F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
APR 4 2000
TENTH CIRCUIT
PATRICK FISHER
Clerk
UNITED STATES OF AMERICA,
Plaintiff - Appellee, No. 99-5039
v. (N.D. Oklahoma)
STEVEN MARTIN CLAYTON (D.C. No. CR-98-27-C)
DODSON,
Defendant - Appellant.
ORDER AND JUDGMENT *
Before EBEL , ANDERSON , and MURPHY , Circuit Judges.
Steven Martin Clayton Dodson appeals his sentence and conviction on
twenty-one counts of mail fraud, in violation of 18 U.S.C. § 1341 and § 2(b), and
one count of money laundering, in violation of 18 U.S.C. § 1957. Mr. Dodson
was acquitted of one count of perjury, in violation of 18 U.S.C. § 1621. He was
sentenced to 60 months imprisonment on each mail fraud count and 108 months
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
on the money laundering count, the sentences to run concurrently. Mr. Dodson
was ordered to pay an assessment of $1,200 and restitution of $4,714,801. We
affirm his conviction and sentence.
BACKGROUND
Between April 1986 and March 31, 1994, Mr. Dodson was a registered
broker-dealer agent for Dean Witter Reynolds, Inc. Dean Witter fired Mr.
Dodson on March 31, 1994, for violating company policy. Mr. Dodson then
formed several corporations: Capital Alliance, Ltd. and Capital Funding Group of
Tulsa were incorporated in August 1994; Capital Alliance Group of Tulsa was
incorporated in May 1995. Mr. Dodson was president of all three companies.
Mr. Dodson had previously incorporated Heilbronn Holdings, Inc. in December
1989 and was its president. In May 1996, he reorganized Capital Alliance, Ltd.,
merged it with Heilbronn Holdings, Inc., and renamed it Capital Alliance, Inc.
He had similarly organized a limited liability company, Stone Hedge Investors
Fund 1993, LLC in February 1994, of which he was the managing member and
chief executive officer, as well as Sontheim Asset Management, Inc., incorporated
in February 1995. Mr. Dodson owned Sontheim until May 1996, at which time it
became a wholly-owned subsidiary of Capital Alliance, Inc. Mr. Dodson was at
all times Sontheim’s president.
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Between September 1995 and March 1997, Mr. Dodson was registered
under the Oklahoma Securities Act as an investment advisor. In April of 1996,
the Oklahoma Department of Securities (“ODS”) began investigating Mr. Dodson
after possible securities violations were discovered following a routine
compliance audit. The government established at trial that Mr. Dodson had
solicited a number of his former clients at Dean Witter and convinced them to
liquidate their investments at Dean Witter and elsewhere and invest their savings
with him. He promised to place their funds in secure, risk-free investments, with
a guaranteed rate of return. In fact, however, Mr. Dodson embarked on a scheme
whereby he invested his clients’ funds in the three Capital Alliance companies
(Capital Alliance Ltd., Capital Alliance Group of Tulsa, and Capital Funding
Group of Tulsa), without disclosing to his clients the true nature of the companies
or that he (Mr. Dodson) had formed, owned and controlled them. He then used
the diverted money to repay other business loans and personal expenses. As
part of this scheme, Mr. Dodson mailed fraudulent account statements to his
investors using the United States mails. The shares of Capital Alliance stock
issued to Mr. Dodson’s investors were deemed worthless because the Capital
Alliance companies had no assets. The ODS investigation into Mr. Dodson led to
a referral of the matter to the FBI, which led to the multi-count indictment against
Mr. Dodson.
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The indictment alleged that, between March 1, 1994, and April 30, 1997,
Mr. Dodson devised and implemented a scheme to defraud numerous people by
convincing them, through material misrepresentations, to invest money with his
Capital Alliance group, and that Mr. Dodson utilized the United States mails and
other commercial interstate carriers to accomplish the scheme. The money
laundering count was based upon an allegation that Mr. Dodson used the proceeds
from his mail fraud scheme to purchase a cashiers’ check, which he then used for
his own personal purposes. The perjury count alleged that Mr. Dodson testified
falsely before a Securities and Exchange Commission officer in connection with
the SEC’s investigation of a company called Reconversion Technology.
Most of the victims of Mr. Dodson’s fraudulent scheme were elderly retired
individuals, many of whom had been clients of Mr. Dodson’s while he worked at
Dean Witter. Many of them lost virtually all or a significant portion of their life
savings.
Prior to trial, Mr. Dodson filed two motions to sever the perjury charge
from the mail fraud and money laundering counts. The district court denied both
motions. Following a two and one-half week trial, the jury convicted Mr. Dodson
of all twenty-one mail fraud counts and of the one money laundering count, and
acquitted him of the perjury charge. At sentencing, the district court departed
upward four levels, concluding that this was a case in which “the loss determined
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under [USSG § 2F1.1](b)(1) does not fully capture the harmfulness and
seriousness of the conduct.” USSG § 2F1.1, cmt.11. 1
The court accordingly
sentenced Mr. Dodson to 108 months, concurrent with the multiple 60-month
sentences, followed by three years of supervised release.
Mr. Dodson appeals his conviction and sentence, arguing: (1) the district
court erred in failing to sever the perjury charge from the remaining charges; (2)
the jury instructions on the money laundering charge were inadequate; and (3) the
district court erroneously departed upward in sentencing Mr. Dodson. Mr.
Dodson seeks a remand for a new trial and/or for resentencing. We reject these
arguments and affirm his conviction and sentence.
DISCUSSION
I. Joinder of Perjury Charge
Fed. R. Crim. P. 8(a) permits joinder of offenses “if the offenses
charged . . . are of the same or similar character or are based on the same act or
transaction or on two or more acts or transactions connected together or
constituting parts of a common scheme or plan.” Where the joinder of offenses
results in prejudice to the defendant, “the court may order an election or separate
trials of counts, grant a severance of defendants or provide whatever relief justice
1
At the time Mr. Dodson was sentenced, this was note 10.
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requires.” Fed. R. Crim. P. 14. Mr. Dodson argues that the perjury count should
not have been joined with the mail fraud and money laundering counts under Rule
8. Further, he asserts that the district court’s refusal to sever the perjury count
from the other counts pursuant to Rule 14 resulted in unfair prejudice to him.
The alleged improper joinder of offenses is a question of law which we
review de novo, broadly construing Rule 8 to allow liberal joinder in the interests
of judicial efficiency. See United States v. Johnson , 130 F.3d 1420, 1427 (10th
Cir. 1997). Even if joinder is proper under Rule 8, however, the district court
may still sever offenses for separate trial under Rule 14, if the defendant may be
prejudiced by the joinder. We review a district court’s denial of a motion to sever
for abuse of discretion. See id. To establish such an abuse of discretion, a
defendant must demonstrate that his right to a fair trial was threatened or actually
deprived. See id. A defendant’s burden to show abuse of discretion in this
circumstance “‘is a difficult one.’” Id. (quoting United States v. Valentine , 706
F.2d 282, 290 (10th Cir. 1983)).
As indicated above, the perjury charged stemmed from Mr. Dodson’s July
1995 testimony before an SEC officer regarding the SEC’s investigation of a
company called Reconversion Technology Corporation. Mr. Dodson, under oath,
allegedly failed to inform the SEC officer of all the corporate entities (in
particular the Capital Alliance group as well as Sontheim Asset Management)
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with which Mr. Dodson had an association as an employee, director, officer or
consultant. The government argues that Mr. Dodson needed to keep his
ownership of those other companies secret from his clients and from the SEC, in
order to successfully continue to pursue his mail fraud scheme. Thus, it argues
the perjury count and the mail fraud and money laundering counts “were part of
two or more acts or transactions connected together and constituting parts of a
common scheme or plan” under Rule 8(a). Appellee’s Br. at 6. Mr. Dodson
responds that the perjury charge was utterly unrelated to the mail fraud and money
laundering counts, and introduction of evidence relating to it—i.e., Mr. Dodson’s
testimony before the SEC officer—constituted the only testimony by Mr. Dodson
before the jury, and it suggested that he was a liar, thereby prejudicing him. 2
Bearing in mind the liberal standard for joinder under Rule 8(a), we agree
with the government and the district court that joinder of the perjury charge was
proper under Rule 8(a). At the time Mr. Dodson testified before the SEC, he was
in the midst of his fraud scheme, which depended for its success upon his
withholding from his clients and any investigatory body the fact that he owned the
Capital Alliance group companies in which he was purportedly investing his
clients’ money. Even if he had additional reasons for not disclosing to the SEC
2
Mr. Dodson did not waive his Fifth Amendment right not to testify at his
trial. As a result, the SEC testimony was the only testimony by Mr. Dodson
which the jury considered.
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his ownership of those companies, it necessarily was also important to his fraud
scheme that he keep that ownership secret. 3
Mr. Dodson argues that, regardless of his need to conceal his ownership of
the companies as part of his fraud scheme, we must determine the propriety of
joinder strictly from the face of the indictment. He asserts that the mail fraud and
money laundering counts in the indictment make no mention of the perjury
charge, nor does the perjury charge mention the fraud and money laundering
counts. That is not dispositive. From the face of the indictment, it is clear that it
was significant for the mail fraud and money laundering counts, as well as for the
perjury count, that Mr. Dodson was in fact the president and incorporator of the
Capital Alliance group of companies and Sontheim Asset Management and that he
kept that fact secret. Thus, the information with respect to which Mr. Dodson
allegedly perjured himself was information which was also highly relevant to, and
“of the same or similar character” as, the mail fraud and money laundering
3
Mr. Dodson argues that the SEC interviewed him as part of its
investigation into Reconversion Technologies “in order to discover which, if any,
of the companies Dodson was involved in between January 1, 1994 and July 19,
1995, had purchased Reconversion Technologies stock. The SEC wanted to
uncover any payoffs from Reconversion Technologies to Dodson in exchange for
the trading services Dodson could supply.” Appellant’s Reply Br. at 6-7.
Because Heilbronn Holdings was the only company of Mr. Dodson’s which had
actually purchased Reconversion Technologies stock, Mr. Dodson argues that his
nondisclosure of his involvement with the other companies was in fact irrelevant
to the SEC investigation, and does not demonstrate an intent to defraud.
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counts. Fed. R. Crim. P. 8(a). We therefore agree that the perjury count was
properly joined with the other counts.
Furthermore, we agree that Mr. Dodson has failed to meet his heavy burden
of establishing that his right to a fair trial was threatened or actually deprived by
the joinder of the perjury charge with the other charges. We so conclude for
several reasons. First, Mr. Dodson was acquitted of the perjury charge. Thus,
while the jury heard evidence suggesting that Mr. Dodson had lied, it evidently
concluded that he did not commit perjury in his statement to the SEC officer.
Moreover, the alleged perjury related to Mr. Dodson’s failure to disclose his
ownership and presidency of the Capital Alliance group of companies and
Sontheim Asset Management. But, as indicated, the concealment of his status
vis-a-vis those companies was at the heart of his mail fraud scheme, and the jury
heard ample evidence from many sources that he had concealed that status. The
added minor evidence that he also concealed that status from the SEC would not
have seriously affected the fairness of his trial. 4
We therefore discern no abuse of
discretion in the district court’s denial of his motions to sever.
4
We likewise conclude that the presentation of that evidence did not violate
his Fifth Amendment right not to testify at his trial. This is no different from the
myriad of other situations where a defendant chooses not to testify, but the
government introduces evidence of other statements he has made.
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II. Jury Instructions on Money Laundering
Mr. Dodson also argues that the jury instructions on the money laundering
count were incomplete because the court failed to explicitly list as an essential
element of the crime the requirement that the monetary transaction at issue affect
interstate commerce. 5
We disagree.
“We examine jury instructions as a whole to evaluate their adequacy, and
review the propriety of tendering an individual instruction de novo.” United
States v. Hanzlicek , 187 F.3d 1228, 1233 (10th Cir. 1999). The instruction given
to the jury in this case on the money laundering count stated as follows:
The crime of engaging in an unlawful monetary transaction in
property derived from mail fraud or wire fraud . . . has five essential
elements which must be proved beyond a reasonable doubt:
FIRST: The defendant knowingly
engaged, or attempted to
engage, in a “monetary
transaction” (as that term will
be defined later);
5
18 U.S.C. § 1957 provides in part as follows:
(a) Whoever . . . knowingly engages or attempts to engage in a
monetary transaction in criminally derived property that is of a value
greater than $10,000 and is derived from specified unlawful activity,
shall be punished . . . .
“Monetary transaction” is defined as “the deposit, withdrawal, transfer, or
exchange, in or affecting interstate or foreign commerce, of funds or a monetary
instrument . . . .” 18 U.S.C. § 1957(f)(1).
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SECOND: The monetary transaction was
in property of a value greater
than $10,000;
THIRD: That the property was derived
from mail frauds, as those
offenses are defined in these
instructions;
FOURTH: The defendant knew that the
property constituted or was
derived from proceeds obtained
from a criminal offense; and
FIFTH: The monetary transaction took
place in the United States.
Appellant’s App. at 156-57. The instruction then defined “monetary transaction”
as follows:
The term “monetary transaction”, as used in these instructions,
includes a transaction involving the use of a financial institution
which is engaged in, or the activities of which affect, interstate or
foreign commerce in any way or degree.
Id. at 158.
“The requirement that a transaction be ‘in or affecting interstate commerce’
is both jurisdictional and an essential element of the charge of money laundering
under 18 U.S.C. § 1957.” United States v. Trammell , 133 F.3d 1343, 1353 (10th
Cir. 1998). Mr. Dodson argues that the instruction’s failure to explicitly list an
effect on interstate commerce as an essential element, along with the fact that the
definition of “monetary transaction” merely states that it “includes” transactions
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involving the use of a financial institution involving interstate commerce,
rendered the instruction misleading. 6
We disagree.
While not an ideal money laundering instruction, we conclude that, read as
a whole, any reasonable juror would have understood that the monetary
transaction must involve the use of a financial institution which is engaged in, or
the activities of which affect, interstate commerce. We therefore hold that
Mr. Dodson is not entitled to a new trial based upon an alleged instructional error.
III. Upward Departure at Sentencing
Finally, Mr. Dodson argues the district court improperly departed upward
four levels at sentencing. When reviewing an upward departure, we inquire:
(1) whether the factual circumstances supporting a departure are
permissible departure factors; (2) whether the departure factors relied
upon by the district court remove the defendant from the applicable
Guideline heartland thus warranting a departure; (3) whether the
record sufficiently supports the factual basis underlying the
departure; and (4) whether the degree of departure is reasonable.
United States v. Whiteskunk , 162 F.3d 1244, 1249 (10th Cir. 1998) (quoting
United States v. Collins , 122 F.3d 1297, 1303 (10th Cir. 1997)). Furthermore,
6
The government urges us to review this instruction only for plain error,
asserting that Mr. Dodson failed to properly object to the instruction before the
district court. Mr. Dodson responds that he did generally object to the failure to
include an effect on interstate commerce as an essential element of the crime of
money laundering. The standard of review is not dispositive in this case, since
under any standard we find no error in the instruction as given.
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“[w]e review the district court’s decision to depart from the Sentencing
Guidelines under a unitary abuse of discretion standard.” United States v. Smith ,
133 F.3d 737, 747 (10th Cir. 1997).
In this case, in determining to depart upward, the district court noted that
Mr. Dodson’s offense was “outside the heartland of cases.” Appellant’s App. at
264. The court observed that the guidelines explicitly contemplate an upward
departure where the loss caused by the fraud “does not fully capture the
harmfulness and seriousness of the conduct.” USSG § 2F1.1, cmt.11. The court
then provided two specific grounds for departing upward. These two grounds are
explicitly set out in the guidelines as examples of situations where the loss does
not fully capture the harmfulness and seriousness of the conduct: “the offense
caused reasonably foreseeable, physical or psychological harm or severe
emotional trauma” and “the offense involved the knowing endangerment of the
solvency of one or more victims.” USSG § 2F1.1. cmt.11(c), (f). Mr. Dodson
argues this constitutes impermissible “double counting” because “[t]he factors
listed are inherently contemplated in the sentencing guidelines allowing for an
enhancement based upon the amount of loss caused by Dodson’s conduct,
pursuant to USSG § 2F1.1(b)(1)(N).” Appellant’s Br. at 27.
We disagree that the district court improperly “double counted” in
calculating its upward departure, or otherwise abused its discretion. The court
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clearly explained why it concluded this case was outside the heartland of typical
fraud cases:
Trial evidence, the Victim Impact Statements presented to the U.S.
Probation Office, and testimony of some victims at the sentencing
hearing, show Dodson’s conduct was particularly egregious. It is
clear his victims were psychologically, emotionally, and financially
devastated because of his offense conduct. Many victims detailed the
psychological harm and severe emotional trauma they have suffered
from worrying about the future without the benefit of the lost funds.
Dodson had personal knowledge of his victims’ financial conditions.
Their psychological harm and severe emotional trauma were
reasonably foreseeable to him.
Several victims lost all savings to the point their solvency was and is
endangered. The Court needs only to find one victim that meets this
requirement but in this case several victims reported losing most if
not all of their savings. Some either depend heavily or completely on
social security for their support. Several victims reported in their
testimony or written statement that they have significantly altered
their lifestyle because of their lost savings.
Appellant’s App. at 264. The district court’s findings are amply supported by the
record. Moreover, contrary to Mr. Dodson’s argument, these circumstances are
not inherently included within the enhancement based on the amount of loss. As
the presentence report in this case acknowledges, the amount of loss enhancement
does not differentiate between “a $300,000 loss to a person who has a net worth
of millions of dollars and a person whose total savings consisted of $300,000.”
PSR at 33. We find no abuse of discretion in the district court’s determination
that this case was not a typical fraud case, and that an upward departure was
warranted.
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We further conclude that the degree of departure was reasonable. See
Smith , 133 F.3d at 751; 18 U.S.C. § 3742(e)(3). The district court decided upon a
four-level upward departure by analogizing the case to USSG § 2F1.1(b)(6),
which at the time of sentencing provided a four level increase “if the offense . . .
substantially jeopardized the safety and soundness of a financial institution.” 7
The court concluded that Mr. Dodson’s offenses “substantially jeopardized the
solvency of approximately fourteen individuals because of the loss of most, if not
all of their life savings.” Appellant’s App. at 264. Noting that a long prison
sentence was warranted “to address the sentencing objectives of punishment,
deterrence, and protection of the public,” id. , the district court’s selection of a
four-level departure was reasonable.
For the foregoing reasons, we AFFIRM Mr. Dodson’s conviction and
sentence.
ENTERED FOR THE COURT
Stephen H. Anderson
Circuit Judge
7
This is currently subsection (7).
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