United States v. Leonard

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

_______________________

No. 93-2768 c/w
No. 93-2769
No. 93-2779
_______________________

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

RICHARD LEONARD,

Defendant-Appellant.

_______________________

No. 93-2769
_______________________

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

RHONDA KELLEY and VERONICA McCRACKEN,

Defendants-Appellants.

_______________________

No. 93-2778
_______________________

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

ALFRED C. GREENE, JR.,

Defendant-Appellant.
_________________________________________________________________

Appeals from the United States District Court
for the Southern District of Texas
_________________________________________________________________

(August 14, 1995)

Before KING and JONES, Circuit Judges, and KAZEN, District Judge.*

By EDITH H. JONES, Circuit Judge:

In this consolidated appeal, we reject challenges to the

convictions and sentencing of four operators and employees of a

Houston-based telemarketing scam. Alfred Greene, owner and

operator of the business, and Richard Leonard, manager of the phone

room, both entered pleas of guilty to wire and mail fraud,

conspiracy, and using a false name to further a scheme to defraud.

They waived their right to jury trial and contested the money

laundering counts at a bench trial. Greene was convicted on

several counts whereas Leonard was found not guilty on the sole

money laundering offense with which he was charged. Employees of

the operation, Kelley and McCracken, contested all the fraud and

money laundering offenses with which they were charged and,

therefore, obtained a severance from Greene and Leonard and were

tried before a jury. They were both convicted of conspiracy as

well as wire and mail fraud. Finding no error, we affirm the

convictions and sentencing decisions in every aspect.

*
District Judge of the Southern District of Texas, sitting by
designation.

2
 I.

BACKGROUND

The scheme itself was simple. Callers, hired by Greene

and Leonard, used phone lines set up in a suite of small offices in

the Houston area to contact elderly citizens located across the

country and inform them that their names had been selected by a

committee to receive one of four awards. These individuals, whose

identities had been purchased from a mail order company, were read

to from a pre-designed script and told that they had already been

chosen to receive either first prize of $15,000.00 cash; second

prize consisting of a diamond and sapphire pendant; third prize

which was a large-screen Sony television; or, fourth prize

consisting of $1,000.00 cash. The pendant, the only prize ever

given out, was designated as second prize so that the victim would

think it the second-most valuable item after the $15,000.00. In

fact, a portion of the script anticipated questions as to the value

of the pendant and was designed to mislead the person to believe

that the jewelry, later appraised for $15.00, was worth between

$2,000.00 and $2,500.00. To obtain the prize, the victim was

informed that he or she had to pay $395.50. This money, the

listeners were told, was for "promotional fees," "shipping and

handling," "registration and processing," and "buying soap."* To

reduce the chances of the victim's changing his or her mind, or a

*
At this point in the phone call, when a victim was about to be hooked,
a person called a "closer" would take over from the initial caller. Closers met
alone on occasion with Leonard and Greene to receive a larger share of the victims'
money than did the callers.

3
family member's coming home and extinguishing the deal, Federal

Express was dispatched to pick up the $395.50 check shortly after

the phone call.

In fact, there was no contest, there was no drawing,

there was no committee, and the victims had not sent in entry cards

to which the script referred. The scheme also included a follow-up

letter to the victim referring to the phone call and repeating the

"good news" that a prize had been won. This letter was designed to

lull the victim into a sense of satisfaction with the contest.

Later, a box of cheap cosmetics was delivered to the victim for the

same purpose. No one ever received anything other than a $15.00

pendant. In effect, the victims each bought a $15.00 pendant for

almost $400.00. By the time the FBI executed a search warrant at

the office of Promotional Advertising Concepts, the business name

of the operation, the scheme had reeled in 497 victims and grossed

close to $200,000.00.

II.

DISCUSSION

A. Greene

Greene first contends that the district court violated

his constitutional rights by considering evidence in his bench

trial which was admitted during the jury trial of Kelley and

McCracken. Greene suggests that the district judge promised he

would not consider evidence that he had heard during the jury trial

of the severed codefendants. A fair reading of the exchange

between counsel and the court indicates, however, that what was

4
really contemplated was a "divorce" between the trials on the

merits and not a complete ban for sentencing purposes. Nothing in

the record suggests that the district court considered any evidence

from the first trial in its determination of Greene's guilt of

money laundering.

Further, at sentencing, Greene did not object to the

court's observations concerning the elderly victims who testified

at the first trial, so he must now establish "plain error." United

States v. Bullard, 13 F.3d 154, 159 (5th Cir. 1994). This he

cannot do. To resolve a dispute at sentencing, the district court

may consider non-admissible "relevant information" provided that it

"has sufficient indications of reliability." U.S.S.G. § 6A1.3(a);

United States v. Burmea, 30 F.3d 1539, 1576 (5th Cir. 1994).

Testimony under oath observed by the district court would qualify.

United States v. Smith, 13 F.3d 860 (5th Cir. 1994), is

not to the contrary. Although this court vacated a sentence where

the court considered of factual matters contained in a co-

defendant's pre-sentencing report, the Smith court premised its

concern on the defendant's lack of opportunity to "see" the PSR or

"contest [its] accuracy." Id. at 867. In contrast, once the court

reported his observations of the elderly witnesses to defendant at

the sentencing hearing, Greene could have attempted to rebut the

court's impressions, or at least asked for some time to do so.

Greene also contends the district court erred in

sentencing him under the money laundering guidelines instead of the

fraud guidelines. The crux of Greene's argument is that while

5
convicted of laundering "only" $3,638.78, compared to a fraud

scheme that grossed nearly $200,000.00 and victimized at least 497

people, he was, nevertheless, sentenced under the "stiffer" money

laundering guidelines. Indeed, a substantial disparity does exist

between the guideline range Mr. Greene would have confronted under

the fraud guidelines of § 2F1.1 and the sentence he actually

received under the money laundering terms found in U.S.S.G. §

2S1.1.**

Greene explicitly analogizes his situation to the facts

of United States v. Skinner, 946 F.2d 176, 179 (2nd Cir. 1991),

where the court vacated sentences calculated under the money

laundering guidelines for $3,320 of expenditures because the

essence of the crime was the conspiracy and distribution of

cocaine. Unfortunately for Greene, the Second Circuit remanded to

the district court for reconsideration of a downward departure.

Id. at 180 ("The financial transactions...can only be said to have

facilitated additional crimes in the most minimal sense.

Accordingly, appellants' conduct was both atypical of the conduct

described by the Sentencing Guidelines and inadequately considered

by the Sentencing Commission, thus empowering the district court to

**
In Mr. Greene's view, the laundering guideline linguistically applies,
but his conduct differs significantly from the norm. He therefore claims he is not
a "normal" money launderer within the "heartland" understanding of the term but
instead just a convicted "garden variety" telemarketer. Notably, however, Greene
failed to file a motion challenging the legal basis or sufficiency of the evidence
supporting his conviction for money laundering. Obviously not every dollar spent
in every transaction that can be traced to a specified criminal activity violates
18 U.S.C. § 1956(a)(1)(A)(i). "To so interpret the statute" would "convert the
money laundering statute into a money spending statute." United States v. Sanders,
928 F.2d 940, 944 (10th Cir.), cert. denied, 502 U.S. 845 (1991). See also Note,
A Full Laundering Cycle is Required: Placing Back the Proceeds to Carry on Crime is
the Crime under 18 U.S.C. § 1956(a)(1)(A)(i), 70 Notre Dame L. Rev. 727, 891 (1995).

6
consider a downward departure.") In the Fifth Circuit, the

decision not to depart is unreviewable on appeal. United States v.

Miro, 29 F.3d 194, 198-199 (5th Cir. 1994).3 In fact, this court

lacks jurisdiction over a district court's refusal to grant a

downward departure. United States v. DiMarco, 46 F.3d 476, 477

(5th Cir. 1995) (failure to grant discretionary downward departure

is "not subject to appellate review").4 Although, in accord with

Skinner, the district court may effectuate the "heartland" language

of the introductory chapter of the Sentencing Guidelines through

the vehicle of a downward departure, its decision not to depart

downward is conclusive.

Indeed, because of the Guideline's grouping rules, where

money laundering and fraud offenses can be properly grouped, the

imposition of the higher base offense level attached to money

laundering was required. Greene, not surprisingly, insists that

the grouping of the money laundering counts of conviction with

those of conspiracy, mail and wire fraud, and the false name counts

was error. The issue of grouping counts for sentencing purposes is

generally a question of law subject to a de novo review. United

States v. Patterson, 962 F.2d 409, 416 (5th Cir. 1992). The

sentence will be upheld if it was imposed as the result of "a

correct application of the guidelines to factual findings which are

3
We have suggested, however, "that a remand might be appropriate when
the record reveals that the sentencing judge erroneously believed that it lacked
the authority to depart." Id. at 199 n.3.
4
Interestingly, in DiMarco we noted that the Second Circuit had adopted
a similar rule. Id. at 477 (citing United States v. Adeniyi, 912 F.2d 615, 619 (2nd
Cir. 1990)). The court in Skinner did not discuss the apparent conflict.

7
not clearly erroneous." United States v. Ponce, 917 F.2d 841, 842

(5th Cir. 1990)(citing United States v. Sarasiti, 869 F.2d 805, 806

(5th Cir. 1989)).

Grouping by virtue of § 3D1.2(d) of the Sentencing

Guidelines necessitates offenses involving the same victim and

involving multiple acts tied together by a common illegal objective

or part of a common scheme. When this predicate is satisfied,

§ 3D1.2(d) explicitly provides for grouping of offenses covered by

the fraud and money laundering guidelines. Undoubtedly, this scam

did involve several transactions as part of a larger common plan.

The more difficult issue, however, is whether the fraud and money

laundering offenses involved the same victim. Greene points to

several cases in support of his argument that fraud and money

laundering do not involve the same victim. See United States v.

Johnson, 971 F.2d 562, 576 (10th Cir. 1992) (vacating grouping of

fraud and laundering counts); United States v. Lombardi, 5 F.3d

568, 570 (1st Cir. 1993)("society" is victim of money laundering);

United States v. Taylor, 984 F.2d 293, 303 (9th Cir. 1993)(vacating

grouping of fraud and laundering counts). Additionally, this court

in United States v. Gallo, 927 F.2d 815, 824 (5th Cir. 1991),

accepted the argument that laundering was a crime in which society

at large is the victim.5

5
Interestingly, in Gallo the United States "argue[d] that drug-related
offenses and the money laundering offense invoke distinct societal interests."
The government defined the harm from money laundering to be the "dispers[ion] of
capital from lawfully operating economic institutions to criminals in and out of
the country." Id. Because Gallo involved drug offenders and not fraud, the
United States avoids, technically perhaps, inconsistency in its arguments before
this court.

8
 We distinguish this case from those cited by Greene

because in none of those cases did the money laundering activities

of the defendants perpetuate the underlying crimes. Here, however,

Greene's money laundering activity, regardless of its limited

extent, advanced the mail and wire fraud scheme that victimized

nearly 500 people. We follow the approach adopted in United States

v. Cusumano, 943 F.2d 305, 312-313 (3rd Cir. 1991), where the

defendant was convicted of theft and bribery from an employee

health fund as well as money laundering. The Third Circuit

considered the propriety of grouping the offenses by inquiring

whether the money laundering convictions and embezzlement offenses

harmed the same victim. It concluded that the victim of the

embezzlement offenses, as well as the laundering offenses, was "the

fund and its beneficiaries." Id. at 313. The court concluded that

these offenses were "part of one overall scheme to obtain money

from the fund and convert it to the use of Cusumano." Id.

Similarly, the money laundering offense was not

"ancillary" here. There was a single, integrated scheme to obtain

money from the elderly victims and to use that money to facilitate

the continuance of the scam. The activities can not be neatly

separated as Greene would hope. By conducting financial

transactions--paying callers, purchasing leads, paying phone bills-

-with the victims' money for the purpose of bilking more people out

of $395.50 each, the group of targeted victims became the victim of

the money laundering activity as well as the fraud scheme. In this

case, the district court properly found that the money laundering

9
and fraud constituted part of the same continuing common criminal

endeavor.

Greene further attacks his sentence by alleging that the

district court, without explanation, sentenced him to sixty months

on the fraud counts whereas a proper application of the guidelines

called for a sentence of between 21 and 27 months. U.S.S.G.

§ 5G1.2(b), however, provides that in cases involving multiple

sentences, each sentence should equal the "total punishment." As

the district court was entitled to sentence pursuant to the money

laundering guidelines, the imposition of 60-months for each fraud

count is permitted. United States v. Porter, 909 F.2d 789, 797 n.3

(5th Cir. 1990)(in multiple-count sentences, to the extent possible

without exceeding statutory maximum or minimums, the sentence on

each count shall be equal to the total punishment).

Greene additionally contends that the court erred by

enhancing the offense level for his role in the scheme as an

organizer, pursuant to U.S.S.G. § 3B1.1(a), because the adjustment

applies to the fraud offenses and not the money laundering counts.

And, while Greene does not contend that the evidence is

insufficient to support the factual finding that he was the

organizer of the criminal activity involving numerous participants,

he repeats his contention that the money laundering counts cannot

be grouped with the fraud counts, and, thus, the enhancement was

improper. We are unpersuaded that the grouping was unauthorized.

With greater cogency, Greene argues the four level "role

in the offense" adjustment, which would apply as an enhancement to

10
Greene's fraud, should not have been added to the money laundering

offense level.6 The United States defends this increased sentence

on several grounds, but the most persuasive basis seems to be §

1B1.3(a)(2). The provision permits consideration of "all acts and

omissions that were part of the same course of conduct or common

scheme or plan as the offense of conviction" where grouping has

occurred. Greene's fraud and money laundering were properly

grouped, and the money laundering was an integral factor in keeping

the telemarketing scheme afloat. It was appropriate factually and

legally under this guideline to apply the fraud-related role in the

offense enhancement to the money laundering base offense level.

Greene, who was awarded a two-level decrease in his

sentence pursuant to U.S.S.G. § 3E1.1(a), over the government's

objection, argues that he was entitled to a three-level decrease.

This court reviews determinations regarding acceptance of

responsibility "for clear error but under a standard of review even

more deferential than a pure 'clearly erroneous' standard."

United States v. Gonzales, 19 F.3d 982, 983 (5th Cir. 1994).

Greene suggests that he should have received the

additional one-level reduction because he waived a jury trial and

wanted to stipulate to most of the evidence. This claim is without

merit for a couple of reasons. First, § 3E1.1(b) makes it clear

that the defendant must timely notify the government of an

intention to plead guilty, not of an intention to seek a bench

6
With a zero criminal history, the adjustment increases the midpoint of
Greene's guideline range sentence by 1/2 years.

11
trial or to stipulate to certain facts. Second, the fact that

Greene informed the government of his intention to plead guilty to

the fraud charges does not mitigate the expenditure of resources

that it required to prosecute the money laundering charges.

Gonzales, at 983-984. Accordingly, the court's refusal was proper.

B. McCracken and Kelly

Appellants McCracken and Kelley assert that the evidence

was insufficient to maintain their convictions for conspiracy and

fraud. Specifically, both insist that the evidence was

insufficient to establish the element of knowledge or intent. With

respect to the conspiracy charges, the government must prove beyond

a reasonable doubt that the defendant knowingly joined a conspiracy

and that at least one conspirator committed an overt act in

furtherance of the conspiracy. United States v. Cavin, 39 F.3d

1299, 1305 (5th Cir. 1994). A defendant's knowing involvement in

a conspiracy can be established by circumstantial evidence. United

States v. Casilla, 20 F.3d 600, 603 (5th Cir. 1994). Once a

conspiracy is established, only "slight evidence" is needed to

connect a defendant to the agreement. United States v. Duncan, 919

F.2d 981, 991 (5th Cir. 1990).

The government must prove beyond a reasonable doubt that

the defendant had a "conscious knowing intent to defraud." United

States v. Kreimer, 609 F.2d 126, 128 (5th Cir. 1980). In other

words, it must prove that the defendant contemplated or intended

some harm to the property rights of the victim. United States v.

Stouffer, 986 F.2d 916, 922 (5th Cir.), cert. denied, 114 S.Ct. 115

12
(1993). If Kelley and McCracken knowingly joined the conspiracy

and scheme to defraud, they are guilty of the substantive mail and

wire fraud offenses. United States v. Basey, 816 F.2d 980, 997

(5th Cir. 1987).

It is readily apparent that these convictions are

supportable. Both Kelley and McCracken worked longer at PAC than

any other employees; they both worked as closers and helped train

the less experienced callers; and, they attended the same meetings

as the callers who realized PAC was a fraud. Particularly

persuasive are the individual comments made by the two that they

knew to be false: (1) McCracken told Mr. and Mrs. Keister that they

had won $15,000.00 and that the $395.00 was for shipping and

handling; (2) McCracken told Mr. Race that she had his entry card

in front of her, he had been selected to win $15,000.00, and she

would lose her job if he did not give his check to Federal Express;

(3) Kelley gave Ms. Russell the impression she had won $15,000.00;

(4) Kelley told Ms. Faust that she had won at least $1,000.00 and

that her prize would be identified the next day during a committee

meeting; and, (5) Kelley told Ms. Cash her name had been drawn and

the least she would win was $1,000.00. Kelley and McCracken

knowingly joined the scheme and conspiracy and were vicariously

liable for all the substantive offenses made pursuant to it.

C. All Four Appellants

All four appellants contend that the two level

enhancement of their sentences pursuant to U.S.S.G. § 3A1.1 was

improper as the victims in this case were not "vulnerable" within

13
the meaning of the guidelines. The burden is upon the government

to establish the facts necessary to support the adjustment by a

preponderance of the evidence. United States v. Kim, 963 F.2d 65,

69 (5th Cir. 1992). The finding of the district court is reviewed

under the clearly erroneous standard. United States v. Brown, 7

F.3d 1155, 1159 (5th Cir. 1993).

Here an adequate factual basis existed for determining

that the telemarketing scheme preyed upon vulnerable victims.

Noting that a group of individuals can be found to be vulnerable

under U.S.S.G. § 3A1.1, the district court concluded that PAC

specifically and intentionally targeted elderly citizens because

they were unusually vulnerable or particularly susceptible to this

type of fraud.

We cannot find clear error in concluding on this record

that these defendants intentionally selected their elderly victims

because of their perceived vulnerability. In fact, all defendants

were aware that the elderly were directly targeted by PAC. For

example:

a. Greene told a caller that they were running a "senior
citizens' contest;"

b. Leonard told callers in a morning meeting that
elderly people were the "target audience" and that they
had nothing better to do than send in puzzle contests;

c. Greene purchased the names and addresses of 1,000
women who were over the age of sixty;

d. Kelley told a caller that the victims were "old
buzzards" who did not know what to do with their money;

e. McCracken referred to the victims as "stupid old
fools;"

14
 f. Questionnaires received by the FBI from 252 of the
497 victims disclosed that 75% of those responding were
over sixty, and the largest representative age group of
the respondents was between the ages of seventy and
seventy-nine.

Moreover, the evidence demonstrated that it was not a fortuitous

decision to target those elder citizens. Compare United States v.

Wilson, 913 F.2d 136, 138 (4th Cir. 1990)(randomly selected targets

for phone fraud not vulnerable).

The evidence available also supports a finding that the

elderly were unusually vulnerable or particularly susceptible to

the fraud perpetrated by the conspirators in this case and that

Greene, Leonard, Kelley, and McCracken specifically targeted them

as a group because of this characteristic. In this regard, the

district court considered Kelley's statement that, "these old

buzzards don't really know what they want to do with their money;"

Leonard's belief that getting the victims to send in their money

was, "easy cash;" and callers' testimony that the elderly were

easier to sell to than the others.7

CONCLUSION

For the foregoing reasons, we AFFIRM the convictions and

sentencing decisions in every aspect.

7
Leonard, in a pro se brief, attacks the constitutionality of the search
of his truck by one of his callers, alleging that she was actually an agent of the
government. This contention has been waived by his entry of a guilty plea. Tollett
v. Henderson, 411 U.S. 258, 267, 93 S. Ct. 1602, 1608 (1973); United States v.
Smallwood, 920 F.2d 1231, 1240 (5th Cir. 1991).

15