United States v. Louper-Morris

• Citation: 277 Ed. Law Rep. 615,672 F.3d 539
• Decision Date: 09 April 2012
• Docket Number: 11–1021.,Nos. 10–3345,s. 10–3345
• Parties: UNITED STATES of America, Appellee, v. Carolyn M. LOUPER–MORRIS, Appellant.United States of America, Appellee, v. William J. Morris, Jr., Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

277 Ed. Law Rep. 615

672 F.3d 539

UNITED STATES of America, Appellee,

v.Carolyn M. LOUPER–MORRIS, Appellant.United States of America, Appellee,

v.William J. Morris, Jr., Appellant.

Nos. 10–3345

11–1021.

United States Court of Appeals, Eighth Circuit.

Submitted: Oct. 21, 2011.Filed: March 2, 2012.Rehearing and Rehearing En Banc Denied April 9, 2012.

Paul J. Edlund, argued, Minneapolis, MN, Deborah Kay Ellis, argued, St. Paul, MN, for appellants.

Timothy Christopher Rank, AUSA, argued, Minneapolis, MN, Lisa D. Kirkpatrick, on the brief, St. Paul. MN, for appellee.

Before RILEY, Chief Judge, SHEPHERD, Circuit Judge, and WEBBER, ¹ District Judge.WEBBER, District Judge.

A jury convicted Carolyn M. Louper–Morris of conspiring to commit mail fraud and wire fraud in violation of 18 U.S.C. § 371, aiding and abetting wire fraud in violation of 18 U.S.C. § 1343, and aiding and abetting mail fraud in violation of 18 U.S.C. § 1341. A jury convicted William J. Morris, Jr., of conspiring to commit mail fraud and wire fraud in violation of 18 U.S.C. § 371, aiding and abetting wire fraud in violation of 18 U.S.C. § 1343, mail fraud in violation of 18 U.S.C. § 1341, and making and subscribing a false tax return in violation of 26 U.S.C. § 7206(1). Louper–Morris and Morris both appeal.

Louper–Morris raises six issues on appeal: 1) the district court ² erred by denying her motion to dismiss the indictment because the United States made a material misrepresentation to the grand jury; 2) the district court erred in overruling her objection under Batson v. Kentucky, 476 U.S. 79, 106 S.Ct. 1712, 90 L.Ed.2d 69 (1986); 3) the evidence was insufficient to support her convictions; 4) the United States intimidated one of her witnesses thereby depriving her of the right to present a complete defense; 5) the district court erred by enhancing her base level offense by four points for her role as a leader or organizer of an activity involving five or more participants under United States Sentencing Guidelines § 3B1.1; and 6) cumulative trial errors warrant reversal or at least remand.

Morris raises six issues on appeal: 1) the evidence was insufficient to support his convictions; 2) the wire and mail fraud statutes, as applied to Morris, exceed Congress's authority to legislate in violation of the Tenth Amendment; 3) the district court erred by not allowing the jury to view the live website at issue; 4) the district court erred in overruling his objection under Batson, 476 U.S. at 79, 106 S.Ct. 1712; 5) the district court erred in enhancing his base offense level by four points for his role as a leader or organizer of an activity involving five or more participants under U.S.S.G. § 3B1.1 and by two points for the sophisticated-means enhancement under U.S.S.G. § 2B1.1(b)(9)(C); and 6) the district court's restitution order improperly included restitution to an entity that was already receiving compensation from a settlement agreement.

Having jurisdiction under 28 U.S.C. § 1291, we affirm.

I. Background

We state the facts in the light most favorable to the jury's verdict. United States v. Johnson, 450 F.3d 366, 369 (8th Cir.2006). Around 1996 in Washington, D.C., Carolyn M. Louper–Morris, a former college professor, assisted in the development of a software product entitled CyberStudy 101. CyberStudy 101 software allowed college students to enter their class notes into the program and the program would generate quizzes from this data. As a software product, CyberStudy 101 never reaped a profit and the venture failed.

Louper–Morris then moved to Minneapolis, Minnesota to live with her son, William J. Morris, who is an attorney. Louper–Morris and Morris (collectively, “Appellants”) decided to try to sell CyberStudy 101 over the internet using the website cyberstudy101.com. Appellants formed the company, CyberStudy 101, a Minnesota corporation (hereinafter “CyberStudy”). Louper–Morris owned a 51 percent interest in the company and Morris owned a 49 percent interest.

Around 1998, Appellants learned of a Minnesota tax credit called the Education Tax Credit. Enacted in 1997, the tax credit was available to low-income Minnesota families who incurred out-of-pocket expenses for certain supplemental educational opportunities for their children in elementary school, middle school, or high school. In order to utilize the tax credit, Appellants changed the educational content of CyberStudy 101 from a college curriculum to an elementary and secondary school curriculum. Louper–Morris also met with employees of the Minnesota Department of Education, the Minnesota Department of Revenue, and other agencies to research the tax credit's requirements in order to utilize the tax credit to expand CyberStudy's business opportunities.

One such individual with whom Louper–Morris met to discuss the tax credit was Morgan Brown, the Director of the Partnership for Choice in Education (“PCE”). PCE is a nonprofit organization that seeks to educate low-income families about the educational opportunities available to them and advocates for additional educational options. At the time, PCE focused on implementing the tax credit and improving its accessibility. PCE had an informal relationship with the Minnesota Department of Education and the Minnesota Department of Revenue. Because of the organization's goals, many individuals and groups contacted Brown to educate them on how to utilize the tax credit.

At a December 1999 meeting, Brown described to Louper–Morris the two available educational tax credits and their requirements. The first credit applied to educational computer software or hardware, which allowed a family to claim up to $200 in a tax credit for purchasing a qualified computer product. The other credit applied to instruction or tutoring provided by a qualified instructor, which allowed a family to claim up to $1000 for one child or $2000 for the family. Brown stressed that the tutoring tax credit required an actual qualified instructor interacting with students. He explained that static content would not satisfy the tax credit's requirements and any tutoring product must be interactive. Louper–Morris told Brown that she was interested in revising CyberStudy 101 to make it comply with the tax credit requirements.

Brown also explained to Appellants that the tax credit could not be claimed until the person had actually made the qualifying expenditure. Because many low-income families have limited disposable income, Appellants discussed with Brown financing options for potential CyberStudy customers. Although the tax credit allowed financing, the tax credit prohibited the vendor of the service from also being a lender. Only a separate third party could loan money to the taxpayer to pay for the qualifying educational service or product.

Brown also had interactions with Morris in early 2000. According to Brown, Morris functioned as CyberStudy's legal counsel and was also involved in business planning and development. Brown repeatedly discussed with Morris the requirements of educational tax credits and how those requirements relate to CyberStudy's product. Brown met with Appellants on numerous occasions, and each time he reiterated the requirements of the tax credit.

At some point, Brown learned that Appellants were marketing CyberStudy 101 by offering a free computer if a person signed up for the online tutorial program. Appellants told Brown that they had negotiated with K–Mart for a certain number of computers to offer with their program.

In May 2000, Brown was present at a meeting with the Minnesota Department of Revenue and the Minnesota Department of Education in which Appellants presented CyberStudy 101 in an effort to qualify the product for the tax credits. At that meeting, it was clearly communicated to Appellants that tutors and interactivity were necessary to qualify for the credit.

Appellants began selling CyberStudy 101 on floppy disk for $999 for families with one qualifying child, and $1499 for families with two or more qualifying children. CyberStudy 101's content was then placed online. Appellants informed Brown that they were in the process of hiring retired teachers to satisfy the tax credit's interactivity requirement and the qualified instructor requirement.

Appellants marketed CyberStudy through their “break the digital divide” campaign that promised a free computer and free internet access for life to everyone who registered for the product. They distributed fliers to local churches, schools, and community centers in African American, Somali, and Hmong communities. Appellants also mailed fliers to individuals residing in low-income communities. The fliers highlighted the free computer and did not mention the cost of the online tutorial program. Fliers stated such things as, “Stop, break the digital divide and sign-up for CyberStudy 101. Receive a new, fully-loaded complimentary free computer. No out-of-pocket expense.” Because of this campaign, evidence shows that members of the community thought CyberStudy was a charitable organization when, in fact, it was a for-profit company. CyberStudy marketed the tutorial as an age-appropriate, online, interactive tutorial course that included twenty-eight study tools in four languages.

In February 2000, the Minnesota Attorney General's office received complaints and inquiries relating to CyberStudy soliciting personal information from individuals living in low-income communities and CyberStudy's promise of giving away 100,000 free computers to low-income individuals. Deb Strafaccia, a consumer fraud investigator for the Minnesota Attorney General, investigated the complaints. Strafaccia became concerned when she learned that hundreds of individuals were providing the relatively unknown CyberStudy with birth certificates, tax returns, social security numbers, and children's school records. Strafaccia spoke with Louper–Morris who informed her that CyberStudy needed to enroll 100,000...