U.S. v. Arledge

• Decision Date: 22 December 2008
• Docket Number: No. 07-60825.,No. 08-60106.,07-60825.,08-60106.
• Citation: 553 F.3d 881
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Robert C. ARLEDGE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

553 F.3d 881

UNITED STATES of America, Plaintiff-Appellee, v. Robert C. ARLEDGE, Defendant-Appellant.

No. 07-60825.

No. 08-60106.

United States Court of Appeals, Fifth Circuit.

December 22, 2008.

Richard Terrell Starrett (argued), Harold Hendricks Brittain, Asst. U.S. Attys., Jackson, MS, for U.S.

Amy M. Adelson (argued), Dershowitz, Eiger & Adelson, New York City, William B. Kirksey, Kirksey & Associates, Jackson, MS, Karl J. Koch, Baton Rouge, LA, Michael Elias Winfield, Winfield & Moran, Vicksburg, MS, for Arledge.

Appeal from the United States District Court for the Southern District of Mississippi.

Before KING, DeMOSS and PRADO, Circuit Judges.

PRADO, Circuit Judge:

In this appeal, Robert Arledge ("Arledge") challenges his conviction for lack of sufficient evidence, alleges that the district court's failure to admit key pieces of evidence deprived him of the ability to present a defense, disputes the admission of evidence related to charges of which he was later acquitted, and maintains that the use of the 2006 Sentencing Guidelines violated the Ex Post Facto Clause of the Constitution. He also challenges the district court's restitution order by asserting that the record did not support the district court's calculation of the amount of "loss," argues that the restitution order violated the Eighth Amendment, maintains that the district court did not take into account requisite statutory factors, and asserts that the restitution order sets forth an unclear payment schedule. We affirm his conviction and sentence, vacate the restitution order, and remand for further proceedings consistent with this opinion.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Factual Background

A jury convicted Arledge of conspiracy and fraud for his involvement in filing fraudulent claims to recover from the Diet Drug Qualified Settlement Funds I and II (collectively the "Settlement Fund"), funds set up to compensate victims of the diet drug Fen Phen. In December 1999, a jury awarded five Mississippi plaintiffs $150 million in damages arising from their use of American Home Products's ("AHP") diet drugs Pondimin and Redux, commonly known as Fen Phen. AHP entered into a settlement agreement to pay $399 million to approximately 1500 claimants. This settlement, known now as "Fen Phen I," relied upon the claimants' attorneys to gather proof that their clients had taken Fen Phen. The settlement required these attorneys to submit proof of injury, if any, and releases of AHP from liability to the lead attorney in the Mississippi case, Michael Gallagher ("Gallagher"). Gallagher then submitted the information to a court-appointed administrator, Butch Cothren ("Cothren"), who determined the amount of the claimants' awards based upon predetermined criteria related to each claimant's medical injury. In December 2000, AHP entered into a second settlement, known as "Fen Phen II," in which it agreed to pay $350 million to an additional 1500 claimants. This settlement was processed in the same manner as the Fen Phen I settlement, with the exception that AHP received copies of the proof that each claimant had taken the drugs. Both settlements provided that claims with proof of usage were worth much more than claims without such proof.

Arledge was a lawyer in the law firm of Schwartz & Associates ("S&A") and head of the mass torts section of the firm. Arledge was one of several attorneys across the country who entered into a fee-splitting and referral-fee agreement to recruit clients for both Fen Phen settlements. The settlement agreements provided for a contingency fee of 40%. After deducting expenses and other costs, Gallagher, the lead attorney in the Fen Phen settlement cases, received 37.5% of the attorneys' fees, another law firm, Langston, Frazier, Sweet & Freese, received 37.5%, and S&A received 25%. Arledge and Richard Schwartz ("Schwartz") agreed to split equally the attorneys' fees collected by S&A. Thus, Arledge received 12.5% of the total contingency fee.

AHP, after reviewing the proof of usage provided by claimants in the Fen Phen II settlement, discovered numerous instances where the proof was identical for multiple claimants and where the proof of usage extended beyond the time when the drug was removed from the market. AHP wrote letters to Gallagher on February 12, 2001, and February 15, 2001, identifying eighty-two potentially false claims and directing that those claimants not be paid. All the claims originated from S&A. Gallagher met with Schwartz and Arledge on February 26, 2001, and distributed a list of suspect claims and the related fraudulent documentation. Arledge sent Gallagher a letter on May 18, 2001, notifying Gallagher that he was conducting an independent investigation into the false claims.

B. The Fraud

S&A had employed Greg Warren ("Warren") to solicit clients, obtain the client's proof of usage, and perform various other tasks to assist Arledge in filing claims with the Settlement Fund. Eventually, it was revealed that Warren and a handful of others connected to him manufactured documents to prove that particular claimants used Fen Phen. Warren built a network of people to help him locate claimants and assist him in preparing false claims, including Regina Green ("Green") and Florine Wyatt ("Wyatt"). Both Green and Wyatt testified that they, with Warren's knowledge, created false records for their friends and family so that they could benefit from the Settlement Fund even though the claimants had not taken Fen Phen. Because AHP paid the claimants more if they had actual proof that they had used Fen Phen, both Wyatt and Green created fraudulent prescriptions to maximize the amount that the claimants could receive from the Settlement Fund.

Warren, Green, and Wyatt solicited the clients, provided them with false documentation indicating that they had used the drugs, and then sent these claims to Arledge. Arledge sent these fraudulent claims to the Settlement Fund. This fraud—which resulted in a loss to the Settlement Fund of $6,710,334.90—formed the basis of the criminal charges filed against Arledge.

C. Procedural Background

For his participation in the Fen Phen fraud, Arledge was convicted of one count of conspiracy in violation of 18 U.S.C. § 371 (count 1), four counts of mail fraud in violation of 18 U.S.C. § 1341 (counts 2-5), and two counts of wire fraud in violation of 18 U.S.C. § 1343 (counts 6-7). Arledge was found not guilty of one count of wire fraud and sixteen counts of money laundering.

Arledge was sentenced to sixty months' imprisonment for each of counts 1 through 3, to run concurrently, and eighteen months' imprisonment for each of counts 4 through 7, to run concurrently with each other and consecutively with his sentence for counts 1 through 3. This resulted in a total sentence of seventy-eight months' imprisonment. In addition, he was sentenced to three years of supervised release on each of the counts of conviction, to run concurrently, and ordered to pay a $700.00 special assessment. In an Amended Judgment, he was ordered to pay restitution in the amount of $5,829,344.90 and a forfeiture of $375,000.00.

On February 15, 2008, Arledge filed an appeal of his conviction and later filed an appeal from the restitution order. This court consolidated the appeals. We have jurisdiction pursuant to 28 U.S.C. § 1291.

II. DISCUSSION

A. Sufficiency of the Evidence

Arledge argues that there was insufficient evidence to sustain a conviction for conspiracy, mail fraud, or wire fraud. He argues, first, that the government did not prove that he knowingly participated in the scheme to defraud, obviating his conspiracy conviction; second, that there was insufficient evidence to prove that the mailings underlying the mail fraud counts were sent pursuant to the scheme to defraud; and third, that the wiring underlying the wire fraud count occurred after the completion of the scheme to defraud. When evaluating the sufficiency of the evidence, we must view the evidence in the light most favorable to the government, and we will sustain the conviction if "a rational trier of fact could have found that each element of the charged criminal offense was proven beyond a reasonable doubt." United States v. Arnold, 416 F.3d 349, 358 (5th Cir.2005); United States v. Stephens, 779 F.2d 232, 235 (5th Cir.1985).

1. Count 1: Knowing Participation

Arledge was convicted of one count of conspiracy. To sustain a conspiracy conviction under 18 U.S.C. § 371, the government must prove:

(1) an agreement between two or more person[s] to pursue an unlawful objective; (2) the defendant's knowledge of the unlawful objective and voluntary agreement to join the conspiracy; and (3) an overt act by one or more members of the conspiracy in furtherance of the objective of the conspiracy.

United States v. Freeman, 434 F.3d 369, 376 (5th Cir.2005) (internal quotation marks omitted). Arledge disputes only the second element, which the government can meet by showing actual knowledge of or deliberate indifference to the scheme to defraud. Id. at 378-79. At trial, the government presented evidence to show that Arledge had actual knowledge of the Fen Phen I fraud and that Arledge was deliberately indifferent to the Fen Phen II fraud.

The primary evidence of Arledge's actual knowledge of the Fen Phen I fraud was testimony from his alleged accomplice, Green. Generally, we "will not disturb (the jury's) verdict [or] weigh the credibility of witnesses." United States v. Garner, 581 F.2d 481, 485 (5th Cir.1978) (citing United States v. Vomero, 567 F.2d 1315, 1316 (5th Cir.1978)) (internal quotation marks omitted); see United States v. Cravero, 530 F.2d 666, 670 (5th Cir.1976). And while we have expressed some trepidation about relying upon accomplice testimony alone, we have found that a conviction will more easily be upheld if the district court provides the jury with an instruction about the dangers of basing its conviction solely upon...