United States v. Allen

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA, 
Plaintiff-Appellee,
v.  No. 05-5249
BYRON KEITH ALLEN,
Defendant-Appellant.

UNITED STATES OF AMERICA, 
Plaintiff-Appellee,
v.  No. 06-4012
ERNEST ROBERT REINHARDT,
Defendant-Appellant.

Appeals from the United States District Court
for the District of Maryland, at Baltimore.
Benson Everett Legg, Chief District Judge.
(CR-02-307)
Argued: March 16, 2007
Decided: June 22, 2007
Before NIEMEYER, MICHAEL, and GREGORY, Circuit Judges.
Dismissed in part; affirmed in part by published opinion. Judge Greg-
ory wrote the opinion, in which Judge Niemeyer and Judge Michael
concurred.
2 UNITED STATES v. ALLEN
COUNSEL
ARGUED: Steven Gene Berry, Rockville, Maryland; Joseph Francis
Lawless, Jr., Newtown Square, Pennsylvania, for Appellants. Chris-
tine Manuelian, Assistant United States Attorney, OFFICE OF THE
UNITED STATES ATTORNEY, Baltimore, Maryland, for Appellee.
ON BRIEF: Rod J. Rosenstein, United States Attorney, Baltimore,
Maryland, for Appellee.
OPINION
GREGORY, Circuit Judge:
Byron Allen and Ernest Reinhardt ("Appellants") appeal, on vari-
ous grounds, their convictions for wire fraud under 18 U.S.C. § 1343
(2000). Additionally, Reinhardt raises numerous issues concerning his
seventy-month sentence. Because the district court did not commit
reversible error, we affirm the Appellants’ convictions and sentences.
I.
Allen and Reinhardt were indicted on multiple counts of wire fraud
in violation of 18 U.S.C. § 1343 arising from their involvement in a
scheme that arranged equipment financing for nonexistent equipment.
In short, Reinhardt’s company, Tech Com, acting as a purported
equipment vendor, would arrange, through financing companies,
equipment-lease financing for various customers. Reinhardt would
take a portion of the loan as a fee and the lessee would keep the
remainder. Neither Reinhardt nor his company would provide the les-
sees with computer equipment. The Government, through prior indict-
ments, secured guilty pleas from eleven other individuals involved in
the scheme. A twelfth individual was indicted along with the Appel-
lants but pleaded guilty shortly after trial commenced.
A.
At trial, the Government presented evidence that Reinhardt was the
major architect of the fraud scheme, while Allen assisted in the
UNITED STATES v. ALLEN 3
scheme through preparing and faxing fraudulent documents. Six other
participants in the scheme testified; all six gave similar testimony
about the logistics of the scheme, Reinhardt’s leadership role, and
Allen’s involvement.
Linda Durkin testified that she was told that Reinhardt could
arrange loans through Tech Com, at a cost of twenty percent, to pro-
vide needed capital for her mortgage business. Prior to the transac-
tion, Reinhardt told Durkin that the loan was actually an equipment
lease for new computers, but that she could use her existing comput-
ers as collateral and did not have to provide any documentation as to
their value. Throughout her relationship with Reinhardt, Durkin never
received any computer equipment—new or used—from Reinhardt or
Tech Com. Durkin expressed her concerns about the arrangement and
Reinhardt assured her that it was legal, but that the leasing companies
"don’t really like it." J.A. 5267.
Reinhardt instructed her to tell the financing company that she
received new equipment when the company called for verbal verifica-
tion. Durkin testified that Reinhardt told her: "That if they [the financ-
ing company] ask if there’s new equipment, yes, it’s new equipment.
Tell them—you know, tell them it’s been installed. If they ask if it’s
been installed, delivered, you say yes." J.A. 5272. Reinhardt told
Durkin when the financing company was going to conduct an on-site
inspection. Prior to the inspection, Reinhardt shipped Durkin labels
with serial numbers printed on them that she affixed to her existing
computer equipment. The serial numbers did not match those on the
actual equipment; instead they matched the numbers on the form for
the particular lease.
Durkin’s account accorded with that of the other witnesses. Clint
Garrison and Paul Gregg testified that Reinhardt offered to arrange
loans for their financial consulting company for a twenty percent fee.
Gregg and Garrison entered into five lease transactions with Rein-
hardt. Neither Reinhardt nor Tech Com provided any of the computer
equipment referenced in the lease documents. Rather, Reinhardt told
Garrison to purchase a label gun to manufacture labels with false
serial numbers on them and affix those labels to computer equipment
prior to a physical inspection. In addition to transactions for their own
company, Garrison and Gregg also arranged leases through Reinhardt
4 UNITED STATES v. ALLEN
for two other companies with which they were involved. None of
these companies received computer equipment through the leases
from Reinhardt or any of his associates or associated entities. Rein-
hardt was the contact person on all of these leases.
Likewise, Tigran Khrlobian was introduced to Reinhardt because
he needed to raise capital for his insurance agency, Proshield, which
had recently emerged from bankruptcy. When he first met with Rein-
hardt, Reinhardt explained that Khrlobian’s company could enter into
computer leases and receive money, rather than equipment. Khrlobian
entered into at least seven lease transactions through Reinhardt, with
Tech Com acting as the purported equipment vendor. He never per-
manently received any of the computer equipment represented in the
leases. When the financing company performed an on-site inspection,
Reinhardt brought Khrlobian equipment, used a label maker to affix
serial numbers to the devices, and then removed the equipment
shortly after the inspection. Reinhardt coached Khrlobian to respond
to telephone inquiries from the financing companies by saying that
the equipment was there and that Khrlobian was happy with it.
Jacques Smith testified that he started a debt collection business,
CRU & Associates, with coconspirator Marc Washington. Smith and
Washington were introduced to Reinhardt, who promised that he
could arrange for two $50,000 loans to CRU. Smith and Washington
had bad credit, but filled out a loan application sent by Reinhardt
using Washington’s grandmother as the applicant (with her permis-
sion).
Reinhardt then informed Smith that the loan would not be approved
without CRU having a Dun & Bradstreet ("D&B") report. Smith
filled out a basic D&B report for CRU, but the bank was not satisfied
and wanted a full D&B report. Smith then filled out a full D&B
report, in which he provided a false reference supplied by Reinhardt.
Reinhardt told Smith that the bank wanted audited financial state-
ments for the company but that he had contacts in California who
could provide financial reports for CRU for $600 to $1,000. Smith
and Washington ordered the reports, which arrived two or three days
later. Smith and Washington had never provided Reinhardt with any
financial information about CRU; the reports they purchased were
completely fabricated.
UNITED STATES v. ALLEN 5
When Reinhardt forwarded Smith the final loan documents that
needed to be signed by Washington’s grandmother, Smith realized
that the loan was actually in the form of a lease for computers. Nei-
ther Smith, Washington, nor CRU ever requested or received com-
puter equipment in connection with the loan. Reinhardt told Smith
that when the financing company called to ask about the equipment,
that Smith should tell them that CRU had received new computer
equipment. This first lease transaction yielded CRU around $30,000.
The second loan that Smith arranged through Reinhardt required an
on-site inspection. Reinhardt faxed Smith a list of serial numbers to
affix to the back of CRU’s existing computer equipment.
Reinhardt instructed Smith that CRU needed to make at least the
first two to four monthly payments on the lease transactions to avoid
suspicion of fraud. Reinhardt told Washington that if he made a mini-
mum of six or seven payments on the loan, it would not be red-
flagged. After those payments, Reinhardt informed Washington that
he could "utilize the insurance that also comes with the leases, and
report, act like you had a break-in at your establishment and report the
computers stolen to get out of the lease." J.A. 2965.
After a dispute, Smith ended his relationship with Reinhardt and
Washington. Washington testified that he then formed his own corpo-
ration, Futureview Graphics, which he and Reinhardt used as a lessee
in two fraudulent leases. Washington also generated numerous lessees
through his friends, using their existing businesses or assisting them
in creating new ones. Reinhardt represented Tech Com as the vendor
on all of these transactions. Reinhardt took fees of ten to twenty per-
cent on these leases, then Washington took fees and provided the
remainder to the lessees. Washington often set up computers at busi-
ness locations for on-site inspections by finance companies. Reinhardt
faxed Washington a list of serial numbers, so that Washington could
affix those numbers to the computers. Washington removed the com-
puters after the inspections were complete.
The father of Washington’s girlfriend was listed as a guarantor for
some of the lease transactions for lessee Variety Cutz and was falsely
listed as the president of the company. Washington testified that he
joked to Reinhardt about the ownership of Variety Cutz and that
Reinhardt compared it to Washington’s grandmother nominally own-
6 UNITED STATES v. ALLEN
ing CRU, because Washington had used her credit. Reinhardt’s
knowledge of the Variety Cutz arrangement was demonstrated by his
threats to Washington’s girlfriend that he would "let it be known that
[she and Washington] used her father’s information." J.A. 3058.
A representative of CIT, which financed seven of Tech Com’s
leases, testified that the invoice provided by the vendor is the title to
the equipment and represents the bill of sale. CIT would not have
approved loans if they knew that the equipment in the invoice had
never been sold or delivered. If the money from the loan flowed to
the lessee rather than the vendor, it would have raised a red flag as
a violation of the agreements, which purported to be equipment-
financing leases. The seven leases with Tech Com were not sale-
leaseback arrangements and were supposed to be for purchase of new
equipment. If Tech Com had wanted to finance sale-leasebacks from
CIT, there would have been different paperwork evidencing owner-
ship and title to the underlying equipment as well as its value. If Tech
Com wanted working capital loans, there would have been proof-of-
ownership and UCC documents.
Representatives of other financing companies testified to the same
material facts. For example, a representative of Alliance Capital testi-
fied that he dealt with Reinhardt and Allen at Tech Com and that he
understood Reinhardt to be the manager and Allen to be in sales. Alli-
ance would not have engaged in any of the lease transactions with
Tech Com if they were aware that there was no actual computer
equipment.
With respect to Allen, Washington testified that Allen was a sales
processor at Tech Com. When Washington submitted a lease-
transaction application to Tech Com, Allen was one of the processors
who called the customers and verified information before submitting
the application to the financing company. Allen assisted with some
twenty of the lease transactions that Washington and Reinhardt con-
ducted following the creation of Futureview Graphics. Reinhardt told
Washington that Allen received commission payments on the transac-
tions with which he assisted. Allen received approximately $19,930
in payments from Tech Com. Allen worked from Reinhardt’s office
at Tech Com, where a fax machine was located. Numerous fax cover
sheets were entered into evidence that had Allen’s name on them and
UNITED STATES v. ALLEN 7
referenced lease agreements between Tech Com and various compa-
nies. These cover sheets all accompanied invoices or other documents
related to the fraudulent lease transactions.
The jury found Reinhardt guilty of twenty-nine counts of wire
fraud and Allen guilty of six counts of wire fraud. The jury could not
reach a verdict on one count of wire fraud for both defendants and on
one count with which only Allen was charged. After a three-day sen-
tencing hearing, the district court sentenced Reinhardt to seventy
months in prison and Allen to thirty-seven months. This appeal fol-
lowed.
II.
Reinhardt and Allen allege that there was insufficient evidence to
sustain their convictions and that the district court improperly
instructed the jury on the mens rea requirement of wire fraud. They
argue that the evidence did not establish that either engaged in wire
fraud because Washington was the architect of the scheme and they
were unknowing participants. In addition, they claim that the evi-
dence did not establish that either possessed the requisite mens rea to
commit fraud because they believed that the leases would be paid
back to the financing companies. Finally, they assert that an error in
a jury instruction misstated the law and allowed the jury to convict
with less than the required quantum of evidence of fraudulent intent.
In evaluating a challenge to the sufficiency of evidence for convic-
tion, "this Court must determine whether, construing the evidence in
the light most favorable to the government, any reasonable trier of
fact could have found [the defendant] guilty beyond a reasonable
doubt." United States v. Curry, 461 F.3d 452, 457 (4th Cir. 2006). In
our inquiry, the Government is given "the benefit of all reasonable
inferences from the facts proven to those sought to be established."
United States v. Tresvant, 677 F.2d 1018, 1021 (4th Cir. 1982).
Accordingly, "if the record reflects that the Government presented
substantial evidence from which a reasonable jury could convict, we
must uphold the verdict." United States v. Godwin, 272 F.3d 659, 666
(4th Cir. 2001). Moreover, "[w]here there are conflicts in the testi-
mony, it is for the jury and not the appellate court to weigh the evi-
8 UNITED STATES v. ALLEN
dence and judge the credibility of the witnesses." Curry, 461 F.3d at
457 (alteration in original) (quoting Tresvant, 677 F.2d at 1021).
A.
When viewed in the light most favorable to the Government, there
is ample evidence to sustain the convictions of both Reinhardt and
Allen. Wire fraud under 18 U.S.C. § 1343 has "two essential ele-
ments: (1) the existence of a scheme to defraud and (2) the use of . . .
wire communication in furtherance of that scheme." Curry, 461 F.3d
at 457. The evidence adduced at trial supports the jury verdict that
Allen and Reinhardt engaged in conduct satisfying both elements of
the charged offense and that both had the requisite mental state,
including intent to defraud, required under the statute. Thus, we reject
Appellants’ sufficiency of the evidence claim and sustain the jury ver-
dict.
Allen and Reinhardt argue that they were not the principals in the
fraud scheme and that Washington was the scheme’s mastermind. The
evidence presented at trial demonstrates that both Appellants engaged
in conduct that satisfies the wire fraud statute. Furthermore, Rein-
hardt’s attempt to portray himself as a victim of Washington does not
comport with the weight of the evidence. Five witnesses testified that
it was Reinhardt, not Washington, who was the principal architect of
the fraudulent scheme. Durkin, Gregg, Garrison, Khrlobian, and
Smith all testified that they dealt with Reinhardt in securing financing
from lease transactions, that they never received any computer equip-
ment in connection with those transactions, and that Reinhardt told
them to make the first few payments on the leases to avoid raising the
suspicion of the financing companies. In addition, Reinhardt
instructed each of them to represent to the financing companies that
they had received new equipment, sometimes going so far as to bring
that equipment to their businesses for on-site inspections and remov-
ing the equipment after completion of the inspection. The financing
companies testified as to their extensive dealings with Reinhardt,
whom they believed was in charge at Tech Com and his other compa-
nies, and that they never would have provided financing for any lease
transactions involving Reinhardt if they were aware that no new com-
puter equipment was being provided to the lessees.
UNITED STATES v. ALLEN 9
The evidence also demonstrates that Allen participated in the lease
transactions, working out of Reinhardt’s office, faxing documents,
and processing leases by phone. Allen’s name appears on the fax
cover sheet of numerous faxes containing false invoices in connection
with lease transactions. Allen received commission payments from
these transactions and was aware that Tech Com was not providing
equipment in connection with the leases. Indeed, Allen accompanied
Reinhardt on trips to temporarily set up computer equipment with
false serial numbers for on-site inspections. Given this evidence, the
jury was not unreasonable in concluding that Allen was a full partici-
pant in the fraudulent scheme when he interacted with Reinhardt, cus-
tomers, and financing companies in connection with transactions
concerning equipment he knew not to exist.
In sum, overwhelming evidence was adduced at trial to support the
convictions of both Reinhardt and Allen on wire fraud and aiding and
abetting wire fraud. Contrary to Reinhardt’s contention on appeal, he
was not Washington’s innocent victim, but a full participant in the
fraud scheme, instructing other coconspirators on the methodology of
the fraud and serving as a chief contact to financing companies. Con-
trary to Allen’s contentions, there is ample evidence that he faxed
fraudulent documents and assisted in completing lease transactions
for computers that he knew did not exist. Allen cannot feign igno-
rance of the scheme simply because he did not participate to the
extent of Washington or Reinhardt.
B.
"The intent to repay eventually is irrelevant to the question of guilt
for fraud." Curry, 461 F.3d at 458; see United States v. Kenrick, 221
F.3d 19, 29 (1st Cir. 2000) (en banc) ("[T]he intent element of bank
fraud . . . is an intent to deceive the bank in order to obtain from it
money or other property. ‘Intent to harm’ is not required." (footnote
omitted)); United States v. Hollis, 971 F.2d 1441, 1452 (10th Cir.
1992) ("[I]f a defendant knowingly provided materially false informa-
tion in order to induce the loan, [bank fraud] is complete, and it is
irrelevant whether or not he intended to repay it or was capable of
repaying it."); see also United States v. Bivins, 104 Fed. App’x 892,
902-03 (4th Cir. 2004) (affirming trial court’s refusal to instruct jury
based on defendant’s theory that he "never intended to cause financial
10 UNITED STATES v. ALLEN
harm or loss to any financial institution because he believed [a cocon-
spirator] would pay back all of the secured loans").
Accordingly, Appellants cannot rely on a belief that the customers
for whom they arranged false computer equipment leases from
financing companies were going to pay the loans in full. This argu-
ment is especially dubious given the evidence that Reinhardt
instructed customers on the number of payments to make to avoid
being red-flagged, provided false serial numbers to be affixed to
equipment to deceive financing company inspectors, and told custom-
ers to inform the financing companies that the equipment was new
and satisfactory, when, in fact, it did not exist. These actions are suffi-
cient to establish the necessary mens rea for wire fraud. Cf. United
States v. Godwin, 272 F.3d 659, 669-70 (4th Cir. 2001) ("The jury
was also entitled to conclude that the partial reimbursements to the
initial investors were meant to dispel investor concerns, to quiet what
are commonly referred to as ‘squeaky wheels,’ to keep investigators
away from the scheme, and, in sum, to permit the fraud scheme to be
perpetrated."); United States v. Painter, 314 F.2d 939, 943 (4th Cir.
1963) (noting that lulling payments do not establish good faith as they
are intended to conceal the fraud and "ensnare" other victims).
C.
"The decision to give or not to give a jury instruction is reviewed
for an abuse of discretion." United States v. Moye, 454 F.3d 390, 397-
98 (4th Cir. 2006). Whether the district court has properly instructed
a jury on the statutory elements of an offense is a legal question that
we review de novo. United States v. Rahman, 83 F.3d 89, 92 (4th Cir.
1996). "However, in reviewing the propriety of jury instructions, we
do not view a single instruction in isolation; rather we consider
whether taken as a whole and in the context of the entire charge, the
instructions accurately and fairly state the controlling law." Id. We
will not vacate a conviction on the basis of an erroneous jury charge
if, in light of the above inquiry, the charge contained an adequate
statement of the law and was not misleading. United States v. Scott,
424 F.3d 431, 434 (4th Cir. 2005).
Reinhardt and Allen complain that the district court omitted a
clause from a written jury instruction ("Instruction 40") provided to
UNITED STATES v. ALLEN 11
the jury after they commenced deliberations, and thus that the instruc-
tion was erroneous. The district court instructed the jury orally:
You are instructed that if the defendant participated in the
scheme to defraud, then a belief by the defendant, if such
belief existed, that ultimately everything will work out so
that no one would lose any money does not require a finding
by you that the defendant acted in good faith.
If the defendant participated in the scheme for the pur-
pose of causing some financial or property loss to another,
then no amount of honest belief on the part of the defendant
that the scheme would not cause a loss, or would excuse
fraudulent actions or false representations by him.
A defendant’s belief that the victim of the fraud will be
paid in the future or will sustain no economic loss is no
defense to the crimes charged in the indictment.
J.A. 4751-52 (emphasis added). When the district court gave the
above instruction to the jury in written form as Instruction 40, the
middle paragraph was omitted. Reinhardt and Allen contend that the
omission of the phrase "for the purpose of causing some financial or
property loss to another" misstated the law and allowed the jury to
convict even if there was not sufficient evidence that they possessed
intent to defraud.
Instruction 40, although omitting a clause, did not misstate the con-
trolling law or mislead the jury as to the elements of the offense. First,
when the district court orally instructed the jury on the portion of the
charge later contained within written Instruction 40, the phrase "for
the purpose of causing some financial or property loss to another" was
included. More importantly, Instruction 40 advised, in the paragraph
following the omitted language:
[I]n order to sustain the charges against the defendant, the
government must establish beyond a reasonable doubt that
he knew that his conduct as a participant in the scheme was
calculated to deceive and, nonetheless, he associated himself
12 UNITED STATES v. ALLEN
with the alleged fraudulent scheme for the purpose of caus-
ing some loss to another.
J.A. 5318 (emphasis added). On the first page of the written instruc-
tion, intent to defraud is defined as "to act knowingly and with the
specific intent to deceive, for the purposes of causing some financial
or property loss to another." J.A. 5316. If the jury found that the
defendant lacked that specific intent to defraud, the instruction coun-
seled an acquittal.
Furthermore, as the district court recounted during sentencing, the
jury instructions as a whole repeatedly emphasized that the Govern-
ment had to prove the requisite intent beyond a reasonable doubt. For
example, the district court instructed the jury orally that the Govern-
ment was required to prove that "there was a scheme or artifice to
defraud or to obtain money or property by materially false and fraud-
ulent pretenses, representations or promises," J.A. 4460, and that the
defendant must have "knowingly, willfully, and voluntarily joined in
the scheme, [and] must have participated in the scheme with an intent
to defraud someone else." J.A. 4756. Based on the entirety of the jury
instructions and the context of the omitted sentence, the charge was
not misleading and contained an adequate statement of the law
regarding the charged offense.
Appellants also object to the portion of Instruction 40 that stated:
"A defendant’s belief that the victim of the fraud will be paid in the
future or will sustain no economic loss is no defense to the crimes
charged in the indictment." J.A. 5318; Appellants’ Br. 16-17. This
instruction accurately states the proposition that a belief that the vic-
tim will be repaid eventually is not a defense to fraud. See United
States v. Molinaro, 11 F.3d 853, 863 (9th Cir. 1993) (approving of
identical instruction), contained in Model Crim. Jury Instr. 9th Cir.
§ 3.17 (2003). In sum, we reject Appellants’ arguments regarding the
sufficiency of evidence for their conviction and whether the district
court properly charged the jury.
III.
Allen alleges that the admission of corporate records from Tech
Com, produced by Reinhardt in response to a Government subpoena,
UNITED STATES v. ALLEN 13
incriminated Allen, and because Reinhardt was not subject to cross-
examination, violated Allen’s rights under Bruton v. United States,
391 U.S. 123 (1968). Allen also argues that because of the Tech Com
documents, as well as Reinhardt’s litigation strategy, the denial of his
severance motion constitutes reversible error.
A.
In Bruton, the Supreme Court held that where a nontestifying code-
fendant’s statement implicates the defendant, a limiting instruction is
inadequate to prevent a violation of the defendant’s Confrontation
Clause rights. Id. at 135-37; see United States v. Locklear, 24 F.3d
641, 645 (4th Cir. 1994).
The threshold issue in this case is whether the Tech Com fax cover
sheets containing Allen’s name were statements by Reinhardt, a non-
testifying codefendant. In Braswell v. United States, 487 U.S. 99
(1988), the Supreme Court recognized that the act of producing docu-
ments pursuant to subpoena could have evidentiary significance. As
a consequence, "in a criminal prosecution against the [corporate] cus-
todian, the Government may not introduce into evidence before the
jury the fact that the subpoena was served upon and the corporation’s
documents were delivered by one particular individual, the custo-
dian." Id. at 118. On the other hand, the government may use the cor-
poration’s act of production against the custodian if evidence is
adduced from another source that the corporation produced the
records. Id. In that case, "[b]ecause the jury [was] not told that the
defendant produced the records, any nexus between the defendant and
the documents results solely from the corporation’s act of production
and other evidence in the case." Id.
In this case, none of the Tech Com documents introduced into evi-
dence before the jury were referred to as documents produced by
Reinhardt. The documents were introduced as Tech Com documents,
and witnesses testified as to the phone numbers or handwriting that
appeared on the documents. Because the jury was never told that
Reinhardt produced the Tech Com evidence, there is no act-of-
production inference that could have been drawn. Cf. Braswell, 487
U.S. at 118. Any link between the Tech Com documents and Rein-
hardt or Allen resulted solely from other evidence linking the defen-
14 UNITED STATES v. ALLEN
dants to Tech Com, rather than Reinhardt’s act of producing the
documents in response to a Government subpoena. Cf. Id. Because
the jury was not told that Reinhardt produced the Tech Com records,
those records were not statements by him. Where there is no introduc-
tion of statements by a nontestifying codefendant, Bruton is not vio-
lated.
B.
We review the district court’s rulings on severance and mistrial
claims for abuse of discretion. United States v. Najjar, 300 F.3d 466,
473 (4th Cir. 2002). We review factual findings made in connection
with those claims for clear error. Id. In Zafiro v. United States, the
Supreme Court commented that "[t]here is a preference in the federal
system for joint trials of defendants who are indicted together." 506
U.S. 534, 537 (1993). Zafiro noted that joint trials play a vital role in
the federal criminal system and promote efficiency while avoiding the
possibility of inconsistent verdicts. Id. at 573. Accordingly, Zafiro
concluded that "a district court should grant a severance under Rule
14 [of the Federal Rules of Criminal Procedure] only if there is a seri-
ous 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.
This risk might be present where evidence admissible against one
codefendant, but not the other, is introduced. Id. In a complex case,
where codefendants have "markedly different degrees of culpability,
this risk of prejudice is heightened." Id. Similarly, a defendant may
be prejudiced if he could not avail himself of exculpatory evidence in
a joint trial that would be available were he tried alone. Id.
"[I]t is well settled that defendants are not entitled to severance
merely because they may have a better chance of acquittal in separate
trials." Id. at 540. Without a strong showing of prejudice, severance
is not justified based on the mere disparity of the evidence adduced
against individual defendants. United States v. Mandel, 591 F.2d
1347, 1371 (4th Cir.), vacated en banc on other grounds, 602 F.2d
653 (4th Cir. 1979). A defendant is not entitled to severance merely
because his defense conflicts with or is antagonistic to a codefen-
dant’s defense. Zafiro, 506 U.S. at 538; Najjar, 300 F.3d at 474. This
UNITED STATES v. ALLEN 15
is true, even where one defendant desires to exculpate himself by
inculpating a codefendant. See Najjar, 300 F.3d at 474 (citing United
States v. Spitler, 800 F.2d 1267, 1271 (4th Cir. 1986)). A showing to
justify severance
requires more than finger pointing. There must be such a
sharp contrast presented by the defenses that the jury is pre-
sented with the proposition that to believe the core of one
defense it must disbelieve the core of the other, or that the
jury will unjustifiably infer that this conflict alone demon-
strates that both are guilty.
Id. (quotation marks and citations omitted). This contrast is satisfied
where a defendant’s guilt is "dictated by the asserted innocence of the
co-defendants." Id.
Reinhardt’s affirmative defense—that the Tech Com transactions
were legitimate and that Washington was the individual involved in
wrongdoing—was likely more harmful than helpful to both him and
Allen. Focusing on the efficacy of the defense, however, overlooks
the salient fact that both Reinhardt and Allen employed essentially the
same defense: that neither were actually engaged in the charged
fraudulent scheme and that Washington and others were the true
wrongdoers. Although Reinhardt elected to present witnesses to cor-
roborate his theory of being the innocent dupe to a consummate
schemer, Washington, and Allen preferred to rest his innocence on the
Government’s failure to prove his involvement and the canard that he
was a mere clerical employee, there was nothing antagonistic, or even
incompatible, about the Appellants’ defenses.
An examination of the evidence presented against Allen during the
Government’s case, as well as the testimony of Reinhardt’s defense
witnesses, demonstrates that Reinhardt’s defense was not so antago-
nistic to Allen’s that to believe one was to disbelieve the core of the
other. Reinhardt’s asserted innocence in no way dictated a finding of
Allen’s guilt. Nor did Reinhardt’s defense cause the jury to infer
unjustifiably that both Allen and Reinhardt were guilty. Examining
the testimony of the witnesses presented during Reinhardt’s defense
corroborates this conclusion. In addition, there was sufficient evi-
16 UNITED STATES v. ALLEN
dence presented during the Government’s case-in-chief to allow the
jury to convict Allen.
Allen claims prejudice from a document that was faxed from Allen
Freight Systems, a company that he owned, and entered into evidence
during the testimony of one of Reinhardt’s witnesses. As a result of
this document, Allen claims that he was forced to show the jury sam-
ples of his own handwriting to establish that he did not fax the docu-
ment. This, in turn, led the jury to be able to link Allen’s handwriting
to that on fax cover sheets, in alleged violation of Allen’s constitu-
tional rights. This argument ignores that the document was faxed
from a company Allen admitted to owning and that the document
would have been admissible against him even if he had been tried
separately from Reinhardt. Additionally, the Government entered into
evidence examples of Allen’s handwriting during its case-in-chief in
connection with a rental application he submitted. Thus, there was no
prejudice to Allen from the entry into evidence of the faxed document
from Allen Freight Systems during Reinhardt’s affirmative defense.
Reinhardt’s defense was not so inherently antagonistic to Allen’s
defense as to justify severance under the standard set forth in Najjar.
In addition, Allen has not demonstrated any specific instances of
impermissible prejudice from his joint trial with Reinhardt. Thus, we
reject his claim that the district court abused its discretion by denying
his motions for severance and a mistrial.
IV.
Reinhardt alleges that the district court did not properly inquire as
to the validity of a potential defense witness’s refusal to testify on the
basis of his Fifth Amendment right against self-incrimination and thus
violated Reinhardt’s Sixth Amendment right to compulsory process.
In addition, Reinhardt alleges that the Government engaged in mis-
conduct with regard to the potential witness, Robert Hickman, and
requests a remand to develop evidence in that regard. Finally, Rein-
hardt argues that his counsel’s acceptance of Hickman’s invocation of
the privilege represented constitutionally ineffective assistance of
counsel. We reject these arguments in their entirety.
UNITED STATES v. ALLEN 17
A.
The Fifth Amendment privilege "not only extends to answers that
would in themselves support a conviction under a federal criminal
statute but likewise embraces those which would furnish a link in the
chain of evidence needed to prosecute the claimant for a federal
crime." Hoffman v. United States, 341 U.S. 479, 486 (1951). The pro-
priety of the invocation of the privilege is not determined by the wit-
ness herself, but by the court. Id. Because requiring a witness to prove
the necessity of the privilege would often vitiate the privilege itself,
"it need only be evident from the implications of the question, in the
setting in which it is asked, that a responsive answer to the question
or an explanation of why it cannot be answered might be dangerous
because injurious disclosure could result." Id. at 486-87. Because a
criminal defendant has a right under the Sixth Amendment to compel
testimony, if a defense witness refuses to testify on the basis of the
Fifth Amendment, "the trial judge must make a proper and particular-
ized inquiry into the legitimacy and scope of the witness’s assertion
of the privilege." Gaskins v. McKellar, 916 F.2d 941, 950 (4th Cir.
1990). "A witness may be totally excused only if the court finds that
he could legitimately refuse to answer any and all relevant questions."
Id.
In this case, because Reinhardt’s counsel accepted Hickman’s
counsel’s assertion that Hickman would invoke his Fifth Amendment
privilege, the district court did not err by declining to inquire further,
given that it had appointed Hickman counsel on the basis of its thresh-
old belief that there was a valid Fifth Amendment issue. Cf. United
States v. Lee, 60 Fed. App’x 425, 427 (4th Cir. 2003); United States
v. Ortiz, 82 F.3d 1066, 1073 (D.C. Cir. 1996) ("We find no plain error
as a result of the district court’s failure to inquire sua sponte whether
the witness was entitled to assert a blanket privilege.").
B.
Reinhardt argues that evidence of a communication between Hick-
man, his counsel, and the Government prior to Hickman’s refusal to
testify warrants a remand to determine whether the Government’s
actions violated Webb v. Texas, 409 U.S. 94 (1972), or United States
v. Golding, 168 F.3d 700 (4th Cir. 1999). To prevail on a claim of
18 UNITED STATES v. ALLEN
prosecutorial misconduct, a defendant must show (1) that the prosecu-
tor’s remarks and conduct were, in fact, improper and (2) that such
remarks or conduct prejudiced the defendant to such an extent as to
deprive the defendant of a fair trial. Golding, 168 F.3d at 702. In this
case, there is no evidence whatsoever that the Government acted
improperly in any manner. A remand is thus unnecessary to develop
any evidence on this claim.
C.
Reinhardt submits that his trial counsel was constitutionally inef-
fective by acquiescing in Hickman’s refusal to testify on the basis of
his Fifth Amendment privilege. Claims of ineffective assistance of
counsel are normally raised before the district court via 28 U.S.C.
§ 2255 and are cognizable on direct appeal only where it conclusively
appears on the record that defense counsel did not provide effective
representation. See United States v. King, 119 F.3d 290, 295 (4th Cir.
1997). The record in this case does not conclusively suggest any prej-
udice to Reinhardt from Hickman’s failure to testify. Thus, Rein-
hardt’s ineffective assistance of counsel claim is not cognizable on
direct appeal.
V.
Allen and Reinhardt argue that the district court’s disclosure to the
Government of a document containing legal arguments regarding the
defense’s intended cross-examination of a witness impermissibly
intruded upon protected attorney work product and violated their
Sixth Amendment rights to effective assistance of counsel. Because
the Appellants do not allege any prejudice from the district court’s
disclosure, and none is apparent from the record, there was no Sixth
Amendment violation.
Recognizing that Washington was a key witness and that the
defense intended to make extensive use of his prior convictions dur-
ing cross-examination, the district court ordered the defense to pre-
pare a document detailing the specific prior convictions it intended to
introduce, as well as legal arguments supporting such questioning.
After defense counsel provided the requested document, the court
indicated that it would review the document over the weekend and
UNITED STATES v. ALLEN 19
then disclose the document the following Monday to the Government,
provided that the Government not reveal the document to the Assis-
tant United States Attorney responsible for preparing Washington for
his testimony. Defense counsel did not object at this time.
After reviewing the document, the district court ordered the
defense to provide a copy to the Government, with the stipulation that
it not be shared with the Assistant United States Attorney preparing
Washington. At that time, the defense attorney who prepared the doc-
ument and who intended to cross-examine Washington, who was not
present during the previous discussion about the document, objected,
claiming that the document was essentially a road map of his cross-
examination. Seeking to "avoid having interminable bench confer-
ences," the district court overruled the objection. J.A. 2913.
On appeal, Appellants do not allege any prejudice from the district
court’s decision to allow a Government attorney to view the docu-
ment prior to the defense’s cross-examination. Nor do Appellants
argue that the district court’s screening order, which essentially kept
the document ex parte, at least from the Assistant United States Attor-
ney preparing Washington, was insufficient to prevent prejudice to
the Appellants. "[I]t is well settled that some showing of prejudice is
a necessary element of a Sixth Amendment claim based on an inva-
sion of the attorney-client relationship." United States v. Chavez, 902
F.2d 259, 266 (4th Cir. 1990). Because Appellants do not allege any
prejudice from the district court’s actions, nor is any prejudice clear
from the record, there was no Sixth Amendment violation. The dis-
trict court took steps to ensure that the document remained screened
off from the Assistant United States Attorney responsible for prepar-
ing Washington and the defense’s cross-examination was not
impaired in any respect. Although district courts possess wide discre-
tion with regard to case management, providing the government with
documents pertaining to a defense’s intended cross-examination risks
disclosure of protected work-product and we discourage such orders.
In this case, however, we need not reach the issue of whether work
product was inherent in the disclosed document because the district
court effectively screened the document from the Government’s coun-
sel responsible for the witness and the Appellants do not allege that
any prejudice resulted from this arrangement. Accordingly, we reject
20 UNITED STATES v. ALLEN
Appellants’ argument that their Sixth Amendment rights were vio-
lated.
VI.
Finally, Reinhardt asserts that the district court committed numer-
ous errors in calculating his sentence. When we review a post-Booker
sentence of a district court, the overall inquiry is whether the sentence
is "within the statutorily prescribed range and is reasonable." United
States v. Hughes, 401 F.3d 540, 547 (4th Cir. 2005). A sentence
within the proper Sentencing Guidelines range is presumptively rea-
sonable. See United States v. Johnson, 445 F.3d 339, 341 (4th Cir.
2006). "In considering whether a sentence is unreasonable, we . . .
review the district court’s legal conclusions de novo and its factual
findings for clear error." United States v. Hampton, 441 F.3d 284, 287
(4th Cir. 2006). In reviewing loss calculation, we review de novo the
district court’s interpretation of what constitutes "loss," while accept-
ing the calculation of loss absent clear error. Hughes, 401 F.3d at 557
(reviewing determination of loss under Sentencing Guidelines
§ 2F1.1(b)(1)).
A.
Reinhardt argues that the district court abused its discretion by not
granting a downward departure because of his family circumstances.
Reinhardt’s son suffers from two rare genetic disorders, neurofibro-
matosis and congenital pseudoarthrosis of the left leg. Reinhardt
claims that the district court’s anger at his sentencing counsel, result-
ing from their voluminous submissions in connection with sentencing
and continued submissions as to Reinhardt’s innocence, caused the
court to deny the downward departure.
"A district court’s decision not to depart from the Sentencing
Guidelines is not reviewable unless the court mistakenly believed that
it lacked authority to depart." United States v. Carr, 271 F.3d 172,
176 (4th Cir. 2001). In this case, the district court acknowledged that
it had the ability to grant Reinhardt a downward departure based on
his family circumstances, but did not believe that such a departure
was warranted. Because the district court understood its ability to
depart from the Guidelines, it was "under no misperception as to its
UNITED STATES v. ALLEN 21
authority, [and] its refusal to depart is not subject to appellate
review." Id. at 176-77. Accordingly, we cannot disturb the district
court’s decision not to grant Reinhardt a downward departure based
on family circumstances and must dismiss this portion of his appeal.
B.
Reinhardt claims that the district court erred in applying a one-level
enhancement for identity theft under § 2F1.1(b)(5)(C)(i). Reinhardt
argues that while the evidence is clear that Washington engaged in
identity theft, there was no evidence that Reinhardt engaged in such
theft, even if he was aware of Washington’s actions.
Section 2F1.1(b)(5)(C)(i) of the Guidelines provides for a two-
level enhancement if a fraud offense involved "the unauthorized
transfer or use of any means of identification unlawfully to produce
or obtain any other means of identification." This subsection applies
where a defendant, without authorization, uses an individual’s name
and social security number or address to obtain a bank loan or credit
card. See Guidelines § 2F1.1 cmt. 16.; United States v. Baldwin, 14
Fed. App’x 192, 196 n.8 (4th Cir. 2001). The subsection has also been
held to apply where a defendant, without authorization, uses an indi-
vidual’s information to obtain a lease or open a bank account. See
United States v. Samet, 200 Fed. App’x 15, 23 (2d Cir. 2006) ("Like
the account number of a bank loan, the account number of the leases
thus constitute ‘means of identification,’ and because they were
obtained unlawfully, [the defendants’] base offense levels were
appropriately enhanced."); United States v. Norwood, No. 05-15154,
2006 WL 952330, at *1 (11th Cir. April 13, 2006) ("The names of his
mother and uncle were the means of identification. [The defendant]
used those means to produce another means of identification: the bank
account numbers. Accordingly, the identity theft enhancement
applies.").
In this case, the district court applied a one-level enhancement to
Reinhardt’s sentence under § 2F1.1(b)(5)(C)(I) based on, among other
facts, Reinhardt’s knowingly processing a lease with Khrlobian con-
taining Khrlobian’s wife’s social security number and name, which
Reinhardt knew were being used without her consent, and Reinhardt’s
knowledge that Washington’s girlfriend had listed her father as guar-
22 UNITED STATES v. ALLEN
antor on the Variety Cutz leases without his knowledge. In addition,
the district court found that the overall fraudulent scheme depended
on "dressing up" the lease applications with creditworthy guarantors,
regardless of whether permission had been obtained from those indi-
viduals.
The evidence adduced at trial reflected the fact that Washington
primarily filled out lease applications where guarantors were listed
without their knowledge. The evidence involving Khrlobian’s wife
and Washington’s girlfriend demonstrates, however, that Reinhardt
was aware in at least two instances of individual’s names, driver’s
licenses, and "credit," including social security numbers, being used
without authorization to obtain leases from financing companies.
Given this, the district court did not err in applying a one-level iden-
tity theft enhancement under § 2F1.1(b)(5)(C)(I) of the Guidelines.
In addition, Reinhardt objects to the inclusion in his loss calcula-
tion of two leases arranged by Telcom, another company that he and
Washington used as a purported equipment vendor, claiming that
there was insufficient evidence that he was involved with Telcom.
Given the evidence, the district court did not clearly err in including
the Telcom leases in Reinhardt’s loss calculation. Even assuming,
arguendo, that the Telcom leases were wrongly included, those leases
only increased the loss calculation by $132,400. The loss calculation
due to Reinhardt’s conduct was $1,694,164. Reducing this amount by
the Telcom lease amount yields $1,561,764, which corresponds to the
same offense level as Reinhardt’s calculated loss level. See Guide-
lines § 2F1.1(b)(1)(M). Thus, any error with respect to inclusion of
the Telcom leases was harmless.
C.
Reinhardt’s remaining objections to his sentencing attack the dis-
trict court’s methodology and his counsel’s effectiveness. We summa-
rily reject these arguments.
First, Reinhardt alleges that the district court’s "stacking" of two
counts to raise Reinhardt’s possible maximum sentence from sixty to
seventy months was improper, but provides no argument as to why.
Under § 5G1.2 of the Guidelines, if a defendant is convicted of multi-
UNITED STATES v. ALLEN 23
ple counts of an offense and the calculated sentence under the Guide-
lines exceeds the statutory maximum on one of the counts, the
sentence should be imposed consecutively, but only to the extent nec-
essary to produce a combined sentence equal to the calculated sen-
tence. See United States v. Chase, 262 F.3d 247, 250-51 (4th Cir.
2002) (explaining "stacking" procedure under § 5G1.2).
Applying the Guidelines, the district court determined Reinhardt’s
offense level as a 27, with a criminal history in category I, yielding
a range of 70 to 87 months. The statutory maximum for each count
under 18 U.S.C. § 1343 is sixty months. See 18 U.S.C.A. § 1343
(2000). Because the Guidelines range exceeded the statutory maxi-
mum for one count, and Reinhardt was convicted of multiple counts
under § 1343, the Guidelines allowed the district court to "stack" mul-
tiple counts consecutively to achieve a sentence within the Guidelines
range. There is no evidence in the record that the district court acted
improperly in following the mandate of the Guidelines and increasing
Reinhardt’s maximum sentence to seventy months. See United States
v. Battle, 174 Fed. App’x 179, 181-82 (4th Cir. 2006) (approving of
post-Booker "stacking" under § 5G1.2(d)); United States v. Smalls,
185 Fed. App’x 218, 220-21 (4th Cir. 2006) (same).
Next, relying on United States v. Lauersen, 348 F.3d 329 (2d Cir.
2003), aff’d on reh’g, 362 F.3d 160 (2d Cir. 2004), vacated by, 543
U.S. 1097 (2005), Reinhardt argues that the cumulation of upward
enhancements for more than minimal planning, sophisticated means,
and masterminding the scheme in question enhanced his sentence to
an impermissible degree. Putting aside the issue of whether Lauersen
is viable in the Second Circuit following its vacatur by the Supreme
Court, it was never the law of this Circuit. Thus, the district court did
not err in rejecting Reinhardt’s Lauersen argument. In addition, the
district court did not err in applying separate upward enhancements
to Reinhardt’s sentence where those enhancements were based on the
Guidelines and supported by the evidence.
Reinhardt argues that the sentence imposed by the district court
was based on facts not found by the jury and that the district court
treated the Guidelines (and enhancements found thereunder) as man-
datory, thus violating Booker and Hughes. The district court did not
err in any respect in calculating Reinhardt’s sentence; the procedure
24 UNITED STATES v. ALLEN
followed was in full accord with our precedents and did not treat the
Guidelines as mandatory in violation of Booker. Accordingly, we
reject Reinhardt’s argument that his sentence was imposed in viola-
tion of Booker and Hughes.
Finally, Reinhardt claims that his sentencing counsel provided inef-
fective representation by submitting too many claims to the district
court, arguing every conceivable legal point, and submitting evidence
that the district court termed "flimflam." Claims of ineffective assis-
tance of counsel are normally raised before the district court via 28
U.S.C. § 2255 and are cognizable on direct appeal only where it con-
clusively appears on the record that defense counsel did not provide
effective representation. See King, 119 F.3d at 295.
The record in this case does not conclusively suggest that Rein-
hardt’s counsel was deficient during the sentencing phase. Further-
more, it is not conclusively shown on the record that any deficiency
in counsel prejudiced Reinhardt. Accordingly, Reinhardt’s ineffective
assistance of counsel claim with regard to the sentencing phase of his
trial is not cognizable on direct appeal.
In sum, none of Reinhardt’s challenges to his sentence are meritori-
ous, and the district court did not err in imposing a sentence of sev-
enty months.
VII.
For the foregoing reasons, we dismiss Reinhardt’s appeal of the
district court’s failure to grant a downward departure and affirm the
convictions and sentences of Reinhardt and Allen in their entirety.
DISMISSED IN PART;
AFFIRMED IN PART