UNITED STATES of America, Plaintiff-Appellee v. Matthew Norman SIMPSON; Nathan Todd Shafer, Defendants-Appellants.
No. 12-10574.
United States Court of Appeals, Fifth Circuit.
Jan. 15, 2014.
741 F.3d 539
Our view finds additional support in the fact that other circuits facing similar alignments of parties and citizenships have also concluded that complete diversity is lacking and that diversity jurisdiction does not exist.20 Even though allowing this case to proceed in federal court might further the underlying purpose of the diversity statute, “[u]ntil Congress changes our jurisdiction and allows us to hear cases based on something less than complete diversity, we cannot act.”21
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For the foregoing reasons, we REVERSE and REMAND with instructions that the district court remand this case to the state court from which it was removed.
[REDACTED]
zenship of defendants from California, Arkansas, and other states, due to lack of diversity between plaintiffs and defendants from Mississippi); see also 15 JAMES WM. MOORE ET AL., MOORE‘S FEDERAL PRACTICE § 102.12 [1] (3d ed.2013) (explaining that under the rule of complete diversity, divеrsity jurisdiction may be held not to exist despite the risk of prejudice to an out-of-state defendant sued in state court).
James Wesley Hendrix, Assistant U.S. Attorney, U.S. Attorney‘s Office, Dallas, TX, for Plaintiff-Appellee.
Shirley L. Baccus-Lobel, Law Offices of Shirley Baccus-Lobel, Franklyn Ray Mickelsen, Jr., Broden & Mickelsen, David James Pire, Dallas, TX, for Defendants-Appellants.
JAMES E. GRAVES, JR., Circuit Judge:
Matthew Simpson and Nathan Shafer raise multiple challenges to their convictions and sentences for participation in a wire and mail fraud conspiracy in the telecommunications industry. Simpson was also convicted of aiding and abetting the transmission of spam, obstruction of justice, and registration of a false domain name. We affirm all the convictions, except for Simpson‘s conviction for registration of a false domain name. We also affirm Shafer‘s sentence. However, we vacate and remand Simpson‘s sentence in light of our reversal of one of his convictions.
I. Factual and Procedural Background
Nineteen co-defendants, including Simpson and Shafer, were indicted in 2009 for their invоlvement in a lengthy conspiracy to defraud telecommunications companies and other entities. Count One of the fourth superseding indictment charged both Simpson and Shafer (along with other co-defendants) with conspiracy to commit wire and mail fraud in violation of
Trial evidence showed that the defendants and their сo-conspirators conspired to defraud various telecommunications companies, lessors, creditors, credit reporting agencies, and various other service providers, of goods and services. Evidence showed that beginning in 2003, the co-conspirators were involved in the creation and/or operation of a series of corporate entities which defrauded telecommunications companies, including, inter alia: American Discount Telecom (ADT), a company that promulgated a method of using routing codes that made long distance or toll-free calls appear to be local calls, thus avoiding paying larger telephone service providers for use of their networks; TxLink, a wholesale dialup internet company which Simpson used to steal network capacity and divert customer payments from one of his employers, CommPartners; camophone.com, a spoofing service that allowed customers to disguise the number they were calling from, which allowed spoofed calls to be routed locally through toll-free lines, thereby avoiding paying fees for the calls; ColoExchange, a colocation company that Simpson used to engage in both lease fraud and insurance fraud; Aston Technology, a company that Michael Faulkner, a co-conspirator, pretended to control to obtain network capacity without paying for it; and Union Datacom (UDC), Premier Voice, Lone Star Power, Incavox, and several other corporate entities that entered into contracts for commercial telecommunications services, leases, and other agreements for goods and services, which were not paid for. The companies were then abandoned or renamed by the co-conspirators to avoid the debts. Evidence
Most of the co-conspirators pleaded guilty. Four co-conspirators went to trial. After a ten-week trial, Simpson was convicted on one count of conspiracy to commit wire fraud and mail fraud (Count One), one count of fraud and related activity in connection with electronic mail (Count Two), one count of obstruction of justice through destruction of evidence (Count Four), and one count of false registration of a domain name (Count Seven). He was acquitted on an additional count of obstruction of justice. Shafer was convicted on one count of conspiracy to commit wire fraud and mail fraud (Count One). The two additional co-defendants at trial were acquitted.
The district court sentenced Simpson to 240 months on Count One; 36 months on Count Two, to run concurrent; 240 months on Count Four, to run consecutive to Count One; and 84 months on Cоunt Seven, to run concurrent, for a total of 480 months in prison. The district court ordered Simpson to pay restitution in the amount of $17,674,704. The district court sentenced Shafer to 108 months in prison on Count One and ordered restitution in the amount of $3,262,909.50. The court also entered an order of forfeiture against each defendant. The defendants appealed.
II. Discussion
Simpson and Shafer raise multiple challenges to their convictions and sentences. We address each of their arguments in turn.
A. Adequacy of Count One (Simpson)
Simpson first argues that the indictment was too indefinite on Count One. We review the sufficiency of the indictment de novo. United States v. Cooper, 714 F.3d 873, 876 (5th Cir.2013). “An indictment is legally sufficient if (1) each count contains the essential elements of the offense charged, (2) the elements are described with particularity, and (3) the charge is specific enough to protect the defendant against a subsequent prosecution for the same offense.” Id. at 877 (internal quotation marks omitted) (quoting United States v. Threadgill, 172 F.3d 357, 366 (5th Cir.1999)). Simpson does not describe these standards or explain how they are not met, but generally argues that the indictment purports to cover a single sevеn-year conspiracy by various different groups of co-conspirators to defraud multiple entities, but that no overarching agreement is described.
We find that the indictment met the required standards. The elements of conspiracy under
B. Conspiracy (Simpson and Shafer)
Both defendants argue that there is insufficient evidence supporting their conviction of conspiracy to commit wire and mail fraud. We review the sufficiency of the evidence de novo. See United States v. Shum, 496 F.3d 390, 391 (5th Cir.2007). “When reviewing the sufficiency of the evidence, we view all evidence, whether circumstantial or direct, in the light most favorable to the government, with all reasonable inferences and credibility choices to be made in support of the jury‘s verdict.” United States v. Ford, 558 F.3d 371, 375 (5th Cir.2009).
1. Simpson
Simpson argues that the evidence is insufficient because: (1) the trial evidence did not prove the existence of a single conspiracy as alleged in the indictment; (2) his relationship with Michael Faulkner was a “buyer-seller” relationship, and thus he could not be held liable for Faulkner‘s business misconduct; and (3) evidence of fraudulent regulatory filings became the “gravamen” of the conspiracy, in violation of Cleveland v. United States, 531 U.S. 12, 121 S.Ct. 365, 148 L.Ed.2d 221 (2000). We address each argument in turn.
a. Single Conspiracy
“The question whether the evidence establishes the existence of one conspiracy (as alleged in the indictment) or multiple conspiracies is a fact question within the jury‘s province.” United States v. Mitchell, 484 F.3d 762, 769 (5th Cir.2007). “We will affirm the jury‘s finding that the government proved a single conspiracy ‘unless the evidence and all reasonable inferences, examined in the light most favorable to the government, would preclude reasonable jurors from finding a single conspiracy beyond a reasonable doubt.‘” Id. at 769 (quoting United States v. Morris, 46 F.3d 410, 415 (5th Cir.1995)).
The principal considerations in counting the number of conspiracies are (1) the existence of a common goal; (2) the nature of the scheme; and (3) the overlapping of the participants in the various dealings. Id. at 770. “This court has broadly defined the criterion of a common goal in counting conspiracies.” Id. For example, in Morris, we held that the common goal of profiting from the illicit business of buying and selling cocaine constituted a single conspiracy. Morris, 46 F.3d at 415. Likewise, the jury here could reasonably have concluded that the common goal of the charged conspiracy was to derive personal gain from the creation of shell companies and other fraudulent actions to defraud telecommunications com-
b. Buyer-Seller Relationship
Simpson next argues that the evidence showed that he had a buyer-seller relationship with Faulkner, rather than a co-conspirator relationship, and that he cannot be held liable for Faulkner‘s business dealings. Simpson provides no evidentiary support for this assertion. By contrast, the government points to multiple pieces of trial evidence that showed, inter alia, that Faulkner described Simpson as part of the infrastructure that he managed, and split profits with Simpson for at least several months. Jason Watts testified that Simpson and Faulkner acted in concert, shared information and worked together in their business arrangements. Though Simpson challenged these assertions at trial, judging the credibility of the evidence was the province of the jury.
c. Regulatory Filings
Simpson next argues that the evidence supporting the conspiracy charge was drawn largely from fraudulent regulatory filings, in violation of Cleveland v. United States, 531 U.S. 12, 121 S.Ct. 365, 148 L.Ed.2d 221 (2000). Cleveland held that the federal mail fraud statutes do not extend to fraudulent filings seeking licenses from public entities. Id. at 20-21, 121 S.Ct. 365. Simpson summarily argues that fraudulent regulatory filings became the basis for a theory of prosecution. Although fraudulent regulatory filings were included in the evidence for various purposes, we have already detailed substantial evidence, not including those filings, which supports his conviction. Further, the district court repeatedly emphasized to the jury, including in the final jury charge,
2. Shafer
Shafer also argues that there is insufficient evidence supporting his conviction for conspiracy to commit wire and mail fraud. Shafer never disputed that he recruited people without assets to be directors of shell corporations on behalf of Faulkner. Shafer‘s contention is that Faulkner told him that he was exploiting a “legal loophole” in the regulatory framework, and that their business practices were legal. In short, Shafer argues that he had no intention to further any unlawful objective of the conspiracy, and that the government never established that he did.
As we stated above, to prove conspiracy, “the gоvernment must prove beyond a reasonable doubt that an agreement existed to violate the law and each conspirator knew of, intended to join, and voluntarily participated in the conspiracy.” United States v. Chon, 713 F.3d 812, 818 (5th Cir.2013). “The existence of an agreement to violate the law may be established solely by circumstantial evidence and may be inferred from ‘concert of action.‘” Chon, 713 F.3d at 818. Finally, “[w]hile a conspirator must knowingly participate in some way in the larger objectives of the conspiracy, he does not need to know all details of the unlawful enterprise or have a major role in the unlawful enterprise.” Id. at 819. Shafer cannot show that there was insufficient evidence that he joined the conspiracy. There is evidence that he knew of the unlawful purpose of the conspiracy, and acted in concert with the other conspirators to carry it out. See Chon, 713 F.3d at 818-19. Shafer himself acknowledges that William Watts, a co-conspirator, testified that Shafer was at a meeting where four co-conspirаtors, including Faulkner, Simpson, Watts and Shafer, planned to use the shell companies to acquire telecommunications services and not pay for them. Watts also described Shafer as being part of “inner circle” during the time that he was involved in the conspiracy. Though Shafer attacks Watts’ credibility and inability to remember the exact date and details of the meeting, the jury is, of course, the best judge of credibility. Shafer has not shown that a reasonable juror could not have found that he was guilty of all the elements of conspiracy beyond a reasonable doubt.
C. Spam (Simpson)
Simpson next argues that his conviction for aiding and abetting the transmission of spam under
Simpson is correct that commercial speech receives First Amendment protection, if the commercial speech is not false, deceptive or misleading. See Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 69, 103 S.Ct. 2875, 77 L.Ed.2d 469 (1983). However, misleading commercial speech receives no First Amendment protection. See RTM Media v. City of Houston, 584 F.3d 220, 224 (5th Cir.2009). Section 1037 provides in relevant part:
“(a) In general.-Whoever, in or affecting interstate or foreign commerce, knowingly ... (2) uses a [computer used in interstate commerce] to relay or retransmit multiple commercial electronic
mail messages, with the intent to deceive or mislead recipients, or any Internet access service, as to the origin of such messages ... shall be punished[.]”
Regarding his assertion that the evidence supporting the conviction is insufficient, Simpson has clearly failed to show that no reasonable juror could have found him guilty. He primarily argues that the CAN-SPAM Act reaches only email; but that his conviction was based on evidence of phone and fax spam. The statute prohibits the transmission of misleading “commercial electronic mail messages.”
D. Obstruction of Justice (Simpson)
Simpson next argues that there is insufficient evidence supporting his conviction for obstruction of justice.
Simpson also argues that there was an insufficient connection between the deletion of the email and an official proceeding. Though a proceeding need not be actually pending at the time of the obstructive act,
We find that this requirement was satisfied here. Simpson admitted that he deleted the emails after learning about the executed search warrants. Simpson also instructed Cargill, an employee and co-conspirator, to delete anything she thought ought to be deleted from her computer, anticipating that their company would also be investigated. This provided sufficient evidence of Simpson‘s intent to interfere with the administration of justice at an official proceeding that he anticipated would occur, and which had already begun with thе execution of the first search warrants.
E. False Registration of a Domain Name (Simpson)
Simpson next argues that his conviction for false registration of a domain name under
Section
We need not reach the parties’ arguments concerning whether the October 2005 renewal constituted another false registration under the statute, because there is no evidence showing that camophone.com was used in the course of the conspiracy after the October 2005 renewal. Section
In a post-argument brief, the government asserted that even if there was insufficient evidence on this count, it was harmless error because
F. Motion for New Trial (Simpson)
Simpson next argues that the district court erred when it denied his motion for a new trial, based on the newly disclosed fact that AT & T was being sued by the United States for fraudulent billing for international phone calls made by Nigerian spammers. He also argues that failure to disclose this previously sealed lawsuit against AT & T before trial violated Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963). Simpson argues that he would have used this evidence to impeach two AT & T witnesses who testified at trial.
We review the denial of a motion for a new trial for abuse of discretion. United States v. Piazza, 647 F.3d 559, 564 (5th Cir.2011). A claim that the government suppressed material evidence is reviewed de novo, but with appropriate deference to the district court‘s factual findings. See United States v. Brown, 650 F.3d 581, 589 (5th Cir.2011). To either warrant a new trial based on newly discovered evidence or succeed on a Brady claim, Simpson must show that the new or withheld evidence is material. See United States v. Pena, 949 F.2d 751, 758 (5th Cir.1991); United States v. Ellender, 947 F.2d 748, 756 (5th Cir.1991).
Simpson does not persuasively argue how the evidence of fraudulent billing by AT & T as a corporate entity is material. He argues that the new evidence lent credence to his assertion to Bandwidth.com, when Bandwidth discovered high international usage by Aston, that Aston could have been Nigerian spammers. However, the evidence in the record shows that what he said to Bandwidth was that Aston was “Nigerian scammers ... basically,” and that the company was based in Nigeria and had changed its name a lot, when in fact he knew that Aston was a company Faulkner and other co-conspirators were fraudulently impersonating. Further, as the district court stated, the evidence was unlikely to have been impeaching to the two AT & T employees who testified, who were not shown to have any connection to the alleged wrongdoing by AT & T, the corporation. Given that AT & T was one of several companies victimized, Simpson‘s argument that this impeaching evidence would somehow have altered the whole course of the trial is not persuasive. The district court‘s denial of a new trial was not an abuse of discrеtion.
G. Rule 404 Evidence (Shafer)
Shafer next argues that the district court erroneously admitted evidence that he had engaged in mortgage fraud, in violation of
Shafer preserved this objection, and thus we review the admission of the evidence for abuse of discretion. See United States v. Templeton, 624 F.3d 215, 221 (5th Cir.2010). “We do not reverse for
H. Sentencing (Simpson and Shafer)
Both Simpson and Shafer raise multiple challenges to their sentences. In reviewing the sentences, first, we consider whether the district court committed a “signifiсant procedural error,” such as miscalculating the advisory Guidelines range. United States v. Odom, 694 F.3d 544, 547 (5th Cir.2012). If there is no procedural error or the error is harmless, we proceed to the second step and review the substantive reasonableness of the sentence imposed for an abuse of discretion. Id. We review the district court‘s interpretation and application of the Guidelines de novo, and the district court‘s factual findings for clear error. Id. at 546-47.
1. Simpson
Simpson argues that the sentencing enhancement for perjury was erroneously applied to him.1 He received a 2-level increase in his offense level for obstruction of justice based on the district court‘s finding that he had committed perjury during the trial. U.S.S.G. § 3C1.1 provides that the offense level is increased by two levels if the defendant willfully obstructed justice during the prosecution. The application notes provide that this section applies to perjury. § 3C1.1, cmt. n. 4(b). “Though the court may not penalize a defendant for denying his guilt as an exercise of his constitutional rights, a sentence may be еnhanced if the defendant commits perjury.” United States v. Como, 53 F.3d 87, 89 (5th Cir.1995); see also United States v. Dunnigan, 507 U.S. 87, 93-95, 113 S.Ct. 1111, 122 L.Ed.2d 445 (1993). The district court specified the testimony it found to be perjury, and found by a preponderance of the evidence that in each instance: (1) Simpson gave false testimony; (2) under oath at trial; (3) it was material; (4) Simpson did not believe it to be true; and (5) Simpson gave it with willful intent rather than because of mistake or lack of memory. The court found eight instances of perjury.
Simpson has not shown that the district court clearly erred in its perjury findings. Simpson argues only that much of the testimony that the court found to be perjury related to testimony about his own motives for taking certain actions, or related to “matters concerning which individual perspective and recollection are bound to vary.” However, the first instance of perjured testimony found by the court was Simpson‘s testimony that he did not associate with spammers. This is contradicted by evidence establishing Simpson‘s association with Faulkner and UDC, who he
In any event, it appears that the two levels added by the perjury enhancement would have made no difference to Simpson‘s Guidelines range. Simpson‘s offense level was calculated at 45. Any offense level higher than 43 is treated as an offense level of 43. If there were no perjury enhancement, the offense level would have been 43. Standing alone-and Simpson does not challenge any other enhancements applied to him-the perjury enhancement did not affect his offense level or Guidelines range.2
2. Shafer
Shafer makes several arguments concerning procedural aspects of his sentence. First, he argues that the district court clearly erred in determining the loss amount attributable to him. He also contends that the district court erred in calculating the number of companies that were victims of his conduct. He alternatively argues that if the district court did not factually err in determining the loss amount, it erred by using the preponderance of the evidence standard as opposed to a higher clear and convincing evidence standard. Lastly, he argues that the court should not have given him two criminal history points for committing the offense while on probation.
a. Loss Calculation
Shafer contends that the loss amount attributed to him at sentencing pursuant to U.S.S.G. § 2B1.1(b)(1) was too high. We review the amount of loss, a factual finding, for clear error. See United States v. Jones, 475 F.3d 701, 705 (5th Cir.2007). Findings of fact for sentencing purposes need only be found by a preponderance of the evidence. See United States v. Harper, 448 F.3d 732, 734 (5th Cir.2006). The finding must be plausible
Before sentencing Simpson and Shafer, the district court conducted an evidentiary hearing to determine the loss amount attributable to each convicted defendant. At the hearing, the district court granted several of Shafer‘s objections to the loss calculation. It agreed that Shafer would not be held responsible for losses that occurred before he had joined the conspiracy, and excluded several loss amounts because the information supporting the claimed loss amount lacked sufficient indicia of reliability. The district court rejected Shafer‘s other objections, finding that the challenged losses were based on sufficiently reliable information and were reasonably foreseeable to Shafer. The total loss attributed to Shafer at sentencing, including the amounts that Shafer does not challenge on appeal, was over $3.2 million.
On appeal, Shafer asserts that the loss figures for several victim companies are unreliable because they were provided without sufficient detail, such that it cannot be determined if the loss occurred after he joined the conspiracy. He points to case law providing that “[b]ald, conclusory statements do not acquire the patina of reliability by mere inclusion in the PSR.” United States v. Elwood, 999 F.2d 814, 817-18 (5th Cir.1993). Here, however, the district court did not accept the statements in the PSR as the loss amount. The court conducted a separate evidentiary hearing on that issue, where the case agent testified about the instructions given to the victim companies, the losses the companies identified, and the supporting documentation provided by the companies. The agent was also cross-examined by Simpson‘s and Shafer‘s attorneys. The district court considered all this evidence before making its findings regarding the loss amounts. Shafer‘s speculative assertions that some of the loss amounts might have occurred before he joined the conspiracy are insufficient to meet his burden or to show that the district court clearly erred, particularly given the district court‘s detailed consideration of the loss calculation.
Further, even if all of Shafer‘s objections are valid, except for the objection to XO Communications, the error would have been harmless because the offense level would not have changed. A loss of approximately $3,200,000 was attributed to Shafer after the evidentiary hearing; he would have to reduce that amount to less than $2.5 million for his offense level to be reduced. See U.S.S.G. § 2B1.1(b)(1)(I), (J). Only the loss to XO Communications is large enough to affect the offense level. Shafer contends, as he did at the evidentiary hearing, that the XO Communications loss of $1,303,439.51 should not be attributed to him because it is not clear when it occurred, and thus it might have occurred before he joined the conspiracy. The
Shafer also objects to certain losses on the basis that they are excluded by U.S.S.G. § 2B1.1(b)(1) cmt. n. 3(D), which provides that “Loss shall not include.... interest of any kind, finance charges, late fees, penalties, amounts based on an agreed upon return or rate of return or other similar costs.” AT & T described some portion of its loss as “regulatory/other fees,” and CBeyond described some portion of its losses as “service charges and taxes.” Shafer asserts that these losses fall within the text of the exclusionary language. However, the district court reasoned that the exclusion applies to types of charges that the companies did not actually lose out-of-pocket; for example, late fees that it would have been paid if the clients had paid their bills, as opposed to the billed amount itself. The court specifically inquired into the bases of the challenged amounts and found that Shafer could not show that the losses fell within the exception or that companies did not actually incur those amounts as losses. We find no basis in the record to conclude that the district court clearly erred.
Shafer also objects to the inclusion of losses that occurred after Faulkner fled the U.S. to Mexico in early 2009, claiming that he was no longer involved in any jointly undertaken criminal activity. Shafer may be correct that he did not take any additional steps to advance the conspiracy, but there is no evidence that he attempted to withdraw from it. See United States v. Torres, 114 F.3d 520, 525 (5th Cir.1997). Mere cessation of activity does not constitute withdrawal from a conspiracy. See id. Further, Shafer continued to communicate with Faulkner, including asking that Faulkner pay him for past work, and there was evidence presented at the sentencing hearing indicating that Shafer was aware that Faulkner was continuing his activities. In these circumstances, the district court‘s findings that the continued losses were the result of the jointly undertaken activity and were foreseeable to Shafer are not clearly erroneous.
In sum, after reviewing the record, we find no basis on which to conclude that the district court clearly erred in calculating the loss amounts attributable to Shafer.3
b. Evidentiary Standard
Shafer next argues that where the loss calculation increased his Guidelines
c. Criminal History Points
Shafer‘s last argument is that the district court erred by applying two criminal history points because Shаfer was on probation at the time of the offense.
Shafer‘s interpretation of the Guidelines is directly contradicted by the text of
I. Forfeiture (Shafer)
Shafer last argues that the amount of forfeiture must be submitted to a jury. The Supreme Court has held that there is no constitutional right to a jury trial on forfeiture. Libretti v. United States, 516 U.S. 29, 49, 116 S.Ct. 356, 133 L.Ed.2d 271 (1995). Since Libretti, Apprendi held that any fact that increases the statutory maximum for an offense must be found by a jury. See Apprendi v. New Jersey, 530 U.S. 466, 120 S.Ct. 2348, 147 L.Ed.2d 435 (2000). In 2012, the Supreme Court held that Apprendi applies to criminal fines, such that any fact that increases a defendant‘s maximum fine must be found by a jury. S. Union Co. v. United States, 567 U.S. 343, 132 S.Ct. 2344, 2350, 183 L.Ed.2d 318 (2012). Shafer argues that, like fines in Southern Union Co, any fact that increases the amount of forfeiture must be found by a jury.
The only circuit to have addressed this argument after Southern Union Co. rejected it. See United States v. Phillips, 704 F.3d 754, 769-770 (9th Cir.2012), cert. denied, 133 S.Ct. 2796, 186 L.Ed.2d 864 (2013). As the Ninth Circuit explained:
III. Conclusion
We AFFIRM Simpson‘s convictions for conspiracy, aiding and abetting the transmission of spam, and obstruction of justice. We REVERSE Simpson‘s conviction for false registration of a domain name and accordingly VACATE and REMAND Simpson‘s sentence.4 We AFFIRM Shafer‘s conviction and sentence for conspiracy.
JAMES E. GRAVES, JR.
UNITED STATES CIRCUIT JUDGE