U.S. v. Martinelli

• Decision Date: 10 July 2006
• Docket Number: No. 04-13977.,04-13977.
• Citation: 454 F.3d 1300
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. David E. MARTINELLI, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

454 F.3d 1300

UNITED STATES of America, Plaintiff-Appellee, v. David E. MARTINELLI, Defendant-Appellant.

No. 04-13977.

United States Court of Appeals, Eleventh Circuit.

July 10, 2006.

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Edward T.M. Garland, Donald F. Samuel, Garland, Samuel & Loeb, P.C., Atlanta, GA, for Defendant-Appellant.

Nancy J. Hess, Dixie Angela Morrow, U.S. Atty., Pensacola, FL, E. Bryan Wilson, Tallahassee, FL, for Plaintiff-Appellee.

Appeal from the United States District Court for the Northern District of Florida.

Before DUBINA, MARCUS and COX, Circuit Judges.

MARCUS, Circuit Judge:

David Martinelli appeals from his conviction after a jury trial and the ensuing 210-month prison sentence for conspiring to launder money in violation of 18 U.S.C. §§ 1956(a)(1) and (h). Martinelli claims that the district court should have suppressed certain evidence, that it erred in its jury instructions and at sentencing. After thorough review, we affirm the conviction but remand for resentencing in light of United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005).

I.

The basic facts developed at trial in this money laundering conspiracy case are these. In 1995, Martinelli and two associates formed Global Business Services, Inc. ("GBS"),¹ a corporation purportedly designed to facilitate the sale of small businesses by putting hopeful sellers in contact with willing buyers. GBS would randomly send letters to small-business owners, attempting to locate those who were interested in selling their business. When a potential seller responded, a GBS representative would meet with the client and gather information about the business. The representative would explain that GBS placed generic advertising in national publications representing that it had businesses for sale; when interested buyers responded, GBS would attempt to match them with compatible sellers.

A seller was required to sign a contract whereby it agreed to pay GBS a certain percentage of the total value of the business in exchange for the advertising. Donald Cox, the original President and CEO of GBS, testified for the government at trial that clients had to immediately pay a small percentage, "around 2 percent," and then an additional "5 to 7 percent" if the business actually sold. The government also presented evidence of initial fees ranging from $1,900 to $16,900. The contracts stated that GBS would provide advertising until the business sold, but did not guarantee an actual sale. Mr. Cox stayed with GBS for slightly under twelve months and testified that, during this time, GBS did not facilitate the sale of a single business.

Cox also testified concerning numerous misrepresentations made by GBS. Thus, for example, he said that GBS sent direct mailings to small-business owners with testimonials from allegedly satisfied customers describing how GBS helped to sell their businesses. In fact, there were no such customers, and the people pictured in the representations were actually Martinelli and other GBS employees. Cox also described how GBS represented in its mailings to putative sellers that all of its buyers were prequalified to ensure they had the financial ability to purchase a business when, in fact, such screening was discontinued soon after GBS was formed. Moreover, Cox testified that GBS touted that it used a sophisticated computer matching system to bring together compatible buyers and sellers. Actually, at least initially, GBS had no computers at all, and all buyers and sellers were manually logged in record books.²

The government also presented the testimony of over 100 witnesses at trial, many of whom were businesspeople who signed contracts with GBS in hopes of selling their companies. They generally testified to receiving the false mailings, which advertised previously successful sales and a sophisticated computer matching system, and to the manner they were subsequently treated by Martinelli and other GBS employees. Various sellers said that a GBS employee who visited with them recounted the many sales GBS had facilitated in the past and predicted a "quick sell" for the business at hand. Many of the sellers never received any "match" at all, and those who did often found that the person purportedly interested in their business did not exist, had never heard of GBS, had no interest in buying a business, or was interested in a wholly unrelated kind of business. Indeed, sellers were given contact names of fictitious GBS employees and Martinelli placated those who complained by sending them bogus matches. As one GBS employee testified, there was "very little" emphasis on securing buyers because "our income was coming from" the sellers. In fact, the evidence established that GBS arranged the sale of only one business between 1995 and 2000, and even that sale occurred only after an ambitious GBS employee scoured the phone book and randomly located a buyer for a seller's trash company.

Carl Carr, an indicted co-defendant and GBS operations manager and vice president, pled guilty and also testified for the government. Carr described the fraud at GBS in great detail. He explained that the defendant, Martinelli, employed fake names in GBS correspondence to avoid being recognized as having a role in the organization and to make it appear as if GBS had a large and stable workforce. Martinelli also knowingly placed false statements in GBS mailings, including assurances that buyers would be financially prequalified and promises of a sophisticated computer matching system, all designed to induce sellers to sign a contract with GBS. Carr confirmed that there was no sophisticated computer matching system and that the testimonials from satisfied customers were entirely false. He observed that GBS sales representatives were told of past successes because "[w]e wanted them to think that we were a reputable business and that we were doing what we said we were doing."

Moreover, Carr described how Martinelli falsified documents (including the application)³ submitted to the Better Business Bureau so that GBS could become a member of that organization and then tout its membership to prospective customers. Finally Carr confirmed that Martinelli was well aware of the fraudulent activities at GBS, stating that Martinelli personally wrote many of the fraudulent mailings and knowingly engaged in the fraudulent practices to induce customers to sign with GBS.

The government also presented testimony regarding the money that was generated from the fraudulent activities. Among other things, GBS employees testified that when a seller submitted payment after signing a contract, that money was generally deposited into one of several GBS-controlled bank accounts. The money in those accounts was then used to fund the underlying scheme to defraud. Thus, for example, Martinelli used the fraudulently-derived proceeds to pay for more fraudulent brochures and mailings, which would, in turn, then be sent to additional potential customers, thereby generating still more illegal proceeds. Evidence was also presented that Martinelli and his family used funds drawn on GBS accounts for personal expenditures such as clothing for Mrs. Martinelli and cellular phone service for Martinelli's children.⁴

The government also presented evidence that GBS moved funds between various accounts under the guise of "loans" to and from GBS, even though the "loaned" money belonged to GBS in the first place. Thus, for example, GBS funds were deposited into a trust fund controlled by Martinelli, withdrawn via a check made out to cash, converted into a cashier's check, and then redeposited into a GBS account as the proceeds of a "loan." All told, between 1995 and 2000, some $6.6 million was deposited into bank accounts controlled by Martinelli and at least 1,521 customers of GBS were identified.⁵

A jury found Martinelli guilty of one count of conspiracy to launder money. He now challenges the district court's refusal to suppress certain evidence procured from several search warrants, the failure to give certain requested jury instructions, and his sentence.

II.

By early April of 2000, GBS had become World Business Services, Inc. ("WBS"), WBS had filed for bankruptcy, and Martinelli had re-opened his venture under the name International Business Associates ("IBA"). On April 12, 2000, investigators with the Bay County Sheriff's Office executed search warrants issued by a state judge at the former business location for WBS and the business location for IBA. More than one year later, a United States magistrate judge issued a federal warrant for computers seized during those searches.

Martinelli moved to suppress the proceeds recovered from both the state and federal warrants. The district court conducted an evidentiary hearing, and ultimately ruled that (1) the state search warrants were supported by probable cause; (2) the state search warrants were not overbroad in failing to describe with particularity what was to be seized; (3) Martinelli was not entitled to a hearing pursuant to Franks v. Delaware, 438 U.S. 154, 98 S.Ct. 2674, 57 L.Ed.2d 667 (1978); (4) even if the warrants had been deficient, the evidence still would not be suppressed because of the "good faith exception" to the exclusionary rule; (5) the federal warrant was not tainted by any improprieties found in the state warrants; and (6) Martinelli did not have Fourth Amendment "standing" to challenge the WBS search in the first place. Martinelli challenges each of those rulings.

First, Martinelli says that the affidavits used in support of the applications for the state search warrants failed to establish probable cause. In reviewing a district court's ruling on a motion to suppress, we review findings of fact for clear error and the application of the law to those facts de novo. United States v. Muegge, 225 F.3d 1267, 1269 (11th Cir. 2000); see also United States v. Jiminez, 224 F.3d 1243,...