U.S. v. Hudspeth

• Decision Date: 19 May 2008
• Docket Number: No. 07-1632.,07-1632.
• Citation: 525 F.3d 667
• Parties: UNITED STATES of America, Appellee, v. Roy James HUDSPETH, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

525 F.3d 667

UNITED STATES of America, Appellee, v. Roy James HUDSPETH, Appellant.

No. 07-1632.

United States Court of Appeals, Eighth Circuit.

Submitted: December 12, 2007.

Filed: May 19, 2008.

Donald R. Cooley, Springfield, MO, argued, for appellant.

Randall D. Eggert, Asst. U.S. Atty., Springfield, MO, argued (John F. Wood, U.S. Atty., Kansas City, MO), for appellee.

Before RILEY, COLLOTON, and BENTON, Circuit Judges.

BENTON, Circuit Judge.

A jury convicted Roy James Hudspeth of conspiracy to distribute pseudoephedrine in violation of 21 U.S.C. §§ 841(c)(2) and 846, conspiracy to launder money in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i) and 1956(h), and two counts of money laundering in violation of 18 U.S.C. § 1956(a)(1)(A)(i). Hudspeth argues the district court¹ erred in denying his motions to suppress and motions for judgment of acquittal, and in providing four jury instructions. Having jurisdiction under 28 U.S.C. § 1291, this court affirms.

I.

This court states the facts in a light most favorable to the jury's verdict. See United States v. Birdine, 515 F.3d 842, 844 (8th Cir.2008).

Hudspeth was vice-president and chief managing officer of Handi-Rak, Inc., in Brookline, Missouri. In 1997, on behalf of Handi-Rak, Hudspeth applied for a List I chemical license with the Drug Enforcement Administration (DEA). As part of the registration, two DEA agents met with him to discuss recordkeeping, the dangers of diversion of pseudoephedrine and ephedrine products,² and the importance of knowing the customer base. The DEA agents also told Hudspeth that he was responsible for making sure that Handi-Rak complied with the law. Hudspeth acknowledged these obligations, volunteering that the sale of pseudoephedrine and ephedrine products would be less than one percent of his sales. Handi-Rak subsequently received a List I chemical license.

Hudspeth met with the DEA again in April 2002. The DEA inspected Handi-Rak for compliance with the regulations on the distribution of List I chemicals. The DEA agent was particularly concerned with the fact that: (1) Hudspeth knew of only four pseudoephedrine or ephedrine products although Handi-Rak sold more than 180 products with at least one as an ingredient; (2) Hudspeth estimated that the sale of these products represented about 30 or 40 percent of Handi-Rak's business; (3) Hudspeth set a 48-box limit per week per product, but customers repeatedly received more than this self-imposed limit; and (4) salesmen submitted handwritten invoices with no information about which customers bought the boxes of these products and how much they bought. The DEA agent expressed her concerns to Hudspeth. She also provided him with a "Red Notice," warning that pseudoephedrine and ephedrine products were being seized at meth laboratories, that suspicious orders should be immediately reported to the local DEA office, and that any person distributing or possessing these products with knowledge or reasonable belief that they will be used to manufacture a controlled substance is in violation of 21 U.S.C. § 841(d)(2). The DEA agent also gave Hudspeth a "Chemical Handler's Manual." The manual included the "Suspicious Task Force Form," listing things to look for to stop diversion. The list includes: "Customers who push to buy more than your sales limits," "Customers who repeatedly buy your sales limit at the shortest interval you set," "Customers who resell to nontraditional outlets of regulated over-the-counter products," "Customers who buy only the largest size available," and "Customers that don't sell other pharmaceutical products or appear to sell those other products in token amounts." Examples of nontraditional outlets are "hair salons, head shops, [and] drug paraphernalia stores. . . ."

Search warrants were executed at Handi-Rak on May 22, 2002, and July 24, 2002, as part of a criminal investigation by the Combined Ozarks Multi-Jurisdictional Enforcement Team. At the May search, officers discovered numerous handwritten invoices in Hudspeth's desk, which listed large amounts of pseudoephedrine products, some in excess of 144 boxes, being checked out to salesmen with no other information provided. The officers questioned Hudspeth about the invoices. He stated that "pseudoephedrine was a popular product and that the salesmen would check out extra pseudoephedrine and carry it on the truck with them in case they came along somebody that they wanted to sell it to." The officers also talked to Hudspeth about their suspicions that one of Handi-Rak's customers diverted pseudoephedrine to meth manufacturers. Hudspeth replied that "it really wasn't his responsibility."

In the July search, officers inventoried all the pseudoephedrine and ephedrine products at Handi-Rak. Again, officers questioned Hudspeth about Handi-Rak's business practices and suspicions about specific customers diverting the product to meth manufacturers. Hudspeth answered that "he really didn't know what the business practices of his customers were, that it really wasn't his responsibility on whether or not they were using or misusing the product or how they were using the product." With regard to specific stores, he claimed that "that wasn't his responsibility." The officers asked why his customers would want to purchase such large amounts of pseudoephedrine. Hudspeth replied that "he didn't know that they were making the drug . . . methamphetamine." Officers also asked why Hudspeth was not turning in his customers who were purchasing large amounts of pseudoephedrine. He responded that "if he turned in every customer that he thought was misusing the pseudoephedrine product, that he wouldn't have any customers left."

After these events, Handi-Rak continued to sell large amounts of pseudoephedrine and ephedrine products to customers until November 2003.

Mike Williams, a salesman, testified that he delivered large amounts of pseudoephedrine and ephedrine products to The Castle. The Castle was a "head shop" in southwest Missouri, which primarily sold drug paraphernalia. Williams delivered once or twice a week the maximum amount of pseudoephedrine and ephedrine products. However, Williams was concerned about the store because it was a head shop; he believed the store was diverting the products to manufacture meth. Williams said that he talked pretty often with Hudspeth about his concerns, but Hudspeth said, "Not to worry," and "Go ahead and sell it." Williams stopped delivering to The Castle in June 2002 after the store asked for iodine, which is also used to manufacture meth. Williams also said that after the second search warrant was executed, another salesman told Hudspeth about a store that wanted to buy 48 boxes of pseudoephedrine. Hudspeth told the salesman, "I didn't hear that," and "Don't talk about that."

Troy Kelly, a salesman, delivered large amounts of pseudoephedrine to the C & M Country Corner, a little mom-and-pop store in southern Missouri. He testified Hudspeth told him how to get around the 48-box limit by making hand tickets, or written invoices. Kelly would take extra product with him and sell it to customers who wanted more boxes or did not order any. He would write out an invoice for the sale and then turn it in with the regular invoices. Kelly also testified that he talked to Hudspeth about selling extra pseudoephedrine to C & M. Hudspeth told him, "With them we sell everything we can sell to them," and "Pills are profit." C & M's owner told Kelly that she thought customers were buying the pseudoephedrine to manufacture meth. Kelly told Hudspeth, who responded: "what she does with it after the fact is her business, not ours." Kelly continued to sell pseudoephedrine to C & M.

Michael Higgins, a salesman, delivered large amounts of ephedrine products to two Quick Stop convenience stores in the Kansas City area. He delivered weekly the maximum amount of ephedrine products. Higgins, though, testified that there was no limit on the amount he could deliver until September 2002. Higgins also stated that he developed suspicions about the Quick Stop stores because they were selling a lot more ephedrine than any other store he delivered to. However, Higgins did not discuss his concerns with Hudspeth.

Handi-Rak's bookkeeper testified she was concerned with the handwritten invoices, which were primarily for pseudoephedrine products. She expressed her concerns with Hudspeth, but he would tell her not to worry about it. Another Handi-Rak employee also testified that she told Hudspeth about the salesmen checking out more pseudoephedrine than the 48-box limit. Hudspeth said he would take care of it. All employees indicated that pseudoephedrine and ephedrine products were Handi-Rak's biggest sellers and that the 48-box limit was repeatedly ignored.

An expert testified that a convenience store would be expected to sale $19.76 per month of pseudoephedrine, according to national averages. A non-convenience store, such as a head shop, would not be expected to sell any pseudoephedrine. In comparison, Handi-Rak's average monthly sales of pseudoephedrine to The Castle were $957.05, to C & M were $700.48, and to the Quick Stops were $581.19. Several other stores that Handi-Rak serviced also purchased similar amounts of pseudoephedrine products.

Multiple police officers testified about their investigation of Handi-Rak. Several undercover officers purchased large amounts of pseudoephedrine from The Castle. The officers matched the lot numbers of these boxes to lot numbers sent to Handi-Rak from Cumberland Swan, a distributor of health and beauty products, including pseudoephedrine and ephedrine products. A representative from Cumberland Swan testified that at that time its only customer in Missouri was Handi-Rak (although it had two customers in Arkansas).

Officers also testified about their investigation of the Pit Stop and Norm's Grocery Store, both serviced by Handi-Rak. Officers searched the property of the manager...