U.S. v. Dale, 03-10228.

• Decision Date: 18 June 2004
• Docket Number: No. 03-10228.,03-10228.
• Citation: 374 F.3d 321
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Lisa L. DALE; Kevin Dewayne Spencer, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

374 F.3d 321

UNITED STATES of America, Plaintiff-Appellee, v. Lisa L. DALE; Kevin Dewayne Spencer, Defendants-Appellants.

No. 03-10228.

United States Court of Appeals, Fifth Circuit.

June 18, 2004.

COPYRIGHT MATERIAL OMITTED

Linda Marie Dedman (argued), Dallas, TX, for Plaintiff-Appellee.

Gina Rene Joaquin (argued), Joaquin & Duncan, Hurst, TX, for Dale.

Nathan Gabriel Kight (argued), Irving, TX, for Spencer.

Appeals from the United States District Court for the Northern District of Texas.

Before DAVIS, PRADO and PICKERING, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Defendant Kevin Spencer appeals his conviction and defendant Lisa Dale appeals her sentence on charges of securities fraud, wire fraud, money laundering and related charges. Based on our conclusion that the district court did not err in its disposition of trial matters raised by Spencer, nor did it err in applying the Sentencing Guidelines to Dale, we AFFIRM.

I.

Lisa Dale and Kevin Spencer, along with two co-defendants, were indicted on charges relating to a Ponzi scheme they ran. The two co-defendants pled guilty. Spencer was found guilty by a jury of one count of securities fraud (in violation of 15 U.S.C. §§ 1(a) & 77x and 18 U.S.C. § 2), one count of interstate transportation of stolen property (in violation of 18 U.S.C. §§ 2314 & 2), several counts of wire fraud (in violation of 18 U.S.C. §§ 1343 & 2), several counts of money laundering (in violation of 18 U.S.C. §§ 1956(a)(1)(A)(I) & 2) and several counts of engaging in monetary transactions in property derived from specified unlawful activity (in violation of 18 U.S.C. §§ 1957 & 2). Dale was found guilty by a jury of two counts of securities fraud (in violation of 15 U.S.C. §§ 1(a) & 77x and 18 U.S.C. § 2), two counts of interstate transportation of stolen property (in violation of 18 U.S.C. §§ 2314 & 2), several counts of wire fraud (in violation of 18 U.S.C. §§ 1343 & 2), and several counts of money laundering (in violation of 18 U.S.C. §§ 1956(a)(1)(A)(I) & 2).

The charges arose from a Ponzi scheme. We focus on Spencer's role in the transaction because only he raises sufficiency of the evidence issues on appeal. Dale and a co-defendant started Progressive Financial Services and Group ("Progressive") as a check cashing company. Progressive was used to solicit investors for the check cashing business and later for trading programs promising investment in foreign capital markets and various commodities. Few investments were made and most of the funds were used on personal luxuries and to perpetuate the Ponzi scheme. Eventually Progressive filed bankruptcy, listing the principal and interest owed to the investors as liabilities.

Spencer owned and ran Spencer Mortgage, a company specializing in serving people with bad credit. After Spencer and Dale became acquainted through one of the other co-defendants, Spencer agreed to let Progressive use its Spencer Mortgage bank accounts for a fee. Before Progressive funds from investors were deposited, the Spencer Mortgage account had a negative balance. Spencer made deposits, gave Progressive investors wiring instructions over the phone and sent confirmations that he had received wire transfers. Over $5 million in investors' funds went into the Spencer Mortgage accounts. Spencer wrote checks to investors for false returns out of the accounts. He also wrote checks for cars, boats and houses using these funds. Spencer took $581,865.20 of the investors' funds for himself, including $200,000 for a house after investors began questioning why they had not been paid as promised. Spencer also used $17,200 of the funds to pay an old business debt. Spencer prepared a letter containing false information about Spencer Mortgage for a co-defendant to use for marketing purposes. He attended sales pitches by the co-defendant and did not correct the lies told to investors.

Dale and Spencer were sentenced to 78 months in prison and 3 years supervised release and ordered to pay special assessments. Dale's Presentence Report did not include an enhancement under U.S.S.G. § 2F1.1(b)(6)(A), which applies to a defendant whose offense substantially jeopardizes the safety and soundness of a financial institution. The government objected to the PSR and Addendum because this enhancement was omitted. The district court sustained the objection noting that although the court was unable to find any federal case law addressing the issue, it concluded that Progressive appears to fall within the definition of a financial institution.

Spencer and Dale appeal.

II.

Spencer raises several trial related issues as a challenge to his conviction.

A.

Spencer argues first that the district court erred in denying his motion to sever his trial from that of Lisa Dale. We review that decision for abuse of discretion. United States v. Nutall, 180 F.3d 182, 186 (5th Cir.1999). In order to prevail, Spencer must show that "(1) the joint trial prejudiced him to such an extent that the district court could not provide adequate protection; and (2) the prejudice outweighed the [G]overnment's interest in economy of judicial administration." United States v. Solis, 299 F.3d 420, 440 (5th Cir.2002), cert. denied, 537 U.S. 1060, 123 S.Ct. 640, 154 L.Ed.2d 543 (2002) (quoting United States v. Richards, 204 F.3d 177, 193 (5th Cir.), cert. denied, 531 U.S. 826, 121 S.Ct. 73, 148 L.Ed.2d 36 (2000)). Spencer claims that the jury was exposed to a significant amount of testimony dealing with his co-defendant whose role in the crime was broader than his. However, joinder is proper where a single scheme to defraud is carried out through the operations of different companies, even if a defendant not connected with all of the companies is charged on only some of the substantive counts. United States v. Chavis, 772 F.2d 100, 111 (5th Cir.1985). Also, disparity in the amount of evidence presented against co-defendants does not justify severance in the absence of a showing of prejudice. United States v. Hogan, 763 F.2d 697, 705 (5th Cir.1985). Spencer makes only a general claim of prejudice by spill-over effect. This does not rise to the level to outweigh the government's interest in judicial economy. The district court did not abuse its discretion in denying Spencer's motion to sever.

B.

Spencer argues next that the district court abused its discretion in admitting, as extrinsic evidence, evidence that Spencer used investors' money to repay an overdue business debt. The district court admitted the testimony of Sharon Brock concerning a $17,200 wire transfer she received from Spencer from investor funds. Brock also testified that Spencer sent her the money because she had invested the funds with Spencer and that Spencer offered her a 200% return on her investment. These facts were not part of the scheme charged in the indictment. Spencer contends that this is extrinsic evidence because Spencer was not charged with defrauding Brock. The government contends that this is not extrinsic evidence because it was presented to show that Spencer was using the investor's funds, which should have been invested as promised, to instead repay a loan unrelated to the investment programs. The admission of this evidence is reviewed for abuse of discretion. United States v. Buck, 324 F.3d 786, 790 (5th Cir.2003).

Brock's testimony is not extrinsic evidence. Rather it is intrinsic as it was presented to show the nature of the Ponzi scheme in that Spencer used investors' funds to repay a loan unrelated to the investment programs. Evidence is intrinsic and admissible when it and the crime charged are intertwined, both acts are part of the same criminal episode or the other act was a necessary preliminary to the crime charged. United States v. Torres, 685 F.2d 921, 924 (5th Cir.1982). The district court appropriately limited this testimony to avoid the mention of fraud. No error resulted from the admission of this testimony.

C.

Spencer argues that the district court erred in failing to compel the government to disclose FBI Form 302s to Spencer under the Jencks Act, Brady or Giglio. Before and during the trial Spencer made requests for FBI Form 302s under its request for Brady, Giglio and Jencks Act material. Brady v. Maryland, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963)(exculpatory material); Giglio v. United States, 405 U.S. 150, 92 S.Ct. 763, 31 L.Ed.2d 104 (1972)(material that would impeach a government witness); Jencks Act, 18 U.S.C. § 3500 (statements of any witness). At trial Spencer asked that the forms for each witness be reviewed in camera to see if they contained any such material. The court reviewed them and determined (with one small exception) that they contained no material required to be disclosed. Spencer now requests that this court review the sealed Form 302s to determine whether they contain Jencks, Brady or Giglio material and thus whether the district court erred in refusing the compel the government to produce them to the defense. If the district court erred, Spencer submits that reversal of his conviction is required.

The district court's conclusion that a document does not contain a Jencks Act "statement" is reviewed for clear error. 18 U.S.C. § 3500. United States v. Brown, 303 F.3d 582, 591 (5th Cir.2002), cert. denied, 537 U.S. 1173, 123 S.Ct. 1003, 154 L.Ed.2d 915 (2003). A denial of a discovery request is reviewed for abuse of discretion. United States v. Gonzalez, 466 F.2d 1286, 1288 (5th Cir.1972).

The government argues that a defendant seeking in camera inspection to determine whether documents contain Brady material must make a "plausible showing" that the file will produce material evidence. United States v. Lowder, 148 F.3d 548, 550-551 (5th Cir.1998); United States v. Martin, 565 F.2d 362, 364 (5th Cir.1978). Also, to obtain production of a statement under the Jencks Act, the defendant must make a preliminary showing that there is a producible document. United States v....