U.S. v. Hull, 97-20557

• Decision Date: 10 November 1998
• Docket Number: No. 97-20557,97-20557
• Citation: 160 F.3d 265
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Ross HULL, Doug Lasco, Lloyd Krein, and Joseph Stafford, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 265

160 F.3d 265

UNITED STATES of America, Plaintiff-Appellee, v. Ross HULL, Doug Lasco, Lloyd Krein, and Joseph Stafford Defendants-Appellants.

No. 97-20557.

United States Court of Appeals Fifth Circuit.

Nov. 10, 1998.

James Lee Turner, Paula Camille Offenhauser, Asst. U.S. Atty., Houston, TX, for Plaintiff-Appellee.

Ray Christopher Goldsmith, Houston, TX, for Hull.

R. Scott Shearer, Houston, TX, for Lasco.

James M. Brooks, Houston, TX, for Krein.

Erik R. Sunde, Houston, TX, for Stafford.

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

Before SMITH, DUHE and WIENER, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

The defendants appeal their convictions that resulted from their participation in a fraudulent investment scheme. We affirm.

I.

Ross Hull, Doug Lasco, Lloyd Krein, and Joseph Stafford were charged with a variety of crimes stemming from their activities in connection with a nearly two-year conspiracy that defrauded over one hundred investors of more than $2.3 million. Originally, Stafford, Krein, and Lasco worked as members of the "John Oliver Group" ("JOG"), which performed legitimate telemarketing services for the purchase and sale of precious metals, effected through JOG's broker, Unimet. In July 1992, Unimet terminated its business relationship with JOG by order of the Federal Trade Commission, leaving JOG without a broker to invest its clients' money.

In turn, JOG pitched, to its clients, the opportunity to trade in ancient coins. Stafford, Krein, and Jim Ammons (a defendant not party to this appeal) masterminded this operation, in which Lasco and Hull worked as salesmen. Of the more than $1.3 million collected from investors, only $255,000 was used to purchase ancient coins; the balance paid JOG's operating expenses and lined the pockets of its principals.

In April 1993, JOG began to offer its clients the opportunity to invest in precious metals again, under the rubric of "Continental Bullion & Coin" ("CBC"), which, however, did not invest any of the more than $400,000 it collected from investors via this scheme.

Also in April 1993, Krein, Stafford, Lasco, and Ronald Keyser (a defendant not party to this appeal) fabricated "ASK Investments" ("ASK"), which pitched the purchase of surplus United States Government equipment that purportedly would be purchased at government auctions and later sold for a guaranteed profit of 10%-100%. ASK attended no such auctions on behalf of its clients and made no such purchases, but reaped over $300,000 from defrauded investors via this scheme.

When investors attempted to withdraw their money, they encountered a plethora of deceptions. They were told it was a bad time to withdraw or that it would be wiser to "reinvest" their funds. If an investor insisted on withdrawing, he was promised a refund check. Repeated calls for the check resulted in repeated promises that it was forthcoming; for many investors, this continued until the telephone number they had been calling had been disconnected.

II.

Hull raises the only novel issue of this appeal: whether a defendant who has been acquitted of conspiracy may be held liable as a co-conspirator for sentencing purposes. We conclude that he may.

A.

Hull was charged with three sets of related counts: count 18 (conspiracy in violation of 18 U.S.C. § 371), counts 19-25 (interstate transportation of stolen property in violation of 18 U.S.C. §§ 2 and 2314), and counts 26-36 (money laundering in violation of 18 U.S.C. § 1956(a)(1)(A)(i)). The jury found him guilty on counts 19-25 and not guilty on counts 8 and 26-36. In determining Hull's sentencing level, the court took into account the conduct of his co-defendants, as per U.S.S.G. § 1B1.3 (1995) (relevant conduct). Hull argues that the jury's determination that he was not guilty of conspiracy precluded the court from holding him liable for the conduct of his co-defendants for sentencing purposes.

B.

Findings of fact made for sentencing purposes are reviewed under the clearly erroneous standard. United States v. Gadison, 8 F.3d 186, 193 (5th Cir.1993). Matters of interpretation of the sentencing guidelines are reviewed de novo. Id. Whether the acts of Hull's co-defendants should be attributable to him is a matter of fact and is reviewed under the clearly erroneous standard.

The scope of relevant conduct attributable to a defendant for sentencing purposes is set out in U.S.S.G. § 1B1.3(a)(1)(B), which states that a defendant is liable for "all reasonably foreseeable acts and omissions of others in furtherance of ... jointly undertaken criminal activity." "Jointly undertaken criminal activity" is defined as "a criminal plan, scheme, endeavor, or enterprise undertaken by the defendant in concert with others, whether or not charged as a conspiracy." Id. Each of these determinations ("reasonable foreseeability," "in furtherance," and the existence of "jointly undertaken criminal activity") is factual and therefore is reviewed under the clearly erroneous standard.

C.

A defendant is liable in sentencing for the reasonably foreseeable acts of co-defendants in jointly undertaken criminal activity. Id. In cases of fraud, this means a defendant is liable for the total dollar amount that victims were defrauded. Id., illustration (c)(2).

Participation in a conspiracy, however, does not automatically give rise to co-conspirator liability under § 1B1.3(a)(1)(B). Rather, the court also must make particularized findings that the elements of foreseeability and scope of agreement have been met. United States v. Evbuomwan, 992 F.2d 70, 72-74 (5th Cir.1993); United States v. Puma, 937 F.2d 151, 160 (5th Cir.1991). The scope of jointly undertaken criminal activity for which a defendant is held responsible encompasses "the specific conduct and objectives embraced by the defendant's agreement." U.S.S.G. § 1B1.3(a)(1)(B), comment. (n. 2).

Ordinarily, Hull's claim would be defeated by the simple fact that the record supports holding him liable for the conduct of his co-defendants. In close association with them, he transported checks he knew had been obtained by fraud. He conned clients into "investing" their money to help further the fraudulent scheme of which he was a part. The court was not clearly erroneous in finding that he was acting "in furtherance" of "jointly undertaken criminal activity" (the scheme), the total losses of which were "reasonably foreseeable."

Such a determination is complicated, though, by the fact that the jury returned a verdict of not guilty of conspiracy. This arguably undercuts the finding that Hull was engaged in "jointly undertaken criminal activity." For two reasons, however, these apparently contradictory findings are not irreconcilable.

The government must prove all elements of a criminal offense beyond a reasonable doubt. But, findings of fact for sentencing purposes need meet only the lower standard of "preponderance of evidence." U.S.S.G. § 6A1.3, p.s., comment; United States v. Huskey, 137 F.3d 283, 291 (5th Cir.1998). Therefore, a finding that Hull was not guilty of conspiracy for purposes of conviction is not inconsistent with a finding that he was a conspirator for purposes of sentencing.

Once we conclude that the "not guilty" verdict on conspiracy charges did not preclude the court from taking into consideration the acts of co-defendants for sentencing purposes, we need merely to review the decision for clear error. More specifically, we must consider whether the court rationally could have found that, by a preponderance of evidence, Hull acted "in furtherance" of a "jointly undertaken criminal activity" that had "reasonably foreseeable" consequences.

Hull was found beyond a reasonable doubt to have transmitted seven checks, taken by fraud, totaling $76,800 in value, over a two-month period. Six witnesses testified Hall persuaded them to invest their money in the scheme. On these facts, the court did not commit clear error in concluding that Hull was indeed part of a criminal enterprise, that he knowingly furthered its ends, and that the total amount by which this scheme defrauded investors (more than $1,500,000) was reasonably foreseeable.

A second ground for affirming is to read § 1B1.3(a)(1)(B) more broadly than the definition of conspiracy in 18 U.S.C. § 371. Support for this comes from the text of the sentencing guidelines.

In setting forth the crime of conspiracy, the statute does not define "conspiracy" but merely criminalizes the act of conspiring against the United States. § 371. The guidelines define "jointly undertaken criminal activity" as "a criminal plan, scheme, endeavor, or enterprise undertaken by the defendant in concert with others." § 1B1.3(a)(1)(B). The fact that the guidelines provided this list, and did not simply reference "conspiracy" as per § 371, suggests that the two concepts may not be identical. Additionally, the guidelines state that such conduct is attributable to the defendant "whether or not charged as a conspiracy." § 1B1.3(a)(1)(B). This in turn suggests that the scope of relevant conduct should not depend on whether a particular defendant has been convicted of conspiracy if so charged.

Lastly, the commentary following § 1B1.3 provides still further reason to believe that co-conspirator liability need not be predicated by a conspiracy conviction: "[T]he scope of criminal activity jointly undertaken by the defendant ... is not necessarily the same as the scope of the entire conspiracy." U.S.S.G. § 1B1.3, comment. (n. 2). A review of the Sentencing Commission's discussion of "Real Offense vs. Charge Offense Sentencing" confirms this. See U.S.S.G. ch. 1, pt. A.

While the Commission "initially sought to develop a pure real offense system," whereby sentencing would be determined strictly by the conduct in which the defendant engaged, regardless of the charges against him, the Commission ultimately "moved closer to a charge offense system" whereby...