United States v. Nicolas Nicolaou

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 98-4061
NICOLAS NICOLAOU,
Defendant-Appellant.
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 98-4149
GEORGE BASLE,
Defendant-Appellant.
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 98-4261
JOHN DAVID MICHAEL,
Defendant-Appellant.
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 98-4298
SYLVIA MICHAEL,
Defendant-Appellant.
Appeals from the United States District Court
for the District of Maryland, at Greenbelt.
Alexander Williams, Jr., District Judge.
(CR-97-115-AQW)
Argued: January 29, 1999
Decided: May 20, 1999
Before WILKINSON, Chief Judge, and LUTTIG and
TRAXLER, Circuit Judges.
_________________________________________________________________
Affirmed by published opinion. Judge Luttig wrote the opinion, in
which Chief Judge Wilkinson and Judge Traxler joined.
_________________________________________________________________
COUNSEL
ARGUED: Henk J. Brands, KELLOGG, HUBER, HANSEN, TODD
& EVANS, Washington, D.C., for Appellants. Sandra Wilkinson,
Assistant United States Attorney, Greenbelt, Maryland, for Appellee.
ON BRIEF: K. Chris Todd, KELLOGG, HUBER, HANSEN, TODD
& EVANS, Washington, D.C.; Ronald R. Rubin, RONALD R.
RUBIN, CHARTERED, Rockville, Maryland, for Appellants
Michael; William B. Purpura, Baltimore, Maryland, for Appellant
Nicolaou; James Savage, Rockville, Maryland, for Appellant Basle.
Lynne A. Battaglia, United States Attorney, Beth P. Gesner, Assistant
United States Attorney, Greenbelt, Maryland, for Appellee.
_________________________________________________________________
OPINION
LUTTIG, Circuit Judge:
Defendants John and Sylvia Michael, George Basle, and Nicholas
Nicolaou were convicted on a variety of charges arising out of their
involvement in an illegal sports-betting operation and attempts to con-
2
ceal its proceeds. All four defendants challenge their convictions, and
John and Sylvia Michael appeal their sentences as well. Finding no
reversible error, we affirm the conviction and sentence of each defen-
dant.
I.
For many years, appellant John Michael ran an illegal sports-
betting operation out of his used-car lot, "John Michael Auto Sales
("JMAS")," in Montgomery County, Maryland. After an extensive
investigation, on November 11, 1995, federal law enforcement agents
executed search warrants on JMAS and several other sites connected
with Michael's illegal gambling operation. On March 31, 1997, a
grand jury of the United States District Court for the District of Mary-
land issued a multiple-count indictment against John Michael, Nicho-
las Nicolaou, George Basle, and four others for conducting an illegal
gambling business, in violation of 18 U.S.C. § 1955, and for conspir-
ing to do so, in violation of 18 U.S.C. § 371. In the indictment and
at trial, the government alleged that John Michael was the ringleader
of the operation, and that Nicholas Nicolaou worked for Michael,
accepting wagers, paying winners and collecting from losers. Accord-
ing to the government's theory, George Basle was one of several
"partners" who received a cut of the winnings from all betting action
they directed to Michael's operation. The government further alleged
that John Michael conspired to launder the proceeds of the illegal
gambling business, and did so, in violation of 18 U.S.C. § 1956(h)
and 18 U.S.C. § 1956(a)(1), respectively, primarily by depositing his
winnings -- attributed to "car sales" -- in the JMAS bank account.
Finally, the government charged John Michael and his wife of thirty
years, Sylvia Michael, with violating 26 U.S.C.§ 7206(1) by filing
false tax returns omitting the gross income from the gambling busi-
ness for the years 1991 through 1994.
The prosecution's case at trial included the testimony of other
members of the organization who had pleaded guilty, individuals who
had placed bets with the organization or the defendants, agents who
had seized physical evidence of the gambling organization, a gam-
bling expert who had analyzed the seized records, and a number of
witnesses who had reviewed the Michaels' financial and tax records.
3
Following a five-week jury trial in the United States District Court
for the District of Maryland, defendants were convicted on all counts
and the court sentenced each to a term of imprisonment.
II.
Appellants John Michael, Nicholas Nicolaou, and George Basle
challenge their gambling and conspiracy convictions on two related
grounds. First, they argue that the district court erroneously charged
the jury on the elements of an illegal gambling business. Second,
appellants contend that the court improperly refused their request for
a specific unanimity instruction.1 With respect to the former assign-
ment of error, although we agree that the district court erroneously
instructed the jury, we nonetheless affirm because appellants cannot
show that the error affected their substantial rights. As to the latter,
we conclude that the district court committed no error.
A.
The gambling defendants argue first that their convictions must be
reversed because the district court failed to comply with our decision
in United States v. Gresko, 632 F.2d 1128 (4th Cir. 1980), interpret-
ing the elements of 18 U.S.C. § 1955. Section 1955(a) makes it
unlawful to conduct an "illegal gambling business," which section
1955(b)(1) proceeds to define as one that
(i) is a violation of the law of a State or political subdivision
in which it is conducted;
(ii) involves five or more persons who conduct, finance,
manage, supervise, direct, or own all or part of such busi-
ness; and
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1 John Michael argues that because the gambling conviction is a neces-
sary precondition to each money-laundering count, the asserted instruc-
tional errors on the gambling counts require reversal of the money-
laundering convictions as well. Because we find no reversible error on
the gambling convictions, we do not disturb the money-laundering ver-
dicts.
4
(iii) has been or remains in substantially continuous opera-
tion for a period in excess of thirty days or has a gross reve-
nue of $2,000 in any single day.
This court held in Gresko that the five-person requirement must be
satisfied in conjunction with the third element. That is, we held that
section 1955 covers only those gambling operations that "involve at
all times during some thirty day period at least five persons," Gresko,
632 F.2d 1128, 1132 (4th Cir. 1980), or that involve at least five per-
sons on any single day on which it had gross revenues of $2,000. In
Gresko, the court reversed a section 1955 conviction that was based
on instructions that would have allowed for conviction on a jury find-
ing simply that the business "involved five people at one time or
another and operated for more than thirty days." Id. at 1135. Although
these instructions would seem perfectly consistent with the plain text
of the section, which includes no evident conjunctive requirement, we
are bound by the earlier panel's conclusion to the contrary. See
Industrial Turnaround Corp v. NLRB, 115 F.3d 248, 254 (4th Cir.
1997) ("A decision of a panel of this court becomes the law of the cir-
cuit and is binding on other panels unless it is overruled by a subse-
quent en banc opinion of this court or a superseding contrary decision
of the Supreme Court.") (internal quotation marks omitted). Appel-
lants contend that the district court's instructions in this case suffered
from the same defect as the Gresko charge, and that their resulting
convictions should therefore suffer the same fate.
Because appellants did not timely object to the lack of a Gresko
instruction, our review is for plain error. See Fed. R. Crim. P. 52(b);
United States v. Olano, 507 U.S. 725, 731-32 (1993). Although appel-
lants did submit a request for a proper Gresko charge, the record
belies their claim on appeal that they "further objected" on these
grounds before the instructions were read to the jury. Appellants con-
tend first that the original request for a Gresko instruction, standing
alone, served to put the district court on notice of their objection and
thus preserve the exception for appeal. We agree, however, with our
sister circuits that have recognized that the requirements of Rule 30
are not satisfied simply by the submission of requested instructions.
See, e.g., United States v. Graziano, 710 F.2d 691, 696 n.8 (11th Cir.
1983); United States v. Byrd, 542 F.2d 1026, 1027 (8th Cir. 1976).
Having considered the requested instruction and received no objection
5
to his actual charge, "the trial judge might well[have] believe[d] that
his instructions as finally formulated incorporate[d] the substance of
any instructions previously tendered by the parties." Byrd, 542 F.2d
at 1027. This is especially so where, as here, the district court did in
fact incorporate almost verbatim sentences from both the Gresko
decision and the requested Gresko charge. Compare J.A. at 492-93
(district court's instructions) with Gresko, 632 F.2d at 1132 ("The
provisions of this title do not apply to gambling that is sporadic or of
insignificant monetary proportions."), and J.A. at 552 (defendant John
Michael's requested jury instructions) ("A four person operation with
changing personnel would be outside the reach of the statute.").
As for appellants second contention, we simply disagree that they
ever lodged an actual Gresko objection at all. After reviewing the
court's intended instructions, appellants stated only that they wished
to "renew [the] request" that the court instruct the jury that it "had to
be unanimous as to which five [individuals] were involved at a partic-
ular time." J.A. at 445. While this renewed request qualifies as an
objection to the lack of a specific unanimity instruction, discussed at
greater length below, it cannot serve double duty as a valid Gresko
objection as well. A party wishing to preserve an exception to a jury
instruction must "stat[e] distinctly the matter to which he objects and
the grounds of his objection." See Fed. R. Crim. P. 30. Appellants dis-
tinctly stated their objection to the lack of a specific unanimity
instruction -- nothing more, nothing less. Because appellants failed
distinctly to state their objection to the instructions on the elements,
the court was not "apprised adequately of the disputed matter and of
the need to take corrective action to avoid a new trial." United States
v. Castro, 776 F.2d 1118,1129 (3rd Cir. 1985). Thus, we conclude
that while appellants may have timely objected on the absence of a
"specific unanimity" charge, see below, they did not do so with
respect to the court's failure to give a satisfactory Gresko instruction,
and our review on that question is for plain error only.
As a threshold matter, we agree with appellants that the district
court erred in charging the jury, even though the district court's
instructions in this case were far more detailed than those given in
Gresko and discussed above. The district court instructed the jury that
the government must prove the three essential elements of the crime,
6
listed those elements individually, and then explained them in some
detail. In relevant part, the district court explained that
[t]he government must prove beyond a reasonable doubt . . .
that five or more persons conducted, financed, managed,
supervised, directed or owned the gambling operation
described in the indictment. A four-person operation with
changing personnel would be outside the reach of the stat-
ute. . . .
The government must prove beyond a reasonable doubt
. . . that at least five people conducted, financed, managed,
supervised, directed, or owned an illegal gambling business
that was in operation for more than thirty years[sic] or that
had gross revenue in excess of $2,000 in any one day.
J.A. at 491-92. As with the instruction invalidated in Gresko, how-
ever, the district court's charge would allow the jury to convict if it
concluded that defendants were involved in an illegal gambling busi-
ness that satisfied the five-person and durational or revenue elements
at different times. So, for instance, a four-person gambling operation
that added a fifth member to its ranks on its thirty-first day in substan-
tially continuous operation would immediately upon augmentation be
covered by this jury charge. Because, at least under Gresko, "such is
not the law", Gresko, 632 F.2d at 1135, we must conclude that the
district court's instructions were in error.
The second step in our plain error inquiry is to determine whether
the identified error is, in fact, plain. There is no question that this
prong of the analysis is satisfied. Our holding in Gresko is unambigu-
ous and now of some vintage, making the district court's error suffi-
ciently "clear" and "obvious" to qualify as plain. See Olano, 507 U.S.
at 734.
Proceeding to the third prong of the plain error analysis, we con-
clude that the error, however, did not affect appellants' substantial
rights. As we recently noted, this inquiry differs from harmless error
review in that "[i]t is the defendant rather than the Government who
bears the burden of persuasion." United States v. Hastings, 134 F.3d
235, 240 (4th Cir. 1997) (quoting Olano, 507 U.S. at 734 (alteration
7
in original)). Because the error in this case, as in Hastings, is one of
misinstruction, rather than noninstruction, on the elements of the
offense charged, it is not one of those "special category of forfeited
errors that can be corrected regardless of their effect on the outcome
of the proceedings." Hastings, 134 F.3d at 240. Instead, before we
may notice the error, defendants must satisfy their burden of showing
that the error "actually affected the outcome of the proceedings." Id.
at 239. Thus, in order for the defense to establish that the jury misin-
struction altered the outcome of the trial, it had to show that the
proper instruction, on the same evidence, would have resulted in
acquittal, or at the very least a hung jury. See id. at 240. This appel-
lants have failed to do.
The government presented evidence at trial that Michael's illegal
gambling business involved more than a dozen people and was in
operation at the very least for the three-year period between October
1992 and November 1995 covered by the indictment. The jury heard
from two cooperating witnesses, Nicolas Alexandrou and Kostas Vel-
lios, who testified at trial to their participation in the business, and
heard evidence of the involvement of, among others, three additional
partners ("Sonny," "Steve," and "Harold"), three "sub-books" who
pleaded guilty prior to trial (Michael Magnolia, Rizos Hadoulis, and
Raymond Duncan), and John Michael's daughter Maria, who also
pleaded guilty before trial. In response, defendants argued, respec-
tively, that the operation never involved five people at once (Michael,
Basle), or that, even if it had, they either withdrew before it attained
that size (Nicolaou) or were never involved at all (Basle). Even more
significant is what defendants did not argue. They presented no evi-
dence to suggest, and made no arguments to the effect, that while
there may have been five people involved in the operation at some
point, there were never five involved for thirty days at a time. The
issues in dispute at trial were exclusively those of size and defen-
dants' involvement, not whether "size and duration coalesce[d]."
Gresko, 632 F.2d at 1134. That being so, appellants simply have not
borne their burden of showing that a complete Gresko instruction,
with its attendant emphasis on the coalesence of these elements,
would have resulted in a different outcome.2 Accordingly, we must
decline to notice the error.
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2 In Gresko itself, we based our finding of a "substantial likelihood that
the [instructional] error was prejudicial" on the "bare sufficiency of the
Government's proof." Gresko, 633 F.2d at 1134. Appellants are unable
to establish that the government's evidence in this case suffers from the
same infirmity.
8
B.
Appellants next claim that the district court committed reversible
error by refusing to instruct the jury that it had to be "unanimous as
to which five [persons] were involved at a particular time." Because
we do not believe section 1955 requires such unanimity as a matter
of law, we find no error in the court's refusal to give this requested
instruction.
Relying on United States v. Gilley, 836 F.2d 1206 (9th Cir. 1988),
appellants contend that a "specific unanimity" instruction was
required in order to avoid the possibility of a conviction based on less
than unanimous agreement as to the satisfaction of the five-person
and thirty-day elements, either separately or in conjunction. See
Gilley, 836 F.2d at 1213. Appellants argue that the general unanimity
instruction was insufficient because it would allow for a conviction
despite the jury's failure unanimously to agree on a particular set of
facts. For example, a conviction would be possible under the general
instruction where some jurors thought five people were involved dur-
ing one thirty-day period and the remaining jurors thought so with
respect to a different five people or over a different such period.
Although we agree that these instructions would permit a guilty ver-
dict under these circumstances, we also believe such is perfectly con-
sistent with the law.
The district court twice instructed the jurors that they must be
unanimous as to the elements of the offense. Section 1955 by its plain
language requires no more. In order to convict, the jury must unani-
mously agree that the gambling business was illegal under state law
and, after Gresko, involved five or more persons at all times over a
thirty-day period or on any single day in which the gross revenues
exceeded $2,000. As long as each member of the jury agrees that
some five persons were involved at all times over some thirty-day
period or on any one single day in which the gross revenues exceeded
$2,000, the law is satisfied. Cf. United States v. Hall, 93 F.32 126,
130 (4th Cir. 1996) (declining to require jury unanimity as to which
five persons were involved in a continuing criminal enterprise as long
as "each juror finds that some five persons were in agreement"). Sec-
tion 1955 is not concerned with which individuals, aside from defen-
dants, were involved in the gambling operation over which thirty-day
9
period (so long, of course, as that period is covered by the indict-
ment). Rather, the section's evident aim is to punish involvement in
gambling operations of a certain scale. See Gresko, 632 F.2d at 1132.
As long as all twelve jurors were convinced beyond a reasonable
doubt that the operation in question achieved that scale, the jury was
entitled by section 1955 to convict. We decline to add to the statute.
We therefore conclude that the district court committed no error in
refusing appellants' request for a specific unanimity instruction.3
III.
Appellants John and Sylvia Michael also contend that their convic-
tions pursuant to 26 U.S.C. § 7206(1) for filing false tax returns
should be reversed because the district court failed to instruct the jury
on the "critical element" of the offense, the defendants' belief in the
falsity of their tax return. Again, we disagree.
Under section 7206(1), the government must prove that "(1) the
defendant made and subscribed to a tax return containing a written
declaration; (2) the tax return was made under penalties of perjury;
_________________________________________________________________
3 Even assuming, arguendo, that we were prepared to require a specific
unanimity charge, as the Gilley court did, in those section 1955 cases in
which the possibility of juror confusion was especially great, we would
decline to do so in this case, the facts of which are "a far cry from
Gilley." United States v. Zizzo , 120 F.3d 1338, 1358 (7th Cir. 1997). In
Gilley, the Ninth Circuit recognized that "[u]sually a general unanimity
instruction suffices," id. at 1211, but required a specific unanimity charge
as to "who did what when" because evidence presented at trial suggested
that the number of participants in the gambling business at times dipped
below the statutory threshold. Gilley, 836 F.2d at 1212 ("Because the
evidence does not unequivocally show that five people were involved at
all times, we cannot say that the guilty verdict rested on unanimous
agreement on a single thirty day period."). In this case, the prosecution
introduced overwhelming evidence, including the testimony of several
members of the organization who had previously pleaded guilty, that
considerably more than five people were involved in the operation
throughout the period covered by the indictment. As"even Gilley recog-
nized . . . a specific unanimity instruction is unnecessary when the evi-
dence clearly establishes that more than five people were involved in the
gambling business at all times." Zizzo, 120 F.3d at 1358.
10
(3) the defendant did not believe the return to be true and correct as
to every material matter; and (4) the defendant acted willfully."
United States v. Aramony, 88 F.3d 1369 (4th Cir. 1996) (emphasis
added). In listing the elements of the offense of filing a false tax
return, the district court instructed the jury as follows:
The government must prove beyond a reasonable doubt
count one -- element one, the first is that the defendant
made or caused to be made and subscribed to a federal tax
return for the year in question; two, that second element is
that the government must prove that the tax return was false
as to a material matter, that is, it contained an understate-
ment of gross income; third, that the return contained a writ-
ten declaration that it was made under the penalties of
perjury; and then, fourth, that when defendants made or
caused to be made and when they signed the return they did
so willfully and knowingly . . . .
It is not enough for the government to prove simply that
the tax return is erroneous.
J.A. at 520. Appellants are correct that these instructions, when
viewed in isolation, would seem to omit the "critical belief-of-falsity
element."
The charge was not given in isolation, however, and we will not
evaluate it as though it were. See United States v. Rahman, 83 F.3d
89, 92 (4th Cir. 1996) ("[I]n reviewing the propriety of jury instruc-
tions, we do not view a single instruction in isolation; rather we con-
sider whether taken as a whole and in the context of the entire charge,
the instructions accurately and fairly state the controlling law.");
Mazzell v. Evatt, 88 F.3d 263, 267 (4th Cir. 1996) (noting that it is
a "basic maxim" that "an allegedly erroneous instruction may not be
judged in artificial isolation, but must be considered in the context of
the instructions as a whole and the trial record" (internal quotations
and citations omitted)). When we consider the instructions in their
entirety, and in the context of the evidence presented at trial, it
becomes clear that they would not, as appellants suggest, permit a
conviction for mere carelessness or negligence in submitting false
returns. The district court instructed the jury on the meaning of
11
"knowingly," "willfully," and "intentionally" at the outset of its
instructions. In so doing, the court explained that
[w]illfully means to act with knowledge that one's conduct
is unlawful and with the intent to do something the law for-
bids. That is to say, with bad purpose to disobey or to disre-
gard the law.
A defendant's conduct was not willful if it was due to
negligence, inadvertence, or mistake, or was the result of a
good faith misunderstanding of the requirements of the law.
J.A. at 485. In addition, in instructing the jury on the law of conscious
avoidance, the district court charged that
[i]f you find that the defendant was aware of a high proba-
bility, that is, the statement was false, and that the defendant
acted with deliberate disregard of the facts, you may find
that the defendant acted knowingly. However, if you find
that the defendant actually believed, that is, that the state-
ment was true, he or she may not be convicted.
J.A. at 486 (emphasis added). Thus, in instructing the jury that they
must find that the Michaels "willfully and knowingly" caused the
statement to be filed, the district court made clear that conviction on
this count, as with all counts, depended upon a finding that the defen-
dants acted with the requisite mens rea -- here, a belief in the falsity
of their returns.
In addition, the evidence presented at trial pervasively established
that the Michaels not only believed that their tax returns were false,
but actually knew that this was so. The evidence clearly demonstrated
that both Michaels knew of the gambling business-- as, in fact, did
much of the extended Michaels family -- and knew as well that they
did not report the income from that business on their returns. Accord-
ingly, because we conclude that, when taken "in the context of the
instructions as a whole and [the] trial record," Mazzell, 88 F.3d at
267, the district court's instructions were not erroneous, we affirm the
convictions of John and Sylvia Michael for filing false tax returns in
violation of 26 U.S.C. § 7601.
12
IV.
Appellant John Michael next contends that his sentence of eighty-
seven months should be vacated because the district court improperly
applied a four-level role adjustment to the base level sentence for
money laundering after grouping the gambling and money laundering
counts. Michael was convicted of conducting an illegal gambling
business, conspiracy to conduct an illegal gambling business, conspir-
acy to commit money laundering, seven substantive acts of money
laundering, and filing false income tax returns. The district court
"grouped" all of the counts pursuant to U.S.S.G. § 3D1.2. In accor-
dance with the Guidelines, Michael's sentence was determined with
reference to the highest individual adjusted offense level, which was
for money laundering. Based on the amount of money laundered, this
adjusted offense level was determined to be 25. The district court then
applied a four-level enhancement for leadership in the organization
pursuant to U.S.S.G. § 3B1.1(a) and arrived at a sentencing range
based on an offense level of 29.
Michael argues that the guidelines require the application of a role
adjustment to individual offenses before grouping, and that, regard-
less of how we resolve the grouping issue, an adjustment to the
money laundering sentence based on his leadership role in the gam-
bling offenses was improper because the latter was not conduct rele-
vant to the former. We disagree on both counts.
First, as the district court correctly noted at sentencing, the law in
this circuit is clear that a role in the offense adjustment is applied
after related offenses are grouped. See United States v. Hartzog, 983
F.2d 604, 608 (4th Cir. 1993) ("The managerial enhancement does not
apply to the sentence imposed on individual counts. Rather, it is
applied to determine the applicable sentencing range for the grouped
offenses collectively."). Thus, to the extent that offenses are legiti-
mately grouped -- and Mr. Michael does not argue that in his case
they are not -- the role adjustment is properly applied after grouping
has occurred.
Second, even if appellant were correct that the adjustment must be
applied first, and then only to those offenses of conviction with
respect to which his gambling-related leadership is"relevant con-
13
duct," we would still affirm the four-level enhancement. The gam-
bling offenses are relevant conduct under the Sentencing Guidelines
because they occurred during "the commission of, and in preparation
for," the money laundering. U.S.S.G. § 1B1.3(a)(1). Without the ille-
gal gambling, there would have been no ill-gotten gains to launder.
See United States v. Savage, 67 F.3d 1435, 1442 (9th Cir. 1995)
(affirming four-level adjustment on sentence for money laundering on
the basis of defendant's leadership role in underlying mail and wire
fraud convictions). In addition, the gambling business is relevant con-
duct under § 1B1.3(a)(2) because the money laundering counts them-
selves were grouped based on the amount of money laundered under
U.S.S.G. § 3D1.2(d), and the gambling organization was part of the
"same course of conduct or common scheme or plan as the offense
of conviction." U.S.S.G. § 1B1.3(a)(2). Thus, even if grouping of the
money laundering and gambling counts were improper, or if a role
adjustment were only to be applied prior to grouping, the four-level
enhancement to the money-laundering sentence on the basis of a lead-
ership role in the gambling offenses would be appropriate under the
Guidelines. Accordingly, we affirm Mr. Michael's sentence.
V.
We have carefully reviewed and considered all other challenges
appellants raise to their convictions and sentences, and find them to
be without merit.
CONCLUSION
For the reasons stated herein, we affirm the judgment of the district
court.
AFFIRMED
14