophisticated laundering.” The commentary provides
that “sophisticated laundering” means “complex or intricate offense conduct
pertaining to the execution or concealment of the 18 U.S.C. § 1956 offense.”
U.S.S.G. § 2S1.1, comment. (n.5(A)). The commentary continues, “Sophisticated
laundering typically involves the use of—(i) fictitious entities; (ii) shell
corporations; (iii) two or more levels (i.e., layering) of transactions, transportation,
transfers, or transmissions, involving criminally derived funds that were intended
to appear legitimate; or (iv) offshore financial accounts.” Id.
This Court reviews a district court’s findings of fact for clear error and its
application of the Sentencing Guidelines de novo. United States v. Gupta, 572
F.3d 878, 887 (11th Cir. 2009). “A factual finding is clearly erroneous when
although there is evidence to support it, the reviewing court on the entire evidence
is left with the definite and firm conviction that a mistake has been committed.”
United States v. Robertson, 493 F.3d 1322, 1330 (11th Cir. 2007) (quotation
18
omitted).
The district court did not clearly err in assessing Hector an enhancement for
sophisticated laundering. The court found that the “cycling of money” enabled the
fraud to continue, and that the cycling constituted “layering” as described in the
commentary to § 2S1.1(b)(3). Hector was involved in a wire-transfer scheme
involving the circular transfer of funds between various companies to create the
illusion of revenues that enabled the perpetuation of the fraud. Hector was one of
only three individuals authorized to sign the checks and underlying wire-transfer
forms. This cycling of funds constitutes “two or more levels (i.e., layering) of
transactions, transportation, transfers, or transmissions, involving criminally
derived funds that were intended to appear legitimate,” such that the district court
did not clearly err in assessing Hector the enhancement.
Next, Hector argues that his 20-year sentence was “clearly and
unequivocally unreasonable” because it was “quite possibly a death sentence.” He
argues that the mitigating circumstances, specifically his age, health, and lack of a
prior criminal record, militated in favor of a lower sentence.
We will remand for resentencing only if we are “left with the definite and
firm conviction that the district court committed a clear error of judgment in
weighing the § 3553(a) factors by arriving at a sentence that lies outside the range
19
of reasonable sentences dictated by the facts of the case.” United States v. Pugh,
515 F.3d 1179, 1191 (11th Cir. 2008) (citation and quotation marks omitted).
Here, there was no clear error. Although the district court stated that several
§ 3553(a) factors (e.g. health and age) supported Hector’s not receiving a lengthy
term of imprisonment, the court noted that some of the § 3553(a) factors called for
a “very severe sentence.” In particular, with respect to the nature of the offense,
the court noted that the case involved a “huge amount of loss” and noted that
approximately $167 million in loss was “a staggering sum.” Additionally, the
court noted that the crime took place “over a period of years” and found that
Hector knew, at least as early as the middle of 1998, that a fraud was taking place.
The court determined that the scheme was intended to further Hector’s financial
interest and pointed out that his sentence was not different from that received by
another individual involved in the offense who had pled guilty. Moreover, the
court reasoned that the need for the sentence to constitute sufficient punishment
supported a severe sentence, given the “large-scale, massive bank fraud,” which
was the “largest bank fraud that the Southern District has seen.” We agree with
the district court that the record supported the sentence.
E. Puerto’s sentence
20
Puerto argues that her sentence was procedurally unreasonable because the
district court incorrectly calculated her guideline range. Specifically, she argues
that the court’s calculation of the loss amount was improper because it was based
on facts not found by a jury beyond a reasonable doubt. Puerto acknowledges that
this Court and the Supreme Court permit such judicial fact-finding by a
preponderance of the evidence, but she submits that her case presents the rare
example where such fact-finding is impermissible because of the enormous
increase that resulted from finding $167 million in loss attributable to her.
Puerto’s sentence was procedurally reasonable. Her only argument is that
the district court erroneously calculated her guideline range because it based the
loss calculation on facts the court found by a preponderance of the evidence.
However, this Court’s precedent permits a court to base guideline enhancements
on facts it finds by a preponderance of the evidence, as long as the court treats the
Guidelines as advisory and does not impose a sentence that exceeds the maximum
permitted by the jury verdict. See United States v. Douglas, 489 F.3d 1117, 1129
(11th Cir. 2007); United States v. Campbell, 491 F.3d 1306, 1314 n.11 (11th Cir.
2007). Here, the district court treated the Guidelines as advisory and did not
impose a sentence above the statutory maximum authorized by the jury verdict.
Therefore, the court was authorized to calculate the amount of loss based on facts
21
it found by a preponderance of the evidence and we affirm her sentence.
F. Eduardo’s Mental State
1. Eduardo’s challenge to the district court’s exclusion of his experts’
mental health testimony
Eduardo sought to introduce evidence about his diminished mental state
during the relevant time period for three reasons. The first was to support his
insanity defense under the Insanity Defense Reform Act (“IDRA”), 18 U.S.C. § 17(2000). Second, he sought to introduce the evidence as a means of challenging the
Government’s argument that he had the requisite mens rea to commit the charged
crimes. Third, he sought to introduce evidence of his diminished mental state to
support his claim that he had been kept in the dark about the fraud and it had been
orchestrated by lower level management.
Eduardo submitted a Notice of Insanity Defense and Expert Evidence of
Mental Condition, which included reports from neuropsychologist Dr. Barry
Crown and neurologist Dr. Jeffrey Gelblum (Eduardo’s treating neurologist). He
also included the report from an MRI, which reportedly showed evidence of an old
stroke in his left caudate nucleus and a large, “very old” fluid accumulation in his
left temporal and temporal frontal region, which probably resulted from a stroke.
In response, the Government moved to exclude evidence that Eduardo suffered
22
from a mental defect, for a Daubert8 hearing, and to exclude the testimony of the
two doctors. The district court excluded the testimony of the two doctors both
because it was inadmissible under the IDRA and because it was inadmissible
under Fed. R. Evid. 702 and Daubert. Eduardo challenges both rulings; we
address each in turn.
a. The legal standard under the IDRA
Under the IDRA, insanity is an affirmative defense that the defendant must
prove by clear and convincing evidence. 18 U.S.C. § 17; United States v.
Westcott, 83 F.3d 1354, 1357 (11th Cir. 1996). The Act restricted the definition
of insanity:
at the time of the commission of the acts constituting the offense, the
defendant, as a result of a severe mental disease or defect, was unable
to appreciate the nature and quality or the wrongfulness of his acts.
Mental disease or defect does not otherwise constitute a defense.
18 U.S.C. § 17(a). Before the Act’s passage, a defendant could also assert a valid
defense if he was unable to conform his conduct to the requirements of the law.
United States v. Freeman, 804 F.2d. 1574, 1576 (11th Cir. 1986). However, as the
second sentence of the Act recites, Congress prohibited the use of “‘non-insanity’
psychiatric evidence that points toward ‘exoneration or mitigation of an offense
8
Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 113 S. Ct. 2786 (1993).
23
because of a defendant’s supposed psychiatric compulsion or inability or failure to
engage in normal reflection.’” United States v. Cameron, 907 F.2d 1051, 1066
(11th Cir. 1990). “Congress intended to prohibit the presentation of evidence of
mental disease or defect, short of insanity, to excuse conduct.” Westcott, 83 F.3d
at 1357-58. In passing the IDRA, Congress considered that such prohibited
evidence would, if allowed to go to the jury, resurrect the former, broader version
of the insanity defense “in the guise of showing some other affirmative defense,
such as . . . diminished responsibility . . . and open the door, once again, to
needlessly confusing psychiatric testimony.” Cameron, 907 F.2d at 1066 (quoting
S. Rep. No. 98-225, 98th Cong., 2d Sess. 229 (1984), reprinted in 1984
U.S.C.C.A.N. 3182, 3411) (internal punctuation omitted). However, we have held
that Congress did not intend to exclude the use of psychiatric evidence that
negated specific intent. Westcott, 83 F.3d at 1358; Cameron, 907 F.2d at 1066-
67.9 We examine the testimony of each of the proffered experts in turn.
i. Dr. Jeffrey Gelblum
Eduardo’s treating neurologist testified at the four-day hearing in November
9
The distinction mentioned in the case law between psychiatric evidence that
negates specific intent, on the one hand, and psychiatric evidence that a defendant does not have
the capacity to form specific intent, on the other hand, is not relevant in this case. See Westcott,
83 F.3d at 1358; Cameron, 907 F.2d at 1066-67; see also United States v. Pohlot, 827 F.2d 889,
903-05 (3d Cir. 1987).
24
2005 about his diagnosis of Eduardo, the etiology of Eduardo’s illness, and his
opinion about Eduardo’s mental state. He testified that he had diagnosed Eduardo
in 2004 with progressive vascular dementia based on reports by his family of
deficits in activities of daily living and an MRI and an electroencephalogram
(“EEG”), neurological tests that pinpoint the dementia’s causes. The MRI showed
that a region in Eduardo’s brain’s left hemisphere was cavitated out, meaning that
the brain tissue had been replaced with fluid. Dr. Gelblum testified that Eduardo
had significant damage to the left temporal lobe, the left frontal lobe, and the left
parietal lobe, which suggests interference of brain functioning in a critical part of
the brain. He explained that the left side of the brain primarily controls right-sided
body function, as well as comprehension, arithmetic, executive planning, and
fluency. Memory is also impaired with this type of injury, with short-term
memory being most prominently affected because it is relegated to the left
temporal lobe.
Dr. Gelblum opined that the damage to Eduardo’s brain was caused by an
arachnoid cyst and superimposed stroke syndrome. Arachnoid cysts are
congenital, meaning that the patient was born with the cyst, and Dr. Gelblum
explained that superimposed stroke syndrome refers to small, “silent” strokes.
While the MRI could not give an exact date of onset, Dr. Gelblum speculated that
25
the degree of whiteout in the brain suggested that the damaged area had been
fluid-filled for “six, seven, [or] eight years.” But he conceded that because he did
not have access to previous MRIs, he could not determine if the cyst had been
growing or if it had been that size since birth; the MRI and the EEG could only
provide a snapshot of the patient’s current condition.
At the time that Dr. Gelblum began to treat Eduardo, in May 2004, Dr.
Gelblum thought that Eduardo was legally insane. However, he testified that there
is no scientifically valid way for him to ascertain Eduardo’s mental state before
that time. Additionally, he agreed that talking to family about the patient’s past
behaviors could not scientifically determine the patient’s mental state in years
past. When asked if there was any scientifically reliable way of determining if
Eduardo had the capacity to deceive during the period from 1994 to 2003, Dr.
Gelblum answered “we don’t have those scans or studies, no.”
Because Dr. Gelblum testified that he relied upon the reports of family and
friends to make diagnoses, Eduardo introduced evidence from Eduardo’s wife,
Jane, and later trial testimony from his former employee, Mendez. Jane Orlansky
testified that Eduardo had begun to act strangely beginning in 1992 or 1993,
engaging in what she termed ritualistic behavior. She also noted a decline in his
intelligence and short term memory. However, she testified that she did not
26
recommend to him that he seek any professional or medical help for the strange
behavior that he began to exhibit. Similarly, Mendez testified to Eduardo’s
ritualistic behavior. Although Jane Orlansky’s and Mendez’s testimony may have
suggested that Eduardo was beginning to develop dementia during the time period
at issue, Dr. Gelblum did not testify that, on the basis of the testimony of Jane and
Mendez, he could opine with any degree of medical certainty about Eduardo’s
state of mind at the relevant time period such that a fact-finder could infer that
Eduardo was unable to appreciate the nature and quality or wrongfulness of his
actions during the relevant time period.10
While Dr. Gelblum testified that accounts from family of behavior and
patient history comprise ninety-five percent of the information required for
diagnosis, as the district court noted, Dr. Gelblum did not state that he relied on
those accounts in his letters or reports when he wrote that, at the time of the
crimes, Eduardo suffered from severe mental defect such that he could not
appreciate the wrongfulness of his actions. And he affirmatively testified that he
could not render an opinion about Eduardo’s ability or capacity to lie during that
10
Furthermore, one of the Government’s experts, Dr. David Fishbain, reviewed
Eduardo’s business writing, correspondence and notes made from 1996 to 2003 and discerned no
signs of mental or cognitive deterioration. Additionally, Dr. Fishbain noted that Eduardo made
no complaints about forgetfulness, anxiety or being upset to his primary care physician until late
2004, after he was being treated by Dr. Gelblum and after he had been indicted.
27
period. Although he did try to rectify his opinion by testifying that he could rely
on family reports to make a retroactive diagnosis, he did not testify that he could
opine with any degree of medical certainty that Eduardo was unable to lie or
deceive at the time of the crimes.
ii. Dr. Barry Crown
Dr. Crown is a neuropsychologist who administered a series of
psychological tests to Eduardo in order to ascertain the severity of the damage
caused by the arachnoid cyst and the stroke syndrome identified by the
neurologists. His report stated that he would testify that at the time of Eduardo’s
involvement in the criminal acts, Eduardo was suffering from vascular dementia
with significant cognitive loss. Further, he wrote, Eduardo, “at best, would have
been performing at a twelve year old level” on his language-based critical thinking
and abstract problem-solving ability.
During the hearing, Dr. Crown testified that all of the tests he administered
to Eduardo only showed Eduardo’s capabilities at the time of the tests’
administration. When asked specifically if he could testify as to Eduardo’s mental
condition during the relevant period of the case, he stated that could not provide
an opinion. He testified that his statement in the report was based on his
understanding that Eduardo was not in the acute stage of the illness and that his
28
illness had been progressing for some time. However, he admitted that he had no
way to “date stamp it,” and that the rate of decline varies by individual. The
district court then asked Dr. Crown if he could say “to any degree of medical
certainty when that significant cognitive loss occurred?” Dr. Crown replied: “No,
other than Mrs. Orlansky relating to me that she felt that he deteriorated, and that
there were problems at or about the time of a civil lawsuit that took place well
over ten to 12, 14 years ago. But that’s the only historical bit of information that I
have that suggests a point of noticeability.” Finally, when asked if he could state
with any degree of scientific certainty that Eduardo was insane at any point during
the ten-year period that the charge embraced, Dr. Crown answered no.
iii. Analysis
The district court properly noted that the IDRA allows a defendant to put on
an affirmative defense that, as a result of a severe mental disease or defect, he was
unable, at the time of the commission of the acts constituting the offense, to
appreciate the nature and quality or the wrongfulness of his acts. 18 U.S.C.
§17(a). We also noted above that in the IDRA, Congress intended to prohibit the
use of non-insanity psychiatric evidence that points to exoneration or mitigation of
an offense, but that Congress did not intend to exclude the use of psychiatric
evidence that negated specific intent. Westcott, 83 F.3d at 1358; Cameron, 907
29
F.2d at 1067. However, the IDRA specifically requires that such evidence focus
on the defendant’s state of mind at the time of the charged offense. See Cameron,
907 F.2d at 1067 (“Evidence offered as psychiatric evidence to negate specific
intent is admissible, however, when such evidence focuses on the defendant’s
specific state of mind at the time of the charged offense.”) (internal quotations
omitted).
Eduardo’s problem is that neither Dr. Gelblum nor Dr. Crown could provide
testimony about what Eduardo’s state of mind was at the time of the charged acts.
At most, they could speculate that he had begun to decline during that period, but
they could not opine with any degree of medical certainty about Eduardo’s state of
mind (or the level or degree of his mental deficiencies) during the relevant time
period.* Moreover, because they did not know what his mental state was during
*
In his petition for rehearing, Eduardo argues for the first time that the district court
erred by insisting that, to be admissible, Dr. Gelblum and Dr. Crown would have to have testified
to the ultimate issue – i.e., that Eduardo lacked the ability at the relevant time to appreciate the
nature and quality or wrongfulness of his acts. Eduardo now argues that the district court erred in
insisting upon testimony on the ultimate issue because such testimony is prohibited by
Fed.R.Evid. 704(b). Although it is true that the doctors did at some point testify without
objection that they were unable to opine with any degree of medical certainty as to that ultimate
issue, they also repeatedly testified to a similar inability to opine generally with respect to
Eduardo’s mental state at the relevant times (including the timing of significant cognitive loss).
The district court construed the doctors’ candid admissions as indicating that there was a paucity
of evidence with respect to Eduardo’s state of mind at the relevant times, such that the two
doctors could not opine with the requisite medical certainty that Eduardo suffered from dementia
with significant cognitive loss during the relevant time period. We cannot conclude that the
district court abused its discretion in this regard.
30
the relevant time, they also could not opine with any degree of medical certainty
with respect to his mens rea during the relevant time period. For this reason, the
district court held that the IDRA rendered the testimony of the two doctors
inadmissible.
The district court (Judge Adalberto Jordan) exhaustively explored this
evidence and its admissibility. First it held a four-day hearing in November 2005,
during which it actively questioned the experts and after which it produced two
well-reasoned and comprehensively analyzed orders excluding the evidence.
Additionally, the court undertook reconsideration of the decision mid-trial and
again determined that the evidence could not meet the IDRA’s standards.11 In
11
Eduardo moved again mid-trial seeking reconsideration of the district court’s
decision to exclude the testimony of the doctors. Eduardo relied on the trial testimony of
employee and co-conspirator Mendez about Eduardo’s behavior during the relevant time, to wit:
that some of Eduardo’s business decisions made no sense; that he had trouble understanding
financial documents; that he had memory problems; and that he engaged in some ritualistic
behaviors. The FBI statement of another employee also reported ritualistic behaviors, like
repeatedly putting out his cigarette by pressing it against the bottom of the ashtray for an
inordinate amount of time. Eduardo did not proffer sworn testimony of either doctor to the effect
that the new evidence would permit them to testify with any degree of medical certainty as to
Eduardo’s state of mind as of the relevant time period. However, Eduardo did proffer brief
emails from the two doctors. The district court concluded that the emails were “conclusory and
provide little to no basis for the opinions offered.” We have considered the testimony of Mendez
and the statement of the other employee as well as the emails. We cannot conclude that the
district court abused its discretion. The emails are conclusory; they fail to explain how the
actions described would indicate either the timing or the degree of any cognitive impairment.
Moreover, especially in the absence of expert testimony, we doubt that the behaviors described
could indicate cognitive impairment to a degree that mens rea would be negated. For example,
the most significant behaviors – poor business judgment and trouble understanding financial
documents – would not seem to indicate cognitive impairment to the extent that a person would
not realize that it is wrong to fabricate accounts receivable in order to mislead one’s lender and
31
view of the careful and comprehensive consideration by the district court,12 and
because neither doctor could testify with any degree of medical certainty about
Eduardo’s state of mind at the relevant times we cannot conclude that the district
court abused its discretion in excluding the testimony of Dr. Gelblum or Dr.
Crown.13
b. Rule 702 of the Federal Rules of Evidence
The district court also denied admission of the testimony based on Rule 702
of the Federal Rules of Evidence, which controls the admission of expert
joint venture partner. In any event, in the absence of expert testimony to that effect, we cannot
conclude that the district court abused its discretion. We also note that after his indictment,
Eduardo’s own doctors initially opined that Eduardo was competent to stand trial.
12
In addition to the hearings the district court held on the evidence of Eduardo’s
mental state, it held a four-day hearing on the related issue of Eduardo’s competency before trial
began and ordered both an in-patient evaluation and an independent expert evaluation of
Eduardo’s competency. Moreover, as discussed below, the court re-examined Eduardo’s
competency both during the trial and after it, producing detailed analyses of the experts’
testimony and demonstrating an extensive understanding of Eduardo’s mental condition.
13
We noted above in Part II.F.1 that Eduardo sought to introduce the testimony of
the two doctors for three purposes: first, to support his insanity defense; second, to negate mens
rea; and third, to support his claim that he had been kept in the dark about the fraud. The district
court’s opinions, and our own opinion in the text above, specifically address the issue only with
respect to its use to support the insanity defense, and to negate mens rea. However, the same
rationale applies with equal force to Eduardo’s attempt to use the evidence to support his claim
that he had been kept in the dark about the fraud. We can assume arguendo, but we expressly do
not decide, that the IDRA would not present an absolute bar to the use of psychiatric evidence for
this third purpose. However, even assuming that, it is clear that the IDRA would require that the
evidence be focused on defendant’s state of mind at the time of the crime. Because the evidence
of the two doctors was not thus focused, the district court did not abuse its discretion in
implicitly holding that the IDRA renders the evidence inadmissible for this third purpose also.
32
testimony. It provides:
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, if (1) the testimony is based upon sufficient facts or data,
(2) the testimony is the product of reliable principles and methods,
and (3) the witness has applied the principles and methods reliably to
the facts of the case.
The Supreme Court has instructed that Rule 702 compels the district courts to
perform a critical “gatekeeping” function concerning the admissibility of expert
scientific evidence. Daubert v. Merrell Dow Pharm., 509 U.S. 579, 589 n.7, 597,
113 S. Ct. 2786, 2795 n.7, 2798 (1993). “This function ‘inherently require[s] the
trial court to conduct an exacting analysis’ of the foundations of expert opinions to
ensure they meet the standards for admissibility under Rule 702.” United States v.
Frazier, 387 F.3d 1244, 1260 (11th Cir. 2004) (en banc) (quoting McCorvey v.
Baxter Healthcare Corp., 298 F.3d 1253, 1257 (11th Cir. 2002)).
This court employs a three-part inquiry to determine admissibility under
Rule 702. The trial court must consider whether:
(1) the expert is qualified to testify competently regarding the matters
he intends to address; (2) the methodology by which the expert
reaches his conclusions is sufficiently reliable as determined by the
sort of inquiry mandated in Daubert; and (3) the testimony assists the
trier of fact, through the application of scientific, technical, or
specialized expertise, to understand the evidence or to determine a
33
fact in issue.
Frazier, 387 F.3d at 1260. Here, the district court denied admissibility of the
testimony of Doctors Gelblum and Crown based on the second and third prongs of
the inquiry, reliability and assistance to the trier of fact. While the Court in
Daubert recognized that “it would be unreasonable to conclude that the subject of
scientific testimony must be ‘known’ to a certainty,” it held that “in order to
qualify as ‘scientific knowledge,’ an inference or assertion must be derived by the
scientific method.” 509 U.S. at 590, 113 S. Ct. at 2795. “Proposed testimony
must be supported by appropriate validation – i.e., ‘good grounds,’ based on what
is known.” Id. Further, assistance to the trier of fact is primarily a question of
relevance. Id. at 591, 113 S. Ct. at 2795. Therefore, the question is whether the
evidence will help the jury decide a factual dispute; “Rule 702’s ‘helpfulness’
standard requires a valid scientific connection to the pertinent inquiry as a
precondition to admissibility.” Id. at 591-92, 113 S. Ct. at 2796.
As discussed in reference to the IDRA, there did not exist “‘good grounds,’
based on what is known.” Neither of the proposed expert witnesses could testify
with any medical certainty to evidence with respect to Eduardo’s state of mind at
the relevant times that would allow a reasonable fact-finder to conclude that
Eduardo was either insane at the time of the offenses or lacked the requisite mens
34
rea at the time of the offenses.14 Therefore, the district court’s conclusion that the
evidence failed both the reliability and assistance to the trier of fact prongs was
not an abuse of discretion.15
2. Competency to stand trial
Eduardo did not argue that he was incompetent to stand trial until November
2005, almost two years after his indictment. At that time, the defense submitted a
motion for a hearing to determine competency in response to a letter the
Government had provided from neurologist Ranjan Duara, M.D., that suggested
Eduardo’s cognitive function might be compromised to the extent that he was
mentally incapacitated. Previously, Eduardo’s treating physician, Dr. Jeffrey
Gelblum, had opined that Eduardo was competent, although he had noted that his
condition was progressively declining. After Dr. Duara’s letter, Dr. Gelblum re-
examined Eduardo and submitted a new report opining that Eduardo was not
competent.
The court first heard testimony about Eduardo’s competency on November
14
The district court also properly rejected, on the basis of Daubert, Eduardo’s third
rationale for admitting the expert witness testimony about his mental state – to show that he was
easily influenced by his employees – because of the experts’ inability to testify with any medical
certainty about his mental state during the relevant time period.
15
In light of our decision that the district court did not abuse its discretion in
excluding the testimony of the two doctors on the basis of the IDRA and Rule 702, we need not
address the district court’s alternative ground, Fed. R. Evid. 403.
35
23, 2005. At that time, the Government sought a 30-day, in-house competency
assessment by Dr. Robert Denney. Dr. Denney testified that, contrary to defense
arguments, the stay would not be detrimental to Eduardo’s mental health but
would, in fact, give a more comprehensive assessment of his abilities and deficits.
Two other Government witnesses testified at that time about Eduardo’s
competency. Dr. Michele Quiroga, a neuropsychologist, testified about the tests
she administered to Eduardo, her interviews with him and his wife, and her
diagnosis. As a result of her examination, Dr. Quiroga determined Eduardo to be
competent, not suffering from severe mental disease or defect, and to be able to
appreciate the nature and quality of his acts. She further stated that although he
did appear to have cognitive deficits, she also detected lack of effort and
malingering. Dr. David Fishbain, a psychiatrist, evaluated Eduardo by
administering a mental status exam and interviewing him and his wife. Further,
Dr. Fishbain reviewed Eduardo’s business correspondence and notes ranging from
1996 to 2003, witness statements about Eduardo’s abilities during the same period,
his medical records, and Dr. Quiroga’s evaluation. He testified that he believed
that Eduardo was competent, with his judgment and insight within normal limits,
although he did suffer from mild cognitive impairment. Additionally, Dr. Fishbain
opined that although Eduardo might have some difficulty disclosing pertinent
36
facts, it was a mild defect in that respect. After hearing from the experts, the
district court agreed to the in-house assessment, and Eduardo was sent to the
United States Medical Center for Federal Prisoners in Springfield, Missouri.
At the end of February 2006, the court held a four-day competency hearing
beginning with Dr. Denney, who had conducted the month-long assessment. Dr.
Denney testified that although he thought that Eduardo had some damage to his
brain, he thought that Eduardo was malingering. This finding comported with the
assessment of another witness, Dr. Quiroga. Dr. Denney administered 26
psychological tests over a nine-day period, including six that were designed to
detect malingering; Eduardo tested positive for poor effort on five of those tests.
As a result, Dr. Denney did not believe that the remaining neurological test results
were valid indicators of Eduardo’s true neuropsychological functioning.
Ultimately, Dr. Denney posited that Eduardo’s current neuropathology did not
support a diagnosis of dementia, and neither did the functional imaging results
(SPECT and PET scans). Furthermore, the test results did not comport with the
conversations Dr. Denney had with Eduardo during interviews and casual
conversation. Finally, Dr. Denney compared Eduardo’s test scores to those from
prior administrations and noted significant departures that were not logically or
reasonably consistent; in some cases Eduardo actually improved, which would not
37
be the case if he had progressive dementia.
Dr. Gelblum testified that he still believed that Eduardo basically
understood the charges against him but that he was not able to assist his attorneys
in preparing his defense and thus was not competent to stand trial. Further, the
damage revealed in the scans of Eduardo’s brain was tied to Eduardo’s ritualistic
behaviors and impaired his executive planning ability, memory search retrieval,
and performance on verbal manual tests. Another defense expert, Dr. Joseph
Sesta, a forensic neuropsychologist and clinical pharmacologist, testified that his
review of the tests Dr. Denney performed did not suggest that Eduardo was
malingering. Instead, he thought the results seemed compatible with a true
neuropathology, as reflected in Eduardo’s neuroimaging studies.
Although the court ruled orally that the Government had shown that
Eduardo was competent, it ordered another round of testing “in an abundance of
caution.” The court then appointed Dr. Charles Golden to evaluate Eduardo for
competency. Dr. Golden performed his evaluation of Eduardo without seeing any
of the other experts’ reports and concluded that Eduardo was not competent to
stand trial. Dr. Golden stated in his report that Eduardo was incapable of
distinguishing between accurate and inaccurate memories. Before the renewed
competency hearing, Dr. Golden was given all of the other experts’ reports to
38
review. At the renewed hearing, which took place during the trial, Dr. Golden
testified that injuries to Eduardo’s anterior left hemisphere meant that he could no
longer effectively retrieve memories and that he had holes in his memory that he
attempted to fill with erroneous information. He explained Eduardo’s test results,
where he scored in the low-normal range, by noting that Eduardo’s deficits did not
affect his intelligence or ability to function on a day-to-day basis. He further
testified that Eduardo’s working memory was intact but his intermediate memory
was disturbed and that although his long-term memory was there, he was not able
to extract information in an organized manner. Like Dr. Denney, Dr. Golden did
not think that Eduardo had dementia or primary memory deficit. But Dr. Golden
thought that Dr. Denney was too quick to conclude that Eduardo was malingering;
he thought that was especially true because he had seen the same pattern of test
scores in other individuals with the same type of brain injury. Dr. Golden
explained that Eduardo’s problems were with processing large amounts of
information and organizing it. As a result, he would not be capable of assisting his
counsel when presented with documents.
After the hearing, the district court again found Eduardo competent. Almost
a year later, at the initial sentencing, the court denied without prejudice his motion
to be declared incompetent but entertained a supplemental motion. On August 13,
39
2007, the court issued a comprehensive order, explaining its decision that Eduardo
was competent.
We review the district court’s finding that the defendant is competent to
stand trial for clear error. United States v. Izquierdo, 448 F.3d 1269, 1276 (11th
Cir. 2006). A district court’s findings of fact are clearly erroneous “only when we
are left with a definite and firm conviction that a mistake has been committed.”
Id. at 1278 (quotation omitted). Additionally, “[w]here there are two permissible
views of the evidence, the factfinder’s choice between them cannot be clearly
erroneous.” Id. (citation omitted).
A defendant is mentally incompetent to stand trial when he is “suffering
from a mental disease or defect rendering him mentally incompetent to the extent
that he is unable to understand the nature and consequences of the proceedings
against him or to assist properly in his defense.” 18 U.S.C. § 4241(a). In order to
be considered competent for trial, a defendant must have “sufficient present ability
to consult with his lawyer with a reasonable degree of rational understanding,” and
he must have a “rational as well as factual understanding of the proceedings
against him.” United States v. Cruz, 805 F.2d 1464, 1479 (11th Cir. 1986)
(quotation omitted). Here, Eduardo challenges only the first prong of the test, i.e.
the ability to consult with his attorney. While the experts may provide evidence
40
about the defendant’s state of mind and abilities, the ultimate decision about
competency lies with the district court. United States v. Makris, 535 F.2d 899,
907 (5th Cir. 1976).16
We begin initially by observing that the district court sought many opinions
and held extensive hearings on this issue. After hearing testimony from both
defense and government experts, the court had Eduardo sent to a facility to be
tested and observed for a month. Then, after that evaluation and more testimony
from more experts, the court appointed Dr. Golden to assess Eduardo’s
competency. Four psychologists administered psychological tests to Eduardo and
a fifth reviewed the others’ tests and gave his opinion; Eduardo’s MRIs and scans
were evaluated by at least five neurologists. All of these experts gave different
opinions about the severity and the cause of the damage in Eduardo’s brain. The
neurologists disagreed about whether his EEGs were abnormal and what caused
the cavitated area of his brain. Some of the psychologists attributed his test scores
to malingering while others looked at the same scores and determined that they
represented a precise injury to a specific part of the brain.
16
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981)(en banc), this
Court adopted as binding precedent all of the decisions of the former Fifth Circuit handed down
prior to the close of business on September 30, 1981.
41
Thus the district court was left to evaluate several expert opinions of the
nature and severity of Eduardo’s condition. The court determined that Dr.
Denney’s opinion was more reliable because of his experience conducting
competency evaluations, his impressive credentials, and his ability to evaluate
Eduardo over a long period of time. See Izquierdo, 448 F.3d at 1279 (approving
district court’s reliance on psychiatrist’s opinion when that expert had examined
the defendant over a longer period than the other expert). It also noted that Dr.
Denney’s finding of malingering was corroborated by Dr. Quiroga’s similar
finding.
We cannot conclude that the district court’s finding was clearly erroneous.
Dr. Denney had conducted, at the time of the competency hearing, over 500
competency evaluations and he had found defendants incompetent approximately
23% of the time. We note that Dr. Denney’s evaluation, taking place as it did over
a month in a resident facility, permitted him to observe Eduardo throughout the
day and consistently, something the other experts did not have the ability to do.
Dr. Denney based his ultimate determination that Eduardo was competent and was
malingering not just on interviews with Eduardo and his wife in conjunction with
psychological testing but also on those daily observations (and those of other staff
members), reading the reports of the experts who testified in the Daubert hearings,
42
and review of the neurologists’ reports. The testing revealed unusual patterns that
suggested to Dr. Denney, who has published in the field, that Eduardo was
malingering, while the interviews revealed that Eduardo understood a great deal
about his prior business dealings. The daily observations are particularly
significant. Eduardo revealed several times in conversation that his memory was
more intact than an incompetent person’s would be. For instance, he remembered
the intake nurse’s name several days after that brief meeting and where Dr.
Denney had vacationed almost two weeks after it occurred. However, at the same
time, Eduardo claimed not to know his address, birth date or clothing size, facts
that dementia patients typically lose last. This type of observation of the whole
person was not available to the other evaluating psychologists. In sum, Dr.
Denney’s evaluation was far more comprehensive and extensive than any of the
other experts’ and the district court did not err in crediting it.
The district court also had, by the time of the second competency hearing,
observed Eduardo at trial and his interactions with his attorneys. Although
Eduardo’s attorney testified that Eduardo was incompetent, the court noted that the
same attorney had earlier argued Eduardo was competent and only changed his
assessment after Dr. Duara’s email. Such an abrupt reversal understandably
undermines the attorney’s persuasiveness on this issue.
43
In conclusion, we hold that the district court did not commit clear error
when it determined that Eduardo was competent to stand trial. The court
thoroughly evaluated the evidence, listened to the experts’ opinions, and provided
persuasive reasoning for crediting Dr. Denney’s opinion.
III. CONCLUSION
We affirm Eduardo’s, Hector’s, and Puerto’s convictions. We also affirm
Puerto’s and Hector’s sentences.17
AFFIRMED.
17
The district judge is to be commended for his superb handling of this case,
especially his careful consideration of the mental health issues.
44