U.S. v. Threadgill

• Decision Date: 13 April 1999
• Docket Number: No. 97-40241,97-40241
• Citation: 172 F.3d 357
• Parties: UNITED STATES of America, Plaintiff-Appellee-Cross-Appellant, v. Walter Matthew THREADGILL, Jr.; Walter Matthew Threadgill, III; Michael Glenn Rigler; Timothy Ray Klement; Mark Victor Threadgill, Defendants-Appellants-Cross-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 357

172 F.3d 357

UNITED STATES of America, Plaintiff-Appellee-Cross-Appellant, v. Walter Matthew THREADGILL, Jr.; Walter Matthew Threadgill III; Michael Glenn Rigler; Timothy Ray Klement Mark Victor Threadgill Defendants-Appellants-Cross-Appellees.

No. 97-40241.

United States Court of Appeals Fifth Circuit.

April 13, 1999.

Heather Harris Rattan, Clifford Benjamin Stricklin, Assistant U.S. Attorney, Sherman, TX, for Plaintiff-Appellee-Cross-Appellant.

Richard Allen Wright, Las Vegas, NV, for Walter Matthew Threadgill, Jr.

Gerald A. Banks, Dallas, TX, for Walter Matthew Threadgill, III.

William B. Sullivant, Sullivant, Sullivant, Meurer & Shaw, Gainsville, TX, for Michael Glenn Rigler.

Belvin R. Harris, Gainesville, TX, Aileen Rachelle Goldman, Jack Gordon Kennedy, Kennedy, Minshew, Campbell & Morris, Sherman, TX, for Timothy Ray Klement.

Robert Reddick Smith, Jr., Law Office of Robert R. Smith, Dallas, TX, for Mark Victor Threadgill.

Appeals from the United States District Court for the Eastern District of Texas.

Before REYNALDO G. GARZA, JONES and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

In this appeal we are asked to review the convictions and sentences of five defendants who operated a gambling operation in Gainesville, Texas. We also are presented with a cross-appeal from the government, challenging the district court's decision to depart downward at sentencing. As explained in this opinion, we detect no infirmity in the defendants' convictions or sentences, and affirm.

I.

On February 15, 1996, a federal grand jury returned a fourteen count indictment charging Walter Matthew Threadgill, Jr. ("Walter Threadgill"), and his sons, Walter Matthew Threadgill, III ("Matthew Threadgill") and Mark Victor Threadgill ("Mark Threadgill"), with various crimes relating to their involvement with an illegal gambling operation in Gainesville, Texas. Also charged in the indictment were codefendants Michael Glen Rigler ("Rigler"), and Timothy Ray Klement ("Klement"), who were closely involved with the Threadgills. Count one of the indictment charged the defendants with conducting an illegal gambling business in violation of 18 U.S.C. § 1955. ¹ Count two alleged that the defendants had conspired to commit money laundering in violation of 18 U.S.C. § 1956(h). Counts three through ten charged the defendants with various instances of money laundering in violation of 18 U.S.C. § 1956(a)(1)(A)(i) and (B)(i), and with aiding and abetting in the commission of those crimes in violation of 18 U.S.C. § 2. Counts eleven through fourteen were brought against Rigler only, alleging that he structured various financial transactions to evade reporting requirements, in violation of 31 U.S.C. § 5324.

At trial the evidence showed that Walter Threadgill had been a bookmaker since the early 1980s. He started alone, but was later joined by his sons Matt and Mark when the great Texas oil bust hit. That small family business eventually blossomed into a large scale gambling operation that handled millions of dollars in bets every year, and serviced hundreds of bettors in numerous states. ² Eventually, the Threadgills were joined by Klement, who brought his own bookmaking business to the organization, and Rigler, who was a practicing accountant.

The enterprise was profitably run for several years out of a windowless building in Gainesville, Texas. On an ordinary day the defendants would arrive in the morning, make sure that the game schedules in the computers were accurate, and then obtain various point spreads from a service in Florida. As the day progressed the defendants would take bets over the telephone and would enter the wagers on several computers, which ran on customized software designed to manage wagering. All conversations with bettors were automatically recorded on cassette tapes to avoid later disagreements. Once a week a computer printout was run of the bettors' accounts in order to settle the balances. Generally, bettors were told to make their checks payable to "Tom Johnson," a fictitious person, although some checks were made payable to the individual defendants.

Rigler, who worked for the organization as its accountant, would endorse and deposit the checks in the bank account of Hesperian Investment Corp ("Hesperian"), at North Texas Bank & Trust, a nationally insured bank. Hesperian was a legitimate business, owned by Rigler and Matthew Threadgill, that made small loans to individuals in advance of their income tax returns. Once the checks from the gambling operation were commingled with Hesperian's money, Rigler would withdraw cash from the account in amounts always less than $10,000. The proceeds were then divided equally among the other defendants, although some of the money was used to pay the gambling operation's expenses. For his services, Rigler initially charged $500 a month, which later increased to $700.

In the Fall of 1994, the Texas Department of Public Safety received anonymous tips about the Threadgills' bookmaking operation. The ensuing investigation revealed that ten telephone lines were being operated in the Threadgills' building, all listed to Cool Water Productions, a defunct corporation. The investigation also revealed heavy telephone activity at that address: over 1,600 calls were made to that location in one weekend alone. In December 1994, the defendants heard rumors that the police were investigating their gambling operation. The operation was then temporarily closed, and later reopened in a barn owned by Paul Smith ("Smith"), who also worked for the bookmaking operation. On March 8, 1995, state law enforcement officers searched Smith's residence and arrested Smith and Mark Threadgill for engaging in organized crime in violation of Texas law. In a search of the barn the police recovered gambling computers, cassette tapes, and sports schedules. Additional gambling records and cassette tapes were found in Smith's home and vehicle. When the officers realized how extensive the operation was--wagers were coming from nineteen states outside of Texas--federal assistance was requested.

On April 22, 1995, federal officers searched numerous locations related to the gambling operation. Discovered at Walter Threadgill's house were numerous sports schedules and excerpts from the Texas Penal Code, including a copy of Chapter 71 on organized crime, as well as §§ 47.02 through 47.06 of the Code, which covers various gambling activities. At Matthew Threadgill's house the officers found several computer printouts of betting records and sports schedules. At Klement's residence the officers found gambling records, notebooks containing betting information, bettors' names and addresses, and cashier's checks made payable to various bettors. Similar evidence was found at Mark Threadgill's home. A search of the Hesperian offices produced numerous corporate documents related to the bookmaking operation. The officers also found carbon copies of cashier's checks made payable to known bettors, and a ledger that tracked the various transactions.

At trial the jury heard 30 taped telephone conversations in which the defendants accepted wagers from their clients. Several bettors who had been given immunity also testified about their dealings with the defendants. Several of those bettors were from out of state. The jury also heard testimony from Smith, who turned government's witness and provided the jury with many details about the gambling operation. Finally, the jury heard from Rigler's bookkeeper, who stated that at Rigler's behest she commingled checks made payable to "Tom Johnson" with legitimate Hesperian funds. The jury ultimately found the defendants guilty on count one, the gambling charge, and guilty on count two, the conspiracy charge. The jury acquitted the defendants on the substantive money laundering offenses alleged in counts three through ten. Rigler was also found guilty on counts eleven through fourteen, the unlawful structuring counts.

The district court subsequently sentenced each of the defendants to 42 months imprisonment. Although their respective guideline ranges varied, the district court arrived at that uniform sentence by departing downward as to each defendant under U.S.S.G. § 5K2.0. The defendants now appeal their convictions. Mark Threadgill is the only defendant that appeals his sentence. The government cross-appeals, contending that the district court erred in departing downward.

II.

The defendants contend that their convictions must be set aside because federal agents used gambling tax records kept by the organization to secure search warrants and to later obtain a grand jury indictment. The defendants assert that the federal agents' use of those records abridged their Fifth Amendment rights against self-incrimination, and also violated the statutory requirements of 26 U.S.C. § 4424(c).

Walter Threadgill raised this argument in a motion to suppress filed in the district court, which was subsequently adopted by each of his codefendants. The district court, after holding a hearing, denied the motion in a written order. In reviewing a district court's denial of a defendant's motion to suppress, we review factual findings for clear error and conclusions of law de novo. See United States v. Carrillo-Morales, 27 F.3d 1054, 1060-61 (5th Cir.1994), cert. denied, 513 U.S. 1178, 115 S.Ct. 1163, 130 L.Ed.2d 1119 (1995). Additionally, we review the evidence in the light most favorable to the prevailing party which, in this case, is the government. United States v. Ishmael, 48 F.3d 850, 853 (5th Cir.), cert. denied, 516 U.S. 818 (1995).

Under federal law, persons who unlawfully accept wagers must nevertheless pay an excise tax equal to two percent of the unauthorized wagers. 26 U.S.C. §§ 4401 & 4411. That tax must be paid on a monthly basis, and must be reported on what is known as an IRS Form 730. 26 C.F.R. § 44.6011(a)(1)(a). To assist the IRS in determining whether a...