U.S. v. Gharbi

• Citation: 510 F.3d 550
• Decision Date: 17 December 2007
• Docket Number: No. 06-51237.,06-51237.
• Parties: UNITED STATES of America, Plaintiff-Appellee-Cross-Appellant, v. Mohammad H. GHARBI, Defendant-Appellant-Cross-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

510 F.3d 550

UNITED STATES of America, Plaintiff-Appellee-Cross-Appellant, v. Mohammad H. GHARBI, Defendant-Appellant-Cross-Appellee.

No. 06-51237.

United States Court of Appeals, Fifth Circuit.

December 17, 2007.

Joseph H. Gay, Jr., Asst. U.S. Atty. (argued), San Antonio, TX, for U.S.

F. Clinton Broden (argued), Franklyn Ray Mickelsen, Jr., Broden & Mickelsen, Dallas, TX, for Gharbi.

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

Before JONES, Chief Judge, and DeMOSS and STEWART, Circuit Judges.

EDITH H. JONES, Chief Judge:

Mohammad Gharbi appeals his conviction of conspiracy and fraud, arguing he was deprived of his Sixth Amendment right to choice of counsel. The Government, in turn, cross-appeals the district court's sentencing decision not to enhance Gharbi's offense level for deriving more than $1 million in "gross receipts" as a result of his fraud. We affirm the conviction, vacate the sentence, and remand for re-sentencing.

BACKGROUND

Mohammad Gharbi is one of twenty defendants who were involved in a large-scale conspiracy to defraud various lenders by obtaining residential real estate loans by means of materially false statements. The conspiracy included, among others, real estate agents, loan processors, appraisers, "straw" buyers and sellers, real estate brokers, and an attorney. The conspirators' typical practice was to purchase a property, obtain a falsely inflated appraisal, and then re-sell, or "flip," the property and pocket the profit. Gharbi, who was a real estate agent in the Austin area, bought and sold properties as part of the conspiracy.

Gharbi's primary trial counsel was David Reynolds. On the morning of trial, Reynolds informed the district court that he needed assistance in trying the case, and sought to enlist Steve Brittain as co-counsel. The Government objected to this arrangement, arguing that Brittain had a conflict of interest because he also represented Gharbi's daughter, Maryam Gharbi ("Maryam"), who was a co-defendant and potential witness in Gharbi's case. Brittain had represented Maryam in negotiating a plea bargain under which she agreed to testify against her father if called by the Government. At the time of the trial, the district judge had not yet accepted Maryam's guilty plea.

Reynolds explained that he and Brittain had erected a "Chinese Wall" between them, and that Brittain would not share any confidential information received from Maryam. Reynolds also stated that Brittain would not cross-examine Maryam in the event she appeared as a witness at trial. Both Gharbi and Maryam testified that they understood and waived any potential conflicts. Nonetheless, the district court found the conflict of interest to be unwaivable, and denied Reynolds's request to associate Brittain as co-counsel.

After a five-day trial, a jury convicted Gharbi on one count of conspiracy to commit mail fraud (18 U.S.C. § 1349); two counts of mail fraud (18 U.S.C. § 1341); one count of wire fraud (18 U.S.C. § 1343); and one count of bank fraud (18 U.S.C. § 1344). At sentencing, the Presentencing Report ("PSR") and Addendum described how Gharbi fraudulently obtained over $1 million in loans, and recommended Gharbi's offense level be enhanced to a minimum of 24 under the United States Sentencing Guidelines § 2B1.1(13)(A). The Government argued in support of this enhancement, but Gharbi objected, contending he should not be charged with loan amounts that were used to retire pre-existing liens on the subject properties. The district court agreed Gharbi should not be charged with loan amounts that went to pay these "legitimate" debts, and declined to apply the § 2B1.1(13)(A) enhancement. Gharbi's offense level was set at 15, with an advisory range of 18 to 24 months' imprisonment. The district court then sentenced Gharbi below the advisory range, to a prison term of 12 months and one day, five years' supervised release, restitution in the amount of $84,914, and a $500 special assessment.

This appeal and cross-appeal followed. Gharbi argues he was deprived of his Sixth Amendment right to choice of counsel and is entitled to a new trial. The Government argues the district court misinterpreted § 2B1.1(13)(A) of the Guidelines, and maintains Gharbi's offense level should have been enhanced under this provision.

DISCUSSION

I. Gharbi's Sixth Amendment Claim

Gharbi contends the district court violated his Sixth Amendment right to choice of counsel by denying Reynolds's request to associate Brittain. The Sixth Amendment to the Constitution guarantees that "[i]n all criminal prosecutions, the accused shall enjoy the right . . . to have the Assistance of Counsel for his defence." U.S. Const. amend VI; United States v. Morrison, 449 U.S. 361, 364, 101 S.Ct. 665, 66 L.Ed.2d 564 (1981). Part of this guarantee is a criminal defendant's right to retain the attorney of his choice. Powell v. Alabama, 287 U.S. 45, 53, 53 S.Ct. 55, 77 L.Ed. 158 (1932). The right to counsel of choice, however, is not absolute. Rather, "the essential aim of the [Sixth] Amendment is to guarantee an effective advocate for each criminal defendant rather than to ensure that a defendant will inexorably be represented by the lawyer whom he prefers." See Wheat v. United States, 486 U.S. 153, 159, 108 S.Ct. 1692, 100 L.Ed.2d 140 (1988). Thus, there is a presumption in favor of a defendant's counsel of choice, but that presumption may be overcome by an actual conflict of interest, or by a showing of a serious potential for conflict. Id. at 164, 108 S.Ct. 1692. This is true even when a defendant expresses a desire to waive the potential conflict. Id.; United States v. Sotelo, 97 F.3d 782, 791 (5th Cir.1996).

A valid waiver does not end the inquiry because the district court has an "independent interest in ensuring that criminal trials are conducted within the ethical standards of the profession and that legal proceedings appear fair to all who observe them." Wheat, 486 U.S. at 160, 108 S.Ct. 1692. If a court justifiably finds an actual conflict of interest, "there can be no doubt that it may decline a proffer of waiver." Id. at 162, 108 S.Ct. 1692. Because "the likelihood and dimensions of nascent conflicts of interest are notoriously hard to predict," we afford the district court substantial latitude in refusing a waiver where a potential conflict may or may not develop into an actual conflict at trial. Id. at 162-63, 108 S.Ct. 1692. We will not reverse a district court's disqualification of counsel for conflict unless the defendant can show the district court abused its substantial discretion in this area. Sotelo, 97 F.3d at 791.

Here we find no abuse of discretion. The district court began with the presumption that Gharbi was entitled to counsel of his choice. Nonetheless, the court found, for a number of reasons, that the presumption was overruled by an irreconcilable conflict of interest. The court noted that Maryam might well be called to testify against her father. If she were called, the court found it "impossible to guess whether [Gharbi's combined] defense team would pull punches" on cross-examination, thereby providing ineffective assistance to Gharbi. The district court also recognized the opposite risk, that Gharbi's counsel could "attack" Maryam Gharbi "with great detail" and thereby jeopardize her plea agreement. Compounding these difficulties was the close family relationship between Gharbi and his daughter, which the court found could create "pressure either real or perceived" on the direction of Maryam's testimony. These factors presented a serious potential for conflict that, in the district court's judgment, could not be resolved by Reynolds's proposed arrangements. In order to protect the rights of all parties and preserve the appearance of fairness, the district court held that Gharbi and Maryam needed separate and independent counsel.

This decision was well within the bounds established by Wheat and is consistent with our precedent. In United States v. Izydore, this court affirmed that a court may deny a request to associate co-counsel based on the serious potential for a conflict of interest. 167 F.3d 213, 221 (5th Cir. 1999). Likewise, in United States v. Millsaps, we affirmed the district court's decision to disqualify a defense attorney who had previously served as counsel for a government witness, citing the potential for "divided loyalties." 157 F.3d 989, 996 (5th Cir.1998). The authorities Gharbi cites are distinguishable,¹ and, in any event, show only that "other district courts might have reached differing or opposite conclusions" if faced with somewhat similar facts. See Wheat, 486 U.S. at 164, 108 S.Ct. 1692. This is insufficient to show an abuse of discretion.

II. Sentencing Appeal

In its cross-appeal, the Government contests the district court's decision not to enhance Gharbi's offense level under U.S.S.G. § 2B1.1(13)(A). We review the district court's findings of fact for clear error and its interpretation and application of the Guidelines de novo. United States v. Sanchez, 484 F.3d 803, 810 (5th Cir. 2007).

Courts interpreting the Guidelines must begin with the text of the provision at issue and the plain meaning of the words in the text. United States v. Wise, 447 F.3d 440, 446 (5th Cir.2006). Here, the text provides that a defendant's offense level shall be enhanced by two levels, with the total offense level not to be lower than 24, if "the defendant derived more than $1,000,000 in gross receipts from one or more financial institutions as a result of the offense." U.S.S.G. § 2B1.1(13)(A), (D). The accompanying commentary defines "gross receipts" as "all property, real or personal, tangible or intangible, which is obtained directly or indirectly as a result of such offense." U.S.S.G. § 2B1.1(13)(A) cmt. n.11(B).

Here, the question is how properly to calculate the "gross receipts" Gharbi derived from eight residential real estate transactions.²...