RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 11a0069p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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Plaintiff-Appellee, -
UNITED STATES OF AMERICA,
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No. 08-4650
v.
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Defendant-Appellant. -
DARRELL CROSGROVE,
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Appeal from the United States District Court
for the Northern District of Ohio at Toledo.
No. 07-00497-001—Jack Zouhary, District Judge.
Argued: January 14, 2011
Decided and Filed: March 18, 2011
Before: MERRITT, ROGERS, and WHITE, Circuit Judges.
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COUNSEL
ARGUED: Deborah Kovac Rump, Toledo, Ohio, for Appellant. Seth D. Uram,
ASSISTANT UNITED STATES ATTORNEY, Toledo, Ohio, for Appellee.
ON BRIEF: Deborah Kovac Rump, Toledo, Ohio, for Appellant. Seth D. Uram,
ASSISTANT UNITED STATES ATTORNEY, Toledo, Ohio, for Appellee.
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OPINION
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ROGERS, Circuit Judge. Darrell Crosgrove appeals his conviction and sentence
for conspiracy to commit mail fraud, in violation of 18 U.S.C. § 371, and conspiracy to
commit money laundering, in violation of 18 U.S.C. § 1956(h). Crosgrove argues that
the Government did not present sufficient evidence at trial to support either conviction.
Because there was sufficient evidence of a conspiracy to commit mail/wire fraud,
Crosgrove’s conviction for that count must be affirmed. However, the Government did
1
No. 08-4650 United States v. Crosgrove Page 2
not produce sufficient evidence at trial to support the conspiracy to commit money
laundering charge, and the judgment of conviction for that count has to be vacated.
Crosgrove also contends that the district court committed several errors in evidentiary
rulings, that certain evidence presented at trial was obtained in violation of the Fourth
Amendment, that he received ineffective assistance of trial counsel, that the prosecutor
engaged in misconduct, and that the district court committed several errors in calculating
his sentence. All of these claims are without merit, forfeited, or premature, and are
therefore rejected.
Darrell Crosgrove was recruited into an ongoing fraudulent insurance scheme in
early 2001. He formally joined the conspiracy by accepting a “claims adjuster” position
some time between March and June of 2001. The conspiracy involved the operation of
two professional organizations: the American Real Estate Association (“AREA”) and
the Noble Group (“Noble”), both of which were created in the early nineties. AREA and
Noble were marketed to real estate agents and appraisers as professional organizations
that would provide members with certain benefits, most prominently errors-and-
omissions insurance coverage.
AREA and Noble were owned by Mark Haukedahl, the head of the scheme,
through a series of offshore shell companies. Haukedahl also owned an offshore
insurance company, Midwest Insurance. Midwest was to provide an insurance policy
to AREA/Noble that would provide errors-and-omissions coverage to all of the
organizations’ members in good standing. However, very soon after Midwest was
created, Haukedahl stopped sending member dues to the company that managed
Midwest’s operations. Midwest fell into arrears on premium payments to its reinsurer,1
and its policy was cancelled. By the middle of 1996, Midwest had virtually no cash on
hand and no reinsurance. Therefore, there was effectively no errors-and-omissions
policy in place for AREA/Noble members. The organizations’ attorney, Douglas Ritson,
was able to secure a genuine insurance policy for roughly six months, but by some time
1
Although AREA/Noble members were told that the organizations’ policies were with Midwest,
Midwest was to secure insurance through a third party. That is, the actual insurance was ultimately
supposed to come from another insurance company.
No. 08-4650 United States v. Crosgrove Page 3
in 1997, there was no insurance from Midwest or any other provider to back up the
coverage promised to AREA/Noble members. However, AREA/Noble continued to
process member claims as though genuine insurance existed. Payouts were funded
through membership fees.
Ritson, concerned about the operation’s legality, eventually chose to leave
AREA/Noble and approached Crosgrove about taking over Ritson’s position. Crosgrove
worked for Haukedahl from spring of 2001 until March 2004. During this time,
Crosgrove was responsible for processing members’ claims; this responsibility included
meeting with Haukedahl to determine which claims should be paid and writing letters
explaining the companies’ frequent denials of coverage. Crosgrove sent over 150 letters
to members, their attorneys, and government investigators as part of his work for
Haukedahl. In some of these letters, Crosgrove identified himself as corporate counsel
for AREA/Noble, in others as counsel for Midwest, and in still others as a claims
adjuster. About a year into his employment with Haukedahl, Crosgrove adopted the
pseudonym John Thomas, which he used in communications with members and with
state insurance investigators. In July 2002, Crosgrove issued a memo to staff at
AREA/Noble in which he stated that his position with the companies was unspecified,
that his name should never be given to any caller, and that any calls regarding insurance
should be referred to “John Thomas.”
As more and more members, members’ attorneys, and state insurance
commissions became doubtful as to the existence of genuine insurance, Haukedahl
decided to shift the assets of AREA/Noble to a new company, United Real Estate
Association (“UREA”), which Crosgrove helped to create.
U.S. Marshals seized AREA/Noble’s offices in March 2004, at which point the
companies ceased operations. Crosgrove, Haukedahl, and Ritson were all indicted on
counts related to the fraudulent insurance scheme. Crosgrove’s indictment contained
two counts: conspiracy to commit mail/wire fraud and conspiracy to commit money
laundering. The mail/wire fraud count alleged that Crosgrove had conspired to obtain
money from AREA/Noble members by means of false and fraudulent representations
No. 08-4650 United States v. Crosgrove Page 4
and had, along with his coconspirators, “knowingly and unlawfully caused to be placed
in and/or delivered by United States mail” multiple fraudulent documents related to the
insurance scheme. The indictment identified several overt acts in furtherance of the
mail/wire fraud conspiracy, including Crosgrove’s writing of fraudulent letters to
members and members’ attorneys; the mailing of checks issued from member fee
accounts in partial payment of claims; Crosgrove’s use of an alias in dealing with
AREA/Noble members, their attorneys, and insurance investigators; and Crosgrove’s
negotiation of monthly checks issued to him from accounts funded only by member fees.
The indictment also contained a count of conspiracy to commit money
laundering, alleging that Crosgrove engaged in a conspiracy to commit promotion
money laundering in violation of 18 U.S.C. § 1956(a)(1)(A)(i). That is, the Government
alleged that Crosgrove, “knowing that the property involved in financial transactions
represented the proceeds of some form of unlawful activity, [conspired] to conduct and
attempt to conduct such financial transactions affecting interstate or foreign commerce,
which in fact involved the proceeds of specified unlawful activity with the intent to
promote the carrying on of specified unlawful activity.” The relevant transactions
identified in the indictment were: 1) paying the salaries of AREA/Noble employees; 2)
paying fees to companies or entities owned or controlled by Haukedahl that provided
administrative services to AREA/Noble; 3) paying attorney fees to attorneys
representing members of AREA/Noble; 4) disbursing settlement payments in connection
with errors-and-omissions insurance claims; and 5) paying fees or salaries to
coconspirators, including Crosgrove himself.
Crosgrove stood trial on both counts in mid-2008. At the close of the
Government’s case and again before the case was submitted to the jury, Crosgrove’s trial
counsel made Rule 29 motions for judgment of acquittal, both of which were denied.
On appeal, Crosgrove renews the argument that there was insufficient evidence to
sustain a conviction for either count.
Crosgrove also renews several evidentiary objections from his trial and raises
two new trial issues on appeal: he argues that certain evidence introduced at trial was
No. 08-4650 United States v. Crosgrove Page 5
gathered in violation of the Fourth Amendment and that the prosecutor engaged in
misconduct. Crosgrove also argues that his trial counsel was ineffective and that the
district court committed several errors in calculating Crosgrove’s sentence.
I. Sufficiency of the Evidence
A. Conspiracy to Commit Mail/Wire Fraud
Crosgrove argues that there was no evidence as to his knowledge of the
conspiracy. There was, however, ample evidence to support both the finding that
Crosgrove knew of the conspiracy and the other elements of the mail/wire fraud
conspiracy charge. At trial, the jury heard testimony from Ritson, other Haukedahl
employees, the federal investigators involved in the case, an attorney Crosgrove had
contacted on behalf of AREA in relation to a pending lawsuit, a friend of Crosgrove’s
with whom Crosgrove had discussed the nature of the insurance, state insurance
investigators, and members’ attorneys. This testimony, along with documents produced
by the Government, supports the conclusion that Crosgrove knowingly participated in
a conspiracy to commit mail/wire fraud.
Ritson, the attorney who preceded Crosgrove at AREA/Noble, testified about the
structure of AREA/Noble and Crosgrove’s initial involvement. Ritson had trained
Crosgrove in the claims process, and testified that he had explained to Crosgrove that
Haukedahl made the final decision on whether claims would be paid, that claims were
paid out of an account made up of members’ dues, that the associations were essentially
“self-insured,” and that one of Crosgrove’s responsibilities in his new position would be
to find a valid outside carrier. Ritson’s testimony provided evidence that Crosgrove was
aware, from the outset of his association with Haukedahl, that AREA/Noble was not
covered by a policy from Midwest or any other outside company.
The Government also introduced a letter from the Supervisor of Insurance for
Barbados informing Crosgrove that Midwest’s Barbados license had been revoked a year
earlier and that Midwest might be operating without a valid license in the United States.
This letter was dated June 15, 2001. Taking the trial evidence in the light most favorable
No. 08-4650 United States v. Crosgrove Page 6
to the Government, Crosgrove began working at AREA/Noble no later than late-May
2001. Therefore, the jury could have concluded from the Barbados letter that Crosgrove
had notice within weeks of beginning work at AREA/Noble that the company had no
valid outside carrier.
Terry Lodge, an attorney who had formerly served as outside counsel to
AREA/Noble, testified during the Government’s case in chief. Lodge testified that
Crosgrove never produced a copy of the insurance policy between Midwest and AREA,
in spite of Lodge’s repeated requests. The jury also heard several former AREA/Noble
employees testify that they had never met or spoken with anyone from Midwest. A jury
could reasonably conclude that if Crosgrove was unable to produce proof of a policy
with Midwest and there was no contact between AREA/Noble and Midwest, Crosgrove
must have been aware that Midwest was not truly providing outside insurance.
There was also ample evidence that Crosgrove willingly continued his
participation in the scheme in spite of its illegality. In a note to Troy Haukedahl, Mark
Haukedahl’s son, Crosgrove wrote: “Here is the updated policies [sic].” The note went
on to state: “The changes I have made to the policy are highlighted and underlined.” Of
course, if the policy were actually provided by an outside entity, AREA/Noble would
not modify the policy’s contents before sending it to members. Crosgrove’s revisions
to the fraudulent policy, which was purportedly underwritten by Midwest, support the
finding that he took an active role in the AREA/Noble fraud scheme.
The Government also presented evidence that Crosgrove had instructed staff not
to give out any information about Midwest, not to inform any callers that Midwest was
an offshore entity, and not to give out his name to any caller. Additionally, Crosgrove
used his John Thomas alias to respond to investigators from multiple state insurance
departments. There was further evidence that Crosgrove repeatedly varied his
statements regarding his position with the AREA/Noble/Midwest entities and the
structure of the companies in dealings with members, members’ attorneys, and
investigators. In September 2001, Crosgrove wrote a letter to a member’s attorney
stating: “As to the status of Midwest, I can’t say, as I have no idea of whom you are
No. 08-4650 United States v. Crosgrove Page 7
talking about.” Three weeks later, Crosgrove wrote a letter to a different member’s
attorney in which he claimed to represent Midwest. An investigator from the Montana
Insurance Commission testified that Crosgrove wrote to her that AREA/Noble records
were no longer available because “a competing company came in and took over the
customers as new accounts.” Yet other evidence revealed that UREA was not a pre-
existing competitor, but rather a new company created solely for the purpose of
transferring AREA/Noble assets, and that Crosgrove himself had written the
memorandum of sale. Based on this evidence, a reasonable jury could conclude that
Crosgrove willingly participated in efforts to conceal the fraud scheme and shield
AREA/Noble’s remaining assets from investigators.
All of this evidence, taken in the light most favorable to the Government,
supports the conclusion that any rational finder of fact could have found beyond a
reasonable doubt that Crosgrove knowingly and willingly participated in the conspiracy
to commit mail/wire fraud. Crosgrove’s conviction for this count is amply supported by
the evidence.
B. Conspiracy to Commit Money Laundering
Although trial evidence was sufficient to support Crosgrove’s conviction for
conspiracy to commit mail/wire fraud, the Government did not produce sufficient
evidence to support the charge of conspiracy to commit money laundering. The
Government failed to show that the money involved in the alleged transactions
represented the profits of unlawful activity, as required under United States v. Santos,
553 U.S. 507, 514 (2008), and United States v. Kratt, 579 F.3d 558, 561-62 (6th Cir.
2009). Crosgrove’s conviction for this count must therefore be vacated.
The indictment alleged that Crosgrove conspired to participate in promotion
money laundering in violation of 18 U.S.C. § 1956(a)(1)(A)(i). “Promotion” money
laundering involves the reinvestment of proceeds of unlawful activity into the illegal
scheme from which the proceeds were derived. The charge required the Government to
prove that Crosgrove “conspired to conduct a financial transaction which involved the
proceeds of unlawful activity, with knowledge that the money was the proceeds of
No. 08-4650 United States v. Crosgrove Page 8
unlawful activity, and with the intent to promote the underlying criminal activity.”
United States v. Reed, 264 F.3d 640, 650 (6th Cir. 2001). To secure a conviction for
promotion money laundering, the Government must identify transactions (or planned
transactions in the case of a conspiracy charge) that represent the proceeds of the
underlying illegality. Although the indictment listed several categories of transactions
as bases for the money laundering charge, the Government’s attorney stated at oral
argument that the only transactions on which the conviction could be upheld were
Crosgrove’s deposits of checks that were issued to him from the member fees account.
These were monthly checks for pre-established, fixed amounts and can be fairly
characterized as salary payments.
The jury returned a guilty verdict on June 3, 2008, one day after the Supreme
Court issued its decision in Santos. Although it is understandable that the impact of the
Santos decision was not considered at trial, the decision’s interpretation of the promotion
money laundering statute, as understood in this circuit, nonetheless controls this case.
Because Crosgrove’s money laundering and mail fraud charges merge, and the money
laundering charge carries a substantially higher statutory maximum than the mail/wire
fraud charge, the Government was required to show that the proceeds involved in the
charged transaction represented AREA/Noble profits and not just gross receipts. Kratt,
579 F.3d at 562.
Santos involved a collateral appeal from a conviction of promotion money
laundering. The underlying criminal activity in Santos was the operation of an illegal
lottery, for which Santos had also been convicted. Similar to the checks issued to
Crosgrove, the transactions used to support the money laundering charge in Santos were
lottery payouts and payments of employee wages. Santos argued that such transactions
could not serve as the basis for a promotion money laundering conviction because they
were normal expenses, rather than profits, of the criminal enterprise. The issue in the
case was whether the term “proceeds,” as used in 18 U.S.C. § 1956, refers to gross
receipts or profits. Although no opinion commanded a majority of the Court, Santos’
money laundering conviction was reversed on the basis that, at least in the context of
No. 08-4650 United States v. Crosgrove Page 9
Santos’ case, “proceeds” must mean profits and not merely receipts. Further, because
payouts of winnings and employee wages were essential to operating a lottery, those
transactions identified by the Government could not be said to represent the profits of
the enterprise.
Prior to Santos, this circuit interpreted “proceeds” to mean gross receipts, an
interpretation that would support Crosgrove’s conviction. United States v. Haun,
90 F.3d 1096, 1101 (6th Cir. 1996). Post-Santos, this circuit concluded that proceeds
means profits for cases that fall within a certain framework, but continues to mean
receipts for all other cases. “‘Proceeds’. . . means profits only when the § 1956 predicate
offense creates a merger problem that leads to a radical increase in the statutory
maximum sentence and only when nothing in the legislative history suggests that
Congress intended such an increase.” Kratt, 579 F.3d at 562. Crosgrove’s case falls
within this framework, and it is therefore not sufficient to show only that he was paid out
of gross receipts of the insurance scheme. Rather, the Government would have to have
shown transactions (or conspiracy to engage in transactions) that involved the profits of
the scheme, a burden it did not meet.
Under the Santos-Kratt framework, a merger problem arises when defining
“proceeds” as “receipts” automatically makes commission of the predicate offense a
commission of money laundering and where the predicate offense carries a much lower
statutory maximum sentence than the associated money laundering charge. Kratt, 579
F.3d at 563. In Crosgrove’s case, the statutory maximum for conspiracy to commit
mail/wire fraud was five years, while the statutory maximum for conspiracy to commit
money laundering was twenty years. Because the money laundering conspiracy charge
significantly increased Crosgrove’s exposure to prison time, it is necessary to determine
whether the predicate offense and the money laundering charge merged.
The Kratt opinion suggests that it is possible to sort predicate offenses into
distinct merger and non-merger categories, 579 F.3d at 563, but at least one other circuit
has called this into question, United States v. Van Alstyne, 584 F.3d 803, 815-16 (9th
Cir. 2009). In Van Alstyne, the Ninth Circuit stated that the “analysis of the ‘merger’
No. 08-4650 United States v. Crosgrove Page 10
problem in the mail fraud context must focus on the concrete details of the particular
‘scheme to defraud,’ rather than on whether mail fraud generally requires payments of
the kind implicated in Santos.” Id. at 815. The court then determined that two of the
defendant’s mail fraud counts merged with his money laundering charge but a third did
not. Id. at 815-16. It is not necessary to decide in this case whether the merger analysis
requires a case-by-case or categorical approach, however, because the crimes as charged
obviously merge. Most notably, the payments Crosgrove received for his services as an
attorney and claims adjuster, which the Government states are the only basis for
upholding Crosgrove’s conviction for conspiracy to commit money laundering, are also
listed in the indictment as overt acts in furtherance of the mail/wire fraud conspiracy.
See United States v. Moreland, 622 F.3d 1147, 1166 (9th Cir. 2010). The indictment
itself, therefore, reveals the Government’s position that the conspiracy to commit
mail/wire fraud would, without any additional action by Crosgrove, also constitute a
money laundering conspiracy.
Crosgrove’s charges of conspiracy to commit mail/wire fraud and conspiracy to
commit money laundering merge, and the money laundering charge carries a far heavier
statutory maximum than the mail/wire fraud charge. Further, we have found nothing in
the legislative history to indicate that Congress intended this result for the predicate
crime of mail/wire fraud unrelated to narcotics trafficking. Therefore, the profits
definition of “proceeds” must apply to this case. Much as payments to the runners in an
illegal lottery operation are essential to the operation of a lottery, and therefore are
transactions involving receipts rather than profits, payments to a “claims adjuster” are
essential to the operation of a fraudulent insurance scheme. Just as someone has to
collect money from lottery participants in order for the lottery to exist, someone must
at least purport to represent the claims department of an insurance operation in order for
the operation to appear legitimate.
It is certainly possible that a conspirator serving as a claims adjuster could
receive profits of the predicate offense rather than just proceeds, but that is not this case,
at least not as presented by the Government. Crosgrove’s pay was not linked to the
No. 08-4650 United States v. Crosgrove Page 11
amount of fees collected, the value of claims denied, the net receipts after settlement
payments, or any other metric that would indicate he was extracting a share of
AREA/Noble’s profits. There may be an argument that someone in Crosgrove’s position
could receive such a high fixed payment that, even if it were characterized as a “salary,”
it obviously represented profits of the enterprise. However, no such evidence was
presented in this case, and the monthly payments Crosgrove received (in amounts of
$2,500, $3,000, and $3,500) do not appear exceptional and cannot be construed as
anything more than payments for services rendered. Because the Government did not
show that these payments were made from profits, the conspiracy to commit money
laundering charge cannot be upheld.
Although Crosgrove raised a claim of insufficient evidence in his initial brief, he
based that claim entirely on his contention that the Government had failed to prove he
had the requisite knowledge to support a conviction for either conspiracy. Crosgrove
mentions Santos only in his reply brief, and even then only in the context of the claim
that he had not knowingly participated in a conspiracy. The reply brief does not discuss
the receipts-profits distinction or the merger issue. At oral argument, the Government
contended that the Santos argument should be deemed forfeited because, to the extent
it was raised at all, it was only in the reply brief and the Government had not been
provided the opportunity to respond. However, Crosgrove did make an insufficiency of
the evidence claim before the trial court and in his initial brief, so the Government was
at least aware of the general claim. Further, while his initial brief emphasizes the
Government’s failure to prove Crosgrove’s knowledge, it also asserts that Crosgrove was
merely an employee of the scheme and argues specifically that the Government failed
to prove “Crosgrove knew the property represented proceeds of unlawful activity, and
he had ‘intent to promote the carrying on’ of that activity.” Therefore, Crosgrove may
have, albeit inartfully, put all aspects of the money laundering charge into issue in his
initial brief.
Even if Crosgrove did fail to raise a Santos claim, however, this court may
nonetheless reverse the conviction in the interest of justice. United States v. Graham,
No. 08-4650 United States v. Crosgrove Page 12
275 F.3d 490, 521-22 (6th Cir. 2001). Such reversal requires a finding of plain error,
meaning (1) error, (2) that is plain, (3) that affects substantial rights, and (4) seriously
affects the fairness, integrity or public reputation of the judicial proceedings. Id. at 522.
Crosgrove’s conspiracy to commit money laundering conviction rises to this standard,
and vacatur of his conviction is appropriate even though his briefs are not thoroughly
developed.
Allowing both the mail/wire fraud and money laundering counts to proceed to
the jury satisfies the first and second prongs of the plain error test. First, the merger
problem discussed above shows that it was error to submit the money laundering
conspiracy charge to the jury when there had been no showing of profit-based
transactions. However, this conclusion is based on the Santos-Kratt framework, which
was not available to the district court. The Santos opinion was released just one day
before the jury instructions were issued, and the Kratt opinion was not issued by this
circuit until over a year later. Therefore, the district court’s denial of Crosgrove’s Rule
29 motions is understandable. However, the requirement that the error be plain means
“plain under current law.” Graham, 275 F.3d at 522. For plain error review, current law
“is the law as it exists at the time of review.” United States v. Calloway, 116 F.3d 1129,
1136 (6th Cir. 1997) (citations omitted); see also Johnson v. United States, 520 U.S. 461,
468 (1997); Moreland, 622 F.3d at 1166. Because this case clearly falls within the
Santos-Kratt framework at the time of appellate review, the error is plain.
Because the error resulted in a prison term longer than that to which Crosgrove
could permissibly be sentenced were he convicted for only the mail/wire fraud
conspiracy, his substantial rights were affected. See United States v. Story, 503 F.3d
436, 440 (6th Cir. 2007). The final factor for plain error review—whether the error
seriously affected the fairness, integrity, or public reputation of the judicial
proceedings—is within this court’s discretion to decide. United States v. Hamm, 400
F.3d 336, 340 (6th Cir. 2005). The integrity of judicial proceedings is affected when a
defendant’s prison term is lengthened as a result of a conviction unsupported by trial
evidence. Therefore, the fourth factor for plain error review is also satisfied, and it is
No. 08-4650 United States v. Crosgrove Page 13
appropriate to vacate Crosgrove’s conviction for conspiracy to commit money
laundering.
II. Evidentiary Objections
Crosgrove raised several evidentiary objections at trial that remain relevant given
our affirmance of his conviction for conspiracy to commit mail/wire fraud. As discussed
below, we uphold the district court’s rulings on each of these claims.
A. Barbados Letter
Crosgrove argues that the letter from the Supervisor of Insurance of Barbados,
which was addressed to Crosgrove at the AREA/Noble offices and found among
AREA/Noble documents, was improperly admitted. Crosgrove’s main arguments are
that the letter is hearsay and was never properly authenticated, but he also mentions that
no chain of custody was established. The letter, however, was not hearsay and was
adequately authenticated, and Crosgrove’s newly raised chain-of-custody argument does
not suggest plain error.
Crosgrove argues that the Barbados letter was the “linch-pin” of the
Government’s case, because it “was the only tangible evidence that there was no
insurance.” Therefore, Crosgrove appears to contend, the letter was offered into
evidence to prove that there was no insurance, making the letter hearsay not within any
exception. The Government responds that the letter was not hearsay, because it was not
used to show that there was no insurance, but rather that Crosgrove was on notice at or
near the outset of his employment with Haukedahl that there may not have been a valid
insurance policy. Crosgrove’s own statements ultimately support the Government’s
position. In his reply brief, Crosgrove states that “the government was specifically using
the Barbados letter to prove that Crosgrove had notice that there were issues with the
underlying insurance.”
As part of its case, the Government had to show that Crosgrove knew of the
illegality of the insurance scheme. Because “[i]t is axiomatic that the hearsay rule only
excludes extrajudicial statements when they are offered to prove the truth of the matter
No. 08-4650 United States v. Crosgrove Page 14
asserted,” Kuklica v. City of Cleveland, No 84-3991, 1986 WL 17706, at *5 (6th Cir.
Sept. 15, 1986), the district court did not abuse its discretion by admitting the letter for
the purpose of showing notice. In fact, Crosgrove’s argument on appeal that the letter
was the Government’s only tangible evidence that there was no insurance is off target,
since Crosgrove has never argued that valid insurance existed and his trial counsel
conceded that a conspiracy existed between Haukedahl and Ritson. Because the
illegality of the scheme was not in issue, the letter’s relevance was predominantly to
show notice, an admissible purpose for the use of out-of-court statements. Id.; United
States v. Jefferson, 650 F.2d 854, 858 (6th Cir. 1981).
Crosgrove’s argument that the letter was not properly authenticated is also
without merit. “The requirement of authentication or identification as a condition
precedent to admissibility is satisfied by evidence sufficient to support a finding that the
matter in question is what its proponent claims.” Fed. R. Evid. 901(a). Crosgrove
argues that the Government did not properly authenticate the letter because no one from
Barbados identified the letter as an authentic document. This argument ignores that
“proponents of exhibits may also prove their authenticity with circumstantial evidence.”
1-8 Weinstein’s Evidence Manual § 8.01. At trial, Ritson testified that he received a
very similar letter at his law office at an earlier date and had notified the appropriate
party that the letter should be addressed to Crosgrove. In addition to this testimony,
Crosgrove acknowledges that the letter was found among the documents seized from the
AREA/Noble offices. Ritson’s testimony that he, AREA/Noble’s former counsel, had
received a similar letter and had subsequently conveyed Crosgrove’s name and position
to that letter’s sender, combined with the fact that the letter addressed to Crosgrove was
found among AREA/Noble documents, was sufficient to authenticate the letter for the
limited purpose of showing notice.
On appeal, Crosgrove mentions that no chain of custody was established for the
Barbados letter. This argument was not raised at trial and is not developed on appeal.
Crosgrove appears to be referring to the fact that no one testified as to what happened
to the letter after it was seized from AREA/Noble offices. Before trial, however, the
No. 08-4650 United States v. Crosgrove Page 15
parties stipulated to locations where government agents found many government exhibits
maintained in the AREA/Noble offices, and agreed that there would not need to be
testimony on those facts for each document. Given that Crosgrove’s trial counsel
stipulated to the location of AREA/Noble documents, the chain-of-custody argument is
particularly weak, and certainly does not survive plain-error review. See United States
v. Thomas, 38 F. App’x 198, 203 (6th Cir. 2002) (citing United States v. Collins, 78 F.3d
1021, 1033 (6th Cir. 1996)).
Crosgrove’s brief makes several other points with regard to the letter, including:
there is no evidence that Crosgrove ever read the letter, a government informant testified
that he never saw the letter in the office that he shared with Crosgrove, and Haukedahl
may have hidden (or even written) the letter. All of these arguments go to the weight the
jury should afford the evidence, not to its admissibility. Trial counsel was able to raise
each of these points at trial, both through cross examination and closing arguments.
Therefore, the district court did not commit error by admitting the Barbados letter into
evidence.
B. Adult Entertainment References
At trial, the Government elicited testimony from several witnesses about
Crosgrove’s interest in the adult entertainment industry, with the purpose of establishing
his motive for participating in the conspiracy. The district court did not commit an abuse
of discretion in admitting this evidence on the grounds that its probative value was not
substantially outweighed by its potential prejudicial effect. See United States v. Ashraf,
628 F.3d 813, 826 (6th Cir. 2011) (scope of review).
The Government argued that Crosgrove had two motives for joining and
continuing in the conspiracy: improving his short-term financial situation and launching
future adult entertainment ventures with Haukedahl. Haukedahl already owned some
adult entertainment businesses and planned to expand this segment of his portfolio, and
the Government contended that Crosgrove continued working with Haukedahl in the
hopes of partnering with him in these endeavors.
No. 08-4650 United States v. Crosgrove Page 16
Crosgrove characterizes the adult entertainment references as “improper
character evidence repackaged as relevant to motive,” and argues that the district court
erred in allowing any references to adult entertainment at trial. Although Federal Rule
of Evidence 404 generally prohibits the use of past crimes, wrongs, or acts to show
action in conformity therewith, the rule allows the use of such evidence to show a
defendant’s motive. Fed. R. Evid. 404(b). Crosgrove contends, however, that motive
is not an element of the crimes charged, suggesting that evidence of motive is therefore
irrelevant. But the fact that motive is not an element of either of the crimes for which
Crosgrove was charged does not make evidence of motive irrelevant. “Motive is not an
element of most crimes, but the state is usually entitled to prove motive because motive
explains the reason for an act and can be important to a required state of mind.” 22A
C.J.S. Criminal Law § 992.
Crosgrove next argues that even if evidence of motive was relevant, there was
other evidence that would not have the same prejudicial effect, making the adult
entertainment references merely cumulative. Crosgrove identifies Ritson’s testimony
that Crosgrove was barely getting by in his solo DUI practice as the other evidence of
financial motive that obviated any need for the adult entertainment references. But the
testimony about Crosgrove’s financial straits at the time he joined the scheme did not
serve the same purpose as the adult entertainment testimony, because the larger potential
revenues that could come from the prospective ventures is relevant to Crosgrove’s
motive for continuing in the conspiracy despite mounting evidence of its illegality.
Therefore, the evidence relating to Crosgrove’s interest in the adult entertainment
industry was not merely cumulative.
Although the adult entertainment evidence may have had some prejudicial effect,
that effect would have to substantially outweigh the evidence’s probative value before
exclusion would be appropriate. Fed. R. Evid. 403. Here, because the financial
prospects of working with Haukedahl are very probative of motive, the prejudicial effect
would have to be great to justify exclusion. See United States v. Cody, 498 F.3d 582,
590-91 (6th Cir. 2007). In Cody, this court upheld the admission of testimony about the
No. 08-4650 United States v. Crosgrove Page 17
defendant’s cocaine use because his drug addiction and related debts revealed his motive
for committing bank robbery. Cocaine use, as opposed to running adult entertainment
businesses, is clearly illegal.2 Nonetheless, because the drug use was “inextricably
intertwined” with the crime at issue, the evidence was admitted. Id. at 591.
This court has also affirmed a trial court’s admission of evidence of a defendant’s
interest in adult entertainment as proof of motive. United States v. Murray, 152 F.
App’x 492, 494-95 (6th Cir. 2005). In Murray, the Government was allowed to present
evidence of the defendant’s lavish lifestyle, including the fact that he frequented strip
clubs, to show that he had a motive to continue committing bank fraud to support his
spending. Id. Murray, like Crosgrove, argued that this evidence was both unfairly
prejudicial and cumulative. Id. This court rejected both arguments. Id. at 495.
It is also worth noting that the trial court took steps to minimize the prejudicial
effect of the adult entertainment references. See United States v. Thomas, 74 F.3d 676,
678-80 (6th Cir. 1996). At jury selection, the district court asked potential jurors
whether they would have any problem with the fact that the defendant may have had
some involvement or interest in the adult entertainment industry. Further, during jury
instructions, the district court reminded the jurors that testimony about Crosgrove’s
interest in pornography was to be considered “only as it relates to the government’s
claim of defendant’s motive and opportunity to join and remain in the conspiracy.”
Because the evidence of Crosgrove’s interest in the adult entertainment business
is highly relevant to motive, and because its harmful effects do not substantially
outweigh its probative value, the district court did not abuse its discretion in admitting
the evidence.
2
At least one of Crosgrove’s planned adult entertainment businesses, an escort service, was
illegal. However, the district court did not allow the Government to introduce evidence of this aspect of
Crosgrove’s plans, and instead limited testimony to more general statements about “adult entertainment,”
a term that could include legal business pursuits.
No. 08-4650 United States v. Crosgrove Page 18
C. Exclusion of Proposed Witness
At trial, Crosgrove sought to have John Murphy, an expert on domestic insurance
companies and captive offshore insurance companies, testify about the general
framework of claims processing and the procedure that a claims adjuster or insurance
company would follow in denying a claim on the basis of fraud, and provide some
information on captive insurance companies. The trial court, however, determined that
because Murphy had no knowledge of the file in Crosgrove’s case or of claims
processing specific to AREA/Noble/Midwest, Murphy’s testimony most likely did not
meet the relevancy threshold of Federal Rule of Evidence 401. The district court went
on to state that even if the testimony would satisfy Rule 401, it should be excluded under
Federal Rule of Evidence 403 because of the likelihood that it could confuse or mislead
the jury.
On appeal, Crosgrove argues that the trial court abused its discretion in excluding
Murphy’s testimony. Crosgrove contends that the testimony was clearly relevant
because “Murphy would have offered the jury an expert’s understanding of how claims
adjusters operate thereby neutralizing the government’s case.” Crosgrove also states that
Murphy would have testified that insurance adjusters routinely use aliases, thereby
minimizing the strength of the Government’s evidence relating to Crosgrove’s use of the
John Thomas pseudonym. However, a review of the record has not revealed that
Crosgrove’s trial counsel stated that Murphy would testify as to the standard use of
aliases in the field of claims adjustment, and Crosgrove’s appellate counsel was unable
to direct the panel to such a statement in the record. Therefore, to the extent the claim
of error is based on the rationale that Murphy’s exclusion precluded Crosgrove from
presenting his defense as to the standard use of aliases, the claim fails, as no plain error
occurred.
As to the relevancy of the other subjects to which Murphy would testify, the
primary testimony which Crosgrove’s trial counsel claimed Murphy would
provide—that captive insurance companies can be legal—was elicited from other
witnesses and conceded by the Government in closing arguments. Further, the case was
No. 08-4650 United States v. Crosgrove Page 19
not about whether AREA/Noble’s operations could have been legal if the entities were
honest with their members. Rather, the case turned on whether Crosgrove was aware
that AREA/Noble did not operate in the manner described to members and whether he
participated in efforts to misrepresent the companies’ insurance structure. Because
Murphy was not prepared to testify with any specificity as to AREA/Noble’s structure,
there is no basis for Crosgrove’s claim that the district court abused its discretion in
excluding Murphy’s testimony.
D. Instant Messages
At trial, the Government introduced parts of an instant-message conversation
between Crosgrove and his friend Brian Crawford. In these messages, Crawford
complained about his financial situation, and Crosgrove responded: “Well, like I said,
if you want to get back to Toledo and abandon your morals, let me know. I have work
for you.” At trial, Crosgrove sought to introduce other instant-message conversations
with Crawford in which he wrote that he had become convinced that the insurance setup
was not a scam, but the Government argued that those non-inculpatory statements were
hearsay not within any exception. (The admitted statements, although made out-of-
court, were non-hearsay admissions of a party opponent.) Crosgrove argues that the
common law rule of completeness compels admission of the remaining messages to
allow him to put the admitted statements in context.
The doctrine of completeness, partially codified in Federal Rule of Evidence 106,
“allows a party who is prejudiced by an opponent’s introduction of part of a document,
or a correspondence, or a conversation, to enter so much of the remainder as necessary
to explain or rebut a misleading impression caused by the incomplete character of that
evidence.” United States v. Howard, 216 F. App’x 463, 472-73 (6th Cir. 2007) (internal
citations and quotations omitted). This circuit has stated, however, that the doctrine
“does not make inadmissible evidence admissible.” Id. (internal citations omitted); see
also United States v. Costner, 684 F.2d 370, 373 (6th Cir. 1982); United States v.
Collicott, 92 F.3d 973, 983 (9th Cir. 1996). Therefore, unless the messages Crosgrove
sought to introduce were truly necessary to correct a “misleading impression caused by
No. 08-4650 United States v. Crosgrove Page 20
the ‘incomplete character’” of the portion of the statement admitted, the evidence was
not admissible. Howard, 216 F. App’x at 472. Here, the statements Crosgrove sought
to introduce were part of an instant-message conversation that took place weeks before
the one testified to by Crawford. Thus, the admission of the messages could not have
been necessary to correct a misleading impression, and there was no error.
Crosgrove argues that the court’s refusal to allow him to introduce additional
instant messages prevented him from testifying. Although the transcript does reflect that
Crosgrove chose not to testify after the ruling on the instant messages, he has not
explained why his decision not to testify resulted from the district court’s ruling or why
it should lead this court to depart from its interpretation of Rule 106. Therefore, the
district court did not err in excluding the instant messages.
E. Lonas Testimony
AREA/Noble’s former marketing director, Grace Lonas, testified that she had
once asked Darrell Crosgrove, Mark Haukedahl, and Tim Foreman (another employee)
about all the complaints the company was receiving, and that one of them (she thought
Haukedahl) responded that there was no insurance or insurance company, and the others
laughed. On cross-examination, Crosgrove’s trial counsel had Lonas acknowledge that
she had not mentioned this conversation in either of her interviews with government
investigators. Lonas testified that she had disclosed the contents of the statement in her
“third interview,” which was revealed to be her trial preparation session with the
prosecutor and two government investigators. Crosgrove argues that the district court
should have stricken this aspect of Lonas’s testimony because of a Jencks Act violation,
but his argument misstates the district court’s ruling and is without merit.
At the first opportunity outside the presence of the jury, Crosgrove’s trial counsel
raised concerns about the fact that he had not received any information about this aspect
of Lonas’s testimony before trial. Trial counsel initially articulated his concern that this
was “unfair” but did not identify any rules of evidence that would require prior
disclosure. The prosecutor stated that there were no agent notes from the trial
preparation meeting, and that his own outline of the meeting was non-discoverable work
No. 08-4650 United States v. Crosgrove Page 21
product. Crosgrove’s trial counsel never made a formal motion to have the prosecutor’s
documents reviewed in chambers, but he did eventually contend that the withholding of
the prosecutor’s outline of the session was a violation of the Jencks Act, 18 U.S.C.
§ 3500, which requires that the Government provide the defendant with statements made
by Government witnesses. Trial counsel moved for a mistrial or, alternatively, that
Lonas’s testimony be stricken. The trial court denied this motion.
The district court explained that the Jencks Act does not provide for a “work
product” exclusion for statements made to federal prosecutors, and the interview outline
could not be withheld on work product grounds. However, the district court said that it
did not have reason to believe that the Act’s definition of “statement” was satisfied in
this case, because there was no evidence that there was a “substantially verbatim recital
of an oral statement made by the witness and recorded contemporaneously with the
making of the statement.” Because there was no Jencks material, there was nothing for
the Government to turn over. The district court further stated that the defense had ample
opportunity to call the credibility of the testimony into question by revealing the time
delay between Lonas’s initial contact with the Government and her relaying of this story
to the prosecutor.
In his brief, Crosgrove argues that the district court “abused its discretion by
finding [Lonas’s] statement to be work product and therefore not discoverable as Jencks
material.” This claim misstates the trial court’s findings, as the district court clearly
stated that there was no work product exception to the Act’s disclosure requirements.
Crosgrove does not argue that the court’s actual finding that the prosecutor’s outline did
not amount to Jencks material was erroneous. Further, there is no argument as to the
harm Crosgrove suffered as a result of not receiving the memo. The Act is meant “to
facilitate meaningful cross-examination.” 1 Crim. Prac. Manual § 20:4. Yet,
Crosgrove’s trial counsel was able to meaningfully cross examine Lonas about the
statement and otherwise call Lonas’s credibility into question through examination of
the investigators who had previously interviewed her. Therefore, the trial preparation
outline would be helpful only if it contained no reference to the conversation to which
No. 08-4650 United States v. Crosgrove Page 22
Lonas testified. Crosgrove has never argued a belief (or even hinted at the possibility)
that the document would reveal such an inconsistency. Because Crosgrove
misunderstands the district court’s findings and has not articulated other grounds for
arguing a Jenks Act violation, he has not shown that the district court committed error
in denying his motions related to Lonas’s testimony.
III. Fourth Amendment Claim
Crosgrove claims that evidence collected by Tim Foreman, who worked with
Crosgrove at AREA/Noble, was improperly obtained because Foreman was a state actor
by virtue of being a paid informant. Crosgrove made no pre-trial suppression motion
with regard to evidence procured by Foreman, and Crosgrove has therefore forfeited that
claim on appeal. Crosgrove acknowledges that his Fourth Amendment claim is new, but
contends that plain-error review should apply. The Government has responded to this
claim on the merits, arguing that Crosgrove had no expectation of privacy in
AREA/Noble’s records. We find no plain error.
IV. Ineffective Assistance of Trial Counsel
Crosgrove asserts that his trial counsel was ineffective in: failing to raise Fourth
Amendment objections to certain evidence, failing to supply requested research to the
trial court, not filing a trial brief, not timely objecting to certain witness questioning,
failing to make an attorney-client privilege objection to the testimony of another
attorney, and trying to intervene in forfeiture proceedings rather than focusing on
sentencing preparation.
This court generally will not review claims of ineffective assistance of counsel
on direct appeal. United States v. Williams, 612 F.3d 500, 508 (6th Cir. 2010).
Although an exception to this rule exists where the record is sufficiently developed to
support the claim, conclusory assertions of ineffective assistance are not adequate.
United States v. Winkle, 477 F.3d 402, 421 (6th Cir. 2007). Crosgrove has not explained
how the record is sufficiently developed to support his argument, and error is not
No. 08-4650 United States v. Crosgrove Page 23
apparent from the record. See id. Therefore, Crosgrove’s ineffective assistance of
counsel claim is premature.
V. Prosecutorial Misconduct
Crosgrove argues that the prosecutor repeatedly asked improper leading or
hearsay questions of witnesses and that the closing argument and rebuttal were filled
with “vouching, personal attacks, and misstatements of evidence.” However, with only
one exception (discussed below), Crosgrove has identified neither specific questions
that demonstrate prosecutorial misconduct nor examples of improper statements during
closing and rebuttal. Instead, Crosgrove “asks this Court to read [the closing argument
and rebuttal] in their entirety.” Because there is no developed argumentation in these
claims, the panel declines to address Crosgrove’s general assertions of misconduct in
witness questioning and closing statements. See, e.g., United States v. Watkins, 179 F.3d
489, 500-01 (6th Cir. 1999).
Crosgrove does articulate one specific argument with regard to prosecutorial
misconduct: that the prosecutor improperly stated that shredded documents found in the
dumpster behind Crosgrove’s office were likely AREA/Noble papers that Crosgrove had
previously stored at his home and sought to dispose. The shredded papers were admitted
into evidence, but because the Government did not reconstruct the documents there was
no evidence that they were actually tied to AREA/Noble (although there was evidence
to link the documents to Crosgrove). However, because prosecutors may argue
reasonable inferences from the evidence and because the court emphasized that closing
arguments are not evidence, this claim of prosecutorial misconduct fails.
A prosecutor has “leeway to argue reasonable inferences from the evidence”
during closing arguments. Byrd v. Collins, 209 F.3d 486, 535 (6th Cir. 2000) (internal
citations omitted). The prosecutor’s statements about the documents represented
reasonable inferences that could be drawn from the appearance of shredded materials in
Crosgrove’s dumpster four days after his offices were searched. This court’s precedent
clearly supports a determination that the suggested inferences do not amount to
prosecutorial misconduct.
No. 08-4650 United States v. Crosgrove Page 24
In Byrd, the defendant was accused of murder, and while the Government had
recovered some of the clothing related to the crime, it had not recovered a missing shirt
sleeve. During closing arguments, the prosecutor stated “we are missing a sleeve, and
I will tell you where that sleeve is. It is out in Hamilton County in the northwest side
with blood all over it.” Id. at 536. The defendant argued that this statement amounted
to prosecutorial misconduct, but this court found that the statement “constitute[d]
arguably reasonable inferences from the evidence presented at trial.” Id. The logical
inference suggested in this case is no more of a stretch than that made by the prosecutor
in Byrd, and the statement itself is far less inflammatory. Therefore, the case law does
not support Crosgrove’s argument that the prosecutor’s statements about the nature of
the shredded materials amount to prosecutorial misconduct.
In addition, even if the prosecutor’s comments about the shredded documents
were improper, this court has held that the trial court can generally correct such
improprieties by instructing the jury that closing arguments are not evidence. United
States v. Emuegbunam, 268 F.3d 377, 406 (6th Cir. 2001). Before closing arguments,
the judge clearly instructed the jury that: “The evidence does not include the indictment,
opening statements, or closing arguments of counsel. The opening statements and
closing arguments of counsel are designed to assist you. They are not evidence.”
Therefore, even if the statements had been improper, that impropriety would likely have
been corrected by the jury instruction, and Crosgrove’s claim of prosecutorial
misconduct fails.
VI. Sentencing Claims
Crosgrove raised several objections to his presentence report and renews these
objections on appeal. As discussed below, the objections are without merit.
A. Calculation of Amount of Loss
Crosgrove objects to the method used in calculating the amount of loss
attributable to him. The PSR stated that the appropriate loss figure for sentencing
purposes was $2,896,432.00. Because this figure was in excess of $2,500,000 and below
No. 08-4650 United States v. Crosgrove Page 25
$7,000,000, Crosgrove’s base offense level was increased by 18 pursuant to U.S.S.G.
§ 2B1.1(b)(1)(J). The loss figure was based on fees paid by AREA/Noble members
during Crosgrove’s involvement with the fraud scheme, but Crosgrove argues that the
correct loss amount is the value of improperly rejected claims. However, the total value
of premiums paid is an appropriate measure of loss in a fraudulent insurance case.
This conclusion is supported by United States v. Sanders, 95 F.3d 449, 454 (6th
Cir. 1996). In Sanders, a defendant convicted for his involvement with a fraudulent
insurance scheme argued that the district court had committed error by basing the loss
amount for sentencing on premiums collected by the entire conspiracy rather than just
the amount he was ordered to pay in restitution to the victims, which he argued
constituted the actual loss caused by the fraud. We determined that because victims in
a fraudulent insurance scheme “are not left with any collateral to sell,” it is inappropriate
to analogize such schemes to secured loan fraud cases in calculating the loss amount.
Id. at 455. In cases of unsecured fraud, the district court may look at all money collected
to determine the appropriate loss amount. Id.
Crosgrove distinguishes his case from Sanders by arguing that Sanders involved
a fraudulent insurance company, while AREA/Noble was a professional membership
organization that offered fraudulent insurance as one of its “benefits.” Crosgrove does
not provide any basis for his position that a fraudulent company that claims only to
provide insurance should be distinguished from a membership organization that markets
itself almost exclusively in terms of the fraudulent insurance coverage it claims to
provide. At best, this argument might support Crosgrove’s position that the value of
other member benefits should be deducted from the fees paid, but it certainly does not
explain why rejected claims rather than fees taken in should have been used to calculate
loss amounts. Because Crosgrove’s distinctions fail, Sanders is controlling, and this
claim of error is without merit.
Crosgrove further argues that AREA/Noble provided its members with benefits
other than insurance coverage, and that the value of these benefits should have been
subtracted from the base loss amount, however calculated. These benefits included a
No. 08-4650 United States v. Crosgrove Page 26
newsletter, gifts for clients, and a referral service. Crosgrove did not suggest an
appropriate value for these incidentals below or on appeal. Regardless, even where
legitimate services are provided in connection with a fraud, the district court may refuse
to consider the value of those services in determining the appropriate amount of loss.
See United States v. Triana, 468 F.3d 308, 320-321 (6th Cir. 2006). In Triana, a
podiatrist who had been banned from collecting Medicare payments set up an elaborate
network of companies through which licensed podiatrists provided needed foot care to
nursing-home residents. These companies had received $1,764,199.36 from Medicare,
which the district court determined to be the appropriate amount of loss. Triana argued
that no actual loss had occurred because all of the billings were for legitimate podiatry
services that had been provided to qualifying Medicare recipients. Id. at 320. The
district court determined that Triana’s argument missed the point, because “the evidence
showed that Medicare would not have paid [Triana’s company] but for the fraud.” Id.
(internal quotations omitted). This court affirmed the district court’s determination.
Like Triana, Crosgrove argues that the value of legitimate services provided in
fraudulent schemes should be used to offset the loss amount. The incidental membership
benefits identified by Crosgrove are of far more questionable value than the medical
services rendered in Triana. For that reason alone there is no basis for departing from
the total-funds-collected method adopted in Sanders and Triana. Triana could be
distinguished in that it involved a separation between beneficiaries and victims: the
Medicare patients received the legitimate services while the Government was the paying
party. In the instant case, the same parties who paid membership fees received the
benefits identified by Crosgrove. Nonetheless, the logic that Medicare would not have
paid but for the fraud in Triana can also apply where beneficiaries and victims are one
and the same. Crosgrove has not argued, and could not credibly contend, that
AREA/Noble members would have paid the groups’ membership fees only to receive
newsletters and client gifts. Multiple AREA/Noble employees testified that the
companies marketed themselves as providing realtors and appraisers with errors-and-
omissions coverage. The organizations gained members by marketing insurance
coverage, and it is impossible to believe that members would have paid anything had
No. 08-4650 United States v. Crosgrove Page 27
they known the coverage was fraudulent. Therefore, Triana applies in spite of this
distinction between the cases, and the district court did not commit error in refusing to
subtract the unspecified value of other member benefits when determining the final loss
amount.
Crosgrove also argues that “[b]ecause the jury made no finding regarding the
amount of loss . . . the trial court should have sentenced him based upon the lowest
available base offense level without enhancements.” Crosgrove supports this claim by
citing Apprendi v. New Jersey, 530 U.S. 466 (2000), without explanation. However,
this court has repeatedly held that a district court can make factual findings as to the
amount of loss in calculating a sentence. See, e.g., United States v. Gross, 626 F.3d 289,
299 (6th Cir. 2010); United States v. Osborne, 545 F.3d 440, 445 (6th Cir. 2008).
Therefore, Crosgrove’s argument that the district court committed error in applying an
amount-of-loss enhancement without a jury finding is without merit.
Crosgrove’s final amount-of-loss argument is that the loss attributed to him was
not reasonably foreseeable to him, because the bulk of the fees received during his
employment were deposited into Chicago accounts to which Crosgrove never had
access. The fact that Crosgrove could not reach the money, however, does not mean he
didn’t know it was coming in. There was testimony that the Chicago “office” was
simply a mailbox to which some members sent fees. Those fees were then deposited in
the Chicago account, and applications and transaction logs would then be forwarded
directly to the Ohio office in which Crosgrove worked. Because Crosgrove sent out
membership acknowledgments with the fraudulent insurance policies, he would
undoubtedly have a sense of the magnitude of the conspiracy based on the transaction
logs and the size of the mailing lists. Therefore, his role in the conspiracy was not
sufficiently compartmentalized to support his argument that he could not foresee the full
extent of the loss.
No. 08-4650 United States v. Crosgrove Page 28
B. Sophisticated-Means Enhancement
Crosgrove received a two-level increase under U.S.S.G. § 2B1.1(b)(9) for the use
of sophisticated means in committing the crime. The application notes to § 2B1.1(b)(9)
identify “hiding assets or transactions, or both, through the use of fictitious entities,
corporate shells, or offshore financial accounts” as conduct that ordinarily indicates
sophisticated means. Although Crosgrove acknowledges that off-shore companies and
shells were involved in this conspiracy, he argues that he should not have received a
sophisticated-means enhancement because he was not involved with the creation of any
shell companies or with off-shore activities. This argument misunderstands the
guidelines definition of relevant conduct. Guidelines § 1B1.3(a)(1)(B) defines relevant
conduct for jointly undertaken criminal activity as “all reasonably foreseeable acts and
omissions of others in furtherance of the jointly undertaken criminal activity.”
Therefore, a sophisticated-means enhancement could be applied to Crosgrove even if his
role in the conspiracy did not involve the use of sophisticated means so long as the use
of such means was reasonably foreseeable to him.
The sentencing court, however, concluded that Crosgrove himself had used
sophisticated means, both by creating the John Thomas alias and by participating in the
creation of false insurance certificates and other fraudulent correspondence. The court
rooted its finding in the guidelines language and in case law dealing with sophisticated-
means enhancements applied to crimes other than money laundering. These cases
support the conclusion that the repeated use of fictitious identities can justify a
sophisticated means enhancement, particularly when the identity is reinforced through
other deceptive practices, such as instructing employees in handling calls directed to the
fictitious party. See United States v. Kopietz, 126 F. App’x 708, 710-11 (6th Cir. 2005)
(finding no clear error in district court’s application of sophisticated-means enhancement
to defendant who had aided in filing fifteen tax returns under fraudulent identities);
United States v. Lewis, 76 F. App’x 47, 48 (6th Cir. 2003) (finding sophisticated-means
enhancement appropriate for defendant who fraudulently obtained merchandise through
No. 08-4650 United States v. Crosgrove Page 29
the use of an alias, fictitious companies, and fictitious references provided by his own
employees).
Crosgrove’s argument that he did not participate in the creation of shells or
otherwise participate in offshore activities is therefore irrelevant unless he can also refute
the finding that the use of a pseudonym and the issuance of fraudulent insurance
certificates is not an appropriate basis for a sophisticated-means enhancement.
Crosgrove makes no such argument, but instead focuses on the things he did not do
during the conspiracy. But even this argument fails, as trial evidence showed that
Crosgrove knew Midwest was an offshore company and repeatedly represented himself
as Midwest’s general counsel. Therefore, while he did not assist in the creation of
Midwest, his role in the conspiracy was certainly not isolated from the use of offshore
entities, and the district court did not commit error in applying a sophisticated-means
enhancement.
C. Special-Skills Enhancement
Crosgrove argues that his role in the conspiracy was only that of a salaried claims
adjuster, and that he did not use his skills as a lawyer as part of the fraud. The district
court properly rejected Crosgrove’s arguments and concluded that a special-skills
enhancement was appropriate under U.S.S.G. § 3B1.3, the notes to which specifically
identify lawyers as possessing special skills for guidelines purposes. The district court
concluded that Crosgrove’s use of his title and his degree did play a role in the case. In
particular, Crosgrove had repeatedly held himself out as general counsel for Midwest
Insurance, giving some members’ attorneys the impression that they were dealing with
a high-ranking attorney and that their claims would therefore be handled properly.
Therefore, the application of the special-skills enhancement does not constitute error.
D. Sentencing Disparities Between Defendants
Crosgrove summarily argues in his reply brief that he was unjustifiably sentenced
to a longer prison term than Haukedahl. Putting aside the fact that this argument was
raised only perfunctorily in reply, this claim is mooted by the vacatur of Crosgrove’s
No. 08-4650 United States v. Crosgrove Page 30
conviction for conspiracy to commit money laundering. Because the statutory maximum
for conspiracy to commit mail/wire fraud is substantially lower than the prison term
Haukedahl received, it is unnecessary to examine Crosgrove’s sentencing disparity
claim.
VII. Conclusion
Crosgrove’s conviction for conspiracy to commit mail/wire fraud is affirmed,
while his conviction for conspiracy to commit money laundering is vacated. All of
Crosgrove’s remaining claims of error are without merit, premature, or forfeited, and do
not provide grounds for appellate relief. The case is remanded for resentencing
consistent with this opinion.