U.S. v. Demmler

• Decision Date: 23 August 2011
• Docket Number: No. 09–3660.,09–3660.
• Parties: UNITED STATES of America, Plaintiff–Appellee,v.Karl DEMMLER, Defendant–Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

655 F.3d 451

UNITED STATES of America, Plaintiff–Appellee,

v.Karl DEMMLER, Defendant–Appellant.

No. 09–3660.

United States Court of Appeals, Sixth Circuit.

Argued: Oct. 14, 2010.Decided and Filed: Aug. 23, 2011.

ARGUED: Dennis C. Belli, Columbus, Ohio, for Appellant. Benjamin C. Glassman, Assistant United States Attorney, Cincinnati, Ohio, for Appellee. ON BRIEF: Dennis C. Belli, Columbus, Ohio, for Appellant. Benjamin C. Glassman, Assistant United States Attorney, Cincinnati, Ohio, for Appellee.Before: GIBBONS and WHITE, Circuit Judges; MALONEY, Chief District Judge.^*

OPINION

JULIA SMITH GIBBONS, Circuit Judge.

Defendant–Appellant Karl Demmler was convicted of obstruction of justice, witness tampering, and conspiracy. He was sentenced to eighty-four months' imprisonment. On direct appeal, he argues that the district court deprived him of his constitutional right to a fundamentally fair trial and a reliable verdict by refusing to give an entrapment instruction to the jury; the district court plainly erred in defining the corrupt intent required to convict Demmler as “characterized by improper conduct”; and the district court's eight-four month prison sentence was unreasonable because of “significant procedural error” in the district court's calculation of the advisory guideline imprisonment range. For the reasons set forth below, we affirm Demmler's conviction and sentence.

I.

Demmler and Lance Poulsen became friends in Columbus, Ohio, in the mid–1980s. The two men played golf and traveled together, and, in the early 1990s, Demmler served as best man at Poulsen's wedding. Poulsen owned a small insurance company, and Sherry Gibson was one of his employees. Gibson met Demmler through Poulsen, and the three became friends.

In 1991, Poulsen formed NCFE, a company focused on financing health-care providers by securitizing and pooling their accounts receivable. Sherry Gibson ascended the ranks of NCFE and ultimately became Vice–President of Compliance. By 1998, a senior advisor of Chase JP Morgan bank, which had become a part owner of NCFE, was recommending changes in NCFE's accounting department, including the removal of Gibson. Gibson testified that, after NCFE made the recommended changes, she felt Poulsen was shifting the blame to her for certain accounting discrepancies.

Ultimately fraud, including the accounting discrepancies, ended NCFE's operations. The FBI searched the company, a crisis management team took over, and NCFE declared bankruptcy. Shortly afterwards, Gibson learned she was the target of an FBI and SEC investigation into the company. In April 2003, Gibson pled guilty to conspiracy to commit a massive securities fraud that had caused over two billion dollars in losses to clients and investors. Gibson admitted that “the entire company worked on defrauding investors.” Her plea agreement required her to meet with prosecutors and truthfully answer all questions regarding NCFE. The district court accepted Gibson's plea, granted the government's motion to reduce her sentence in light of her cooperation, and sentenced Gibson to four years' imprisonment beginning in October 2004. Gibson also had to pay $420,000 in restitution.

Demmler and Gibson continued their friendship. They corresponded while Gibson was in prison, and Demmler sent her money and came to visit her. Gibson testified that she was surprised to hear from Demmler so often and that she was unsure of Demmler's motives. However, because the two had a long-standing friendship, which included Demmler's sending Gibson a birthday card for eighteen straight years, the conduct was not entirely surprising.

While Gibson was in prison, Demmler told her during his first visit, in July 2006, that she could get her sentence overturned, a prospect of which Gibson later said she was wary. In January 2007, shortly before Gibson finished her prison sentence, Demmler wrote her a letter in which he mentioned that Poulsen had “a $3 billion lawsuit against Chase Bank” and that “there is still hope you can get your assets back.” Gibson wrote back and expressed her desire to find “a way to reclaim [her] assets without nullifying, voiding or in any way imperiling [her] plea agreement.”

After being released from prison, Gibson asked Demmler for assistance in finding a place to live. Then, on June 19, 2007, Gibson thought of Demmler when driving by their favorite restaurant. She called him, and he proposed that they meet for dinner that evening.

At dinner, Demmler began by saying, “Business first.” He mentioned having met with Poulsen and told Gibson that Poulsen would like to make her “whole” if her testimony as a material witness in Poulsen's trial would help Poulsen “win his case.” Demmler suggested that Gibson would receive one or two million dollars if she agreed. He promised to be in touch with Poulsen soon and recommended that he and Gibson meet weekly.

Gibson believed that Demmler was offering her a bribe in exchange for favorable testimony. For this reason, on June 20 Gibson contacted the FBI. From that point on, Gibson followed the instructions of federal investigators when meeting or corresponding with Demmler. Gibson's meetings and phone conversations with Demmler were recorded.

In the conversations between Demmler and Gibson, Demmler told Gibson that Poulsen wanted to help her so that he might “win his case,” that Gibson should “not remember” what had happened, that Gibson should watch the movie The Godfather for examples of how she should testify, that Demmler would manage funds for Gibson in “an existing account outside of the country” for a ten-percent fee, that she should “prevaricate,” and that he understood if she needed “to have some moolah to not remember.” Demmler also asked Gibson to email him with details of testimony she could alter. He cautioned Gibson not to put her name on the email, and he suggested she explicitly ask Poulsen for $25,000. He promised Gibson, “whatever you get, it's not going to be trackable.” But then he noted that if anyone found out about the arrangement, “[W]e'd all be in ... a big bag of shit.”

The FBI also issued subpoenas for Demmler's phone records, which indicated that Demmler and Poulsen had spoken more than thirty times between January and June of 2007. The FBI then obtained a pen register on Demmler's cellular phone. On August 6, 2007, Special Agent Jeffrey Williams of the FBI submitted an affidavit in support of the application for the interception of wire communications from Demmler's cellular phone. The wiretap was authorized on that same day. The recorded conversations provided the following evidence: discussions between Poulsen and Demmler about getting Gibson a new attorney who was preapproved by Poulsen; multiple conversations between Poulsen and Demmler and Demmler and Gibson about how Gibson would be paid; instructions on how Gibson should answer prosecutors' questions and how she should testify; Demmler's statement to Poulsen that he should pay Gibson with funds that were not trackable and that he was pleased that Gibson, in a few years, “went from a hostile witness to one that can be ... worked”; and Poulsen's and Demmler's concerns about discussing Gibson over the phone.

Demmler took questionable actions too. The day he was arrested, Demmler was at the airport on the way to Venezuela. He had just handed Gibson a blank check drawn on the account of “Paragon Legal Services” with the promise that Poulsen would transfer funds into the account once Gibson had contacted one of three lawyers whose names she had been given.

Demmler and Poulsen were tried together. At trial, the jury heard all of the evidence noted above. Poulsen testified on his own behalf and also presented the testimony of several attorneys. Demmler did not present evidence. His argument, however, was that he did not try to bribe Gibson; rather, he wanted to help her. Demmler states that he knew that Thomas Tyack, an attorney representing Poulsen, believed Gibson had pled guilty unnecessarily. According to Tyack, Gibson was set up to take the blame by lawyers from Jones Day, a law firm in the NCFE bankruptcy matter. Tyack testified at trial that he shared this information with Poulsen and that Poulsen thought Gibson had been “railroaded.” Poulsen wanted to see if there were a way to make Gibson “whole,” and Tyack told him that if Gibson's guilty plea were vacated, Gibson would be fully compensated by the United States government. Demmler asserts that he merely wanted to help Gibson because he genuinely believed she had been treated unfairly.

In proposed jury instructions, both Demmler and Poulsen requested an entrapment instruction. The district court waited until the end of trial before making a decision on the instruction. After lengthy arguments from Poulsen's attorney that an entrapment instruction was proper, the district court ruled, “I don't believe that there is any evidence that the defendant was not already willing to commit the crime or that the government or someone acting for the government induced or persuaded the defendant to commit it. Hence, the Court will not give the entrapment instruction.” Neither party renewed his objection to the jury instructions after they were given.

The jury found Demmler and Poulsen guilty on all counts. Following trial, the United States Probation Office prepared a Pre-sentence Report (“PSR”). The report concluded that the fraud at NCFE was in excess of $2 billion. The report applied an accessory-after-the-fact guidelines range based on an underlying crime of fraud involving a loss of more than $400,000,000.00. The resulting offense level of thirty led to an advisory imprisonment range of ninety-seven to 121 months, to which Demmler objected. Demmler argued that he never knew money was lost; he thought NCFE merely had bookkeeping errors. Demmler also argued that it was error for him to be considered as an accessory to a crime to which he had no connection. Instead...