U.S. v. Brown

• Decision Date: 08 June 1998
• Docket Number: No. 97-5095,97-5095
• Citation: 147 F.3d 477
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Terrance D. BROWN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 477

147 F.3d 477

UNITED STATES of America, Plaintiff-Appellee, v. Terrance D. BROWN, Defendant-Appellant.

No. 97-5095.

United States Court of Appeals Sixth Circuit.

Argued April 29, 1998.

Decided June 8, 1998.

Howell G. Clements (argued and briefed), Spears, Moore, Rebman & Williams, Chattanooga, TN, for Defendant-Appellant.

Richard A. Quaresima (argued and briefed), Lawrence Hodapp (briefed), Federal Trade Commission, Washington, DC, John P. MacCoon, Asst. U.S. Attorney (briefed), Office of the U.S. Attorney, Chattanooga, TN, for Plaintiff-Appellee.

Before: KENNEDY, CONTIE, and MOORE, Circuit Judges.

OPINION

MOORE, Circuit Judge.

Defendant-Appellant Terrance Daniel Brown appeals his conviction and sentence, following a jury trial, for conspiracy and wire and mail fraud in connection with a telemarketing scheme. For the reasons that follow, we affirm.

I. BACKGROUND

Continental Distributing Company ("CDC") was a telemarketing company based in Chattanooga, Tennessee. The company targeted its telemarketing schemes at elderly people because the elderly tend to be most vulnerable to the various telemarketing tricks and ploys used by CDC. ¹ J.A. at 259-60 (Craig W. Heaps, Pres. of CDC, Test.). The company operated a one-in-four scheme whereby a telemarketer would call a victim and tell the victim that she had won one of four fabulous awards. J.A. at 230-31. The awards were usually stated in order of the least expensive to the most expensive. J.A. at 250 (Heaps Test.). For example, the telemarketer, when speaking to a potential victim, would list the awards in the following order: a 1994 car, a speed boat, the open award, and cash. The telemarketers purposely listed the awards in this manner to disguise the fact that the "open award" (also known as the "gimmie") was worth substantially less than the other awards. J.A. at 234. Typically, the open award was a very inexpensive piece of merchandise such as a lithograph, JFK coin set, or cheap sculpture. J.A. at 232; 250; 453 (Product List).

The object of the scheme was to convince the victim that she had won some really fabulous award and then get the victim to pay substantially more for the award than CDC had paid for it. ² J.A. at 265. In fact, CDC would deduct the cost of the award, known as the "pad," from the commission of the telemarketer. J.A. at 232. For example, a telemarketer would tell the elderly victim that she had won one of four great awards and then try to convince her to send CDC a large amount of money for the award (often as much as $15,000 or more). If the victim sent the money, then the telemarketer would ensure that the victim received a sculpture for which CDC might have paid $200. The owners of CDC would then deduct the $200 from the sales price and the telemarketer would receive a commission on $14,800 ( $15,000 minus the $200). Thus, telemarketers at CDC had a great incentive to provide victims with cheap merchandise rather than a car, motor home, sail boat, or some other expensive award. This was so because the more expensive the award, the less commission the telemarketer would receive on the money sent by the victim to CDC. J.A. at 295 (Jeffrey J. Hutchinson, a CDC employee, Test.).

Telemarketers at CDC did not have much to worry about because the odds were three in three thousand that a victim would win a major award; that is, 2,997 victims would definitely receive the open award, and the open award could be any cheap item the telemarketer wanted it to be. J.A. at 179 (Brown Test.); 295 (Hutchinson Test.). In addition to the open award, CDC also sent victims a "mixed box of products," which were essentially worthless trinkets or products like letter openers, space pens, and frisbees. Accordingly, CDC made its money sending open awards and the mixed box of products to victims in exchange for enormous sums of money by convincing the victims that they had a real chance at winning a house or car.

CDC found its victims, often referred to as "mooches," by buying what were known as "leads" lists from lead brokers in Las Vegas. J.A. at 238; 266 (Heaps Test.). Additionally some telemarketers, such as Brown, brought leads lists with them to CDC. Those leads lists contained the names of elderly people who had previously purchased products over the telephone from another company, usually spending large amounts of money to do so. CDC, like most telemarketing companies, organized its telemarketers into "fronters" and "reloaders." J.A. at 293-94. The fronters called the leads, told them about the one-in-four promotion and that they had been selected as winners. On the first call, the fronters normally pushed to have the customers send in an amount under $1000 in exchange for the open award which would be a lithograph or coin set that only cost CDC $50 to purchase. ³ Once the fronter sold the customer, the fronter would then pass the lead card containing the customer's information (address, telephone number, what the person had purchased, and sales price) on to the reloader. J.A. at 238-40 (Heaps Test.). The reloader would then call the victim and try to sell them again and again on succeeding promotions for larger and larger amounts of money until the victim was totally without funds. J.A. at 298 (Hutchinson Test.).

Brown joined CDC as a reloader in January of 1994 and worked there until October of 1994. J.A. at 328 (Kennedy Test.). Brown had accumulated a wealth of experience as a reloader from having worked eight years in the telemarketing industry at companies using fraudulent schemes comparable to the one used by CDC. J.A. at 176-78 (Brown Test.). In fact, Brown was proud of the fact that he had been the top reloader at almost every company where he had worked. J.A. at 213 (Brown Test.). Things were no different at CDC where he quickly rose to become the top reloader, generating over $443,209 in the nine months he worked at CDC. J.A. at 327-28 (Kennedy Test.).

Brown also operated his own telemarketing company known as "Smokey Mountain Distributing" ("SMD"). J.A. at 147 (Brown Test.). SMD was a one-person operation, but the object was the same: Brown focused on elderly leads who had previously purchased products over the telephone and thus were especially vulnerable to his nefarious tactics. J.A. at 337-38 (Kennedy Test.).

In January of 1995, a telemarketing task force comprised of the Federal Bureau of Investigation, Internal Revenue Service, Secret Service, and local law enforcement raided CDC's operations and closed it. J.A. at 323 (Kennedy Test). Six people, including Brown, were eventually indicted for conspiracy, wire fraud, mail fraud, use of fictitious name, and money laundering. Also, the government moved to forfeit assets. J.A. at 32 (Indictment). Everyone pleaded guilty except Brown, who demanded and received a jury trial.

Prior to his trial, but while under indictment, Brown continued to operate SMD, although he had ostensible employment as a salesperson for Advanced Cellular and Paging. J.A. at 174; 388-91, 398 (Burns Test.). Based on a tip from a confidential informant, an FBI agent obtained a search warrant for Brown's home. J.A. at 393 (Burns Test.). The task force executed the search warrant and found numerous materials indicating that Brown had been operating a fraudulent telemarketing agency from his home. Subsequently, Brown filed a motion to suppress the evidence found in his home, a motion the court denied. J.A. at 108 (Mot.); 79 (Mem. and Order).

At trial, two of Brown's co-conspirators and several of his victims testified against him. Nevertheless, at the close of the government's case, Brown moved for a judgment of acquittal, which the district court denied. J.A. at 416. The jury convicted Brown on all of the counts in the indictment for which he was charged. J.A. at 140 (Verdict Form). The district court sentenced him to 120 months' incarceration (including a two-level upward departure and a three-level enhancement), three years' supervised release, $450 special assessment, and $2,677,161.68 in restitution. J.A. at 82-89 (Judgment in a Criminal Case).

After his sentencing, Brown filed a timely notice of appeal. On appeal, Brown raises the following five issues: (1) the district court improperly admitted evidence of Brown's activities at SMD under Federal Rule of Evidence 404(b); (2) the district court erred in failing to suppress the evidence found at Brown's home; (3) the district court improperly imposed a two-level upward departure and a three-level enhancement in sentencing Brown; (4) the district court erred in denying Brown's motion for a judgment of acquittal on the mail fraud count of the indictment; and (5) there was insufficient evidence to support the guilty verdict.

II. ANALYSIS

A. Federal Rule of Evidence 404(b)

Brown argues that, under Federal Rule of Evidence 404(b), the district court erred in admitting evidence concerning the following: (1) his activities at SMD and other telemarketing agencies; (2) conversation between Brown and Dorothy Schlaikjer, one of his victims at SMD; and (3) IRS agent Scott Kennedy's testimony regarding Brown's activities at Quality Home Health Care, a telemarketing concern, which were outside of the indictment's time frame.

In reviewing a district court's decision to admit evidence of "other crimes, wrongs, or acts" under Rule 404(b), we first review for clear error the district court's factual determination that the other acts occurred. ⁴ Second, we examine de novo the district court's legal determination that the evidence was admissible for a legitimate purpose. Finally, we review for abuse of discretion the district court's determination that the probative value of the other acts evidence is not substantially outweighed by its unfairly prejudicial effect. United States v. Myers, 123 F.3d 350, 362-63 (6th Cir.), cert. denied, --- U.S. ----, 118 S.Ct. 611, 139 L.Ed.2d 498 (1997).

Brown does not challenge that the other acts occurred. Instead, he...