United States v. Pulgar

• Decision Date: 19 June 2015
• Docket Number: No. 14–3503.,14–3503.
• Citation: 789 F.3d 807
• Parties: UNITED STATES Of America, Plaintiff–Appellee, v. Herberto PULGAR, Defendant–Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

789 F.3d 807

UNITED STATES Of America, Plaintiff–Appellee

v.Herberto PULGAR, Defendant–Appellant.

No. 14–3503.

United States Court of Appeals, Seventh Circuit.

Argued May 18, 2015.

Decided June 19, 2015.

Bryan D. Freres, Attorney, Office of the United States Attorney, Springfield, IL, for Plaintiff–Appellee.

Catharine Downard O'Daniel, Attorney, Law Offices of Catharine D. O'Daniel, Chicago, IL, for Defendant–Appellant.

Before KANNE and SYKES, Circuit Judges, and ELLIS, District Judge.^*

Opinion

KANNE, Circuit Judge.

Markets, at bottom, exist for two sets of people: buyers and sellers. In the context of the illegal drug market, we attach sundry titles to members from either set—dealer, distributor, trafficker, etc. But to attach the title of conspirator, there must be something else happening in the marketplace besides merely buying and selling some illegal drug. There must be an agreement between two or more parties to commit a crime distinct from the sale itself.

Here, the government alleged that Appellant Herberto Pulgar entered into such an agreement with Klinton Schmidt and Michael Myers—namely, to distribute 5 kilograms or more of cocaine.¹ See 21 U.S.C. §§ 846, 841(a)(1) and (b)(1)(A). But there was one problem for the government: Pulgar never met Myers. Only Schmidt had. So at trial, the government focused on Pulgar's transactions with Schmidt to prove the conspiracy charge. Largely through Schmidt's testimony, the government offered evidence that: (1) Pulgar sold large quantities of cocaine to Schmidt at wholesale prices for over ten years; (2) Pulgar fronted cocaine to Schmidt; (3) Pulgar accepted returns from Schmidt when lousy cocaine did not sell; and (4) Pulgar enjoyed a friendship with Schmidt.

At the outset, we note that Pulgar vigorously disputed the government's evidence of fronting, as well as the government's evidence of a so-called “return policy.” Pulgar is steadfast on appeal.

After a four-day trial, the jury returned a split verdict. It convicted Pulgar on the conspiracy count, although it found he conspired to distribute “500 grams or more of cocaine,” not the “5 kilograms or more” originally charged in the indictment. The jury then acquitted Pulgar of the only other count—distribution of 500 grams or more of cocaine. Months later, the district court upheld the conspiracy conviction when it denied Pulgar's combined motion for judgment of acquittal and motion for a new trial.

Pulgar contends the evidence is insufficient to support the conspiracy conviction. In his view, the government merely proved a buyer-seller arrangement between him and Schmidt, which, under our well-established case law, is not enough to support a drug-distribution conspiracy. The government, of course, disagrees. It argues the evidence establishes a conspiracy to distribute cocaine, albeit circumstantially. As Pulgar raises no other issues on appeal, we examine this dispute in great detail. Before we do, some additional background is necessary.

I. Background

A. The Dealings of Pulgar and Schmidt

Pulgar met Schmidt through a mutual friend in 2002. At the time, Pulgar lived near Chicago, Illinois, and Schmidt lived in Bloomington, Illinois. Not long after their initial meeting, Pulgar sold cocaine to Schmidt. Pulgar continued to sell cocaine to Schmidt at fairly regular intervals—once every month or so, with the exception of a few, brief hiatuses—until March 2013.

The quantities varied, but they trended upward over time. For example, the first transaction between Pulgar and Schmidt resulted in a sale of 4.5 ounces for approximately $2,600. By 2005, the amount increased to nearly half a kilogram (over 16 ounces) for $12,000 to $16,000—depending on market demand. By 2010, the amount increased again, this time to three-quarters of a kilogram (over 26 ounces) for approximately $27,700.

Just as the quantity and price varied, so too did the place of purchase. Sometimes Schmidt purchased cocaine from Pulgar in Chicago, other times in Joliet. Sometimes the deals occurred at Wendy's, other times at Best Buy, and still other times “just off the interstate.” It was not unusual, moreover, for the meeting place to suddenly change on the way to the deal. Schmidt never knew what type of vehicle Pulgar would arrive in—that changed as well.²

Wherever they met, one fact appeared to be consistent: Schmidt paid Pulgar in full for the cocaine at the time he received it. After Drug Enforcement Agency (“DEA”) agents arrested Schmidt, he told them that Pulgar never fronted him drugs and that he always paid for the drugs at the time of the transaction. This statement is reflected in the reports of DEA Agents Weiss and Bonnett, who wrote that Schmidt “always pays for the cocaine when he gets it, and the cocaine is never fronted to Schmidt by Pulgar.” In fact, no law-enforcement reports mention anything to the contrary. And Agent Bonnett testified to the cash-up-front arrangement before the grand jury, stating Schmidt “was one of those guys that wanted to pay for everything up front, didn't want to owe anybody anything.”

B. Trial Evidence–The Government's Case–in–Chief 1.Evidence of Fronting³

At Pulgar's trial, Schmidt changed his story and testified that Pulgar fronted him cocaine. The only example of fronting that Schmidt could remember, though, occurred during a sham deal that he arranged for the DEA. Schmidt, having been arrested one month before Pulgar, had been cooperating with the DEA during that deal.

Schmidt testified that Pulgar wanted to drop off cocaine while on his way to traffic court in Lincoln, Illinois, and then pick up the money for the cocaine after his hearing. Pulgar wisely did not want to bring the payment required for the cocaine—over $27,000 in cash—into court with him. So he set up this alternative arrangement with Schmidt to delay payment for a few hours. This is the only concrete example of fronting that the government introduced at trial. As it happens, Pulgar never received the money from that transaction; DEA agents arrested him after he dropped off the cocaine. The jury acquitted Pulgar of this conduct, which formed the basis of the distribution charge in Count 2.

Schmidt seemed to vaguely recall other evidence of fronting. He just could not remember when: “I mean there was probably a couple times that he fronted them to me. But like I said, I can't remember every single time.” Notwithstanding the vague nature of this testimony, the government assigns it great weight. The government claims it means Pulgar sold large amounts of cocaine to Schmidt, multiple times, on credit —a persuasive combination that has established a drug-distribution conspiracy in other cases. See United States v. Brown, 726 F.3d 993, 1002 (7th Cir.2013) (observing “multiple, large-quantity purchases on credit” are considered “sufficient proof” of conspiracy), cert. denied, ––– U.S. ––––, 134 S.Ct. 1876, 188 L.Ed.2d 911 (2014).

Additionally, the government argues that this evidence is supported by recorded phone calls between Pulgar and Schmidt, where Pulgar at least initially discussed fronting cocaine to Schmidt. The government emphasizes the fact that one of these discussions actually “resulted in a wholesale distribution on credit.” Remarkably though, that discussion, which indeed resulted in an instance of fronting, also resulted in Pulgar's arrest. For as we mentioned above, it was precipitated by Schmidt's cooperation with the DEA. The government acknowledged as much during its closing argument, but maintained the example could still count against Pulgar: “You heard evidence of a credit transaction.... [T]he plan was to leave the money behind and pick it up on the way back. Didn't work out that way, but that was the plan.”

Aside from what we just detailed, the government offered no other evidence of credit transactions between Pulgar and Schmidt. So the government turned its focus to other facts that it believed helped prove the conspiracy: returns of cocaine and a burgeoning friendship between Pulgar and Schmidt.

2. Evidence of a Return Policy and a Friendship

During direct examination of Schmidt, the government introduced evidence of an alleged return policy between him and Pulgar:

A. Okay. The cocaine, if it was real bad, I could give it back to him.

Q. Was this some sort of ... return policy or something?

A. Yeah, I guess you could say that—call it that.

Q. How many times would you say that happened during your relationship?

A. Maybe just a couple. Two or three.

The government relies heavily on this testimony. It also points out that Pulgar screened the cocaine for quality before he sold it to Schmidt. A return policy, the government argues, demonstrates that “no transaction between Schmidt and Pulgar was final until Schmidt resold the drugs.” That in turn means that Pulgar held a “stake in the venture” of Schmidt's downstream sales, which in turn demands an inference of conspiracy to distribute cocaine. Or so the argument goes.

Not so, contends Pulgar. For he reads Schmidt's testimony differently. Pulgar first notes that evidence of a return policy—like evidence of fronting—did not surface until Schmidt testified at trial. And when it did surface, the government's introduction of the phrase “return policy” seemed to catch Schmidt by surprise: “Yeah, I guess you could say that—call it that.” Thus, Pulgar contends that the alleged “return policy” is little more than a rebranding effort by the government to help support its conspiracy case. As he puts it, “2–3 returns of poor quality cocaine over 11 years surely do not constitute a return policy.”

The stakes on this point are high. For when a “seller permits the buyer to return unsold drugs,” he stands on the precipice of a consignment sale. Brown, 726 F.3d at 999. And consignment sales are “quintessential evidence” of a drug-distribution conspiracy. Id. (citing Johnson, 592 F.3d at 755 n. 5 ). But other factors are typically involved in consignment sales. A middleman is usually present, and profits are...