IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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No. 97-20557
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UNITED STATES OF AMERICA,
Plaintiff-Appellee,
VERSUS
ROSS HULL, DOUG LASCO, LLOYD KREIN, and JOSEPH STAFFORD,
Defendants-Appellants.
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Appeals from the United States District Court
for the Southern District of Texas
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November 10, 1998
Before SMITH, DUHÉ, and WIENER, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
The defendants appeal their convictions that resulted from
their participation in a fraudulent investment scheme. We affirm.
I.
Ross Hull, Doug Lasco, Lloyd Krein, and Joseph Stafford were
charged with a variety of crimes stemming from their activities in
connection with a nearly two-year conspiracy that defrauded over
one hundred investors of more than $2.3 million. Originally,
Stafford, Krein, and Lasco worked as members of the “John Oliver
Group” (“JOG”), which performed legitimate telemarketing services
for the purchase and sale of precious metals, effected through
JOG’s broker, Unimet. In July 1992, Unimet terminated its business
relationship with JOG by order of the Federal Trade Commission,
leaving JOG without a broker to invest its clients’ money.
In turn, JOG pitched, to its clients, the opportunity to trade
in ancient coins. Stafford, Krein, and Jim Ammons (a defendant not
party to this appeal) masterminded this operation, in which Lasco
and Hull worked as salesmen. Of the more than $1.3 million
collected from investors, only $255,000 was used to purchase
ancient coins; the balance paid JOG’s operating expenses and lined
the pockets of its principals.
In April 1993, JOG began to offer its clients the opportunity
to invest in precious metals again, under the rubric of
“Continental Bullion & Coin” (“CBC”), which, however, did not
invest any of the more than $400,000 it collected from investors
via this scheme.
Also in April 1993, Krein, Stafford, Lasco, and Ronald Keyser
(a defendant not party to this appeal) fabricated “ASK Investments”
(“ASK”), which pitched the purchase of surplus United States
Government equipment that purportedly would be purchased at
government auctions and later sold for a guaranteed profit
of 10%-100%. ASK attended no such auctions on behalf of its
clients and made no such purchases, but reaped over $300,000 from
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defrauded investors via this scheme.
When investors attempted to withdraw their money, they
encountered a plethora of deceptions. They were told it was a bad
time to withdraw or that it would be wiser to “reinvest” their
funds. If an investor insisted on withdrawing, he was promised a
refund check. Repeated calls for the check resulted in repeated
promises that it was forthcoming; for many investors, this
continued until the telephone number they had been calling had been
disconnected.
II.
Hull raises the only novel issue of this appeal: whether a
defendant who has been acquitted of conspiracy may be held liable
as a co-conspirator for sentencing purposes. We conclude that he
may.
A.
Hull was charged with three sets of related counts: count 18
(conspiracy in violation of 18 U.S.C. § 371), counts 19-25
(interstate transportation of stolen property in violation of
18 U.S.C. §§ 2 and 2314), and counts 26-36 (money laundering in
violation of 18 U.S.C. § 1956(a)(1)(A)(I)). The jury found him
guilty on counts 19-25 and not guilty on counts 8 and 26-36. In
determining Hull's sentencing level, the court took into account
the conduct of his co-defendants, as per U.S.S.G. § 1B1.3 (1995)
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(relevant conduct). Hull argues that the jury's determination that
he was not guilty of conspiracy precluded the court from holding
him liable for the conduct of his co-defendants for sentencing
purposes.
B.
Findings of fact made for sentencing purposes are reviewed
under the clearly erroneous standard. United States v. Gadison,
8 F.3d 186, 193 (5th Cir. 1993). Matters of interpretation of the
sentencing guidelines are reviewed de novo. Id. Whether the acts
of Hull's co-defendants should be attributable to him is a matter
of fact and is reviewed under the clearly erroneous standard.
The scope of relevant conduct attributable to a defendant for
sentencing purposes is set out in U.S.S.G. § 1B1.3(a)(1)(B), which
states that a defendant is liable for “all reasonably foreseeable
acts and omissions of others in furtherance of . . . jointly
undertaken criminal activity.” “Jointly undertaken criminal
activity” is defined as “a criminal plan, scheme, endeavor, or
enterprise undertaken by the defendant in concert with others,
whether or not charged as a conspiracy.” Id. Each of these
determinations (“reasonable foreseeability,” “in furtherance,” and
the existence of “jointly undertaken criminal activity”) is factual
and therefore is reviewed under the clearly erroneous standard.
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C.
A defendant is liable in sentencing for the reasonably
foreseeable acts of co-defendants in jointly undertaken criminal
activity. Id. In cases of fraud, this means a defendant is liable
for the total dollar amount that victims were defrauded. Id.,
illustration (c)(2).
Participation in a conspiracy, however, does not automatically
give rise to co-conspirator liability under § 1B1.3(a)(1)(B).
Rather, the court also must make particularized findings that the
elements of foreseeability and scope of agreement have been met.
United States v. Evbuomwan, 992 F.2d 70, 72-74 (5th Cir. 1993);
United States v. Puma, 937 F.2d 151, 160 (5th Cir. 1991). The
scope of jointly undertaken criminal activity for which a defendant
is held responsible encompasses “the specific conduct and
objectives embraced by the defendant's agreement.” U.S.S.G.
§ 1B1.3(a)(1)(B), comment. (n.2).
Ordinarily, Hull's claim would be defeated by the simple fact
that the record supports holding him liable for the conduct of his
co-defendants. In close association with them, he transported
checks he knew had been obtained by fraud. He conned clients into
“investing” their money to help further the fraudulent scheme of
which he was a part. The court was not clearly erroneous in
finding that he was acting “in furtherance” of “jointly undertaken
criminal activity” (the scheme), the total losses of which were
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“reasonably foreseeability.”
Such a determination is complicated, though, by the fact that
the jury returned a verdict of not guilty of conspiracy. This
arguably undercuts the finding that Hull was engaged in “jointly
undertaken criminal activity.” For two reasons, however, these
apparently contradictory findings are not irreconcilable.
The government must prove all elements of a criminal offense
beyond a reasonable doubt. But, findings of fact for sentencing
purposes need meet only the lower standard of “preponderance of
evidence.” U.S.S.G. § 6A1.3, p.s., comment; United States v.
Huskey, 137 F.3d 283, 291 (5th Cir. 1998). Therefore, a finding
that Hull was not guilty of conspiracy for purposes of conviction
is not inconsistent with a finding that he was a conspirator for
purposes of sentencing.
Once we conclude that the “not guilty” verdict on conspiracy
charges did not preclude the court from taking into consideration
the acts of co-defendants for sentencing purposes, we need merely
to review the decision for clear error. More specifically, we must
consider whether the court rationally could have found that, by a
preponderance of evidence, Hull acted “in furtherance” of a
“jointly undertaken criminal activity” that had “reasonably
foreseeability” consequences.
Hull was found beyond a reasonable doubt to have transmitted
seven checks, taken by fraud, totaling $76,800 in value, over a
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two-month period. Six witnesses testified Hall persuaded them to
invest their money in the scheme. On these facts, the court did
not commit clear error in concluding that Hull was indeed part of
a criminal enterprise, that he knowingly furthered its ends, and
that the total amount by which this scheme defrauded investors
(more than $1,500,000) was reasonably foreseeable.
A second ground for affirming is to read § 1B1.3(a)(1)(B) more
broadly than the definition of conspiracy in 18 U.S.C. § 371.
Support for this comes from the text of the sentencing guidelines.
In setting forth the crime of conspiracy, the statute does not
define “conspiracy” but merely criminalizes the act of conspiring
against the United States. § 371. The guidelines define “jointly
undertaken criminal activity” as “a criminal plan, scheme,
endeavor, or enterprise undertaken by the defendant in concert with
others.” § 1B1.3(a)(1)(B). The fact that the guidelines provided
this list, and did not simply reference “conspiracy” as per § 371,
suggests that the two concepts may not be identical. Additionally,
the guidelines state that such conduct is attributable to the
defendant “whether or not charged as a conspiracy.”
§ 1B1.3(a)(1)(B). This in turn suggests that the scope of relevant
conduct should not depend on whether a particular defendant has
been convicted of conspiracy if so charged.
Lastly, the commentary following § 1B1.3 provides still
further reason to believe that co-conspirator liability need not be
predicated by a conspiracy conviction: “[T]he scope of criminal
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activity jointly undertaken by the defendant . . . is not
necessarily the same as the scope of the entire conspiracy.”
U.S.S.G. § 1B1.3, comment. (n.2). A review of the Sentencing
Commission's discussion of “Real Offense vs. Charge Offense
Sentencing” confirms this. See U.S.S.G. ch. 1, pt. A.
While the Commission “initially sought to develop a pure real
offense system,” whereby sentencing would be determined strictly by
the conduct in which the defendant engaged, regardless of the
charges against him, the Commission ultimately “moved closer to a
charge offense system” whereby sentencing is based “upon the
conduct that constitutes the elements of the offense for which the
defendant was charged and of which he was convicted.” Id. The
result is a system that “contain[s] a significant number of real
offense elements . . . . [The conduct described is] descriptive of
general conduct rather than . . . track purely statutory language.”
Id.
This suggests that § 1B1.3(a)(1)(B) does not refer solely to
conspiracy to commit the crime, but rather to the general concept
of assisting others to achieve some unlawful end. Thus, whether
the defendant was charged with, convicted of, or acquitted of
conspiracy should not dispositively affect attributable conduct for
sentencing purposes as per § 1B1.3(a)(1)(B).
III.
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The remaining challenges concern merely the application of
fact to well-settled law. We examine and reject these challenges
seriatim.
A.
Lasco challenges the decision to hold him liable in sentencing
for the acts of his co-conspirators, on the ground that he played
only a minor role in the conspiracy. Under the lenient clearly
erroneous standard of review, we affirm.
Lasco was charged with and convicted of two counts of
conspiracy in violation of § 371, and of interstate transportation
of stolen property. He was involved with the fraudulent activities
of his co-conspirators for nearly two years, primarily as a broker
or telemarketer. The presentence report (“PSR”) found him
responsible for $2,371,450 of the losses suffered by victims of the
scheme. It was not clearly erroneous to hold him liable for the
full amount of harm ($2,371,450) inflicted by the conspiracy.
Lasco suggests that the court erroneously held that reasonable
foreseeability automatically followed from proof of participation
in conspiracy. He cites to cases standing for the proposition that
reasonable foreseeability does not automatically follow from proof
of participation in conspiracy. E.g., United States v. Puma,
937 F.2d 151, 160 (5th Cir. 1991). While Lasco is correct in
stating the law, he is incorrect in attacking the sentencing
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decision on these grounds.
As discussed in part II.B., supra, participation in a
conspiracy does not automatically give rise to co-conspirator
liability under § 1B1.3(a)(1)(B). Rather, the court also must make
particularized findings that the elements of foreseeability and
scope of agreement have been met. United States v. Evbuomwan,
992 F.2d 70, 72-74 (5th Cir. 1993); United States v. Puma, 937 F.2d
151, 160 (5th Cir. 1991).
There is sufficient evidence from which the district court
could find that all the harms of the conspiracy were foreseeable to
Lasco and that his agreement embraced the entirety of the
conspiracy. His nearly two years of involvement, in which he
worked alongside other “brokers” who peddled the conspiracy’s
fraudulent pitches, evidences both his notice and acquiescence to
the scope of the conspiracy. Furthermore, the PSR specifically
held Lasco “responsible for the loss of $324,940 in ASK, $404,769
in the precious metals, and $1,641,741 from the ancient coin
program,” fulfilling the requirements of particularized findings
demanded by Puma and Evbuomwan. Id. Thus, the court did not
impermissibly hold that Lasco, being guilty of conspiracy, a
fortiori was subject to sentencing enhancement as per §
1B1.3(a)(1)(B).
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B.
Hull argues that the court erred in ordering him to pay
$50,000 in restitution. We review for abuse of discretion. United
States v. Reese, 998 F.2d 1275, 1280 (5th Cir. 1993).
An order of restitution will be reversed on appeal only
when the defendant shows that it is probable that the
court failed to consider a mandatory factor and the
failure to consider the mandatory factor influenced the
court. The Court's failure to follow the statutory
requirements is reviewed for abuse of discretion.
Id. at 1280-81 (citations omitted). The mandatory factors consist
of “the amount of loss sustained by any victim as a result of the
offense, the financial resources of the defendant, the financial
needs and earning ability of the defendants and the defendant's
dependants, and such other factors as the court deems appropriate.”
18 U.S.C. § 3664(a).
Hull does not argue that the court failed to consider a
mandatory factor (namely, his ability to pay) in ordering
restitution, but rather he challenges the court's ultimate
determination. Because the PSR covered these requisite factors,
and there is no reason to believe that the court intentionally
refused to consider any of them, we see no abuse of discretion in
ordering $50,000 restitution over three years.
C.
Stafford, Krein, and Lasco contend that the court erred in
charging the jury on the issue of deliberate ignorance. The
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standard of review to be applied in evaluating the propriety of a
deliberate ignorance jury instruction is “whether the courts [sic]
charge, as a whole, is a correct statement of the law and whether
it clearly instructs jurors as to the principles of law applicable
to them. This court has consistently upheld such an instruction as
long as sufficient evidence supports its insertion into the
charge.” United States v. Fuller, 974 F.2d 1474, 1482 (5th Cir.
1992) (quotations and citations omitted).
Defendants do not challenge the accuracy of the charge but,
rather, challenge the propriety of giving it at all. Whether the
evidence is sufficient to justify the giving of a particular
charge is a “fact-intensive” question and thus is reviewed under
the clearly erroneous standard. United States v. Lara-Velasquez,
919 F.2d 946, 952 (5th Cir. 1990).
A deliberate ignorance instruction is justifiable if the
record reflects (1) evidence that a defendant lacked knowledge of
wrongdoing; (2) highly suspicious circumstances surrounding his
activities; and (3) conscious avoidance. United States v.
Stouffer, 986 F.2d 916, 925 (5th Cir. 1993).1 The court did not
commit clear error in finding that the record satisfied these
elements: Stafford, Krein, and Lasco dispute their knowledge of
wrongdoing, the circumstances in which they worked were highly
1
See United States v. Posada-Rios, No. 94-20645, 1998 U.S. App. LEXIS
27715, at *120-*122 (5th Cir. Oct. 21, 1998).
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suspicious, and their failure reasonably to question their
superiors with regard to these suspicious circumstances constitutes
conscious avoidance. Id.
D.
According to Stafford, the court erred in charging the jury on
the issue of deliberate ignorance as it relates specifically to
money laundering and conspiracy to commit money laundering.
Although the argument is an interesting one, we reject it under the
plain error standard of review.
Issues raised for the first time on appeal are reviewed only
for plain error; an appellant must show (1) the existence of actual
error; (2) that the error was plain; and (3) that it affects
substantial rights. United States v. Calverley, 37 F.3d 160,
162-64 (5th Cir. 1994) (en banc). Because Stafford is unable to
surmount the second of these hurdles, his claim is defeated. In
explaining “plain error” in Calverley, we noted: “Plain is
synonymous with “clear” or “obvious,” and “[a]t a minimum,”
contemplates an error which was “clear under current law at the
time of trial.” Id. at 162-63 (citing United States v. Olano, 507
U.S. 725, 734 (1993)). Because Stafford’s theory requires the
extension of precedent, any potential error could not have been
“plain.”
Stafford calls our attention to United States v. Chen,
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913 F.2d 183 (5th Cir. 1990), arguing that we “prohibit[ted] . . .
the use of a deliberate ignorance instruction in cases involving
specific purposes . . . .” This reading of Chen is too broad, for
as explained in United States v. Soto-Silva, 129 F.3d 340, 344 (5th
Cir. 1997), Chen prohibits a deliberate jury instruction “if given
. . . to an alleged [21 U.S.C.] section 856(a)(1) violation.”
(emphasis added).
Stafford was not charged with violating § 856(a)(1). While
the crime with which he was charged contained a purposeful element,
similar to that in § 856(a)(1), in Chen we held that deliberate
ignorance jury instructions can be appropriate in cases involving
purposeful crimes other than those arising under § 856(a)(1). See
Chen, 913 F.2d at 191.
In United States v. Fierro, 38 F.3d 761 (5th Cir. 1994), we
approved the use of a deliberate jury instruction in a money
laundering case similar to Stafford’s. See Fierro, 38 F.3d at 772.
While Fierro did not squarely address the issue raised in Chen,
regarding the appropriateness of the instruction in cases
containing a purposeful element, Fierro demonstrates that the court
a quo did not commit plain error in giving the deliberate ignorance
charge.
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E.
Krein raises sufficiency of the evidence challenges to his
convictions of (1) money laundering; (2) conspiracy to commit
fraud, interstate transportation of money obtained by fraud, and
money laundering; (3) conspiracy involving CBC; and (4) interstate
transportation of stolen property. We uphold a verdict if a
rational jury could have found that the evidence established the
essential elements of the crime beyond a reasonable doubt. United
States v. Ismoila, 100 F.3d 380, 387 (5th Cir. 1996). We view the
evidence, including all reasonable inferences and credibility
determinations, in the light most favorable to the verdict. United
States v. Resio-Trejo, 45 F.3d 907, 910 (5th Cir. 1995).
As the government notes, it is important to recall that as a
co-conspirator, Krein faces accomplice liability for the wrong-
doings of his co-conspirators in furtherance of the conspiracy.
See Pinkerton v. United States, 328 U.S. 640, 646-47 (1946). So,
if there is sufficient evidence that Krein was a member of this
conspiracy, and that the commission of these crimes was foreseeable
and done in furtherance of the conspiracy, Krein’s convictions for
them must be affirmed. Id. There is ample evidence to support the
finding of a conspiracy to defraud investors, that Krein was a
member thereof, and that all the wrongdoings that occurred were
reasonably foreseeable.
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F.
Krein challenges the admission of the testimony of Ronald
Casper and John Hivital concerning a conviction of Krein’s. Casper
testified that Krein had defrauded him of $10,000 in 1990; Hivital
testified that Krein’s company had paid Krein’s restitution in the
criminal case that had resulted from the fraud against Casper.
Krein argues that permitting the testimony of Casper and Hivital
was an abuse of discretion and violated FED. R. EVID. 403 and
404(b). We review evidentiary rulings for abuse of discretion.
United States v. West, 22 F.3d 586, 591 (5th Cir. 1994); United
States v. Robichaux, 995 F.2d 565, 568 (5th Cir. 1993).
Under United States v. Beechum, 582 F.2d 898, 911 (5th Cir.
1978) (en banc), evidence of a defendant’s conviction is admissible
if (1) the evidence is relevant to an issue other than the
defendant’s character and (2) the probative value of the evidence
is not substantially outweighed by its prejudicial value. On the
facts of the instant case, this test is satisfied.
Evidence of Krein’s conviction arguably could go to his modus
operandi, intent, or knowledge. Because the crime committed
against Casper was not particularly heinous, it was neither
unreasonable nor, more significantly, an abuse of discretion for
the court to find that its probative value was not substantially
outweighed by its prejudicial value.
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G.
Krein disputes the calculation of his total offense level.
The court increased his sentencing level by 4 on account of the
amount of money it found Krein had launderedSS$949,941. See
U.S.S.G. § 2S1.1(b)(2)(E). Krein asserts that this sum was without
evidentiary support. Because the determination is a matter of
fact, we review for clear error. United States v. Tansley,
986 F.2d 880, 884 (5th Cir. 1993).
The court accepted the PSR’s determination that Krein had
laundered $949,941. This figure was arrived at via reliance on the
FBI’s tracing of funds through the conspiracy’s multiple schemes.
Krein argues that the court should have calculated the amount
laundered by using the testimony of the twenty-six defrauded
investors who at trial testified to losses of $293,205. Even if
Krein’s method of calculating loss were superior, the court’s was
neither unreasonable nor, based on the record, clearly erroneous.
AFFIRMED.
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