U.S. v. Crosgrove

• Citation: 637 F.3d 646
• Decision Date: 18 March 2011
• Docket Number: No. 08–4650.,08–4650.
• Parties: UNITED STATES of America, Plaintiff–Appellee,v.Darrell CROSGROVE, Defendant–Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

637 F.3d 646

UNITED STATES of America, Plaintiff–Appellee,

v.Darrell CROSGROVE, Defendant–Appellant.

No. 08–4650.

United States Court of Appeals, Sixth Circuit.

Argued: Jan. 14, 2011.Decided and Filed: March 18, 2011.

ARGUED: Deborah Kovac Rump, Toledo, Ohio, for Appellant. Seth D. Uram, Assistant United States Attorney, Toledo, Ohio, for Appellee. ON BRIEF: Deborah Kovac Rump, Toledo, Ohio, for Appellant. Seth D. Uram, Assistant United States Attorney, Toledo, Ohio, for Appellee.Before: MERRITT, ROGERS, and WHITE, Circuit Judges.

OPINION

ROGERS, Circuit Judge.

Darrell Crosgrove appeals his conviction and sentence for conspiracy to commit mail fraud, in violation of 18 U.S.C. § 371, and conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h). Crosgrove argues that the Government did not present sufficient evidence at trial to support either conviction. Because there was sufficient evidence of a conspiracy to commit mail/wire fraud, Crosgrove's conviction for that count must be affirmed. However, the Government did not produce sufficient evidence at trial to support the conspiracy to commit money laundering charge, and the judgment of conviction for that count has to be vacated. Crosgrove also contends that the district court committed several errors in evidentiary rulings, that certain evidence presented at trial was obtained in violation of the Fourth Amendment, that he received ineffective assistance of trial counsel, that the prosecutor engaged in misconduct, and that the district court committed several errors in calculating his sentence. All of these claims are without merit, forfeited, or premature, and are therefore rejected.

Darrell Crosgrove was recruited into an ongoing fraudulent insurance scheme in early 2001. He formally joined the conspiracy by accepting a “claims adjuster” position some time between March and June of 2001. The conspiracy involved the operation of two professional organizations: the American Real Estate Association (“AREA”) and the Noble Group (“Noble”), both of which were created in the early nineties. AREA and Noble were marketed to real estate agents and appraisers as professional organizations that would provide members with certain benefits, most prominently errors-and-omissions insurance coverage.

AREA and Noble were owned by Mark Haukedahl, the head of the scheme, through a series of offshore shell companies. Haukedahl also owned an offshore insurance company, Midwest Insurance. Midwest was to provide an insurance policy to AREA/Noble that would provide errors-and-omissions coverage to all of the organizations' members in good standing. However, very soon after Midwest was created, Haukedahl stopped sending member dues to the company that managed Midwest's operations. Midwest fell into arrears on premium payments to its reinsurer,¹ and its policy was cancelled. By the middle of 1996, Midwest had virtually no cash on hand and no reinsurance. Therefore, there was effectively no errors-and-omissions policy in place for AREA/Noble members. The organizations' attorney, Douglas Ritson, was able to secure a genuine insurance policy for roughly six months, but by some time in 1997, there was no insurance from Midwest or any other provider to back up the coverage promised to AREA/Noble members. However, AREA/Noble continued to process member claims as though genuine insurance existed. Payouts were funded through membership fees.

Ritson, concerned about the operation's legality, eventually chose to leave AREA/Noble and approached Crosgrove about taking over Ritson's position. Crosgrove worked for Haukedahl from spring of 2001 until March 2004. During this time, Crosgrove was responsible for processing members' claims; this responsibility included meeting with Haukedahl to determine which claims should be paid and writing letters explaining the companies' frequent denials of coverage. Crosgrove sent over 150 letters to members, their attorneys, and government investigators as part of his work for Haukedahl. In some of these letters, Crosgrove identified himself as corporate counsel for AREA/Noble, in others as counsel for Midwest, and in still others as a claims adjuster. About a year into his employment with Haukedahl, Crosgrove adopted the pseudonym John Thomas, which he used in communications with members and with state insurance investigators. In July 2002, Crosgrove issued a memo to staff at AREA/Noble in which he stated that his position with the companies was unspecified, that his name should never be given to any caller, and that any calls regarding insurance should be referred to “John Thomas.”

As more and more members, members' attorneys, and state insurance commissions became doubtful as to the existence of genuine insurance, Haukedahl decided to shift the assets of AREA/Noble to a new company, United Real Estate Association (“UREA”), which Crosgrove helped to create.

U.S. Marshals seized AREA/Noble's offices in March 2004, at which point the companies ceased operations. Crosgrove, Haukedahl, and Ritson were all indicted on counts related to the fraudulent insurance scheme. Crosgrove's indictment contained two counts: conspiracy to commit mail/wire fraud and conspiracy to commit money laundering. The mail/wire fraud count alleged that Crosgrove had conspired to obtain money from AREA/Noble members by means of false and fraudulent representations and had, along with his coconspirators, “knowingly and unlawfully caused to be placed in and/or delivered by United States mail” multiple fraudulent documents related to the insurance scheme. The indictment identified several overt acts in furtherance of the mail/wire fraud conspiracy, including Crosgrove's writing of fraudulent letters to members and members' attorneys; the mailing of checks issued from member fee accounts in partial payment of claims; Crosgrove's use of an alias in dealing with AREA/Noble members, their attorneys, and insurance investigators; and Crosgrove's negotiation of monthly checks issued to him from accounts funded only by member fees.

The indictment also contained a count of conspiracy to commit money laundering, alleging that Crosgrove engaged in a conspiracy to commit promotion money laundering in violation of 18 U.S.C. § 1956(a)(1)(A)(i). That is, the Government alleged that Crosgrove, “knowing that the property involved in financial transactions represented the proceeds of some form of unlawful activity, [conspired] to conduct and attempt to conduct such financial transactions affecting interstate or foreign commerce, which in fact involved the proceeds of specified unlawful activity with the intent to promote the carrying on of specified unlawful activity.” The relevant transactions identified in the indictment were: 1) paying the salaries of AREA/Noble employees; 2) paying fees to companies or entities owned or controlled by Haukedahl that provided administrative services to AREA/Noble; 3) paying attorney fees to attorneys representing members of AREA/Noble; 4) disbursing settlement payments in connection with errors-and-omissions insurance claims; and 5) paying fees or salaries to coconspirators, including Crosgrove himself.

Crosgrove stood trial on both counts in mid–2008. At the close of the Government's case and again before the case was submitted to the jury, Crosgrove's trial counsel made Rule 29 motions for judgment of acquittal, both of which were denied. On appeal, Crosgrove renews the argument that there was insufficient evidence to sustain a conviction for either count.

Crosgrove also renews several evidentiary objections from his trial and raises two new trial issues on appeal: he argues that certain evidence introduced at trial was gathered in violation of the Fourth Amendment and that the prosecutor engaged in misconduct. Crosgrove also argues that his trial counsel was ineffective and that the district court committed several errors in calculating Crosgrove's sentence.

I. Sufficiency of the EvidenceA. Conspiracy to Commit Mail/Wire Fraud

Crosgrove argues that there was no evidence as to his knowledge of the conspiracy. There was, however, ample evidence to support both the finding that Crosgrove knew of the conspiracy and the other elements of the mail/wire fraud conspiracy charge. At trial, the jury heard testimony from Ritson, other Haukedahl employees, the federal investigators involved in the case, an attorney Crosgrove had contacted on behalf of AREA in relation to a pending lawsuit, a friend of Crosgrove's with whom Crosgrove had discussed the nature of the insurance, state insurance investigators, and members' attorneys. This testimony, along with documents produced by the Government, supports the conclusion that Crosgrove knowingly participated in a conspiracy to commit mail/wire fraud.

Ritson, the attorney who preceded Crosgrove at AREA/Noble, testified about the structure of AREA/Noble and Crosgrove's initial involvement. Ritson had trained Crosgrove in the claims process, and testified that he had explained to Crosgrove that Haukedahl made the final decision on whether claims would be paid, that claims were paid out of an account made up of members' dues, that the associations were essentially “self-insured,” and that one of Crosgrove's responsibilities in his new position would be to find a valid outside carrier. Ritson's testimony provided evidence that Crosgrove was aware, from the outset of his association with Haukedahl, that AREA/Noble was not covered by a policy from Midwest or any other outside company.

The Government also introduced a letter from the Supervisor of Insurance for Barbados informing Crosgrove that Midwest's Barbados license had been revoked a year earlier and that Midwest might be operating without a valid license in the United States. This letter was dated June 15, 2001. Taking the trial evidence in the light most favorable to the Government, Crosgrove began working at AREA/Noble no later than late-May...