184 F.3d 566 (6th Cir. 1999), 97-6097, US v. Ford
|Docket Nº:||Donald G. Ford (97-6097/6270); Sandra Hutchins Ford (97-6271), Defendants-Appellants.|
|Citation:||184 F.3d 566|
|Party Name:||United States of America, Plaintiff-Appellee, v.|
|Case Date:||July 23, 1999|
|Court:||United States Courts of Appeals, Court of Appeals for the Sixth Circuit|
Argued: October 29, 1998
Rehearing and Suggestion for Rehearing En Banc Denied Oct. 8, 1999
Appeal from the United States District Court for the Western District of Kentucky at Louisville. Nos. 93-00081; 93-00082--Charles R. Simpson, III, Chief District Judge.
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Terry M. Cushing, Alexander T. Taft, Jr., Michael R. Mazzoli, OFFICE OF THE U.S. ATTORNEY, Louisville, Kentucky, for Appellee.
Robert C. Webb, BROWN, TODD & HEYBURN, Louisville, Kentucky, Alan M. Dershowitz, HARVARD LAW SCHOOL, Cambridge, Massachusetts, C. Fred Partin, Louisville, Kentucky, for Appellants.
Before: NELSON, CLAY, and GIBSON,[*] Circuit Judges.
JOHN R. GIBSON, Circuit Judge.
Don Ford and his wife, Sandra Hutchins Ford,1 appeal their convictions for operation of an illegal gambling business, 18 U.S.C. § 1955 (1994), and money laundering, 18 U.S.C. §§ 1957 (1994) (both defendants) and 1956(a)(1)(B)(1994) (Ford only). Ford also appeals his conviction under 26 U.S.C. § 7206(1) (1994) for filing a false income tax return. Both raise numerous claims of error in denying various motions and in sentencing. Ford and Hutchins raise Fourth Amendment issues concerning the search of Ford's bingo hall and another building. They also contend that the district court erroneously determined that there were no permissible bases for departure from the Guidelines sentencing range. We reverse Ford's tax conviction because it is based on evidence that was seized in violation of his Fourth Amendment rights. We affirm Ford's and Hutchins's gambling and money laundering convictions, but remand Ford's case for
resentencing in light of the reversal of his tax conviction.
Don Ford owned and operated the Arcade Bingo Plaza, which was in the business of conducting bingo games for the benefit of charities. Under Kentucky law, it is illegal to promote gambling (which includes bingo) other than "charitable gaming" subject to complex rules that were amended twice during the time periods relevant to this case. See Ky. Rev. Stat. Ann. §§ 528.010(10) (Michie 1985); 1990 Ky. Rev. Stat. and R. Serv. ch. 469 (Banks-Baldwin) (effective July 13, 1990); 1992 Ky. Rev. Stat. and R. Serv. ch. 461(Banks-Baldwin) (effective April 13, 1992). Throughout the time in question, gambling could only be legal "charitable gaming" if it was operated by a tax exempt organization; if that organization had maintained tax exempt status for five years before the gaming; if the gaming was conducted exclusively by unpaid volunteers for the charity; and if the proceeds were used solely for the charitable purposes of the organization. During various times there were many other requirements for the conduct of charitable gaming, including a limitation of $5,000 per day in prizes and limitations on the number of days and hours per week the organization could conduct gaming.
Ford first operated the Arcade Bingo Plaza in Louisville, Kentucky in 1990, conducting bingo games for various charities, such as the Knights of Columbus. Ford would charge the charities rental and overhead for use of the hall. Hutchins was Ford's second in command at the Arcade Plaza, and when he was not there she conducted the business. Instead of using volunteers from the sponsoring charities to run the bingo games in accordance with Kentucky law, Ford hired workers. The workers were paid from money "cut" or "skimmed" from the bingo proceeds. The skim was made by the controller for the session, then given to Hutchins. The workers were paid in cash, often surreptitiously handed to them in a handshake. The amount of money skimmed varied with the size of the crowd, because the more players there were, the larger the amount that could be skimmed without the players detecting the diminution of the prize money. Sometimes there was cash left over from the skim after the workers were paid; this money would be put in the safe in "Mr. Ford's compartment."
In November 1990 Ford sold the Arcade Plaza to his employee Clay Ballinger, for $1 down and $249,999 in credit. Ford had no further role in the operation of the bingo hall, except to collect payments from Ballinger, until the end of 1991.
At that time Ford came up with the idea of controlling his own charitable sponsor. Ford bought the Arcade Plaza back from Ballinger. Ford reactivated a lapsed post of the Regular Veterans Association on December 16, 1991. Later, he registered several other RVA Posts and suborganizations. Because of the statutory limitations on the number of sessions one organization could sponsor and the amount of prize money an organization could award in one day, once the limits had been reached for one RVA sponsor, Ford would substitute another RVA sponsor. At a Christmas party for the Arcade workers in 1991, Ford told the workers that the RVA was going to sponsor bingo games at the Arcade Plaza. The workers testified that Ford expected them to join the RVA in order to work at the Arcade Plaza. Bingo patrons at the hall were invited to join the RVA, and the RVA subsidized their $5 dues with a bingo pass worth $5.
Ford made himself treasurer and Sandra Hutchins secretary of the RVA entities he controlled. Ford and Hutchins were the signatories on the various RVA bank accounts. The other officers were Ford's employees or long-time associates who had virtually no knowledge of the RVA posts' operation or function. For instance, Clay Ballinger was president of one post, although he couldn't say which. He testified at trial, "To this day, I really can't tell you what RVA is." Roy Bunch, president of
RVA Post No. 1, stated: "I was President of the club, but I had no position . . . Well, I had no authority, let's put it that way."
After the RVAs began sponsoring bingo at the Arcade Plaza, the method of paying non-RVA charitable sponsors changed. Rather than the old system of paying the sponsors the net proceeds, Ford and Hutchins began paying a flat fee of $500 in the form of a check and $500 cash "discreetly" handed to the sponsor's representative. The result of the new system was that the non-RVA sponsors made less and the Arcade Plaza kept more of the proceeds. In addition, Ford began giving the RVA the proceeds of the pull-tab games sold by vendors on the bingo floor during other sponsors' sessions.
After Kentucky law was changed in April 1992 to forbid the award of more than $5,000 in prizes in one day, 1992 Ky. Rev. Stat. and R. Serv. ch. 461, Hutchins altered Arcade Plaza records to eliminate any record of prizes exceeding the $5,000 limit.
After police executed a search warrant on the Arcade Bingo Plaza and the RVA Hall across the street, Ford and Hutchins were indicted on two counts of operating a gambling business in violation of state law, 18 U.S.C. § 1955. Ford was also indicted on twenty-eight counts of engaging in monetary transactions in criminally derived property for transactions involving gambling proceeds, 18 U.S.C. § 1957; three counts of engaging in transactions undertaken to disguise the nature, location, source, ownership or control of criminally derived money, 18 U.S.C. § 1956(a)(1)(B)(i) and (ii); and one forfeiture count. Hutchins was indicted on two counts of engaging in monetary transactions with criminally derived proceeds, 18 U.S.C. § 1957, and one forfeiture count. (Offenses under both section 1956 and section 1957 are referred to as "money laundering" offenses.)
Ford was also indicted in a separate case of eleven counts of tax offenses completely unrelated to the bingo operation. During the search of the RVA Hall at 2902 South Seventh Street Road, across from the Arcade Plaza, police seized documents that had no relation to the bingo operation, including files from 1984 to 1988 relating to a real estate transaction known as the "Huber's deal." In the Huber's deal, Ford had sold land to Huber's, Incorporated for $1.5 million, in the form of $400,000 down and a note for $1.1 million. Ford sold the $1.1 million note to his accountant for $800,000 and took a $300,000 loss from the sale transaction on his 1986 income tax. The accountant paid Ford for the note with the proceeds of a bank loan; simultaneously, Ford used the $800,000 to purchase a certificate of deposit which Ford pledged to secure the accountant's bank loan. When Huber's paid the $800,000, the accountant paid off the loan and the bank released its lien on Ford's certificate of deposit. The accountant then assigned the Huber's, Inc. note back to Ford, who eventually received the remaining $330,969.33 payment from Huber's, Inc. in 1988. Ford did not report that payment as income on his 1988 tax return.
After a jury trial on the gambling and money laundering charges, Ford was convicted of both gambling counts, twenty-six counts of section 1957 money laundering and one count of section 1956 money laundering. Hutchins was convicted of one of the gambling counts and two counts of section 1957 money laundering. In the separately tried tax case, Ford was convicted of one count of filing a false income tax return, 26 U.S.C. § 7206(1), for failing to report income on his 1988 return.
Ford was sentenced to twenty months' imprisonment in the tax case, and 108 months in the gambling and money laundering case, to be served concurrently with each other. Hutchins was sentenced to forty-one months' imprisonment. Both appeal from...
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