UNITED STATES of America, Plaintiff-Appellee, v. Jerry W. FREEMAN, Defendant-Appellant.
No. 04-30037.
United States Court of Appeals, Fifth Circuit.
Dec. 23, 2005.
434 F.3d 369
IV. CONCLUSION
The judgment of the district court is AFFIRMED.
Richard William Westling (argued), Law Offices of Richard W. Westling, New Orleans, LA, for Freeman.
Before JOLLY, SMITH and DeMOSS, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
Jerry Freeman challenges his conviction of and sentencing for conspiracy, wire fraud, travel fraud, and money laundering. Although the district court correctly decided most of the issues on appeal, it did commit reversible error under United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005). For this reason, we affirm the conviction but vacate and remand for resentencing.
I.
Freeman was indicted alongside co-defendant Motillal Sudeen on 1 count of conspiracy in violation of
The government presented evidence that Sudeen had created a large Ponzi scheme that involved telling investors that he would invest their funds in high yield programs or “private placement secured trading programs” involving overseas trades of financial instruments. He told investors they would receive a higher-than-market rate of return and that their principal would remain safe, exposed to little or no risk, and would be returned on the expiration of the investment returns. He represented that the trading programs involved highly rated banks, were monitored by the federal government, and would fund humanitarian projects in developing countries. He assured investors that he had earned profits for himself and others by making similar investments. The funds, however, were never invested as promised, but instead were used for personal enrichment and to make “lulling payments” to prior investors to make them believe that their initial investments were profitable.1
Sudeen and Freeman increased the appearance of legitimacy and safety of the investments by giving investors bogus “Private Placement Agreements” or “Joint Venture Agreements,” guarantees and promissory notes. They also told investors that their funds were guaranteed by Sudeen‘s personal wealth. They instructed investors to purchase Certificates of Deposit from banks to allow Sudeen to use the credit as collateral for loans, the proceeds of which would also be invested, and they represented that a fictitious minimum investment was required to participate.
Continued participation was ensured by lulling payments, encouraging investors to roll over their investments rather than seeking immediate returns, and by reassuring investors that the funds were safely invested and soon would result in returns. When investors demanded proceeds, the defendants would claim that the profits could not be paid because the investors had failed to comply with false requirements, that the profits were tied up by the federal government, or that they could not be liquidated from overseas investments.
The government presented evidence that the defendants were involved in another fraudulent Ponzi scheme involving the trade of insulin contracts, although they were not indicted for that scheme. Freeman was involved in the insulin contracts by giving the investors checks as initial, false profit returns; meeting with investors to encourage and sign contracts related to their continued participation in the scheme; and assuring investors that “everything is legal.” When one investor told Freeman she wanted to withdraw money, Freeman gave her three checks totaling $10,000 and informed her that the remainder of her money had “two more banks to clear” before being returned. The money invested for insulin trade was co-mingled with other investment funds gained by the defendants’ various fraudulent schemes, and the funds received from
Although the defendants were indicted together, the court severed the trials. Freeman was convicted on all counts and was sentenced to 108 months’ imprisonment.
II.
Freeman argues that the district court erred in admitting evidence regarding the insulin investment scheme; he claims the evidence was not intrinsic to the offenses enumerated in the indictment and also did not satisfy
Extrinsic evidence is not admissible to prove propensity to commit the charged crime, see
The district court did not abuse its discretion in admitting the evidence regarding the insulin investment scheme, because it was intrinsic to the charged offense, involving the high yield investment scheme. The evidence regarding the insulin investors was inexorably intertwined with the charged scheme as “part of a single criminal episode,” id.3 The uncharged offense arose out of the same series of transactions, because the funds were co-mingled and used to make lulling payments to investors from both schemes.
III.
Freeman contends the insulin scheme evidence constituted an impermissible constructive amendment of his indictment, or alternatively a fatal variance. Although Freeman broadly outlines the elements of each claim, he does not specifically delineate how the introduction of the evidence modified an essential element of the offense so as to constitute a constructive amendment. Therefore, the claim of constructive amendment is waived for inadequate briefing; we proceed to consider only Freeman‘s claim that there was a fatal variance.
A variance occurs when the charging terms of an indictment remain unaltered but the evidence at trial proves facts other than those alleged. See United States v. Puig-Infante, 19 F.3d 929, 935 (5th Cir.1994). A variance is reviewed for harmless error; “[a] defendant cannot prevail on such a claim unless he demonstrates that the variance was material and prejudiced his substantial rights.” United States v. Guidry, 406 F.3d 314, 322 (5th Cir.), cert. denied, U.S., 126 S.Ct. 190, 163 L.Ed.2d 198 (2005). “As long as the defendant receives notice and is not subject to the risk of double jeopardy, his substantial rights are not affected.” Id. (quoting United States v. Mikolajczyk, 137 F.3d 237, 243 (5th Cir.1998)).
As we have said, the insulin investment scheme evidence was intrinsic to the charged conspiracy offense, because the schemes were inextricably intertwined. Because the insulin investment scheme evidence proved facts that were alleged in the indictment, there was no variance.
IV.
Freeman claims the district court erred in denying his motion for a mistrial made after the government had elicited testimony barred by a ruling of the district court. Freeman testified on direct examination that he assisted Sudeen in business ventures relating to a failed attempt to import shrimp from Guyana. On cross-examination, he denied altering an invoice to help Sudeen receive more money from a lawsuit filed against the shrimp supplier.
The government called a witness who had worked with the defendants when they were involved in importing shrimp; he testified that Sudeen wanted to strengthen the lawsuit and asked him to increase the amount of the original invoice. Freeman objected to this testimony on the ground that it was impermissibly offered to show his involvement in other bad acts unrelated to the indictment. The district court sustained the objection.
Despite the court‘s admonition, the government proceeded to show the witness an altered invoice and asked whether he had a belief as to who had altered the document and sent it in connection with the lawsuit. Freeman objected again and moved for a mistrial. The court granted the objection but denied the motion, and instructed the jury to disregard any specific reference to the shrimp material.
Freeman argues that he was entitled to a mistrial because he contends the curative instruction was insufficient to cure any prejudice. We review this claim for abuse of discretion. See United States v. Honer, 225 F.3d 549, 555 (5th Cir.2000). “[A] new trial is required only if there is a significant possibility that the prejudicial evidence had a substantial impact upon the jury verdict, viewed in light of the entire record.” United States v. Paul, 142 F.3d 836, 844 (5th Cir.1998). “In determining whether a prosecutor‘s remarks constitute reversible error, [the court] consider[s] the magnitude of the prejudicial effect of the statements, the efficacy of any cautionary instruction, and the strength of the evidence of guilt.” United States v. Robles-Vertiz, 155 F.3d 725, 731 (5th Cir.1998).
We dismiss Freeman‘s argument because he has failed to explain how the error would have a substantial prejudicial impact on the verdict. Although his theory is completely conclusional, the government correctly points out that even if the prosecutor asked an improper question, prejudice was minimal; the question was never answered by the witness. Moreover, the curative instruction was sufficiently plain and broad to prevent prejudice. The district court did not abuse its discretion in denying a mistrial.
V.
Freeman avers that the evidence was insufficient to support a conviction. “In resolving a sufficiency of the evidence claim, we must decide whether a rational trier of fact could have found that each element of the charged criminal offense
A.
Count one charged Freeman with conspiracy to violate wire fraud, travel fraud, and money laundering statutes in violation of
Freeman claims the evidence was insufficient to prove the first element — whether a conspiratorial agreement existed. Freeman suggests that the evidence was deficient because there was no direct evidence of an agreement, because no testimony was introduced from any alleged co-conspirator. This argument is without merit, because it is well-settled that the government does not need to show that the conspiratorial agreement was explicit or formal — proof of a tacit agreement is sufficient.5
There is a wealth of evidence from which a reasonable jury could conclude that the agreement element of the conspiracy charge was satisfied, including Freeman‘s admission that he was aware that the investors’ funds were being used for items unrelated to the investment program.6 This, combined with evidence that Freeman was intimately familiar with Sudeen‘s business from being his only employee for many years, was sufficient to establish a conspiratorial agreement and to support Freeman‘s conviction under
B.
Freeman urges that the evidence was insufficient to support his conviction of aiding and abetting travel fraud under
Freeman claims there was no evidence that he was involved in any scheme to defraud D‘Amico, but this contention is without merit. Evidence demonstrated that Freeman was personally involved and was sufficient for a reasonable jury to find Freeman guilty on the travel fraud count.7
C.
Freeman challenges his conviction on one of the wire fraud counts and one of the money laundering counts, both dealing with a particular victim-investor, Krystoff Lukaszuk. To prove wire fraud in violation of
Freeman argues that the evidence was deficient because Lukaszuk was not a witness at trial; Freeman claims the record is otherwise devoid of evidence that false representations were made to Lukaszuk. This is incorrect; Lukaszuk‘s testimony was not necessary, because Freeman typed Lukaszuk‘s agreement; Lukaszuk wired money to Freeman and Sudeen that was not invested in high yield investments as promised; and Freeman made lulling payments to Lukaszuk, as exhibited by requests for wire transfers that Freeman signed. Moreover, a government expert traced a $10,500 personal expenditure made by the defendants from Lukaszuk‘s funds. The evidence was sufficient to allow a reasonable jury to find Freeman guilty of both the wire fraud and money laundering counts dealing with Lukaszuk.
VI.
Freeman posits that the district court gave improper jury instructions. A properly objected-to instruction is reviewed for abuse of discretion. See United States v. Daniels, 281 F.3d 168, 183 (5th Cir.2002). We consider whether the instruction, taken as a whole, “is a correct statement of the law and whether it clearly instructs jurors as to the principles of law applicable to the factual issues confronting them.” Id.
Freeman asserts that the district court committed reversible error in instructing
We have previously upheld the deliberate indifference instruction, provided it has the required factual basis. See id. The proper factual basis is present if the record supports inferences that “(1) the defendant was subjectively aware of a high probability of the existence of illegal conduct; and (2) the defendant purposely contrived to avoid learning of the illegal conduct.” United States v. Scott, 159 F.3d 916, 922 (5th Cir.1998). In determining whether the evidence supports the charge, the evidence and all reasonable inferences that may be drawn from it are viewed in the light most favorable to the government. See United States v. Sharpe, 193 F.3d 852, 871 (5th Cir.1999).
First, there is a wealth of evidence that supports an inference that Freeman was subjectively aware of a high probability of the existence of illegal conduct. He was involved in typing and witnessing the agreements with the investors that promised exorbitant returns, and he was a signatory on the accounts into which the investments were deposited. Although he was aware of the arrangements, he wired funds into the account and checked on the balances on a daily basis and wrote checks from them for items entirely unrelated to investments. Moreover, Freeman maintained financial records that reflected that investor funds were used to pay Sudeen‘s corporate and personal expenses and to make payments to other investors. Freeman was aware that Sudeen had been accused of fraud by several investors and was being investigated by the FBI.
Next, there is sufficient evidence to support an inference that Freeman purposely contrived to avoid learning of the illegal conduct involved in this case. Although there is no evidence that Freeman took any affirmative acts to avoid knowledge, we have previously recognized that where the likelihood of criminal wrongdoing is so high, and the circumstances surrounding a defendant‘s activities are extremely suspicious, a failure to conduct further inquiry justifies an inference of deliberate indifference.8 Here, Freeman was intimately involved in the finances of Sudeen‘s operations and should have made an inquiry into the legitimacy of the transactions based on the immense number suspicious circumstances previously described.
Finally, Freeman argues that the district court erred by giving the deliberate indifference instruction, where the government proceeded on a theory of actual knowledge at trial. This argument is without merit — we have previously held that a
VII.
Freeman claims the district court improperly used the 2002 edition of the sentencing guidelines instead of the 2000 edition.10 Although we discuss this issue as part of our “Booker error” analysis, the objection actually subdivides into two distinct inquiries, only one of which Booker technically controls: (1) whether the use of the 2002 edition constitutes an independent Booker error and (2) whether the use of the 2002 edition violated the Ex Post Facto Clause (a claim we analyze the same as we would have before Booker).
A.
Freeman claims his sentence is infirm under Booker, in which the Court made plain that under the Sixth Amendment, “[a]ny fact (other than a prior conviction) which is necessary to support a sentence exceeding the maximum authorized by the facts established by a plea of guilty or a jury verdict must be admitted by the defendant or proved to the jury beyond a reasonable doubt.” Booker, 125 S.Ct. at 756. Freeman asserts that the district court‘s factual determination that the conspiracy extended past the amendment of the guidelines violated his Sixth Amendment rights under Booker.
1.
The government, however, contends that Freeman did not properly preserve his Booker objection and that we should thus review his challenge for plain error.11 The government is incorrect.
At sentencing, Freeman argued that where, “like Apprendi,” the factual determination of when the conspiracy existed has the “practical effect” of increasing the maximum for the offense, it should be looked at as an issue that the “jury has to decide.” Despite the fact that he did not express reliance on Apprendi (earlier, counsel stated that he could “not in good faith argue Apprendi fits [the] case“), and although he never explicitly mentioned the Sixth Amendment or Blakely before the district court, his objections adequately apprised the court that he was raising a Sixth Amendment violation to the guidelines edition issue based on the ground that the government did not prove to the jury beyond a reasonable doubt that the conspiracy extended past November 1, 2001.12
2.
a.
On the merits of the issue, Freeman also is correct. Freeman asserts that, under Booker, the district court cannot constitutionally have made factual determinations regarding the end-date of the conspiracy. Freeman neither admitted that end-date, nor was it found by a jury beyond a reasonable doubt. Nevertheless, that finding plainly increased his sentencing range.
There is no dispute that if the conspiracy was proven to extend to a date on or after November 1, 2001, a set of guidelines later than the 2000 version would apply (in an advisory capacity, of course, in the wake of Booker). The indictment states that “[b]eginning in or about March 1997, and continuing to the present [meaning February 28, 2002], ... the defendants ... did knowingly and willfully ... conspire ....” The indictment charges the overt acts under the conspiracy with specificity; the latest such charged act is Sudeen‘s promise to pay a particular investor additional money, an act alleged to have occurred “[i]n or about August 2001.”
In its brief on appeal, the government, in an effort to avoid use of the 2000 guidelines, points to proof of several acts occurring on or after November 1, 2001.13 The government also accurately points to the fact that at sentencing, the district court made a finding that the conspiracy continued past November 1, 2001. The flaw in the government‘s position, however, is that the procedure it correctly recounts is the very essence of a Booker violation.
The jury was charged in relevant part as follows:
Baumeler. In February 2002 Baumeler met with Sudeen in Switzerland, and Sudeen promised that he would remit all overdue profits within two weeks.
Moreover, Alice Celestin testified at trial and sentencing that every 120 days she and her husband “rolled over” their principal and purported interest payments into a new contract. When she met with Freeman on July 1, 2001, and signed a fifth contract, she advised him that she was going to need $54,000 back in November. When she didn‘t receive the money, she telephoned Freeman frequently. In December 2001 Freeman called her and said that he had both good news and bad news: she was getting money, but it was only $10,000. They met the next day and he gave her three separate checks totaling $10,000. She testified that at that time she still believed that she had funds invested in insulin. She continued calling Freeman and during their last conversation in February 2002 he said that her funds had “two more banks to clear.” Freeman‘s misrepresentations plainly lulled Mrs. Celestin into the continued belief that her funds were safely invested and that the promises made at the time of her initial investment would be fulfilled.
(Record citations and footnote omitted.)
Accordingly, the fact of conviction does not necessarily establish that the jury found the existence of any overt acts on or after November 1, 2001. It was only the district court, and not the jury, that found that the conspiracy continued beyond the trigger date for the post-2000 guidelines.14 This is specifically what Booker prohibits: The actual sentence ... was ... longer than the Guidelines range supported by the jury verdict alone. To reach this sentence, the judge found facts beyond those found by the jury .... “[T]he jury‘s verdict alone does not authorize the sentence. The judge acquires that authority only upon finding some additional fact” [quoting Blakely v. Washington, 542 U.S. 296, 305, 124 S.Ct. 2531, 159 L.Ed.2d 403 (2004)]. Booker, 125 S.Ct. at 751.
In short, the indictment charged no specific acts after August 2001, and the jury was told it could find defendants guilty without finding any overt acts on or after November 1, 2001. There is no basis on which, in the wake of Booker, we can infer that any such acts indeed occurred, i.e., that the jury, if asked, would have found them beyond a reasonable doubt.15
b.
Because Freeman‘s sentence is infected with Booker error, and he properly preserved his objection, we must vacate the sentence and remand for resentencing unless we determine that the error was harmless under
The government does not meet this burden. It points to nothing that would show beyond a reasonable doubt that the court would have imposed the same sentence under an advisory guidelines regime. See Akpan, 407 F.3d at 377.17
B.
We do not reach Freeman‘s ex post facto claim. Under Akpan, id. at 360 n. 2, we have the authority to leave to the district court the discretion to consider this argument as long as we have already determined there was a reversible Booker violation.
In summary, the judgment of conviction is AFFIRMED. The judgment of sentence is VACATED and REMANDED for further proceedings in accordance with this opinion.
E. GRADY JOLLY, Circuit Judge, dissenting in part:
I respectfully dissent from the majority‘s finding of Booker error based on the district court‘s application of the 2002 version of the Guidelines. I would affirm Freeman‘s sentence: No Booker error exists because whether the conspiracy continued until the effective date of the 2002 Guidelines is in this case a question of law, not a question of fact.
The Guidelines provide that the court apply the version of the Guidelines in effect on the date that the defendant is sentenced; if such use implicates the Ex Post Facto clause of the Constitution, the court is directed to apply the version in effect on the date the offense of conviction was committed.
The indictment filed against Freeman on February 28, 2002 alleged a conspiracy “[b]eginning in or about March 1997, and continuing to the present ....” Thus, the indictment clearly alleged that the offense of conviction was committed when the 2002 Guidelines applied. The jury returned a general verdict finding Freeman guilty of the offense charged in the indictment. I would hold that the jury‘s general verdict against Freeman on the count alleged in the indictment is sufficient to affirm the district court‘s sentence. No Booker error exists because Freeman was sentenced on the jury‘s finding that he was guilty of participating in a criminal conspiracy that continued until at least February 28, 2002.
The majority, however, relies on the jury instructions to conclude that the jury‘s verdict is insufficient to establish that the conspiracy continued past the effective date of the 2002 Guidelines. The jury was instructed in relevant part:
It is not essential that the Government proved that the conspiracy started and ended on those specific dates. Indeed it is sufficient if you find that in fact a conspiracy was formed and that it existed for some time within the period set forth in the Indictment and that at least one overt act was committed to further
the conspiracy within that period of time.
Such an instruction, according to the majority, did not require that the jury find the end date of the conspiracy beyond a reasonable doubt. The majority further reads this instruction to mean that the fact of conviction does not necessarily establish that the jury found the commission of any overt acts on or after November 1, 2001.1
Panel Opinion at 380-81. Assuming that the majority is correct, I cannot agree with the majority‘s conclusion that the district court must have found facts in order to determine that the conspiracy continued after November 1, 2001, resulting in Booker error. Panel Opinion at 380-81.
As a matter of law, a conspiracy continues until the evidence affirmatively shows that the conspirators terminate the alleged conspiracy, or with respect to conspirators individually, until the conspirators withdraw.2 The unchallenged affirmative evidence establishes that the defendant‘s scheme and the purposes underlying the scheme continued well past November 1, 2001. Furthermore, with respect to the defendant, “[a] defendant is presumed to continue involvement in a conspiracy unless she makes a ‘substantial affirmative showing of withdrawal, abandonment, or defeat of a conspiratorial purpose.’ ” United States v. Schorovsky, 202 F.3d 727, 729 (5th Cir.2000) (quoting United States v. Puig-Infante, 19 F.3d 929, 945 (5th Cir.1994)). None of these events ever occurred before the return of the indictment. “To establish withdrawal a defendant bears the burden of demonstrating affirmative acts inconsistent with the object of the conspiracy that are communicated in a manner reasonably calculated to reach conspirators.” Id. Freeman never claimed that he withdrew from the conspiracy. As such, his guilt of engaging in a criminal conspiracy continued as a matter of law through the time of the indictment. The district court, therefore, did not commit Booker error by concluding that the conspiracy continued through the effective date of the 2002 Guidelines.
For the foregoing reasons, I would affirm Freeman‘s sentence3 and, for that reason, I respectfully dissent.