U.S. v. Sudeen
| Decision Date | 23 December 2005 |
| Docket Number | No. 04-30067.,04-30067. |
| Citation | 434 F.3d 384 |
| Parties | UNITED STATES of America, Plaintiff-Appellee, v. Motillal L. SUDEEN, also known as Moti Sudeen, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Michael S. Fawer (argued), Covington, LA, for Sudeen.
Appeal from the United States District Court for the Eastern District of Louisiana.
Before JOLLY, SMITH and DeMOSS, Circuit Judges.
Motilall Sudeen was convicted of wire fraud, travel fraud, money laundering and conspiracy offenses and sentenced to 220 months' imprisonment. He appeals, contending that the district court committed reversible error (1) in severing his trial from that of his co-defendant; (2) in admitting evidence of an uncharged investment scheme and statements he alleges to be hearsay; (3) in the application of the sentencing guidelines; and (4) by finding certain facts in contravention of United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005). We find Booker error with respect to the district court's use of the 2002, rather than the 2000, guidelines. As to all other claims pertaining to conviction or punishment, we find no reversible error. We therefore affirm the conviction and vacate the sentence and remand for resentencing.
Sudeen sought to build a large urea processing plant in Poplarville, Mississippi, where he ultimately consolidated all his business dealings.1 He formed a corporation, MS Carbamate ("Carbamate"), and acquired land on which to build the plant. He contends that he was "financing" the plant using a variety of investment devices.
The plant was never built, because of alleged regulatory difficulties. As a result, Sudeen breached contracts with investors.
The investment programs Sudeen alleged he was using to finance the plant were, in actuality, constituent frauds in a fairly elaborate Ponzi scheme. Sudeen and his co-conspirators represented to potential investors that their money would be placed in "high yield investment programs" that would generate profits for them at greater-than-market rates of return.2
Sudeen told investors that their principal would remain safely in banks and would be exposed to little or no risk; that the high yield programs involved marquee banks, including the World Bank and the IMF; and that the trading programs were monitored by the federal government. Sudeen periodically mollified investors by returning "dividends" from the programs;3 by encouraging investors to roll over their investments instead of seeking immediate returns; and by reassuring investors that their money had been safely invested and that they would be paid soon.4 Sudeen and his co-conspirators used the funds to make "lulling" payments to encourage further investment in the "programs" and for Sudeen's personal and business expenses.5
Sudeen and Freeman continued to maintain the appearance of safety by issuing investors bogus "Private Placement Agreements" and "Joint Venture Agreements." They also told investors that Sudeen's personal wealth guaranteed their investment. Investors were told to purchase Certificates of Deposit from various banks to allow Sudeen to use the credit for loans, the proceeds of which would also be invested. When a given investor demanded proceeds, Sudeen and Freeman would claim that the investor was ineligible because he had failed to comply with fictitious requirements, that the profits were "tied up" by the federal government, or that the returns could not be liquidated from overseas assets.
1. Sudeen was a principal in another Ponzi scheme involving insulin (the "insulin scheme"), for which he and Freeman were not indicted. Sudeen co-mingled funds involved in the two schemes, making lulling payments using resources of one to the other. On this issue the government cites to the record extensively, whereas Sudeen does nothing more than advance speculation.
In February 2002 Sudeen and Freeman were indicted on one count of conspiracy under 18 U.S.C. § 371, fourteen counts of wire fraud under 18 U.S.C. § 1343, two counts of travel fraud under 18 U.S.C. § 2314, and twenty-one counts of money laundering under 18 U.S.C. § 1957. Trial was originally set for May 2002. The district court granted several of the defendants' motions for continuance.
In December 2002, Sudeen's cardiologist informed the court that Sudeen was healthy enough to go to trial in January. In January 2003 Sudeen and Freeman again moved for continuance because Freeman's attorney had a conflict with a case previously scheduled for trial in North Carolina. The government opposed the motion and moved to sever the trials and proceed with Sudeen's. The district court granted Freeman a continuance, denied a continuance to Sudeen, and granted the government's motion to sever, thus forcing Sudeen to proceed to trial on January 13.
The jury found Sudeen guilty on thirty-eight of the counts. Applying the 2002 sentencing guidelines, the court calculated an offense level of 37, which produced a guidelines range of 210-262 months' imprisonment. The court sentenced Sudeen to 220 months.
Sudeen argues that because his and Freeman's counsel had prepared their defenses jointly, Sudeen was prejudiced by a severance. We disagree.
We review a grant or denial of severance for abuse of discretion. See United States v. Ramirez, 954 F.2d 1035, 1037-38 (5th Cir.1992). A severance is reversible only on a showing of specific compelling prejudice. See United States v. Barnett, 197 F.3d 138, 144 (5th Cir.1999).6
Although it is generally true that "defendants who are indicted together should be tried together," see United States v. Piaget, 915 F.2d 138, 142 (5th Cir.1990), that generalization says nothing of the legal circumstances that justify deviating from it. Sudeen cites no authority for the standard he advances as the criteria for such deviation: "[W]hether the Government articulated a specific risk that could be averted only through severance, and it must further query whether alternative means less prejudicial to Sudeen existed to remedy that risk." Sudeen seems to be fabricating that standard entirely.
Sudeen's primary argument attempting to show such prejudice involves the short period in which his attorney had to prepare for trial after the severance. Sudeen does not allege prejudice with any specificity. His counsel was ready for trial anyway, because Sudeen would have been deemed the principal had the two defendants been tried jointly, and Sudeen's and Freeman's attorneys had been working on a joint defense for many months. Moreover, Sudeen's attorney was, by all accounts, well prepared for trial.7
Sudeen actually orchestrated another fraudulent venture involving insulin contracts. He does not deny that the funds from those investing in the insulin contracts were used as lulling payments to investors in the fertilizer plant and vice versa.8 The district court therefore found that the funds from the two ventures were commingled and that the evidence regarding the insulin venture was "intrinsic."
Sudeen argues that the insulin evidence was extrinsic and should have been excluded under Federal Rules of Evidence 403 and 404(b). First, we must decide whether the district court reversibly erred in finding the insulin evidence intrinsic. Second, if we that the evidence was extrinsic, we must determine whether the court erred by failing to exclude the evidence under other evidence rules. We terminate our inquiry at the first stage by finding that the court did not abuse its discretion in treating the evidence as intrinsic.
We review admission of evidence for abuse of discretion. See United States v. Hicks, 389 F.3d 514, 522 (5th Cir.2004). That Sudeen commingled funds between the two sub-schemes is not a contested fact. Intrinsic evidence is generally admissible to allow the jury to "evaluate all the circumstances under which the defendant acted."9 Evidence is considered intrinsic if it is "inexorably intertwined" with evidence used to prove the crime charged. See Navarro, 169 F.3d at 233. Where evidence is intrinsic, it qualifies without reference to rule 404(b), which states generally that "evidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show action in conformity therewith." See id.10 Citing superior authority and referencing the record far better than Sudeen does, the government overwhelmingly establishes the two propositions necessary for it to prevail on this argument: (1) Funds for the insulin scheme were commingled with funds from the fertilizer scheme, and initial investments in each were used to make lulling payments to investors in the other;11 and (2) such commingling of funds qualifies the insulin scheme as intrinsic evidence.12
Rule 403 states that: "Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence."13 The insulin evidence must pass the rule 403 bar without respect to whether the district court admitted it as intrinsic evidence.
The district court noted that if it considered evidence of the insulin scheme to be intrinsic, it would not exclude that material on the ground that it is prejudicial under rule 403.14 This holding is consistent with language in our circuit stating that rule 403 should generally not be used to exclude intrinsic evidence, because intrinsic inculpatory evidence is by its very nature prejudicial.15 The insulin evidence proves both the source of the lulling payments made to Poplarville investors and the destination of funds paid in by those investors. It is highly probative of the existence of a Ponzi scheme, and it is...
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...but there must also be independent evidence establishing the factual predicates for Rule 801(d)(2)(E). See United States v. Sudeen, 434 F.3d 384, 390 (5th Cir. 2005). Although the rule speaks of statements made in furtherance of a "conspiracy," we have recognized that admissibility under Ru......
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