[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
___________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 05-13809 March 26, 2008
___________________ THOMAS K. KAHN
CLERK
D.C. Docket No. 04-00010 CR-3-001-MCR
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
DAVID W. SVETE,
RON GIRARDOT,
Defendants-Appellants.
__________________
Appeals from the United States District Court
for the Northern District of Florida
__________________
(March 26, 2008)
Before DUBINA and KRAVITCH, Circuit Judges, and COOGLER,* District
Judge.
COOGLER, District Judge:
__________________________________________________________________
* Honorable L. Scott Coogler, United States District Judge for the Northern District of Alabama,
sitting by designation.
After a six week jury trial, David W. Svete and Ron Girardot were convicted
of conspiracy, mail fraud, money laundering, and interstate transportation of money
obtained by fraud, all charges being related to their dealings with viaticals. They now
appeal their convictions and present five issues for review. Perhaps the most
significant issue is whether the current Eleventh Circuit pattern jury instruction for
mail fraud, which omits the requirement of ordinary prudence by investors, is proper.
The defendants also challenge the sufficiency of the evidence presented by the
government and Svete alleges violations of Brady v. Maryland, 373 U.S. 83, 83 S. Ct.
1194 (1963) and Giglio v. United States, 405 U.S. 150, 92 S. Ct. 763 (1972) based on
inconsistencies between the trial and sentencing testimony of a government witness.
Finally, Svete raises two sentencing issues.
Because the jury instruction seriously impaired the defendants’ ability to
conduct their defense on the substantive counts of mail fraud, we reverse as to those
counts. We affirm as to all other issues raised by the defendants.
I. Background
A. Procedural History
Svete and Girardot were charged in a superseding indictment with conspiracy
to violate the laws of the United States in violation of 18 U.S.C. § 371 (Count One);
conspiracy to launder money in violation of 18 U.S.C. § 1956(h) (Count Two); mail
2
fraud in violation of 18 U.S.C. § 1341 (Counts Three through Seven); and substantive
violations of interstate transportation of money obtained by fraud in violation of 18
U.S.C. § 2314 (Counts Eight through Ten). The jury convicted Svete and Girardot
of all counts. Thereafter, the district court sentenced Girardot to a term of
imprisonment of 60 months as to Count One and 63 months as to Counts Two
through Ten, to run concurrently with one another. In addition, Girardot was ordered
to pay a special monetary assessment of $1,000, restitution in the amount of
$100,722,605.34, and to serve a 3 year period of supervised release. Svete was
sentenced to a term of imprisonment of 60 months as to Count One and 200 months
as to Counts Two through Ten, to run concurrently with one another. Svete was also
ordered to pay a special monetary assessment of $1,000, restitution in the amount of
$100,722,605.34, a $21,000,000 forfeiture, and to serve a 3 year period of supervised
release.
B. Facts1
1. Introduction
Viaticals are legitimate insurance products in all states, allowing patients
(“viators”) to sell the right to receive benefits under their life insurance policies for
1
The facts as set forth herein have been considerably condensed from their original form to
address only the issues presented by the appeal.
3
tax-free cash. The sale of viaticals is usually made to a provider company through
a broker. The provider company, in turn, typically through a sales agent, finds
independent purchasers to invest in the policies. Each purchaser (also referred to as
“investor”) buys the right to become a beneficiary of the viator’s life insurance policy.
Thereby, purchasers receive a high return on their investment if the viator dies within
the time projected by the viatical settlement provider. However, investors risk a
reduction of their return or a complete loss if the viator does not die within the time
projected because the investor must continue to pay the premiums on the policy as
they accrue or the policy will lapse.
Svete became involved with viaticals in 1997 when he incorporated LifeTime
Capital, Inc. (“LCI”) in Nevada as a provider company. He later incorporated
Alexander Chase, d/b/a WSI, for the same purpose, as well as multiple additional
businesses offering financial, office, marketing, and viatical services.2 According to
trial testimony, Svete’s control of these corporations was secreted, thus misleading
investors and providing an avenue to launder money taken by fraud.
Svete’s right hand man was Ron Girardot. Girardot first became employed
with Alexander Chase, Svete’s financial advisory company, in 1997 as an operations
2
Those businesses included: Pacific View Management, Inc.; Ocean View Holdings Limited
Partnership; A.C. Group, Inc.; Sovereign Enterprises, Inc.; Dove Creative, Inc.; and Medical
Underwriting, Inc. (“MUI”).
4
engineer responsible for processes and procedures. In April 1998, Girardot became
the temporary President of LCI. From LCI, Girardot moved to another of Svete’s
companies, Sovereign Enterprises, as Vice President of Operations. Finally, in
November 1999, Girardot moved to Svete’s Blue Crest, an investment servicing
company, as President. As alleged by the government, Girardot’s role was to aid in
defrauding investors and to launder the money taken by fraud.
During the course of trial, the government presented evidence that defendants
defrauded viatical investors by intentionally misrepresenting: (1) life expectancies of
viators; (2) the status of the life insurance contracts; and (3) the risks associated with
the purchase of certain viatical contracts. During the time Svete’s companies were
buying viaticals and selling investments, not less than $101,811,873.88 was invested
by at least 3,125 investors. Of that group, at least 1,351 were investors over the age
of 65.
2. Evidence of Fraudulent Misrepresentations
Thirty-five witnesses testified during the course of the trial that their
investment failed to mature when anticipated. Those investors had been told or
provided marketing materials stating that their investment policies concerned
terminally ill patients as determined by independent medical specialists who had
access to the viators’ complete medical records and doctors. This was inaccurate on
5
many levels. Medical doctors were retained to review patient files and estimate life
expectancies. However, complete medical records were not provided to those
doctors. Instead, they only reviewed medical and laboratory summaries, and did not
consult with the attending physicians. Some medical files were submitted for life
expectancy review multiple times in an effort to shop for the life expectancy that
matched the funded amount. Other times, viator information was never even
presented to independent medical doctors for mortality reports. In those instances,
Charme Austin, a medical underwriter for Svete, was instructed to create opinions on
life expectancy herself and to forge the signatures of independent physicians on those
mortality reports. At all times during this process, sales agents were prohibited from
obtaining the actual medical information establishing life expectancies.
Additional evidence of fraud perpetuated on investors came in the form of
testimony regarding altered contracts. Initial viatical settlement contracts reflected
that the terminally ill status of the viator was determined by a physician’s medical
opinion. Nanette Zima,3 who served as President and CEO of LCI for about one year,
3
Zima had concerns about the business of LCI. As of September of 1997, LCI did not have
enough viaticals to assign to the funds investors had given to invest because the policies were too
expensive. Sometime after September, Svete directed Zima to alter the established life expectancies
on the marketing materials to make them more attractive.
6
testified that she was instructed by Svete to, along with Ron Girardot,4 alter pre-
existing investor agreements to remove the terms “terminally ill” and “by a physician”
without the knowledge or consent of investors.
Finally, investors were told that an independent investment servicing company
maintained a premium reserve account for the purpose of underwriting the policies.
In fact, the company was created and controlled5 by Svete and lacked sufficient funds
to pay premiums on purchased policies as they came due for one year past the life
expectancy established by a particular policy, as most of the investors’ contracts
required.
II. Discussion
Of the five issues presented for appeal, only two, the jury instruction issue6 and
4
Zima’s precise testimony was that Girardot “was there” and that she remembered him
“being present” during the alteration of the contracts.
5
Svete’s control of the company is evidenced by his control of the money maintained therein.
Svete arranged for Girardot to withdraw $1.9 million from the premium reserve account and transfer
that money to Svete. Svete then closed the company and suggested that LCI hire Girardot.
6
Although Girardot did not follow FED. R. APP. P. 28(i) and explicitly adopt Svete’s
arguments by reference in his brief, the Court will give Girardot a generous benefit of the doubt and
conclude that Girardot adopted Svete’s jury instruction argument at oral argument. Counsel for
Girardot was asked at the outset of oral argument whether sufficiency of the evidence was his only
ground for appeal. Counsel for Girardot answered in the affirmative. Then, at the conclusion of his
argument, counsel for Girardot asked for leave to adopt the briefs of Svete.
Ordinarily, we would limit Girardot’s appeal to the issue raised in his brief. However, we
have discretion to suspend the Federal Rules of Appellate Procedure for “good cause.” See FED. R.
APP. P. 2. Believing it anomalous to reverse one conviction and not another when both defendants
suffer from the same error, we consider Svete’s argument regarding the improper jury instruction to
be adopted by Girardot. See United States v. Gray, 626 F.2d 494, 497 (5th Cir. 1980) (citing United
7
the sufficiency of the evidence issue, are attributed to both defendants. Only Svete
asserts potential Brady and Giglio violations, and there exists no good cause to
attribute those arguments to Girardot. See n.6, supra. It is under this framework that
we begin substantive review of the issues presented.
A. Sufficiency of the Evidence
We address the sufficiency of the evidence at the outset, as a finding of
insufficient evidence would obviate any need to consider the alleged trial errors. See
United States v. Smith, 459 F.3d 1276, 1286 (11th Cir. 2006); United States v. Bobo,
419 F.3d 1264, 1268 (11th Cir. 2005) (noting the Court’s prudential rule “that
requires the court to review sufficiency of the evidence claims raised by defendants,
even if resolution on alternative grounds would otherwise dispose of the case”). We
review the record for sufficiency of the evidence de novo in the light most favorable
to the government. See United States v. Brown, 40 F.3d 1218, 1221 (11th Cir. 1994)
(citing United States v. Harris, 20 F.3d 445, 452 (11th Cir. 1994), and United States
v. Camargo-Vergara, 26 F.3d 1075, 1078 (11th Cir. 1994)). For there to be sufficient
evidence from which a reasonable jury could find guilt,
[i]t is not necessary that the evidence exclude every reasonable hypothesis of
innocence or be wholly inconsistent with every conclusion except that of guilt,
provided that a reasonable trier of fact could find that the evidence established
States v. Anderson, 584 F.2d 849 (6th Cir. 1978)).
8
guilt beyond a reasonable doubt. A jury is free to choose among the
constructions of the evidence.
Brown, 40 F.3d at 1221 (citing Harris, 20 F.3d at 452). That is, where testimony may
lead to one or more conclusions, it is for the jury to decide the outcome. See Harris,
20 F.3d at 452. If, on the other hand, the record reveals a lack of substantial evidence
from which a fact-finder could find guilt beyond a reasonable doubt, we must reverse
the defendant’s conviction. See id.
Both Girardot and Svete contend that the evidence presented by the
government was insufficient to support their convictions. Each defendant, however,
makes separate arguments regarding the sufficiency of the evidence. The Court first
addresses the argument made by Girardot.
1. Girardot
Girardot argues that the government failed to provide substantial evidence of
his knowing participation in any scheme to defraud. Indeed, knowing participation
is relevant to each of the charges.
To sustain the conspiracy counts (Counts One and Two), the government must
prove that Girardot knew of the essential nature of the charged conspiracy and that
he voluntarily joined the conspiracy. See United States v. High, 117 F.3d 464, 468
(11th Cir. 1997); United States v. Miller, 22 F.3d 1075, 1080 (11th Cir. 1994).
9
Similarly, to sustain the conviction for mail fraud (Counts Three through Seven), the
government must prove the existence of a scheme to defraud that involved use of the
mails for the purpose of executing the scheme, and the defendant’s specific intent to
commit fraud. See United States v. Bethea, 672 F.2d 407, 410 (11th Cir. 1982)
(citations omitted). Proof of actual reliance by the victim and proof of damages are
not required. See United States v. Yeager, 331 F.3d 1216, 1221 (11th Cir. 2003)
(citing United States v. Brown, 79 F.3d 1550, 1557 n.12 (11th Cir. 1996), and
Pelletier v. Zweifel, 921 F.2d 1465, 1498 (11th Cir.1991)).
Finally, to sustain the remaining convictions for interstate transportation of
money obtained by fraud (Counts Eight, Nine, and Ten), the Court must conclude that
a reasonable fact-finder could determine that the defendants knew that certain
property of a value in excess of $5,000 had been obtained by fraud and that the
defendants caused that fraudulently obtained property to be transported in interstate
commerce. See United States v. Ross, 131 F.3d 970, 986 (11th Cir. 1997).
a. Evidence Specific to the Charged Offenses
Girardot contends that the evidence presented by the government of his
knowing participation in the scheme to defraud was flawed and insufficient to
establish his guilt. Specifically, he argues that the only evidence presented by the
government to establish his knowing participation was: (1) Charme Austin’s
10
testimony that Girardot was falsifying life expectancies at Medical Underwriting,
Inc.; (2) Nanette Zima’s testimony that Girardot participated in the alteration of
existing contracts with investors by changing pages in them; and (3) LCI accountant
Cindy Kienenger’s testimony that Girardot can be tied to two improper transfers of
money, one in 1998 and the other in 2000. Essentially, Girardot’s argument is that
these witnesses, who testified to the best of their recollections, should not have been
relied upon by the jury to establish guilt because other constructions of their
testimony exonerating Girardot were possible.
Girardot’s argument is not only flawed under the clear holding in Brown, 40
F.3d at 1221, which permits the jury to choose among constructions of the evidence,
but also fails because the evidence of Girardot’s knowing participation in the scheme
to defraud encompassed much more than the three areas outlined by Girardot. Trial
testimony revealed that Girardot was Svete’s “right hand man,” someone who “knew
everything” there was to know about LCI. Girardot was the “go-between” for
marketing materials created by Svete’s Dove Creative, Inc. These materials
inaccurately stated that Svete’s companies were independent and operated by medical
professionals who, where applicable, contacted up to ten doctors for mortality reports.
Girardot was also responsible for selecting files for MUI’s audit, choosing only those
that did not disclose the existence of fraudulently obtained policies. Later, when
11
several of the fraudulently obtained policies were cancelled, Girardot authorized a
letter to investors which misrepresented that the policies had matured and encouraged
investors to roll their money over into a new account. The sum of this evidence was
clearly sufficient to sustain Girardot’s convictions.
b. Girardot’s Testimony
Perhaps the most substantive evidence of Girardot’s guilt is his own testimony.
It is axiomatic that a defendant in a criminal case may choose whether to testify in his
or her own defense. However, the decision of a criminal defendant to testify presents
a substantial risk of not only bolstering the government’s case, but also providing
substantive evidence of his or her own guilt:
[A] statement by a defendant, if disbelieved by the jury, may be
considered as substantive evidence of the defendant’s guilt. By
“substantive evidence” we mean evidence “adduced for the purpose of
proving a fact in issue, as opposed to evidence given for the purpose of
discrediting a witness (i.e. showing that he is unworthy of belief), or of
corroborating his testimony.” . . . [W]hen a defendant chooses to testify,
he runs the risk that if disbelieved the jury might conclude the opposite
of his testimony is true. . . .
United States v. Brown, 53 F.3d 312, 314 (11th Cir. 1995) (internal citations and
quotations omitted).
Girardot testified under oath that he acted in good faith at all times. He also
generally denied that he participated in or was aware of any wrongdoing by Svete.
12
The jury, however, who actually heard Girardot’s testimony and witnessed his
demeanor7 on the stand, was entitled to disbelieve Giradot’s testimony. See id. Not
only was the jury entitled to disbelieve Girardot, it was entitled to believe the exact
opposite of what Girardot said. See id.; see also Atkins v. Singletary, 965 F.2d 952,
961 n.7 (11th Cir. 1992); United States v. Sharif, 893 F.2d 1212, 1214 (11th Cir.
1990).
“At least where some corroborative evidence of guilt exists for the charged
offense . . . and the defendant takes the stand in his own defense, the defendant’s
testimony, denying guilt, may establish, by itself, elements of the offense.” Brown,
53 F.3d at 314-15. This rule especially applies “where the elements to be proved for
a conviction include highly subjective elements: for example, the defendant’s intent
or knowledge. . . .” Id. at 315 (citations omitted). In this case, we have both. As
thoroughly discussed above, the government presented more than some corroborative
evidence of guilt of the charged offenses. In fact, the evidence presented was in and
of itself sufficient to support the convictions. Moreover, the highly subjective
element of Girardot’s knowledge is the evidence challenged by Girardot. That the
jury disbelieved or believed the opposite of Girardot’s testimony is the only
7
“[W]here the issues in litigation involve highly subjective matters, the appearance and
demeanor of the witnesses is of particular significance.” Brown, 53 F.3d at 315 (citation omitted).
13
conclusion that can be reached by this Court. See id. at 314. This Court finds that the
evidence was sufficient to support Girardot’s conviction.
2. Svete
As to the sufficiency of the evidence, Svete appeals only the substantive mail
fraud convictions and his convictions for interstate transportation of money obtained
by fraud. Svete contends that a properly instructed jury could not have found beyond
a reasonable doubt that a reasonably prudent investor would have relied on the
charged misrepresentations. More specifically, Svete argues that because the
investors signed contracts, which articulated the risks of the investment, it was
unreasonable for any prudent investor to rely upon contrary statements made by the
sales agents or the promotional literature. Because “[a] ‘scheme to defraud’ . . . has
not been proved where a reasonable juror would have to conclude that the
representation is about something which the customer should, and could, easily
confirm–if they wished to do so–from readily available external sources,” Brown, 79
F.3d at 1559, Svete contends that the government’s evidence was insufficient to
establish the substantive mail fraud counts and the counts for interstate transportation
of money obtained by fraud.
Svete’s argument fails for two reasons. First, Svete’s scheme was so
sophisticated and complex that even the most intelligent investor would have been
14
defeated in his quest for the truth. There was no information readily accessible in the
public domain that the victims could immediately obtain to confirm or disprove the
representations of the sales agents. See United States v. Gray, 367 F.3d 1263, 1270
(11th Cir. 2004). An illusion of independence and reliability was present with no way
to ascertain that the viators were not terminally ill. Even if an investor actually
visited the offices of MUI or LCI, they could not have learned the truth.
Second, and more importantly, Svete’s argument fails under the reasoning of
United States v. Brown, 53 F.3d 312. Like Girardot, Svete chose to testify in his own
defense. The jury, who heard Svete’s testimony and witnessed his demeanor, was
entitled to disbelieve Svete’s testimony and was entitled to believe the opposite of
Svete’s testimony. Brown, 53 F.3d at 314. Because of the combination of Svete’s
testimony and the other corroborative evidence supporting Svete’s convictions, see
id., the evidence was sufficient to support Svete’s convictions.
B. The Jury Instructions
Defendants contend that the district court abused its discretion when it gave the
pattern mail fraud charge to the jury instead of using language consistent with United
States v. Brown, 79 F.3d 1550, 1557 (11th Cir. 1996). We review a question of the
propriety of the jury instruction for abuse of discretion. See United States v.
Cornillie, 92 F.3d 1108, 1109 (11th Cir. 1996) (citing United States v. Morris, 20
15
F.3d 1111, 1114 (11th Cir. 1994)). Reversible error occurs only when the requested
instruction: (1) was correct; (2) was not substantially covered by the charge actually
given; and (3) dealt with some point in the trial so important that the failure to give
the requested instruction seriously impaired the defendants’ ability to conduct their
defense. See United States v. Chastain, 198 F.3d 1338, 1350 (11th Cir. 1999), cert.
denied sub nom.; see also United States v. Carrasco, 381 F.3d 1237, 1242 (11th Cir.
2004) (internal citations omitted).
In this Circuit, mail fraud requires the government to prove that the defendant
intended to create a scheme “reasonably calculated to deceive persons of ordinary
prudence and comprehension.” See Brown, 79 F.3d at 1557 (citing Pelletier, 921
F.2d at 1498-99). This burden is not reflected in the current Eleventh Circuit pattern
jury instruction for mail fraud. Pattern Instruction 50.1 merely states that a “scheme
to defraud” is “any plan or course of action intended to deceive or cheat someone out
of money or property by means of false or fraudulent pretenses, representations, or
promises.” Pattern Jury Instructions (Criminal Cases), No. 50.1 (11th Cir. Jud.
Council 2003 rev.) (Mail Fraud). Because the definition does not include the
reasonable person standard as articulated in Brown, Pattern Instruction 50.1 is
16
deficient.8 A more accurate definition of “scheme to defraud,” tracking the language
set out in Pelletier and Brown, would read: “The term ‘scheme to defraud’ includes
any plan or course of action intended to deceive or cheat a person of ordinary
prudence and comprehension out of money or property by means of false or
fraudulent pretenses, representations, or promises.”
The inaccuracy of the definition of “scheme to defraud” in the jury instruction
seriously impaired defendants’ ability to conduct their defense on the substantive
counts of mail fraud. Defendants did not have the opportunity to argue in connection
with charged law that the contracts, signed by the investors, made it unreasonable for
any prudent investor to have relied upon contrary statements by sales agents or LCI’s
promotional literature. Defendants did not have the opportunity to argue in
connection with charged law that investors should have sought independent advice
on investing in viaticals. Such arguments are clearly contemplated by controlling law
in this Circuit. Therefore, the district court abused its discretion when it did not
include the Brown, 79 F.3d at 1557, language in the jury instruction. Svete and
Girardot are entitled to a new trial on the substantive counts of mail fraud.
The incomplete jury charge did not however affect Defendants’ ability to
8
“Scheme to defraud” is also insufficiently defined in Pattern Jury Instructions 50.2, 51.1,
and 51.2.
17
conduct their defense as to the conspiracy counts and the counts for interstate
transportation of money obtained by fraud. This Court has previously held that the
elements of mail fraud need not be explained to the jury in a money laundering
conspiracy case under 18 U.S.C. § 1956(h) because the government does not have to
prove that a defendant committed mail fraud to obtain a conviction on conspiring to
launder money. See United States v. Martinelli, 454 F.3d 1300, 1311 (11th Cir. 2006)
(“The pattern mail fraud instruction, which details the affirmative actions a defendant
must undertake to violate the mail fraud statute, simply does not apply in a money
laundering conspiracy case, where the defendant need only have knowledge that the
funds were derived from mail fraud.”). The same logic applies to charges under 18
U.S.C. § 2314 where the defendant need only have knowledge that the property was
derived from fraud. See 18 U.S.C. § 2314; see also United States v. Turner, 871 F.2d
1574, 1578 (11th Cir. 1989) (upholding a jury charge on knowledge which stated:
“the proof need not show who may have stolen the property involved, only that the
Defendant knew it had been stolen or taken by fraud at the time it was transported”).
The government does not have to prove that a defendant committed mail fraud to
obtain a conviction on interstate transportation of money obtained by fraud. See
18
Johnson v. U.S., 207 F.2d 314, 319 (5th Cir. 1953)9 (“The gravamen of the offense
prohibited by 18 U.S.C. § 2314 is the transportation in interstate or foreign commerce
of goods with knowledge that they have been secured by the unlawful means referred
to in the statute. It is immaterial whether the accused is guilty of any offense in
connection with the primary wrongful taking of the goods, nor is it significant how
the accused acquired possession of the goods, except that this may be shown in order
to prove his knowledge of their character as being stolen, converted or taken by
fraud.”). Therefore, the district court did not abuse its discretion when it declined to
instruct the jury on the requirement of an ordinarily prudent investor as to the counts
of conspiracy to launder money and interstate transportation of money obtained by
fraud. Svete and Girardot are not entitled to a new trial as to those convictions.
C. The Motion for New Trial
Prior to sentencing, Svete moved the district court for a new trial based upon
what he contends were Brady and Giglio violations. Svete points to inconsistencies
between the trial and sentencing testimony of government witness Charme Austin.
Svete insists that the district court was in error to deny the motion.
To resolve this issue, we must delve into the circumstances surrounding
9
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en banc), we adopted
as binding precedent all decisions of the former Fifth Circuit that were rendered prior to October 1,
1981.
19
Charme Austin and her testimony. Austin worked as a medical underwriter for
Svete’s companies and thus had knowledge of the scheme to defraud viatical
investors. She explained that some life expectancies were created without doctor
consultation and others were modified to fit particular portfolios. She referred to
these processes as “falsifying life expectancies.” Austin also testified that the scheme
was dependent upon secreting Svete’s involvement with LCI and MUI. Austin
quoted Svete as saying that “when investors were looking on, that it would maybe to
them seem not correct or not appropriate that he was overseeing both the
underwriting company and the viatical company.” Additionally, the scheme was
furthered, according to Austin’s testimony, by the use of inaccurate marketing
materials that overstated the qualifications of LCI and MUI.
Austin’s involvement with defendants led to her being scrutinized by the
government for her own participation in the fraud. She was ultimately charged with
conspiracy, pled guilty on August 30, 2004, testified on January 18 and 19, 2005, and
was sentenced on May 6, 2005.10 One week after Austin’s sentencing, the
10
Following her guilty plea, Austin was interviewed by the government where she disclosed
to the government that she had been the subject of a military disciplinary proceeding involving
allegations of theft. She informed the government in the interview that the proceedings resulted in
her receiving a “less than honorable discharge.” This information was then disclosed to Svete and
Girardot prior to her trial testimony and resulted in an on the record discussion with the district court.
Svete, through his attorney, informed the district court that it was their “understanding . . . that not
only was it a less than honorable discharge, it involved a theft, specifically that their were
accusations that she either embezzled money or stole from the PX.”
20
government filed a notice disclosing certain inconsistencies between her testimony
at the trial and her testimony at her own sentencing. Specifically, there were three
areas of concern. First, at her sentencing, Austin admitted that she had been
incarcerated for ten months at military stockades in Germany and Colorado, following
her court-martial for theft of property. During her trial testimony, however, Austin
stated, in response to cross examination by Svete, that she had never been
imprisoned.11 Second, Austin admitted at sentencing that an adjudication against her
had been withheld on September 19, 2004, in a grand theft charge in Broward
County, Florida. That matter pertained to the use of a credit card to pay for storage
charges. The government did not disclose this fact to the defense prior to the trial,
and, accordingly, no line of questioning brought out the fact of the withheld
adjudication. Finally, Austin revealed at sentencing that she had been in weekly
counseling with a psychologist for three months in 1980 due to “concerns over the
‘unreliability’ of statements made by Austin and her behavior at home and school.”
Again, the government did not disclose this fact to the defense prior to the trial, and
no line of questioning brought out the fact of the counseling.
11
The testimony was as follows: Question: “And you’ve never been to prison before?”
Answer: “No, actually.” No one asked the witness what she meant by “No, actually.”
21
The only argument for a new trial that has any potential merit is based on the
government’s failure to disclose Austin’s confinement in the military stockades prior
to trial.12 Had Austin’s military stockade record been disclosed at the time of trial,
Svete argues, the defense would have had powerful impeachment evidence and solid
proof that Austin, a significant witness for the government, had lied during her trial
testimony.13 We review the district court’s denial of the motion for a new trial for
abuse of discretion. See United States v. Kersey, 130 F.3d 1463, 1465 (11th Cir.
1997); see also United States v. Woodruff, 296 F.3d 1041, 1043 n.1 (11th Cir. 2002).
12
While Svete argues that the 2004 withheld adjudication and the weekly counseling sessions
in 1980 each entitle him to a new trial under Brady or Giglio, it is not likely that either would have
been admissible at trial. Further, even if admitted, there is no reasonable likelihood that either item
could have affected the judgment of the jury; therefore these items will not be addressed further.
As to the withheld adjudication, Federal Rule of Evidence 609 provides for impeachment by
evidence of conviction of a crime. A withheld adjudication generally does not fit that definition.
See United States v. Georgalis, 631 F.2d 1199, 1202 (5th Cir. 1980) (holding that, while it was
improper to impeach with an adjudication withheld since by operation of Florida law there existed
no conviction, the error was harmless); see also United States v. Chubbuck, 252 F.3d 1300, 1305
(11th Cir. 2001) (citing State v. McFadden, 772 So. 2d 1209 (Fla. 2000)).
With regard to the weekly counseling sessions, which occurred more than twenty years prior
to her testimony when the witness was in school, the prejudicial impact of allowing such information
into evidence would clearly outweigh any value that such information might shed on Austin’s
credibility.
13
We note that, in the context of Giglio, the statement must actually be false (as opposed to
the mere suggestion of falsehood) in order to qualify as perjured testimony. See Maharaj v. Sec’y.
for Dep’t of Corrs., 432 F.3d 1292, 1313 (11th Cir. 2005) (citing Moon v. Head, 285 F.3d 1301,
1315 (11th Cir. 2002), and Brown v. Head, 272 F.3d 1308, 1317-18 (11th Cir. 2001)). While the
government perhaps could have made an argument against the motion for a new trial on this ground
–that a military stockade is different from imprisonment or that the witness did not say “no,” but
instead said “no, actually”–they did not. Regardless, the district court’s denial of the motion for a
new trial is affirmed herein on different grounds.
22
1. Standards Governing Brady and Giglio Violations
To establish a Brady violation, Svete must show: (1) that the government
possessed evidence favorable to the defendant; (2) that the defendant did not possess
the evidence nor could he have obtained it himself with any reasonable diligence; (3)
that the prosecution suppressed the favorable evidence; and (4) that had the evidence
been revealed to the defense, there is a reasonable probability that the outcome of the
proceedings would have been different. See United States v. Perez, 473 F.3d 1147,
1150 (11th Cir. 2006); see also Woodruff, 296 F.3d at 1043 n.1. Failure to meet any
one of these elements will defeat a motion for a new trial. See United States v.
Starrett, 55 F.3d 1525, 1554 (11th Cir. 1995).
“Giglio error is a species of Brady error that occurs when the undisclosed
evidence demonstrates that the prosecution’s case included perjured testimony and
that the prosecution knew, or should have known, of the perjury.” Ventura v.
Attorney Gen., Fla., 419 F.3d 1269, 1276 (11th Cir. 2005) (internal quotations and
citations omitted). “When the reliability of a given witness may well be
determinative of guilt or innocence, nondisclosure of evidence affecting credibility
falls within this general rule.” Giglio, 405 U.S. at 154; see also Jennings v.
McDonough, 490 F.3d 1230, 1236 (11th Cir. 2007). Further, the materiality standard
under Giglio is less stringent than under a garden variety Brady claim; under Giglio,
23
a failure to disclose evidence is material if “there is any reasonable likelihood that the
false testimony could have affected the judgment of the jury.” See Grossman v.
McDonough, 466 F.3d 1325, 1342 n.14 (11th Cir. 2006) (quoting Ventura 419 F.3d
at 1278). Therefore, if a defendant fails to articulate a Giglio violation, a Brady
violation cannot exist. See Williams v. Griswald, 743 F.2d 1533, 1542 n.22(11th Cir.
1984) (“[A]s a result, it is not necessary in this case to address the possible Brady
violations because a Giglio criterion will suffice for our purposes.”); see also Brown
v. Head, 272 F.3d 1308, 1317 (11th Cir. 2001) (“The materiality prong is easier to
establish with Giglio claims than with Brady claims.”).
2. The Government’s Duty
What then was the government required to do? First, the government was
required to disclose any material evidence that it possessed that was favorable to the
defendant that (1) the defendant did not possess and (2) could not have been obtained
by the Defendant himself with reasonable diligence. The government further had the
duty to step forward and disclose “[i]f false testimony surface[d] during [the] trial and
the government [had] knowledge of it. . . .” Brown v. Wainwright, 785 F.2d 1457,
1464 (11th Cir. 1986) (emphasis added). “That the prosecutor . . . chose not to run
an FBI or NCIC check on the witness, does not change ‘known’ information into
24
‘unknown’ information within the context of the disclosure requirements.” United
States v. Auten, 632 F.2d 478, 481 (5th Cir. 1980).
Austin disclosed to the government that while she was in the military, she had
been subjected to a disciplinary proceeding stemming from an allegation of theft for
which she received a “less than honorable discharge.” What she failed to tell the
government, and the government failed to discover prior to her testimony, was that
she had also served time in the military stockades as a result of the charge. Although
the government revealed the information it had to the defense prior to her testimony,
it did not reveal Austin’s confinement in the military stockades and did not “step
forward” and disclose the apparent inconsistency in her testimony when she denied
imprisonment.14
3. Materiality of the Evidence
Whether the government’s failure to disclose should result in a new trial is
largely dependant upon whether the evidence was material.15 Evidence is material
if there is “any reasonable likelihood that the false testimony could have affected the
judgment of the jury.” See Grossman, 466 F.3d at 1342 n.14.
14
See n.10, supra.
15
For the purpose of this analysis, we will assume, but not decide, that Svete did not possess
and could not have obtained the information himself with the exercise of reasonable diligence.
25
Whether the false testimony offered . . . could in any reasonable
likelihood have affected the judgment of the jury must be analyzed in
light of a number of highly context-specific factual considerations,
including the importance of the testimony of the falsely testifying
witness to the government’s case, the nature and significance of the
falsehood, and, notably, to what extent the witness’s testimony is
substantially corroborated by other evidence.
Ventura, 419 F.3d at 1281.
a. Importance of the Testimony of the Witness and Purpose
of Impeachment
When discussing Austin’s military discharge record with the district court,
Svete made it clear that his purpose in asking about the record was to demonstrate
that Austin had said something different in obtaining her employment with Svete.
This testimony supports one of the defenses theories–that Austin was manipulating
and misleading Svete. This conclusion is supported by the fact that Svete did not
seek the assistance of the district court in obtaining further information about the theft
aspects of the military discharge even though he confirmed to the district judge that
he knew theft was involved. For that matter, when Austin was asked whether she had
ever been in prison, it was not in an effort to impeach her with past criminal conduct.
Instead, it is clear from the context of the questions that Svete was attempting to
establish a motive for Austin to be less than truthful. That is, since she had never
26
been to prison before, she would say anything the government wanted to keep from
going to prison.
Svete had sufficient information from the government’s disclosure to conclude
that Austin had been the subject of some type of proceeding arising from a charge of
theft in the military that resulted in at least her less than honorable discharge. He
obviously decided not to pursue that line of impeachment. His impeachment of
Austin was clearly a two-edged sword for the defense. A thorough review of Austin’s
testimony reveals that she was, in many respects, a positive witness for Svete and
attacking her credibility would have distracted from that evidence. For example, she
revealed that she exerted a significant amount of control over MUI. She related in her
testimony that it was her idea to hire three doctors as MUI staff. She confirmed that
she was the signatory on MUI’s bank accounts. She held 25,000 shares of MUI
stock. Austin further described how she refused to “sign over” her MUI ownership
to Svete when he asked her for it, informing him that she had worked too hard to just
sign it over. She also related to the jury how she received a significant sum of money
from the sale of MUI. Thus, Austin’s testimony was arguably, at least in part,
beneficial to Svete.
b. Other Impeachment of the Witness
27
Austin’s failure to admit that she spent time in the military stockades is
troubling, but had she made such an admission, she would have only enabled the
defense to beat an already dead horse. In short, it would have made no difference.
See LeCroy v. Sec’y, Fla. Dep’t of Corrs., 421 F.3d 1237, 1267 (11th Cir. 2005).
Austin’s trial testimony is riddled with successful impeachment. Austin admitted that
certain portions of her resume concerning her educational background, work
experience, and prior salaries were inaccurate. She admitted that she knowingly
allowed marketing materials for Svete’s companies to misrepresent her work
experience, labeling her as a nurse when in fact she only had experience as a patient
care technician. She admitted that she had pled guilty to the criminal acts stemming
from the facts of this very case. She was presented with portions of her grand jury
testimony which were inconsistent with her trial testimony. Further, she was anything
but forthcoming in her testimony, choosing instead to be continuously evasive in her
responses. Thus, an admission from Austin that she had been in military stockades
would have had little, if any, impact on the jury’s evaluation of her testimony. See
id.
c. Corroborating Evidence
Where the government’s case depends almost entirely on the testimony of a
single witness, such witness’s credibility is undeniably essential to the jury’s
28
evaluation of the evidence. See generally Giglio, 405 U.S. 150. But where, as here,
several independent witnesses testify regarding the same illegal acts, the
impeachment of any single witness is less likely to meet the materiality prong and
thus require a new trial. See United States v. Noriega, 117 F.3d 1206, 1219 (11th Cir.
1997).
When Austin was sentenced on May 6, 2005, the court addressed her as
follows:
[T]he lion’s share of your testimony or the pertinent portion of your
testimony was corroborated by other witnesses, and for that reason the
motions to strike were denied and I think the jury figured out the same
thing, that others corroborated your testimony, gave credence to it and,
thus, they credited your testimony about the life expectancies and about
what was going on at LifeTime Capital and MUI.
Indeed Austin’s testimony was well-supported by other witnesses, as evidenced by
the following non-exhaustive examples:
• Nanette Kveder-Zima testified that Svete instructed that life expectancy
sheets were not to be given to salesmen and that LCI often “guessed”
life expectancies instead of sending medical records to doctors for
review. She testified that Svete himself would “chop[] off [or change]
life expectancies” to make policies more attractive. She testified that
Svete instructed her to alter existing contracts by removing the phrases
“terminally ill” and “by a physician” because “that would be similar to
what the original document said, but would not legally bind LifeTime
Capital in the same manner that ‘terminally ill’ and ‘physician’ would.”
She testified that Svete owned and directed MUI, despite the fact that it
gave the appearance of being a separate company.
29
• Brian Barclay, Assistant Network Administrator and later Supervisor of
Funding Operations at LCI testified that he was informed by Shausta
Merrill, an LCI employee, that LCI would not receive medical
summaries regarding life expectancies signed by doctors. Instead, “the
life expectancies that I would be receiving would be a cover letter
signed by [a representative of MUI].”
• David Ganzsanto, an LCI employee responsible for developing
relationships with brokers to bring in insurance policies, testified from
personal experience that LCI was not buying policies on terminally ill
patients as represented to investors.
• David Kozee, an account executive, was told by Girardot that the
company sold products involving the terminally ill, and when Kozee
asked for medical information to establish life expectancies, Svete told
him to make it up.
• Steven Stucker, formerly an attorney with Laughlin and Associates in
Nevada, testified that Svete used Laughlin’s services to secrete his
involvement in “several corporations.”
Clearly, Austin’s testimony was not the lynchpin of the government’s case.
4. Motion for New Trial Properly Denied
Had Austin disclosed her incarceration from the witness stand when asked by
Svete, this issue would not have been made the subject of his appeal. Further, had
Svete sought the assistance of the district court in determining the details of the
military theft charge, it also may have prevented the need for this discussion. That
is not to say, however, that even if Svete had known of the incarceration in the
30
military stockades he would have chosen to utilize that information or been allowed
to impeach Austin with it.16
Despite the government’s failure to disclose the incarceration, this defect does
not rise to the level of requiring a new trial under Brady or Giglio. Ample
corroborating and other impeachment evidence allowed the jury to effectively
determine what weight, if any, to afford the testimony of Charme Austin.
D. Sentencing Issues
Svete contends that the district court miscalculated the loss to investors, finding
it exceeded $80,000,000.00 under U.S.S.G. § 2F1.1, and improperly included within
the restitution order amounts to pay life insurance premiums to maintain the viability
of the viatical portfolios. Both arguments fail.
1. Loss Calculation
We review a district court’s determination of the amount of loss involved in an
offense for clear error. See United States v. Woodard, 459 F.3d 1078, 1087 (11th
Cir. 2006). Section 2F1.1 “compels the district court to increase a defendant’s
16
The transcript reflects that the district court ruled from the bench, immediately prior to
Austin taking the stand, that Svete would be allowed to inquire of Austin as to the statements she
made regarding her military discharge. That was all Svete had sought permission to do in his cross-
examination of Austin despite the fact that he knew theft was involved. The district court then
concluded its remarks on that issue by saying that the conduct that led up to the discharge was
neither probative or relevant and was “not helpful to anyone.” This ruling by the district court was
not made the subject of any argument by either side of this appeal.
31
offense level based on the loss attributable to that defendant.” United States v.
Dabbs, 134 F.3d 1071, 1081 (11th Cir. 1998) (citing United States v. Calhoon, 97
F.3d 518, 530 (11th Cir. 1996)). Where the loss exceeds $80,000,000.00, the offense
level is increased by 18. See U.S.S.G. § 2F1.1(b)(1)(S) (2000) (deleted November
2001 and consolidated with § 2B1.1). Such loss must be proven by the government
by a preponderance of the evidence. Dabbs, 134 F.3d at 1081. This burden is
satisfied with “reliable and specific evidence.” Id. (quoting United States v.
Sepulveda, 115 F.3d 882, 890 (11th Cir. 1997)). However, “the loss amount does not
need to be precise and may only be a reasonable estimate of the loss based on the
available information.” Woodard, 459 F.3d at 1087 (citing U.S.S.G. § 2B1.1, cmt.
n.3 (2000)).
A preponderance of the evidence developed at trial established that the victim-
investors lost in excess of $80 million. Although Svete contends that the loss
attributable to him should be measured only by the amount by which selling prices
were inflated by false misrepresentations, fraudulent schemes come in various forms
and may require different methods to calculate loss. See United States v. Orton, 73
F.3d 331, 333 (11th Cir. 1996). This Court has upheld methods which hold “a
defendant fully accountable for all losses suffered by those victims who lose money,
but does not allow the defendant to fully benefit from payments made to others.” Id.
32
at 334. For example, we have affirmed a district court’s loss determination as to all
amounts fraudulently received by a defendant where coin investors received coins but
lost the expected opportunity for appreciation. United States v. Funt, 896 F.2d 1288,
1299 (11th Cir. 1990). We have similarly rejected arguments that no loss incurred
where the property may be recovered or is of no value to others. See United States
v. Jenkins, 901 F.2d 1075, 1083 (11th Cir. 1990) (considering non-negotiable
securities); see also United States v. Goldberg, 60 F.3d 1536, 1540 (11th Cir. 1995)
(considering stolen unexecuted bonds).
During the sentencing hearing, Svete did not challenge the qualifications of the
Receiver or present evidence to contradict his testimony. The Receiver testified that
the loss to the victim-investors could be as high as $114 million and would be in
excess of $80 million even if the value of the portfolios was considered, as Svete
suggests. Recognizing the difficulty in determining an exact loss amount, the district
court reasonably found a loss of $100 million. As the district court correctly
concluded, it was “certainly over 80 million” based on the reliable testimony
presented. Therefore, the district court did not err when it increased Svete’s offense
level by 18 under § 2F1.1.
2. Restitution
33
Because Svete did not raise the argument that the restitution order was
improper in the district court, we review for plain error. See United States v. Odom,
252 F.3d 1289, 1299 (11th Cir. 2001) (holding that if a defendant fails to challenge
a restitution order at sentencing, review is for plain error only). Under this standard
of review, a defendant “must show that: (1) an error occurred; (2) the error was plain;
(3) it affected his substantial rights; and (4) it seriously affected the fairness of the
judicial proceedings.” United States v. Gresham, 325 F.3d 1262, 1265 (11th Cir.
2003) (citing United States v. Humphrey, 164 F.3d 585, 588 n.3 (11th Cir. 1999)).
Where neither precedent nor the explicit language of the statute specifically resolves
an issue, plain error cannot exist. See United States v. Lejarde-Rada, 319 F.3d 1288,
1291 (11th Cir. 2003) (citing United States v. Magluta, 198 F.3d 1265, 1280 (11th
Cir. 1999) (“[A] district court’s error is not ‘plain’ or ‘obvious’ if there is no
precedent directly resolving an issue”), vacated in unrelated part on other grounds,
203 F.3d 1304 (11th Cir. 2000)).
Neither the Eleventh Circuit nor the Supreme Court has determined whether
funds to ensure the viability of fraudulently induced investments may be included in
a restitution order. As such, if there was error, it was not plain. See Lejarde-Rada,
319 F.3d at 1291. The district court, therefore, did not plainly err when it included
34
$5 million per year for the payment of life insurance premiums to maintain the
viability of the portfolios. See Id.
III. Conclusion
Defendants’ convictions on Counts Three through Seven are VACATED and
REMANDED for a new trial based on the erroneous jury instruction. Defendants’
convictions as to Counts One, Two, Eight, Nine, and Ten are AFFIRMED. The
sentences as to all counts, while they may be wholly accurate, are REVERSED for
re-sentencing consistent with this opinion.
35
United States v. Svete
Court: Court of Appeals for the Eleventh Circuit
Date filed: 2008-03-26
Citations: 556 F.3d 1157
Copy CitationsCombined Opinion