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Rule 11 Of The Federal Rules Of Criminal Procedure: During A Plea The Trial Court Must Inform Defendant Of His Rights

By Stephen N. Preziosi, October 1st, 2014

Criminal appeals lawyer, rule 11 proceedings

U.S v. Adams

United States Court of Appeals for the Second Circuit

No.13-146-cr

Decided on: September 25, 2014

The Standard Of Review For Plea Agreements Is Plain Error Review

Blog By: Stephen N. Preziosi Esq., Criminal Appeals Lawyer

Issue: Whether the District Court erred when during the Rule 11 proceedings of a plea agreement, it failed to inquire what impact the Defendant’s heart condition and medications would have on his ability to enter a knowing and voluntary plea to the crime.

Summary: Defendant pleaded guilty to one count of conspiracy to distribute and possess with intent to distribute marijuana. On Appeal, he asserts that his plea of guilty was invalid because the trial court did not inquire under Rule 11 of the Federal Rules of Criminal Procedure about the effect of his heart condition and the medications he was taking on his ability to knowingly and voluntarily to enter a guilty plea. A two-year period elapsed between when Defendant changed his plea and when he was sentenced, he made no objection to the validity of his plea either during that period or at the time of sentencing. The Second Circuit Court of Appeals affirmed the District Court’s judgment.

See Also: Fifth Amendment Right To Remain Silent And Cross-Examination Of Defendant

Holding: The Second Circuit Court of Appeals held that the District Court did not err during the Rule 11 proceedings of Defendant’s plea to the crime because Defendant did not demonstrate any reasonable probability that he would not have pleaded guilty, or that the Judge would have accepted his plea, if the District Court had inquired about his medical condition or medications.

To Second Circuit Court of Appeals held that Defendant failed to raise any claim that Rule 11 was violated in the court below and the Court reviewed this claim, asserted for the first time on appeal, for plain error.

To establish plain error in the context of Rule 11, a Defendant must establish that the violation affected substantial rights and that there is a reasonable probability that, but for the error, he would not have entered the plea. The Court of Appeals held they do not need to resolve the question of whether the District Court erred in conducting the Rule 11 proceedings because the Defendant made no such showing.

Facts: Defendant pleaded guilty to one count of conspiracy to distribute and possess with intent to distribute marijuana. During the Rule 11 proceedings, the District Court confirmed that Defendant was satisfied with his attorney’s representation and advice, had discussed the Plea Agreement thoroughly with his attorney, and had signed the Plea Agreement.

The District Court further confirmed that Defendant was not under the influence of any alcohol or narcotics and had not been induced to plead guilty as a result of any force or threats. The District Court explained the indictment, explained what the Government would have to prove at trial, and asked Defendant whether he understood this information; Defendant replied that he did and was sentenced to 210 months’.

Defendant appealed to the Second Circuit Court of Appeals and argues that that the District Court violated Rule 11 of the Federal Rules of Criminal Procedure. He states that the District Court erred when it failed to inquire during the plea allocution about the possible impact his heart condition and medications had on his ability to enter a knowing, intelligent and voluntary plea. The Second Circuit Court of Appeals stated that they do not need to resolve whether the District Court erred in conducting the Rule 11 proceedings because the Defendant has made no showing that he was under the influecen of any drugs or alcohol during the plea. The Court of Appeals and affirmed.

Legal Analysis: The Second Circuit Court of Appeals held that in this case, Defendant failed to raise any claim that Rule 11 was violated in the court below so they reviewed this claim asserted for the first time on appeal, for plain error.

Plain error requires a Defendant to demonstrate that 1) there was error, 2) the error was plain, 3) the error prejudicially affected his substantial rights, and 4) the error seriously affected the fairness, integrity or public reputation of judicial proceedings. United States v. Cook, 722 F.3d 477, 481 2d Cir. 2013. 

To show plain error in the context of Rule 11, a Defendant must establish that the violation affected substantial rights and that there is a reasonable probability that, but for the error, he would not have entered the plea. United States v. Yang Chai Tien, 720 F.3d 464, 469 2d Cir. 2013.

In this case, the Second Circuit held that, given the District Court’s knowledge of Defendant’s medical problems, it is possible that the District Judge should have asked Defendant about his heart condition and medications at the plea hearing and that its failure to do so was error. If there is any indication that the Defendant is under the influence of any medication, drug, or intoxicant, it is incumbent upon the District Court to explore on the record Defendant’s ability to understand the nature and consequences of his decision to plead guilty.

To satisfy the plain error standard applicable to this case, however, the Defendant must also establish a reasonable probability that, but for the error, he would not have entered the plea. The Second Circuit Court of Appeals held that they do not need to resolve whether the District Court erred in conducting the Rule 11 proceedings because the Defendant has made no such showing.

Here, Defendant has not demonstrated any reasonable probability that he would not have pleaded guilty, or that the Judge would not have accepted his plea, if the District Court had inquired about his medical condition or medications. Defendant’s behavior following entry of his guilty plea confirms that he fully intended to plead guilty.

The Second Circuit added that, unlike other cases in which Defendant’s have claimed soon after their pleas that their medical conditions vitiated any conclusion that their pleas were knowing and voluntary, Defendant, in this case, made no effort to have his asserted misunderstanding of the proceedings or the consequences of his plea corrected in the two years prior to sentencing. Defendant neither filed nor sought to file a motion to withdraw his plea during the two years separating the plea proceedings and his sentencing. Only when he did not receive the below-Guidelines sentence he had hoped for did he assert, for the first time in this appeal, that his medications and heart condition may have adversely affected his ability to enter a knowing, intelligent, and voluntary plea. Therefore, the Second Circuit concluded that the Defendant did not demonstrate plain error in connection with his guilty plea.

The Second Circuit Court of Appeals affirmed the conviction.

Fifth Amendment Right To Remain Silent And Cross-Examination Of Defendant.

By Stephen N. Preziosi, September 30th, 2014

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U.S. v. Shannon

United States Court of Appeals for the Third Circuit

2014 WL 4401054

Decided on: September 8, 2014

Blog by: Stephen N. Preziosi Esq., Criminal Appeals Lawyer

Issue: Whether Defendant’s Fifth Amendment right to remain silent was violated when the Government tried to impeach his credibility by cross-examining him about his post-arrest silence.

Summary: Defendant appeals his conviction and the sentence imposed on him by the District Court to the Third Circuit Court of Appeals. He contends that the Government violated his Fifth Amendment rights at trial by cross-examining him about his post-arrest silence. The Third Circuit Court of Appeals agreed that the Government violated his Constitutional right to remain silent, vacated his judgment and remanded for a new trial.

See Also: The Excited Utterance Exception To The Hearsay Rule: The Gun Whisperer

Holding: The Third Circuit Court of Appeals held that the Defendant’s Constitutional right to remain silent was violated when the Government questioned him about his post-arrest silence when he testified at trial. The Government failed to prove beyond a reasonable doubt that the error did not contribute to the verdict obtained which required the Court of Appeals to vacate the judgment of conviction and remand for a new trial.

The Fifth Amendment guarantee’s that no person shall be compelled in any criminal case to be a witness against himself.

Facts: Defendant Dudley Shannon was charged with conspiracy to distribute and possess with intent to distribute five kilograms or more of cocaine. At trial, the Government asked Defendant why he had not come forward earlier with his exculpatory version of the facts. Defense objected to the Government’s questions, stating that Defendant asserted his Fifth Amendment right to remain silent.

The Defendant appealed to the Third Circuit Court of Appeals arguing that his Fifth Amendment right was violated because the Government’s questioning about his post-arrest silence is alone enough to require that his conviction be set aside. The Third Circuit Court of Appeals stated that silence should carry no penalty because the primary purpose of Miranda warnings is to safeguard an arrested individual’s Fifth Amendment right to not speak to law enforcement authorities.

Legal Analysis: The Third Circuit Court of Appeals held that the Fifth Amendment is so fundamental to our system of Government that, in the landmark case of Miranda v. Arizona, 384 U.S. 436, 86 S.CT. 1602, the Supreme Court established the now famous rule that a Defendant must be informed upon arrest that he has the right to remain silent.

Because of the protections of the Fifth Amendment right to silence, it would be fundamentally unfair and a deprivation of Due Process to allow an arrested person’s silence to be used to impeach an explanation subsequently offered at trial, Doyle v. Ohio, 426 US 610.

The Third Circuit therefore held that the use for impeachment purposes of Defendant’s silence, at the time of arrest and after receiving Miranda warnings, violated the Due Process Clause of the Fourteenth Amendment. The Supreme Court has noted that silence should carry no penalty because the primary purpose of Miranda warnings is to safeguard an arrested individual’s Fifth Amendment right to not speak to law enforcement authorities, Wainwright v. Greenfield, 474 U.S. 284, 290, 106 S.Ct. 634, 88 L.Ed.2d. 623 1986. When seeking to impeach a Defendant’s credibility, a Prosecutor thus violates the Fifth Amendment when he highlights the Defendant’s post-arrest silence.

A Defendant may, however, open himself up to questions about his post-arrest silence if he testified to an exculpatory version of events and claims to have told the police the same version upon arrest, Hassine v. Zimmerman, 160 F.3d, 941, 947-49 3rd Cir.1998. In that very limited circumstance, some inquiry is permitted to prevent a Defendant from misleading a fact-finder about his claimed cooperation with law enforcement. But the Third Circuit held that the foundation for such an inquiry is not easy to lay. The Court explained that, to open himself up to questions about his silence, is not enough for a Defendant’s later testimony to be ambiguous about his supposed cooperation. Instead, his earlier silence must appear to be an act blatantly inconsistent with his trial testimony, United States v. Fairchild, 505 F.2d 1378, 1382 5th Cir.1975.

Even when the Government wrongly cross-examines a Defendant about his post-arrest silence it does not mean that his conviction will necessarily be infirm. The error may still be harmless. The operative question becomes whether the Constitutional trial error was harmless beyond a reasonable doubt, Chapman v. California, 386 U.S 18, 24, 87 S.Ct, 824, 17 L.Ed.2d 705 1967.

The Third Circuit held, to sustain a conviction, the Government must prove beyond a reasonable doubt that the error complained of did not contribute to the verdict obtained. The Court of Appeals held that they have previously determined that error of the sort condemned in Doyle, may be held harmless beyond a reasonable doubt in cases where there is overwhelming evidence against Defendant. But it is a decidedly heavy burden to demonstrate that reversal is not warranted, United States v. Waller, 654 F.3d 430, 438 3d Cir.2011.

In this case, the Third Circuit Court of Appeals held they must first determined whether, under Rule 103(a)(1)(B) of the Federal Rules of Evidence, Defendant properly objected to the Government’s cross-examination and preserved that objection so that we can exercise plenary review, or whether the Court only must review the alleged Doyle violation for plain error. Defense counsel’s consternation was fully justified, as the questions the Government asked Defendant are patently beyond the bounds set in Doyle and are examples of a Fifth Amendment violation.

The Court held that the obvious errors in the Government’s questioning created at trial, and the specific and repeated objections from Defendant’s attorney showed a Fifth Amendment violation. Even if the Government had, in fact, asked pages of questions regarding Defendant’s pre-arrest silence, the problem remains that it also asked inappropriate questions regarding Defendant’s post-arrest silence. Doyle does not establish a threshold quantity of improper questioning to qualify as a Constitutional violation. The Third Circuit Court of Appeals held that they must still determine whether the Government proved beyond a reasonable doubt that the error did not contribute to the verdict obtained.

When the Government fails to carry a burden of proof, the Third Circuit held that they must vacate the judgment of conviction and remand for a new trial. Because the Government’s questioning of Defendant about why he had not come forward earlier to the police, the Court of Appeals held they cannot say the constitutional error was harmless. Accordingly the Third Circuit Court of Appeals vacated the District Court’s judgment and remanded for a new trial.

The Excited Utterance Exception To The Hearsay Rule: The Gun Whisperer

By Stephen N. Preziosi, September 29th, 2014

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U.S v. Zuniga

United States Court of Appeals for the Seventh Circuit

2014 WL 4454984

Decided on: September 11, 2014

Statements Made Without Deliberative Thought

U.S.S.G Previous Convictions Are Sentencing Factors Not Necessary To Be Submitted To The Jury And May Be Determined By A Judge

Blog By: Stephen N. Preziosi Esq., Criminal Appeals Attorney

Issue: Whether statements whispered by a witness to his girlfriend that Defendant possessed a gun and was holding it to another person’s head could qualify as excited utterance and whether the District Court abused it’s discretion when it determined that Defendant’s prior convictions were sentencing factors rather than elements that must be submitted to a jury.

Summary: Defendant was arrested for pointing a gun at his ex-girlfriend. At trial, the Government introduced a witness’s testimony under the excited utterance exception to the hearsay rule. The witness testified that the Defendant pointed a gun at his ex-girlfriend and he was scared and concerned that something was about to happen to her. He then whispered to his friend that Defendant possessed a gun and they called the Police. Second, whether the trial court erred when it found that prior convictions were sentencing factors, which enhanced Defendant’s mandatory minimum sentence rather then elements of the crime to be submitted to the jury.

On Appeal, Defendant argues 1) that the District Court improperly admitted the witness’s testimony under the excited utterance exception; and 2) that the District Court abused its discretion when a Judge determined that his three prior felony predicates to make him eligible for the enhanced mandatory minimum penalty, as opposed to elements of a crime that must be submitted to a jury.

See Also: Federal Sentencing Guidelines Applying The Correct Legal Standard Under U.S.S.G § 2K2.1

Holding: The Seventh Circuit Court of Appeals held that the witness’s statements were properly admitted under the excited utterance exception.

Federal Rules of Evidence under Rule 803(2) states, hearsay is admissible as an excited utterance if the statement made was related to a startling event and made while the declarant was under the stress of the excitement that caused the statement to be uttered. For an out of court statement to qualify under the excited utterance exception: 1) a startling event must have occurred; 2) the declarant must make the statement under the stress of the excitement caused by the startling event; and 3) the declarant’s statement relates to the startling event.

Seventh Circuit held that the District Court did not abuse it’s discretion when it determined that that Defendant’s prior convictions were not facts that must be submitted to a jury, but rather sentencing factors that may be determined by a Judge.

Facts: Defendant was arrested for pointing a gun at his ex-girlfriend outside a bar and was charged with being a felon in possession of a firearm and possessing cocaine. At trial, the Government introduced a witness’s testimony under the excited utterance exception to the hearsay rule. The witness testified that the Defendant pointed a gun at his ex-girlfriend and he was scared and concerned that something was about to happen to her. He then whispered to his friend that Defendant possessed a gun and they called the Police. Defendant appealed to the Seventh Circuit Court of Appeals. On Appeal, Defendant argues that the witness was neither startled nor excited when he witnessed him hold a gun to his ex-girlfriend. The Defendant contends that a whisper, as opposed to blurting out, does not qualify the witness as being excited. The Court found that the statement was properly admitted under the excited utterance exception, and a declarant whisper, as opposed to yelling, does not necessarily mean that the statement cannot qualify as an excited utterance.

Second, the District Court found Defendant’s prior convictions as sentencing factors and submitted them to the Judge who enhanced Defendant’s mandatory minimum sentence. Defendant argues that a remand is warranted because the District Court submitted his prior felony predicates to be determined by a Judge rather than submitted to a jury to be proven beyond a reasonable doubt. The Court of Appeals affirmed the District Court’s judgment relying on Almendarez-Torres, which held that prior convictions are not factors that must be submitted to a jury, but rather may be found by Judges.

Legal Analysis: The Seventh Circuit Court of Appeals held that they review a District Court’s evidentiary rulings for abuse of discretion, United States v. Simon, 727 F.3d 682, 696 7th Cir.2013, and it will not be reversed unless the record contains no evidence on which the trial Judge rationally could have based his decision, United States v. Conley, 291 F.3d 464, 472 7th Cir.2002.

Defendant argues that the District Court improperly admitted the witness’s statement under the excited utterance exception because the witness whispered to his girlfriend that Defendant had a gun, as opposed to blurting it out as evidence that the witness was not excited. The Court of Appeals held that a declarant whispering, as opposed to yelling, does not necessarily mean that the statement cannot qualify as an excited utterance. Rather, the witness’s reasoning was curious because in almost every imaginable scenario, seeing a person pointing a gun at the head of another is a startling situation.

When asked on direct-examination why he did not confront Defendant directly, he stated that the situation was ‘heated’ and he did not want ‘it to come his way.’ The witness also said that he did not want to create panic, which the Court held is bound to happen when people hear that someone is pointing a gun at another person. Based on that evidence, the Seventh Circuit had no trouble finding that the witness saw a startling event and the volume at which he uttered, makes little difference in this case.

Defendant than argues that even if the witness was startled, he did not make his statement while under the stress or excitement of an event. Defendant asserts that, because the witness thought about how he was going to avoid a dangerous situation, he could not have been under the stress of seeing Defendant holding a gun. The Seventh Circuit held, a District Court need not find that the declarant was completely incapable of deliberative thought at the time he uttered the declaration it order for it to be admissible under the excited utterance exception to the hearsay rule. All that exception requires is that the statement is made contemporaneously with the excitement resulting from the event, Martinez v. McCaughtry, 951 F.2d 130, 135 7th Cir. 1991.

In sum, the Seventh Circuit Court of Appeals held that even if the witness’s statement was inadmissible evidence because it did not fit under the excited utterance exception, the error was harmless because admission of hearsay testimony does not constitute reversible error if the Court of Appeals determined that the error had no substantial influence on the verdict, United States v. Dominguez, 992 F.2d 678, 681 7th Cir.1993, quoting United States v. Cherry, 938 F.3d 748, 757 7th Cir.1991. With the removal of the witness’s statement, sufficient evidence remains for a rational jury to conclude beyond a reasonable doubt that Defendant possessed a gun.

Defendant next argues that the District Court abused its discretion when it found his prior convictions as sentencing factors and remand is warranted because the District Court violated Alleyne v. United States, U.S. 133 S.Ct. 2151, 186 L.Ed.2d 314 2013, when it, opposed to a jury, found that he had three qualifying felony predicates to make him eligible for the enhanced mandatory minimum penalty.

The Seventh Circuit held that according to Alleyne, any fact that increases the mandatory minimum sentence for a crime is an element of that crime, not a sentencing factor, and must be submitted to the jury.

The Seventh Circuit Court of Appeals held that they review de novo the question of whether a sentencing court erred in sentencing a Defendant under the Armed Career Criminal Act (ACCA), United States v. Foster, 652 F.3d 776, 692 7th Cir.2011. The Court held that the Defendant’s argument is foreclosed by Almendarez-Torres v. United States, 523 U.S. 224, 246, 118 S.Ct. 1219, 140 L.Ed2d 350 1998, which held that prior convictions are sentencing factors that could be determined by a Judge, and did not need to be alleged in the indictment or proven to a jury. The Court concluded that, because the parties in Alleyne did not contest the vitality of Almendarez-Torres, and because the Court did not rule on the matter, Almendarez-Torres is still good law. Therefore, under the narrow exception created by the Court in Almendarez-Torres, prior convictions are not facts that must be submitted to a jury, but rather may be found by Judges. United States v. Johnson, 743 F.3d 1110, 1111 7th Cir.2014.

Accordingly, the Seventh Circuit Court of Appeals affirmed the District Court’s findings.

Federal Sentencing Guidelines: Applying The Correct Legal Standard Under U.S.S.G § 2K2.1

By Stephen N. Preziosi, September 26th, 2014

federal sentencing guidelines, applying wrong legal standard under U.S.S.G § 2K2.1, CRIMINAL APPEALS ATTORNEYU.S v. Jiminez

United States Court of Appeals for the Fifth Circuit

No. 13-40457

Decided on: September 17, 2014

Applying The Sentencing Guidelines: “Reasonably Foreseeable  Actual Knowledge”

Blog By: Stephen N. Preziosi Esq., Criminal Appeals Lawyer

Issue: Whether the District Court erred when it applied United States Sentencing Guidelines § 2K2.1(c), which requires knowledge and intent that a Defendant possessed or transferred a firearm or ammunition in connection with another offense, when the facts showed that it was only reasonably foreseeable that Defendant knew the firearms were being illegally smuggled and did not possess actual knowledge.

Summary: Defendant was charged with aiding and abetting the making of a false statement with respect to information required to be kept in the records of a licensed firearms dealer. Defendant’s Pre Sentence Report (PSR) found that the cross-reference at U.S.S.G. § 2K2.1(c)(1)(A), which applies where a Defendant possessed or transferred a firearm or ammunition with knowledge or intent that it would be used or possessed in connection with another offense, applied to Defendant.

The PSR report explained that it was reasonably foreseeable that Defendant knew that the firearms were being illegally smuggled into Mexico. The Government stated that it had no objection to the District Court’s consideration of a minor role reduction for the cross-reference; Defendant appealed to the Fifth Circuit Court of Appeals where the Court vacated and remanded for re-sentencing.

See Also: Sufficiency In Wire Fraud Cases: Evidence Must Demonstrate That Acts Were Made In Furtherance Of A Fraudulent Scheme. 

Holding: The Fifth Circuit Court of Appeals held that the District Court erred when it utilized the wrong legal standard in applying U.S.S.G § 2K2.1(c), when there was no record Defendant had actual knowledge that the firearms were being illegally smuggled. Because the Government has failed to meet their burden to show that the error was harmless, the Court vacated Defendant’s sentence and remanded for re-sentencing.

U.S.S.G § 2K2.1, applies where a Defendant possessed or transferred a firearm or ammunition with knowledge or intent that it would be used or possessed in connection with another offense.

Facts: Defendant Jiminez was charged with aiding and abetting the making of a false statement with respect to information required to be kept in the records of a licensed firearms dealer. Defendant’s PSR found that the cross-reference at U.S.S.G. § 2K2.1(c)(1)(A), which applies where a Defendant possessed or transferred a firearm or ammunition with knowledge or intent that it would be used or possessed in connection with another offense, applied to Jiminez.

The PSR report explained that it was reasonably foreseeable that Defendant knew that the firearms were being illegally smuggled into Mexico. The Government stated that it had no objection to the District Court’s consideration of a minor role reduction for the cross-reference; Defendant appealed to the Fifth Circuit Court of Appeals. The Fifth Circuit held that the District Court erred in utilizing the wrong legal standard in applying the U.S.S.G. § 2K2.1(c) cross-reference, and because the Government has failed to meet its burden and showed no indication on the record that Defendant possessed actual knowledge of that offense, the Court vacated Defendant’s sentence and remanded for re-sentencing.

Legal Analysis: The Fifth Circuit Court of Appeals held that they ordinarily review the appeal of a sentence for procedural error and for substantive reasonableness, applying abuse of discretion standard, Gall v. United States, 552 U.S 38, 51 2007. However, because Defendant challenges only the District Court’s application of the Guidelines, the Court of appeals held that they need consider only that procedural aspect of the sentence, United States v. Simmons, 649 F.3d 301, 305 5th Cir. 2011. The District Court’s application of the Guidelines is reviewed de novo, and its factual findings are reviewed for clear error, United States v. Hicks, 389 F.3d 514, 529 5th Cir. 2004.

      If a District Court commits a significant procedural error, such as an improper calculation of the Guidelines range, an Appellate Court must reverse and remand unless the error was harmless, United States v. Delgado-Martinez, 654 F.3d 750, 752-52 5th Cir.2009. A procedural error during sentencing is harmless is the error did not affect the District Court’s selection of the sentence imposed.

 The Fifth Circuit Court of Appeals held that a party seeking to uphold the sentence bears the burden of establishing harmless error and must point to evidence in the record that will convince an Appellate Court that the District Court had a particular sentence in mind and would have imposed it, notwithstanding the error made in arriving at the Defendant’s Guideline’s range.

Here, Defendant challenged the application of the U.S.S.G § 2K2.1 (c) (1(A) cross reference, arguing that the District Court applied the wrong legal standard and that, even if it applied the correct legal standard, the evidence does not support the application of the cross-reference.

The Fifth Circuit held that the cross-reference applies only if the District Court finds that 1) the firearm facilitated or had the potential to facilitate another offense., and 2) the Defendant transferred the firearm knowingly or intending it to be used or possessed for that offense, United States v. Johnston, 559 F.3d 292, 295 5th Cir. 2009.

The Fifth Circuit held in Johnston, they reviewed a District Court’s application of the cross-reference where the Defendant knew or should have known that the firearm would be used to commit another offense; the Court reversed and remanded for re-sentencing clarifying that the cross-reference applies only if the Defendant transferred the gun knowing it would be used to commit the other offense, and stating that, the cross reference should not be followed if the Defendant should have known, but did not actually know the gun would be used for the other offense.

Sufficiency In Wire Fraud Cases: Evidence Must Demonstrate That Acts Were Made In Furtherance Of A Fraudulent Scheme

By Stephen N. Preziosi, September 25th, 2014

 criminal appeals attorney, sufficiency in wire fraud cases, evidence must demonstrate that acts were in furtherance of a fraudulent scheme.

U.S v. Durham, Cochran, and Snow

United States Court of Appeals for the Seventh Circuit

Nos. 12-3819, 12-3833 & 12-3867

Decided on: September 4, 2014

Blog By: Stephen N. Preziosi Esq., Criminal Appeals Attorney

Where Appellate Court Reviews For Sufficiency Of Evidence, Review Is De Novo

Issue: Whether there was sufficient evidence to support a criminal conviction for conspiracy to commit wire fraud and securities fraud and whether Defendants’ used the wires in furtherance of that scheme where the evidence produced at trial consisted of single-page printouts reflecting transfers that were meant to be the first pages of much larger exhibits and the Government neglected to introduce additional evidence regarding the circumstances of these transfers.

Summary: Defendants’ were convicted of perpetrating widespread financial fraud at Fair Holding, a respectable company that had been in the business of providing financial services primarily focusing on consumer receivables. Fair Holdings’s accountants soon began questioning its financial statements, raising numerous concerns about third-party loans and noting that they lacked sufficient collateral. As problems mounted, the FBI began a criminal investigation into Fair’s activities after receiving a proffer from a Fair board member who was targeted in a separate investigation. The board member disclosed that Fair was being operated as a Ponzi scheme.

The FBI investigated for approximately 8 months, then sought and obtained authorization to tap Durham, Fair Holding’s CEO’s phone. Recorded phone calls revealed many discussions about how to hide Fair’s true financial status from regulators and investors. The FBI used this evidence to obtain a warrant to search Fair’s office and seize its computer servers, effectively shutting the company down.

Durham was charged with conspiracy to commit wire fraud and securities fraud; and the substantive crimes of wire fraud and securities fraud. Durham challenged the sufficiency of evidence on two counts of wire fraud. The Seventh Circuit Court of Appeals concluded that there was insufficient evidence in the record to establish that these particular wire transfers were made in furtherance of a fraudulent scheme.

See Also: Confrontation Rights At Federal Revocation Hearings: Defendant’s Limited Confrontation And Due Process Rights

Holding: The Seventh Circuit Court of Appeals held that the Government introduced no evidence from which a jury reasonably could conclude that these particular wire transfers were made in furtherance of the fraudulent scheme. The gap in the trial record left the Court no choice but to reverse Defendant Durhams’s conviction on insufficient evidence. Although the single-page print outs were meant to be the first pages of much larger exhibits, the Government failed to introduce additional evidence regarding the circumstances of the transfers.

The Seventh Circuit held that in order to prove that these transfers constituted wire fraud, the Government needed to establish that Defendant 1) was involved in a scheme to defraud; 2) had an intent to defraud; and 3) used the wires in furtherance of that scheme.

The Seventh Circuit held that they review evidence in the light most favorable to the Government and will ask whether any trier of fact could have found the essential elements of the crime beyond a reasonable doubt.

Facts: Defendants’ Timothy Durham, James Cochran, and Rick Snow were convicted of perpetrating widespread financial fraud at Fair Holding. Durham was its CEO, Cochran was its COO and chairman of the board, and Rick Snow was its CFO. Fair Holdings’s accountants soon began questioning its financial statements, raising numerous concerns about third-party loans and noting that they lacked sufficient collateral. As problems mounted, the FBI began a criminal investigation into Fair’s activities after receiving a proffer from a Fair board member who was targeted in a separate investigation. The board member disclosed that Fair was being operated as a Ponzi scheme.

Durham was charged with conspiracy to commit wire fraud. and securities fraud. He challenged the sufficiency of evidence on two counts of wire fraud. The Seventh Circuit Court of Appeals concluded that there was insufficient evidence in the record to establish that these particular wire transfers were made in furtherance of a fraudulent scheme.

Legal Analysis: The Seventh Circuit Court of Appeals held that in order to review sufficiency of evidence, they review the evidence in the light most favorable to the Government and ask whether any trier of fact could have found the essential elements of the crime beyond a reasonable doubt, Unites States v. Love, 706 F.3d 832, 837 7th Cir.2013. In this case, Defendant Durham argues that the evidence was insufficient on Counts 2 and 5. Count 2 involved a transfer of $250,000 from Fair to Fair Holdings; Count 5 concerned a transfer of $50,000 from Fair to Fair Holdings.

The Seventh Circuit held, in order to prove that these transfers constituted wire fraud, the Government needed to establish that Defendant 1) was involved in a scheme to defraud; 2) had an intent to defraud; and 3) used the wires in furtherance of that scheme. Unites States v. Leahy, 464 F.3d 773, 786 7th Cir. 2006

.The Seventh Circuit held that they agreed with Defendant that there was insufficient evidence in the record to establish that these particular wire transfers were made in furtherance of the fraudulent scheme.

Here, the Government introduced single-page printouts reflecting each transfer. At most, the evidence shows that the wire transfers were in fact made; it does not establish that the transfers were made in furtherance of the fraudulent scheme.

The Government intended to introduce additional evidence regarding the circumstances of these transfers, however, they neglected to do so. The single-page printouts were meant to be the first pages of much larger exhibits. The complete exhibits were transferred to the Court of Appeals in connection with this appeal; the exhibits included financial records tracing the money and documenting how it was used. For what it’s worth at this too-late stage of the case, The Court held that these additional documents showed that the $250,000 wire transfer paid for a luxury garage and the $50,000 transfer was used to pay dues at a country club. Consequently, the trial record contained only the single-page printouts showing that the two wire transfers were made. Without the additional documentary evidence, the jury had no evidence about how the money was used.

The Government offers up a Hail Mary in an attempt to salvage these two convictions. Its theory is that the trial evidence was sufficient to show that the modus operandi of the entire scheme involved wire transfers between Fair and Fair Holdings.

The Seventh Circuit held that the argument is problematic because it will essentially transform every wire transfer from Fair to Fair Holdings into a criminal act. The evidence supports the basic theory that Fair Holdings was used to further Defendant’s illicit scheme, but the Government has not established that fraud was its exclusive function. Moreover, because this argument was not raised at trial, Defendant Durham was unable to defend against it.

The Seventh Circuit Court of Appeals reversed on Counts 2 and 5 and remanded for re-sentencing.