U.S. v. Haas

• Decision Date: 29 March 1999
• Docket Number: No. 97-41335,97-41335
• Citation: 171 F.3d 259
• Parties: UNITED STATES of America, Plaintiff-Appellee-Cross-Appellant, v. Ronnie S. HAAS, Defendant-Appellant-Cross-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 259

171 F.3d 259

UNITED STATES of America, Plaintiff-Appellee-Cross-Appellant, v. Ronnie S. HAAS, Defendant-Appellant-Cross-Appellee.

No. 97-41335.

United States Court of Appeals Fifth Circuit.

March 29, 1999.

Alice Ann Burns, Paula Camille Offenhauser, Assistant U.S. Attorneys, Houston, TX, Catherine Marie Cook, U.S. Food & Drug Administration, Rockville, MD, for United States.

Roy R. Barrera, Sr., Nicholas & Barrera, San Antonio, TX, for Ronnie S. Haas.

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

Before JOLLY, DUHE and EMILIO M. GARZA, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

A jury convicted Ronnie Haas, who conducted a pharmaceutical drug importation business, on multiple conspiracy charges involving fraud and other illegal conduct relating to Food and Drug Administration ("FDA") regulations. The jury also convicted him of aiding and abetting others involved in the illegal conduct and of introducing misbranded drugs into this country with the intent to defraud. Haas argues that the government did not produce sufficient evidence for a rational jury to convict him. He also argues that the district court erroneously instructed the jury. Finally, both Haas and the government (which cross-appeals) contend that the district court incorrectly calculated Haas's sentence under the Sentencing Guidelines. We hold that the evidence is sufficient to support convictions on all counts. We further hold that the district court did not err when instructing the jury. Finally, we agree with the government that the district court did err in calculating Haas's sentence when it failed to consider loss caused by his fraudulent activities. We therefore uphold all convictions, but remand for resentencing.

I

Taken in the light most favorable to the government, see United States v. Ortega Reyna, 148 F.3d 540, 543 (5th Cir.1998), the evidence established the following facts.

Ronnie Haas was, shall we say, an entrepreneur. He, along with two other partners, founded North American Pharmaceutical Services, Inc. ("NAPS"). ¹ NAPS operated as a mail-order business that advertised in several states, claiming that it could supply pharmaceutical drugs at prices lower than the average wholesale prices because of "the benefits of International Trade." These "benefits of International Trade," however, had little to do with NAFTA, GATT or any other international trade agreement. Instead, the benefits came by way of avoiding U.S. regulations governing the sale of drugs; NAPS avoided regulatory oversight by purchasing drugs in Mexico and then transporting them into the United States (either through the mail or by way of NAPS employees themselves) without declaring the importation to any customs authority.

NAPS maintained two primary places of business to sustain its mode of operation. The headquarters were located in San Antonio, Texas. Here NAPS received its orders from United States customers. NAPS employees would then transmit the orders to its Mexican pharmacy located in Nuevo Laredo, Mexico. To fill the orders, the NAPS employees at the pharmacy would purchase drugs from a wholesale supplier in Monterrey, Mexico. The NAPS employees would then fill the orders and, at the early stage of this operation, would mail them from Mexico to the U.S. customers.

Over the course of several months, NAPS slightly altered its procedure for moving the drugs from the Mexican pharmacy to the U.S. customers. Instead of mailing the drugs directly from the pharmacy, NAPS employees began transporting the drugs--sometimes by car, and sometimes even by foot--into the United States. Only after entering the United States would NAPS employees place the drugs into the mail. NAPS never reported the importation of the drugs to customs officials as required. It is significant that this alteration of distribution methods occurred after Haas met with FDA agents concerning his questionable operation, and during a period in which Haas received written warnings from the FDA stating that he appeared to be violating the law.

During the months of September and October of 1994, Haas participated in three meetings with various state and federal government officials who were concerned about the legality of his conduct. At the first meeting, which Haas initiated, Haas met with a customs inspector, Agent Leyendecker, to discuss his importation plans. Importantly, the inspector told Haas that his activities would be considered commercial--as opposed to personal--importation of drugs. The characterization of Haas's activities as "commercial" is a crucial point for both the legality of Haas's activities and Haas's convictions. The characterization is crucial because the facial legality of Haas's importation business turns upon the availability to him of a narrow exemption (the "personal importation exemption") from various customs and FDA importation regulations. Under the personal importation exemption, the FDA waives its standard rule that only drugs manufactured or prepared in foreign facilities registered with the FDA may enter the United States. ² At this first meeting, however, Haas was instructed that his planned course of business constituted commercial importation and that the personal importation exemption did not apply. Furthermore Agent Leyendecker suggested that Haas speak with the FDA.

The next day, September 21, 1994, Haas did meet with FDA agents. These agents warned Haas that his activities were commercial and that he must comply fully with customs and FDA regulations. Approximately two weeks later, Haas met with the FDA again. They again informed him that they considered NAPS to be engaged in commercial importation. Furthermore, they explicitly told Haas that his activities were illegal. ³ Undeterred, Haas continued NAPS's operations without complying with customs or FDA regulations.

In February 1995, the FDA began to confiscate NAPS drug shipments made through the mail from Mexico. After the FDA began confiscating the shipments, Haas and other NAPS employees altered the delivery method by transporting the drugs into the United States before placing them into the mail system. Then, in March 1995, the FDA sent Haas the first of two warning letters. Among other things, the letter stated that NAPS's "drugs may not be legally marketed in this country, and, therefore, your activities are in serious violation of the Federal Food, Drug, and Cosmetic Act." The letter went on to list specific sections of the United States Code that the FDA thought NAPS was violating. Although the letter asked for a response, Haas ignored the letter. ⁴ The FDA sent another warning letter (repeating the content of the first letter) in November 1995. Again, Haas ignored the letter; NAPS operations continued without change.

Later that same month, FDA officials sought to determine whether NAPS's was still operating in violation of federal law. To this end, an FDA agent--operating under cover and acting as a typical customer--ordered some drugs from NAPS. In due course the drugs were delivered. The undercover order confirmed that NAPS was still operating in violation of FDA regulations. The drugs were not properly labeled and they did not come from a foreign facility registered with the FDA. Soon thereafter, FDA agents obtained a search warrant, searched NAPS's San Antonio premises, and found paraphernalia indicating that Haas was still conducting NAPS's operations out of that location. Haas was subsequently arrested, indicted, and brought to trial.

II

The government charged Haas with six counts at trial. First, Haas was charged with conspiracy to defraud an agency of the United States (the FDA) in violation of 18 U.S.C. § 371. ⁵ Section 371 also supports the charge in the second count for conspiracy to commit an offense against the United States by (1) introducing misbranded drugs into interstate commerce with the intent to defraud and mislead, ⁶ and (2) entering and introducing imported goods into United States commerce by means of a false statement and false and fraudulent practice. ⁷ In the remaining four counts, Haas was charged with aiding and abetting the illegal delivery of misbranded drugs into interstate commerce in violation of 18 U.S.C. § 2 ⁸ and 21 U.S.C. §§ 331(a), 333(a)(2).

The jury returned a verdict of guilty on all six counts. The trial judge then sentenced Haas to a 27-month term of imprisonment for each count, each term to run concurrently. The court also sentenced Haas to three years of supervised release based on counts 1 and 2 and one year of supervised release for each of counts 3-6. The court ordered that all the terms of supervised release would run concurrently.

At the sentencing hearing, the district court enhanced Haas's sentence, under U.S.S.G. § 3C1.1, for obstruction of justice. The court found that Haas obstructed justice by perjuring himself in his testimony at trial. In particular, the court found that Haas falsely testified by claiming that he had not been told that he could not import drugs from Mexico and by denying that NAPS was operating commercially when it brought the drugs into the United States.

The prosecution also argued that the court should enhance Haas's sentence under U.S.S.G. § 2F1.1(b)(1)(H). This subsection calls for a sentence enhancement based upon the dollar amount of loss caused by the offender's fraud. The district court, however, disagreed because it could find no "loss" and refused to enhance the sentence under this provision.

Haas now appeals, challenging the sufficiency of the evidence for conviction, the jury instructions, and the calculation of his sentence. The government cross-appeals the calculation of Haas's sentence.

III

A

We first address the sufficiency of the evidence. Viewing all of the evidence and the inferences to be drawn therefrom in the light most favorable to the government, we conclude that a rational jury could find that the evidence was...