UNITED STATES of America, Plaintiff-Appellee, v. Donald B. PENNINGTON, Defendant-Appellant. United States of America, Plaintiff Appellee/Cross-Appellant, v. John E. Oldner, Defendant-Appellant/Cross-Appellee.
Nos. 97-2847, 97-2888 and 97-3152.
United States Court of Appeals, Eighth Circuit.
Decided Feb. 5, 1999.
Rehearing and Suggestion for Rehearing En Banc Denied in No. 97-2888 April 6, 1999. Rehearing and Suggestion for Rehearing En Banc Denied in No. 97-2847 April 7, 1999.*
168 F.3d 1060
Submitted Sept. 22, 1998. * Judge McMillian would grant the petition.
Omar F. Greene, Little Rock, Arkansas, argued, for Appellant Oldner.
Michael D. Johnson, Little Rock, Arkansas, argued (Paula J. Casey, United States Attorney, on the brief), for Appellee.
BEFORE: BEAM, LAY, and LOKEN, Circuit Judges.
LOKEN, Circuit Judge.
In the early 1990s, Donald Pennington was President of Harvest Foods, a grocery store chain. He received secret payments or kickbacks from consultant John Oldner and food broker Billy Armstrong based on monies they received from Harvest Foods and its suppliers. Pennington and Oldner were indicted on multiple counts of mail fraud and money laundering. (Armstrong was indicted but not tried because of illness.) A jury convicted Pennington and Oldner of aiding and abetting mail fraud in violation of
I. Challenges to the Government‘s Case.
Viewing the evidence in the light most favorable to the jury‘s verdict, the trial record reveals four distinct aspects of the scheme to defraud Harvest Foods.
1. In February 1990, Harvest Foods began paying $10,000 per month to Oldner‘s consulting company, John E. Oldner and Associates. The monthly payments increased to $15,000 per month in July 1990. Shortly after Oldner received each monthly payment, he sent a check to Capitol City Marketing, a consulting company owned by Pennington, for exactly one-half of the amount paid by Harvest Foods.
3. The owner of a Harvest Foods supplier, Big R Ice, testified that his company normally did not use food brokers or consultants. However, based on its understanding that suppliers had to go through Oldner to get Harvest Foods business, Big R Ice signed two consulting contracts with Oldner, one paying John E. Oldner and Associates $50,000, and the other paying Oldner personally $25,000. The only service Oldner provided was to negotiate a supply agreement with Harvest Foods. After receiving payments from Big R Ice, Oldner sent checks to Capitol City Marketing totaling $25,000, one-half the amount Big R Ice paid to John E. Oldner and Associates.
4. Billy Armstrong negotiated a supply contract with Harvest Foods on behalf of his client, Coleman Dairy. After ninety days, Coleman Dairy began paying Armstrong a four percent monthly commission on all sales to Harvest Foods. Armstrong sent a check to Capitol City Marketing for one-half of each monthly payment, showing the payments on his books as “advertising and flowers.”
Pennington deposited all the kickbacks he received from Oldner and Armstrong into a Capitol City Marketing bank account. Capitol City had no other income. The money laundering counts of conviction concerned subsequent transfers out of the Capitol City account into Pennington‘s personal bank account.
A. The Mail Fraud Counts.
To sustain a conviction for aiding and abetting mail fraud, the government must prove defendants knowingly aided and abetted a scheme to defraud in which use of the mails was reasonably foreseeable. See United States v. Hildebrand, 152 F.3d 756, 761 (8th Cir.), cert. denied sub nom, Webb v. United States, — U.S. —, 119 S.Ct. 575, 142 L.Ed.2d 479 (1998). Congress recently amended the mail fraud statutes to provide that the term “scheme or artifice to defraud” in
1. Pennington first argues the mail fraud indictment was legally insufficient because it charged defendants with a scheme to defraud Harvest Foods of its right to the “faithful and impartial services” of Pennington, whereas the statute prohibits depriving another of the right to “honest” services. Pennington first raised this issue in the middle of trial. When an indictment is chal-
Pennington contends “faithful and impartial” are not the same as “honest” services, and therefore the indictment failed to charge a crime. An indictment need not use the specific words of the statute, so long as “by fair implication” it alleges an offense recognized by law. United States v. Mallen, 843 F.2d 1096, 1102 (8th Cir.), cert. denied, 488 U.S. 849, 109 S.Ct. 130, 102 L.Ed.2d 103 (1988). Here, the mail fraud counts alleged schemes to defraud and cited
2. Both Pennington and Oldner argue the evidence was insufficient to convict them of mail fraud because there was no evidence they intended to defraud Harvest Foods of Pennington‘s honest services, and because Harvest Foods in fact benefitted from the contracts negotiated by consultant Oldner. We will overturn a jury verdict only if no reasonable jury could have found the offense elements proved beyond a reasonable doubt. See Hildebrand, 152 F.3d at 761.
There was overwhelming evidence that Pennington received secret kickbacks from Oldner and Armstrong from contractual payments they received as a result of doing business with Harvest Foods and its suppliers. As a Harvest Foods corporate officer, Pennington owed Harvest Foods a fiduciary duty of loyalty, including the duty to disclose all material information. Yet he never disclosed these payments to anyone at Harvest Foods; indeed, he concealed the payments by use of a sham corporation, Capitol City Marketing. Pennington and Oldner correctly assert that, when dealing with business transactions in the private sector, a mere breach of fiduciary or employee duty may not be sufficient to deprive a client or corporation of “honest services” for purposes of
Oldner argues he should be acquitted of aiding and abetting a scheme to defraud because there was no proof he knew of Pennington‘s duty to Harvest Foods. We disagree. The jury could reasonably find that Oldner, an experienced businessman, knew the secret kickbacks to Capitol City Marketing violated Pennington‘s duty to disclose material information to his employer.
B. The Money Laundering Counts.
Pennington and Oldner argue the evidence was insufficient to convict them of
Oldner argues he cannot be convicted of aiding and abetting money laundering because his involvement in the scheme ended with the mailing of checks to Pennington. The district court correctly instructed that Oldner may be convicted of aiding and abetting if he knew money laundering was being committed and “knowingly acted in some way for the purpose of causing, encouraging, or aiding” the money laundering. See, e.g., United States v. Farm & Home Sav. Ass‘n, 932 F.2d 1256, 1261 (8th Cir.1991). Oldner paid Pennington through a sham corporation, Capitol City Marketing. Oldner pretended the payments were for consulting work by Pennington and provided Pennington with a tax Form 1099 to evidence this pretense. Starting in May 1991, Oldner stopped sending checks directly to Capitol City Marketing; instead, he wrote checks to his accountant and instructed him to purchase cashier‘s checks payable to Capitol City. A reasonable jury could find from this evidence that Oldner knew Pennington violated
C. Oldner‘s Obstruction of Justice.
In 1992, the government began investigating Oldner, Pennington and McPherson. McPherson agreed to cooperate. In a taped conversation between Oldner and McPherson, Oldner suggested McPherson tell the investigators that Oldner had agreed to pay McPherson around $150,000 over two years for consulting work, but the agreement was not completed because McPherson moved to Arizona. McPherson testified at trial that he never performed any consulting work for Oldner. The jury convicted Oldner of tampering with a witness in violation of
Oldner argues that
II. Alleged Trial Errors.
Pennington argues his Sixth Amendment right to counsel was violated because his trial counsel had a conflict of interest—he was a member of the law firm that represented Pennington in a civil case, and the law firm was facing a potential $6,000,000 malpractice suit by Pennington for causing his appeal from an adverse judgment
Pennington and Oldner argue the district court abused its discretion by not declaring a mistrial when a juror reported that Pennington‘s wife put a quarter in the juror‘s parking meter and smiled at her before the second day of the jury‘s deliberations. Like the district court, we reject Pennington‘s contention because he was present when his wife plugged the meter and therefore cannot benefit from any misconduct. Oldner argues outside juror contact of this kind is presumptively prejudicial under Remmer v. United States, 347 U.S. 227, 74 S.Ct. 450, 98 L.Ed. 654 (1954), and the jury may have held Mrs. Pennington‘s actions against him as well as Pennington. The government argues the presumption of prejudice does not apply in this case. Compare United States v. Wallingford, 82 F.3d 278, 281 (8th Cir.1996) (off-hand remark to juror by a restaurant employee not presumptively prejudicial). Whether or not the presumption applies, we agree with the district court that the contact between Mrs. Pennington and the juror did not prejudice Oldner. The contact was short, it was explained by Pennington as a kind gesture his wife routinely does for others, and it did not involve a favor of sufficient magnitude to likely influence a juror. Moreover, the contact occurred on the second day of deliberations, and the jury‘s dated verdict forms show they had returned guilty verdicts against Oldner on all the mail fraud counts, one money laundering count, and the obstruction of justice count the previous day. The district court did not abuse its discretion in refusing to declare a mistrial. See United States v. Rhodenizer, 106 F.3d 222, 225 (8th Cir.1997) (standard of review).
Pennington argues the district court erred by not excusing a Harvest Foods employee from the jury when the new CEO of Harvest Foods, Harry Janson, testified as a government rebuttal witness. Pennington waived this issue by not challenging the juror when the jury was empaneled because the basis for the objection was then known. See Robinson v. Monsanto Co., 758 F.2d 331, 334-35 (8th Cir.1985). Pennington knew the juror worked for Harvest Foods, knew Janson as CEO of Harvest Foods was a possible witness, and specifically asked the juror during voir dire if she knew Janson.
Pennington further argues the district court abused its discretion by allowing McPherson to testify he had pleaded guilty to mail fraud as a result of participating in the SAJ scheme. This argument is without merit. A confederate‘s guilty plea is admissible during the government‘s direct examination as evidence of the witness‘s credibility and of his acknowledgment he participated in the offense. See United States v. Hutchings, 751 F.2d 230, 237 (8th Cir.1984), cert. denied, 474 U.S. 829, 106 S.Ct. 92, 88 L.Ed.2d 75 (1985). Here, the court gave an appropriate limiting instruction explaining that McPherson‘s plea could not be used as evidence against the defendants.
III. Sentencing Issues.
A. Pennington.
In determining Pennington‘s Guidelines sentencing range, the district court properly began with the higher base offense level for money laundering. See
Pennington next argues the district court erred in denying him a downward departure because Harvest Foods received a $6,000,000 judgment in its civil fraud action against him for the conduct at issue in the criminal case.6 The district court concluded that an adverse judgment in a prior civil case involving the same fraudulent conduct is not a permissible basis to reduce the prison sentence for the criminal fraud. We agree. The adverse civil judgment against Pennington is quite different from the substantial, voluntary restitution that we held a permissible basis for downward departure in United States v. Garlich, 951 F.2d 161, 163 (8th Cir.1991). Like the career loss factor held an impermissible basis for downward departure in Koon v. United States, 518 U.S. 81, 110, 116 S.Ct. 2035, 135 L.Ed.2d 392 (1996), it is entirely foreseeable that fraud victims will seek to recover their damages in civil actions against fraud perpetrators. Yet the Sentencing Commission did not cite an adverse civil judgment as a mitigating factor in sentencing for fraud in its lengthy Commentary to
Finally, Pennington argues the district court committed a double counting error by adjusting his money laundering base offense level upward because he knew the laundered monies were fraud proceeds. See,
B. Oldner.
The district court granted Oldner a twenty-month downward departure based upon a combination of factors—because Pennington‘s conduct involved a much greater breach of trust yet his Guidelines range was the same, Oldner‘s health problems, and his need to support his mother. The government cross-appeals this departure. Because the government did not object at sentencing, we review the departure for plain error. See United States v. Posters ‘N’ Things Ltd., 969 F.2d 652, 663 (8th Cir.1992), aff‘d, 511 U.S. 513, 114 S.Ct. 1747, 128 L.Ed.2d 539 (1994). The government‘s contention on appeal that it had no notice of the district court‘s intent to depart is waived because it was not raised to the district court. See United States v. Barajas-Nunez, 91 F.3d 826, 830 (6th Cir.1996).
To succeed under plain error review, the government must show there was a clear error affecting substantial rights that resulted in a miscarriage of justice. See United States v. Olano, 507 U.S. 725, 735-36, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993). The government argues the district court relied on an improper basis for the downward departure because Pennington‘s more serious breach of trust was accounted for in the Guidelines by his two-level enhancement for abuse of trust. In concluding that Penning-
Though this argument might well have had merit if timely presented to the district court, we conclude it does not entitle the government to plain error relief. The government challenges one of the departure factors the district court expressly considered in combination. We do not know whether the district court would have agreed with that challenge and, if so, how it would have affected the court‘s decision to depart. In these circumstances, we conclude that this downward departure, like the downward departure in United States v. Ragan, 952 F.2d 1049 (8th Cir.1992), “did not result in a miscarriage of justice.”
The judgments of the district court are affirmed.