United States v. CoonUnited States v. Coon
- Reporters:
- Before:
- Loken, Hansen, Morris Sheppard Arnold
LOKEN, Circuit Judge.
Following a five week jury trial, Ferrell Travis Riley and
I. Background and Sufficiency of the Evidence
Beginning in the late 1980s, Riley and Coon created four companies to sell surplus lines insurance and provide insurance related services -- Meadowlark Insurance Company, Commercial Indemnity Assurance Company, M&M Management Company, and Magnolia Acceptance Corporation, a premium finance company. These companies were collectively the alleged RICO enterprise. Riley effectively ran the enterprise. Coon controlled financial affairs, usually as company president. After regulators ran the insurance companies out of several States, Riley and Coon settled them in Missouri.
The trial focused on defendants’ insurance activities in thе early 1990s. Marketing surplus lines insurance in California, Riley and Coon collected premiums and then used the funds for other purposes, leaving numerous unpaid insurance claims and forcing corporate victims into insolvency. The government charged Riley and Coon with fraud together with bribery and obstruction offenses that constituted a pattern of racketeering activities. Defendants maintained that state insurance regulators were biased against them because they sold surplus lines, unregulated types of insurance usually provided by off-shore companies to insure high risks that licensed domestic insurers avoid. The jury found the government‘s chаrges valid beyond a reasonable doubt. We first discuss defendants’ challenges to the sufficiency of the evidence, viewing that evidence in the light most favorable to the verdict and upholding a count of conviction if a reasonable jury could have found defendant guilty beyond a reasonable doubt. See United States v. Johnson, 56 F.3d 947, 956 (8th Cir. 1995).
A. The WBA Fraud. In April 1991, Commercial Acceptance Insurance Company (“CAIC“) agreed that Meadowlark would sell surplus lines liability insurance under CAIC‘s name, with Meadowlark insuring the risks but paying 7 1/2% of the premiums to CAIC. Though CAIC‘s principals explained it was not licensed to sell health insurance, Riley and Coon as authorized agents of CAIC signed a contraсt to provide health insurance to members of the Western Businessmen‘s Association (“WBA“). Between August and November 1991, WBA members paid over $1,000,000 in health care premiums that were deposited into a “M&M Management Corp. Trust Account” at the TransPacific Bank in Alameda, California. Coon transferred $649,000 out of this account, and defendants then used those funds for unrelated expenses, including bribes, personal investments, and the purchase of an insurance company. In October, CAIC learned that its name was being used to underwrite health insurance and withdrew Meadowlark‘s authority. In December, Riley and Coon transferred the claims files from Californiа to Kansas City. Insureds were told that claims would not be paid in
For this scheme, the jury convicted Riley and Coon of two counts of knowingly transporting in interstate commerce property “stolen, converted or taken by fraud.”
B. The IAC Fraud. The third fraud count concerned a separate scheme in which the predecessor to Meadowlark, which was not qualifiеd to sell surplus lines insurance in California, undertook to provide malpractice insurance for members of the International Association Coalition (“IAC“), a group of podiatrists formed in California. The agreement provided that M&M Management would deposit thirty percent of the premiums into a segregated trust account “for the payment of claims losses and loss adjustment expenses only.” Disbursements from the account required two signatures, Coon as representative of M&M, and Dr. Wener for IAC. Riley moved the account and removed the IAC signature requirement. Coon then made interstate transfers of $201,000 out of the trust acсount for non-related uses. The jury convicted Riley and Coon of violating
C. The Missouri Bribery Scheme. Riley and Coon were each convicted of four substantive violations of the Travel Act, and of conspiring to violate that Act,
Meadowlark applied to the Missouri Department of Insurance for a license to sell surplus lines insurance. In December 1990, an exаminer opined that its financial condition was inadequate. Robert Weller, a business associate of Kansas City attorney Kevin Hare, testified that in April 1991, Hare and Raymond Sermon hired Weller to make scripted telephone calls. Beginning in May, Weller met with Hare and Sermon four times to receive telephone calls from Riley. Each time, Hare would receive a call from Riley and turn the phone over to Weller, who posed as the Missouri Commissioner of Insurance and worked off a script prepared by Hare and Sermon. In the first conversation, Weller “discussed the possibility of getting [Riley] licensed to write insurance in Missоuri.” In the three subsequent conversations, Weller as Commissioner said he could get the application through and demanded that Riley pay specific any acts in furtherance of the attempted bribery after the wire transfers, as
D. The Obstruction of Justice. James Wining was a Meadowlark employee who helped incorporate Meadowlark in the Dominican Republic and helped Coon prepare unreliable financials for an affiliated insurer. On March 17, 1992, Wining quit Meadowlark, pleaded guilty to fraud charges, and began cooperating with the on-going investigation of Riley and Coon. Between March and November 1992, Riley made bi-weekly payments to Wining totaling about $25,000. M&M reimbursed Riley, and Coon had an IRS Form 1099 prepared for Wining. Wining taped conversations with Riley in which they discussed the FBI investigation. Wining testified that the payments from Riley were to “keep his mouth shut.” Riley and Coon were convicted of violating
On appeal, Coon challenges the sufficiency of the evidence to convict her of this charge, arguing that Riley made the payments and there is no evidence Wining ever spoke to her about a federal investigation. However, Coon was present at a tape-recorded meeting when Wining and Riley discussed Wining‘s cooperation. She was financially responsible for M&M, which reimbursed Riley for the payments and prepared a Form 1099 for Wining. Viewing the evidence in the light most favorable to the verdict, a reasonable jury could find that Coon knew Riley was paying Wining to prevent harmful disclosures to federal investigators, and that she aided and abetted the offense by causing M&M to cover up the true nature of the payments.
E. The RICO Conviction. To convict defendants of a RICO violation, the government must prove they participated in the conduct of an enterprise through a pattern of racketeering activity. See
F. Denial of New Trial for Newly Discovered Evidence. Riley and Coon moved for a new trial, alleging that newly discovered bank records show that payments totaling $674,102 were made to WBA claimants from M&M‘s Kansas City account in 1992. The district court denied the motion because this evidence would not have affected the outcome of the WBA fraud conviction and was cumulative to other trial evidence. We agree. Whether defendants decided after collecting the WBA premiums to honor part of their obligations to insureds does not weaken the government‘s proof that the premiums were initially “taken by fraud.” Moreover, the alleged new evidence was cumulative beсause Riley testified at trial that he paid over $1,000,000 to satisfy WBA claims. The district court may grant a new trial “if the interest of justice so require.”
II. Evidentiary Issues
A. Limits on Defense Cross Examination. Defendants next contend that their convictions must be reversed because the district court unfairly limited their cross-examination of three prosecution witnesses. Although the Sixth Amendment‘s Confrontation Clause guarantees defendants an opportunity for effective cross-examination, the district court retains wide latitude to impose reasonable limits. We review the limiting of cross exam for clear abuse of discretion. See United States v. Ortega, 150 F.3d 937, 941 (8th Cir. 1998), cert. denied, 119 S.Ct. 837 (1999), citing Delaware v. Van Arsdall, 475 U.S. 673, 678-79 (1986). After careful review of the record, we conclude the cоurt did not abuse its discretion in limiting the extent of cross examination regarding CAIC civil litigation over WBA premiums and whether the WBA insurance arrangement was an ERISA trust -- these issues were adequately explored throughout the trial. Nor did the court abuse its discretion in controlling the way in which conversation tapes could be used during the cross examination of James Wining -- the tapes were admitted into evidence, and defense counsel played them during closing argument.
B. Evidence of the Maryland Code of Ethics. In addition to the Travel Act charges previously discussed, Riley was convicted of conspiring to violate the Travel Act by bribing the manager of the Maryland Department of Transportation‘s self-insurance program to approve an application in which Meadowlark would provide a surety bond and liability insurance. The government proved that Riley paid over $17,000 to this manager from June to December 1991. Riley testified this was compensation for work outside the manager‘s agency responsibilities. The district court precluded the government from introducing into evidence the Maryland statute and Code of Ethics prohibiting state employees from taking money from persons they regulate. However, the court permitted testimony that it was the policy of the Maryland Department of Transportation nоt to allow its employees to accept secondary employment from regulated persons. Riley argues this testimony unfairly prejudiced his defense. We disagree. The district court adhered to its ruling that witnesses could not refer to Maryland law. The agency‘s policy barring employees from accepting this kind of outside employment was obviously relevant to the issue of whether Riley‘s payments were bribes. The court did not abuse its broad discretion by admitting that evidence. See United States v. Ballew, 40 F.3d 936, 941 (8th Cir. 1994) (standard of review), cert. denied, 514 U.S. 1091 (1995).
C. Unfair Trial. Quoting snippets of testimony from the five-week trial, Riley and Coon argue that the district court‘s “actions, comments and rulings during trial were one-sided and prejudicial to the defense resulting in a fundamentally unfair proceeding.” There was no contemporaneous objection to most of the court‘s comments, questions, and rulings now emphasized on appeal, so those actions are reviewed for plain error. See Williams v. Fermenta Animal Health Co., 984 F.2d 261, 263 (8th Cir.), rehearing denied, 992 F.2d 192 (8th Cir. 1993). Many occurred outside the jury‘s presence.
Viewing the trial record in its entirety, we conclude that Judge Stevens did not persistently interject himself on the side of the prosecution. Compare United States v. Turner, 975 F.2d 490, 493 (8th Cir. 1992), cert. denied, 506 U.S. 1082 (1993), with United States v. Singer, 710 F.2d 431, 436 (8th Cir. 1983). Over the course of the trial, the court
III. A Jury Instruction Issue
Riley and Coon defended the two counts of WBA fraud in part by contending that the funds in the TransPacific account were unrestricted and therefore defendants were free to transfer them out and use them for other purposes. The government countered with evidence the account was established as a “trust account” for the purpose оf paying health insurance claims. Not surprisingly, during the trial there was much wrangling with witnesses about the significance of the trust account designation. Ultimately, defendants proposed an instruction on California trust law. The district court refused to give that instruction, explaining:
I am not going to give that California instruction, that really collateralizes the issue and is confusing. I don‘t think they need it.
* * * * *
I am not going to give these people a semester-long course in trust and estates as to what the law of trusts in California is.
If you all can come together with some sort of a one-paragraph instruction telling them if there was, if there were special conditions on this account which were not complied with, then it was taken out of the trust account, I will go along with you. And you ought to be able to come up with something like that but I am not going to confuse them with all the details of the law of trusts.
Nothing further was proposed to the district court on this subject, but on appeal, Riley and Coon argue the district court erred in refusing to instruct on the essential elements of a trust under California law. We disagree.
The jury was properly instructed that, to convict Riley and Coon of violating
IV. Sentencing Issues
A. Amount of Fraud Loss. In determining defendants’ Guidelines sentencing ranges, the district court increased their base offense levels by eleven levels based on its finding that the loss caused by the WBA and IAC frauds exceeded $800,000. See
Defendants also argue the district court improperly shifted to them the burden of proof оn this issue at sentencing. We agree the government has the burden of proving the amount of fraud loss by a preponderance of the evidence. We disagree the court shifted that burden to the defense. At trial, the government introduced bank records showing that $649,090 of the $1,058,066 deposited in the TransPacific account was withdrawn by defendants in 1991 for purposes other than the payment of health care claims. At sentencing, the court admitted defendants’ evidence of payments totaling $674,102 made to WBA claimants in 1992. Simply because the court found the government‘s evidence more persuasive on the issue of fraud loss does not mean it improperly shifted the burden of proof on this issue.
B. An Ex Post Facto Clause Issue. The district court applied
C. Role in Offense. The district court imposed role-in-the-offense upward adjustments of four levels for Riley (organizer or leader) and three levels for Coon (manаger or supervisor). See
D. Upward Departure. The district court imposed upward departures of two levels for each defendant under
An upward departure is specifically encouraged if the loss calculated under
E. Condition of Supervised Release Banning Self-employment. We also conclude that the district court did not abuse its discretion in imposing as a special condition of supervised release that Riley and Coon “shall not be self-employed during the term of supervised relеase.” In light of defendants’ long-standing and extensive pattern of criminal racketeering activities, a prohibition against self-employment during supervised release is a restriction reasonably necessary to protect the public. See
F. Restitution. The criminal judgments require both Riley and Coon to pay restitution in the amount of $649,090 to CAIC. They argue those orders must be reversed because of insufficient evidence that CAIC was a fraud victim, or that CAIC suffered a loss. As we have explained in affirming the WBA fraud convictions and the findings as to amount of fraud loss, there was sufficient evidence in the record to affirm the restitution orders.
V. Alleged Judicial Bias
Prior to trial, the district court appointed John C. Craft as monitor and then receiver of Meadowlark and other companies previously controlled by Riley and Coon whose assets were allegedly subject to criminal forfeiture under RICO. See
On appeal, after an intemperate preamble attacking Judge Stevens‘s integrity and fairness, Riley and Coon argue that the Judge committed reversible error by declining to recuse himself under
In addition, the contention is plainly without merit. Immediately after this court vacated the district court‘s receivership order, Judge Stevens held a pre-trial conference at which Craft as receiver raisеd the question whether his fees should be paid by the government, which had sought the ill-fated receivership, or the receivership estate. Judge Stevens commented that this issue “would come out in the wash in the long run when a determination is made as to forfeiture.” Defendants argue this off-hand comment indicates the court was predisposed to convict. Section 455(a) “deals with the objective appearance of partiality.” Liteky v. United States, 510 U.S. 540, 553 n.2 (1994) (emphasis in original). Neither that comment nor any other comment or action by Judge Stevens during these lengthy proceedings reflects the kind of deep-seated favoritism or antagonism requiring recusal under
VI. The Appeals from Preliminary Forfeiture Orders
Two days after the jury‘s verdict in the primary criminal trial, the distriсt court tried the government‘s criminal RICO forfeiture charges to the jury, which returned a verdict forfeiting defendants’ interests in the RICO enterprise companies and their proceeds from racketeering activities. Nine to twelve months later, the court issued a series of “Preliminary Forfeiture Orders” based on the jury‘s forfeiture verdict. Riley and Coon appeal the sufficiency of the evidence underlying those orders, referring to them as forfeiture “judgments.”
VII. The Appeal in No. 97-2886
In November 1994, the district court entered preconviction restraining orders on assets of the RICO enterprise that the government asserted were subject to RICO forfeiture.5 In November 1996 and March 1997, long after the criminal trial, the district court issued orders amending these restraining orders to the extent they impeded John Craft in his new capacity as insurance company liquidator operating
When the November 1996 and March 1997 orders were issued, Riley‘s interests in the companies comprising the RICO enterprise had been forfeited, at least preliminarily. Thus, we have difficulty perceiving how he has standing to challenge these orders. See Pelullo, 1999 WL 330422, at *6-7. More significantly, while noting that the November 1996 order was inadvertently filed without notice to Riley, the district court explained in the March 1997 order that any interest Riley may have in the assets to which liquidator Craft was given access was adequatеly protected by the provision preserving Riley‘s right to assert “offsets against or credits toward the satisfaction of any forfeiture orders or judgments entered in this case.” We agree and therefore affirm the orders in question. In addition, we note that to the extent this issue may be intertwined with the interlocutory forfeiture orders, as to which we have no jurisdiction, it may be reviewable when a final forfeiture order or judgment is entered.
The judgments and orders of the district court are affirmed except that the attempted appeals from the district court‘s preliminary forfeiture orders are dismissed for lack of jurisdiction.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.