U.S. v. Sanders

• Decision Date: 12 September 1996
• Docket Number: 95-5819,Nos. 95-5744,s. 95-5744
• Parties: 45 Fed. R. Evid. Serv. 597 UNITED STATES of America, Plaintiff-Appellee, Cross-Appellant, v. Grahame P. SANDERS, Defendant-Appellant, Cross-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 449

95 F.3d 449

45 Fed. R. Evid. Serv. 597

UNITED STATES of America, Plaintiff-Appellee, Cross-Appellant, v. Grahame P. SANDERS, Defendant-Appellant, Cross-Appellee.

Nos. 95-5744, 95-5819.

United States Court of Appeals Sixth Circuit.

Argued May 17, 1996.

Decided Sept. 12, 1996.

James Zerhusen, Frances E. Catron (argued and briefed), Asst. U.S. Attorneys, Lexington, KY, for Plaintiff-Appellee, Cross-Appellant.

James A. Shuffett, Lexington, KY (argued and briefed), for Defendant-Appellant, Cross-Appellee.

Before: BOGGS and MOORE, Circuit Judges; HILLMAN, District Judge. ^*

MOORE, Circuit Judge.

Defendant-Appellant Grahame P. Sanders appeals his convictions and sentence for conspiring to commit wire fraud in violation of 18 U.S.C. § 371 and committing wire fraud in violation of 18 U.S.C. § 1343. Sanders asserts that the district court erred when it admitted allegedly prejudicial evidence, denied his motion to introduce a co-conspirator's acquittal, entered a restitution order, and valued the loss for sentencing purposes. The government cross-appeals, claiming that the district court failed to enhance Sanders's sentence in accordance with the Sentencing Guidelines. For the reasons stated below, we affirm the district court's judgment of conviction, but we vacate Sanders's sentence and remand the case for resentencing.

I. BACKGROUND

In 1991, Gary White and Sanders started an insurance company called Griffin Insurance and Reinsurance Co., Ltd. ("Griffin"). Sanders apparently advised White about setting up the company and asked another person to register Griffin as an offshore company in the British West Indies. The Griffin financial statement falsely listed some personal assets and other non-existent assets as corporate assets. White operated Griffin, while Sanders referred potential clients to the company. Both White and Sanders provided potential customers with the false financial statements. Griffin purportedly provided both insurance and performance bonds but never paid any claims made against it. Indeed, Sanders instructed White on how to process claims but avoid paying them. The premiums collected apparently were distributed among Sanders, White, Thomas Reid Methvin, and Gene J. Lambert.

In 1994, Sanders, White, Methvin, and Lambert were indicted on sixty-nine counts of conspiracy and wire fraud. Methvin and White pleaded guilty, and Lambert was acquitted after a jury trial. Sanders was convicted after a jury trial and sentenced to thirty-three months of imprisonment. Sanders timely filed a notice of appeal to this court, and the government cross-appealed.

II. ANALYSIS

Sanders appeals both his conviction and sentence, raising six issues. We discuss each issue in turn.

A. Admission of the Methvin Letter

Sanders argues that the district court erred by admitting a letter from co-conspirator Methvin to co-conspirator White. The letter referred to a pending investigation by the State of Florida into Sanders's activities and portrayed Sanders as trying to "screw" his partners. The letter stated:

A few weeks ago, an investigator from the Insurance Department of the State of Florida, called and ask [sic] questions about your friend Grahame Sanders. They are building a case against him about some of his past activities. I tell you this because, unless I receive the refund of the $600.00 for the Travel Agents Bond and the $375.00 for Systems Forming $11,500 Bond and some "help" in getting some of the $5,000.00 on the Puckett Bond, I intend to cooperate fully with the investigator. Grahame has until noon Friday, 10/4/91.

Gary, as you know I don't believe in screwing your friends/partners. That is just what he is trying to do to me. If he'll do it to me, he'll do it to you to [sic]. Also, he has made us look like crooks and fools to our big client, Systems Forming Co.

Anything you can do in this regard, will be appreciated.

Letter from T. Reid Methvin to Gary White, Appellant's Br. at 5; Government's Br. at 20.

Sanders challenges the admission of this letter pursuant to Rule 403 of the Federal Rules of Evidence. This court reviews Rule 403 challenges to a district court's decision to admit evidence or testimony for abuse of discretion. United States v. Bonds, 12 F.3d 540, 567 (6th Cir.1993). We must view the evidence in the light most favorable to the government by maximizing the probative value of the evidence and minimizing its potential prejudice. United States v. Moore, 917 F.2d 215, 233 (6th Cir.1990), cert. denied, 499 U.S. 963, 111 S.Ct. 1590, 113 L.Ed.2d 654 (1991). Moreover, the prejudice to be weighed is the unfair prejudice caused by admission of the evidence. Evidence that is prejudicial only in the sense that it paints the defendant in a bad light is not unfairly prejudicial pursuant to Rule 403. United States v. Mullins, 22 F.3d 1365, 1373 (6th Cir.1994).

The district court did not abuse its discretion when it admitted the Methvin letter. The Systems Forming bond referred to in the letter apparently formed the basis of some of the charges in the indictment. Indictment, Counts 63-69, J.A. at 83-84 (referring to Systems Forming bond). The letter also is probative in that it ties Sanders to the activities of the conspiracy--the letter was written during the course of the conspiracy and refers to acts of the conspiracy. Thus, the letter has some significant probative value. Its prejudicial effect mainly is its portrayal of Sanders as a crook and as someone trying to sell out his co-conspirators. Thus, the letter prejudices Sanders by making him look bad but does not unfairly prejudice him by confusing or misleading the jury. At most, any unfair prejudice is minimal and is outweighed significantly by the probative value. Thus, the district court did not abuse its discretion by admitting the letter into evidence.

B. Admission of Testimony of Insurance Regulators

Sanders also argues that the district court abused its discretion by admitting the testimony of insurance regulators Connell, Johnson, and Cordial regarding licensing requirements for domestic and offshore insurance companies. Sanders argues that the evidence was confusing to the jury and thus unfairly prejudicial pursuant to Fed.R.Evid. 403. This court reviews the district court's decision to admit this testimony pursuant to the abuse of discretion standard of review discussed in Section IIA above.

The government argues that the evidence was relevant to show Sanders's knowledge that Griffin was a sham company that was operating illegally. The government's theory apparently was that Sanders, who had extensive experience in the insurance industry, knew of the regulatory requirements and knew that Griffin was operating in violation of those requirements. The evidence presented is somewhat probative for this purpose, although it may have been somewhat confusing to the jury. Any confusion, however, was mitigated by the district court's limiting instruction. This instruction cautioned the jury that Sanders was not being tried for violating licensing laws, and that the licensing information could be used only for determining Sanders's state of mind, i.e., whether he knowingly defrauded his customers. Jury Instructions, J.A. at 449-50. When we view the testimony in the light most favorable to the government by maximizing its probative value and minimizing its prejudicial effect, as we must, we cannot find that the district court abused its discretion by admitting the insurance regulators' testimony.

C. Failure to Admit Co-Conspirator's Acquittal

Sanders argues that the district court erred by refusing to admit testimony that co-conspirator Lambert had been acquitted, when the government was permitted to elicit from co-conspirators Methvin and White that they had pleaded guilty to some of the charges in the indictment. Although Sanders's argument has surface appeal, it does not withstand close scrutiny.

Generally, the guilty plea or conviction of a co-defendant or co-conspirator is not admissible at trial, and such guilty pleas and convictions are never admissible as substantive evidence of the defendant's guilt. United States v. Blandford, 33 F.3d 685, 709 (6th Cir.1994), cert. denied, --- U.S. ----, 115 S.Ct. 1821, 131 L.Ed.2d 743 (1995). However, guilty pleas and convictions may be introduced into evidence if the co-conspirator or co-defendant testifies at trial, so that the factfinder will have appropriate facts on hand to assess the witness's credibility. Id. When a guilty plea or conviction is introduced into evidence, the district court is required to give a cautionary instruction to the effect that the jury may use the conviction or guilty plea only to determine the testifying witness's credibility. Id. Convictions and guilty pleas generally are not admissible for credibility purposes if the co-conspirator or co-defendant does not testify, and convictions and guilty pleas of co-conspirators or co-defendants other than the witness are not admissible to attack or bolster the witness's credibility. See United States v. Austin, 786 F.2d 986, 992 (10th Cir.1986) ("We have found no case, and the Government has not cited one, in which a conviction other than that of the witness himself was properly admitted on the issue of his credibility.").

Methvin and White, whose guilty pleas were admitted, both testified for the government at Sanders's trial. Their guilty pleas properly were admitted for credibility purposes, and the district court gave an adequate limiting instruction. Lambert did not testify at Sanders's trial, so if he had pleaded guilty, his plea would not have been admissible. Thus, under a parallel treatment for guilty pleas and acquittals, his acquittal may not be admitted either. See United States v. Fernandez-Roque, 703 F.2d 808, 813 (5th Cir.1983) (district court did not abuse its discretion by refusing to admit the acquittal of a non-testifying co-conspirator to impeach a co-conspirator witness's testimony).

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