U.S. v. Woods

• Decision Date: 14 July 2003
• Docket Number: No. 01-50539.,No. 01-50618.,01-50539.,01-50618.
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Doreen WOODS, aka Joann Barnes, Defendant-Appellant. United States of America, Plaintiff-Appellee, v. Jason Garcia, aka Michael Bennett, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

335 F.3d 993

UNITED STATES of America, Plaintiff-Appellee, v. Doreen WOODS, aka Joann Barnes, Defendant-Appellant.

United States of America, Plaintiff-Appellee, v. Jason Garcia, aka Michael Bennett, Defendant-Appellant.

No. 01-50539.

No. 01-50618.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 12, 2003.

Filed July 14, 2003.

COPYRIGHT MATERIAL OMITTED

Kenneth M. Miller (argued), Steward & Miller, Capistrano Beach, CA, for defendant-appellant Doreen Woods.

Judith Rochlin, Law Offices of Judith Rochlin, Los Angeles, CA, for defendant-appellant Jason Garcia.

Debra Yang, United States Attorney; Jacqueline Chooljian, Assistant United States Attorney, Chief, Criminal Division; and Elana Shavit Artson (argued), Assistant United States Attorney, Criminal Appeals Section, Los Angeles, CA, for the plaintiff-appellee.

Appeals from the United States District Court for the Central District of California; Gary L. Taylor, District Judge, Presiding. D.C. Nos. CR-98-00152-GLT-02, CR-98-00152-GLT-03.

Before: TASHIMA, BERZON, CLIFTON, Circuit Judges.

OPINION

CLIFTON, Circuit Judge:

Doreen Woods and Jason Garcia were convicted of mail fraud, wire fraud, and money laundering based on their involvement in a telemarketing scheme. Woods and Garcia appeal their convictions for mail and wire fraud on the ground that the district court erroneously instructed the jury that no specific false statement was required. Woods also contends that the district court erred by taking judicial notice of a Federal Trade Commission ("FTC") telemarketing rule. Finally, Woods challenges sentencing enhancements she received for having been a manager or supervisor and for having violated a judicial order. We affirm the convictions but vacate Woods' sentence and remand for resentencing of Woods.

I. BACKGROUND

From 1995 to 1997, Woods and Garcia participated in a telemarketing scheme at a company in Orange County, California, known initially as Magazine Network and later as Magtopia, Inc. ("MTI"). The scheme solicited over one million dollars from more than 1,900 customers, many of them elderly. An "opener" would make initial contact with potential customers, telling them that they had been selected to win one of four awards: (1) a cashier's check for $2,500, (2) a television or $3,500, (3) a designer diamond watch, or (4) a new car or $15,000. MTI bought the watches for $28 each. If asked how much the watch was worth, openers were instructed to say that they couldn't tell because "the price of diamonds varied from coast to coast." However, they were told to describe the watch in ways that made it sound valuable. For example, it was sometimes described as being like the watches given away on game shows "The Price is Right" and "Wheel of Fortune."

The openers told the customers how much money to send, purportedly representing the cost of receiving the award. The amount requested ranged from $299 to $866. The openers did not say that the money was actually for the purchase of magazines. If a customer expressed interest, the opener would pass the call to a "closer," who was described inaccurately to the customer as a "manager." The job of a closer was to convince customers to send in their checks. Closers told customers to make their checks payable to MTI, to write "magazines" on the memo line of the check, and to send the checks by overnight delivery. The closers told the customers neither the odds of winning any prize nor that MTI was selling them magazines.

After MTI received a customer's check, a closer would make a "preparation call" to the customer informing him that his check had been received and that the money he had sent was for magazines, making the award a free bonus. The closers also told the customers to expect a "verification call" from the shipping department, and instructed the customers to tell the verifiers that they understood everything. Customers were told not to ask any questions during the verification calls. During the verification calls, customers were told that the odds of receiving the car, television, or $2,500 check were each 1 in 4,000, and that everyone else would receive a watch. They were told that they were "absolutely guaranteed" to receive one of those four awards. The customers were also told that they would receive an award certificate and a form for ordering magazines.

The purpose of the verification call was to get the customer on tape as agreeing to everything. If a customer asked questions or raised objections during the verification call, the verifiers would rewind the tape and have the closer call back to "re-prep" the customer in an attempt to close the deal. If a customer continued to ask questions or object during a second verification call, the verifier would erase the tape and write "verbal verification" on the order.

Woods was the corporate secretary for MTI and did such things as maintain customer files, order magazines, handle incoming checks, and verify the funds in customers' bank accounts. She also worked as an opener and as a verifier, using the name Joann Barnes. Garcia, using the name Michael Bennett, worked as a closer for MTI. Co-defendant Robert Flarida was the owner, president, and CEO of MTI. He held staff meetings, instructed salespeople on how to conduct calls, and monitored calls. He also served as a verifier and salesperson and handled customer complaints.

MTI was searched by federal agents in May 1997. Shortly thereafter, Woods and Flarida (along with Rachel Bennett¹) set up a virtually identical operation known as North Star Publications ("North Star"). Woods, using the name Marie Evans, worked as an opener, closer, and verifier for North Star. North Star solicited approximately $130,000 from more than 350 customers. It was searched by federal agents and shut down in February 1998.

At trial, seven elderly victims testified for the government. They had each sent in between $316 and $866 to MTI. They testified that they would not have sent money to MTI had they known it was for the purchase of magazines. Some of the victims had complained but to no avail. A postal inspector testified that he had determined that 68% of MTI's full-paying customers neither returned the award certificate nor received a prize, and that 48% of the full-paying customers neither returned the award certificate, received a prize, nor received a magazine. Some of the full-paying customers who did not return the award certificate or receive a prize did receive magazines selected by MTI. Seventy percent of North Star's customers did not return the award certificate; some of them received nothing while others received magazines selected by North Star. Most of the customers who did return the award certificate received the magazines they had selected.

Woods and Garcia were convicted of mail fraud under 18 U.S.C. § 1341, and of wire fraud under 18 U.S.C. § 1343. Woods was also convicted of money laundering.² Woods was sentenced to 87 months of imprisonment and Garcia to 41 months of imprisonment. Woods and Garcia timely appealed.

II. DISCUSSION

A. Jury Instructions

1. No Specific False Statement Was Required.

Defendants Woods and Garcia challenge their convictions for mail and wire fraud, contending that the court's jury instructions violated Neder v. United States, 527 U.S. 1, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999), by not requiring a specific false statement. We review de novo whether the jury instructions omitted or misstated an element of the charged offense. United States v. Stapleton, 293 F.3d 1111, 1114 (9th Cir.2002). We review the formulation of the instructions for abuse of discretion, considering the instructions as a whole and in context. Id.

In Instructions 5 and 7, the court told the jury that, for a defendant to be convicted of mail or wire fraud, the government must prove four elements: (1) that the defendant knowingly devised or knowingly participated in a scheme or plan to defraud, or a scheme or plan for obtaining money or property by means of false or fraudulent pretenses, representations or promises; (2) that the statements made or the facts omitted as part of the scheme were material; (3) that the defendant acted with the intent to defraud; and (4) that in advancing or furthering or carrying out the scheme, the defendant used the mails/wires or caused the mails/wires to be used.

The court charged the jury in Instruction 10 that:

In determining whether a scheme to defraud exists, you are entitled to consider not only the defendant's words and statements, but also the circumstances in which they are used as a whole.

A defendant's actions can constitute a scheme to defraud even if there are no specific false statements involved. The deception need not be premised upon words or statements standing alone. The arrangement of the words or the circumstances in which they are used may create an appearance which is false or deceptive, even if the words themselves fall short of this. Thus, even if statements as part of the scheme are not literally false, you may consider whether the statements taken as a whole were misleading and deceptive. Evidence beyond a reasonable doubt that a scheme was reasonably calculated to deceive is sufficient to establish a scheme to defraud.

Defendants contend that Neder required the government to prove a specific material false statement on which the jury unanimously agreed. We are not persuaded.

Before Neder, our caselaw was clear that "[a] defendant's activities can be a scheme or artifice to defraud whether or not any specific misrepresentations are involved." United States v. Halbert, 640 F.2d 1000, 1007 (9th Cir.1981) (citing United States v. Bohonus, 628 F.2d 1167 (9th Cir.1980); Lustiger v. United States, 386 F.2d 132, 138 (9th Cir. 1967); and Lemon v. United States, 278 F.2d 369, 373 (9th Cir. 1960)). In Lustiger, the defendant advertised property for sale with materials containing "statements, photographs and maps,...