United States v. Gross

• Decision Date: 12 October 2016
• Docket Number: No. 15-11780,15-11780
• Parties: UNITED STATES OF AMERICA, Plaintiff-Appellee, v. TRAVIS EDWARD GROSS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. TRAVIS EDWARD GROSS, Defendant-Appellant.

No. 15-11780

UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

October 12, 2016

[DO NOT PUBLISH]

D.C. Docket No. 1:13-cr-00268-WS-C-1

Appeal from the United States District Court for the Southern District of Alabama

Before WILSON and MARTIN, Circuit Judges, and RODGERS,^* District Judge.

PER CURIAM:

Travis Gross was charged, tried, and convicted of conspiracy to smuggle a drug known as XLR11 into the United States and to introduce that drug into interstate commerce as misbranded, in violation of 18 U.S.C. §§ 371, 542, 545, and 21 U.S.C. §§ 331, 333(a)(2) (Count One); as well as three counts of money laundering, in violation of 18 U.S.C. § 1957 (Counts Four, Five, and Six); and conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h) (Count Seven).¹ Gross was sentenced to 156 months' imprisonment. He now appeals his convictions and sentence. Having carefully reviewed the matter and with the benefit of oral argument, we affirm.

I.

ZenBio, LLC ("ZenBio") produced and sold smokable "designer" drugs commonly known as "spice," which were manufactured with the synthetic drug XLR11. Travis Gross was responsible for ordering ZenBio's supply of XLR11. The indictment charged Gross and others with a conspiracy to smuggle and misbrand XLR11 from November 20, 2012, through June 25, 2013. Although XLR11 was not a federally controlled substance until May 16, 2013, the record establishes that at all relevant times, XLR11 was a "drug" subject to FDA labelingand branding laws,² that it became a controlled substance in Florida in December 2012, and that law enforcement was seizing XLR11 during the entire period.³

ZenBio followed the ordinary "industry" model used by designer drug businesses, which was described at trial by Special Agent Scott Albrecht of the Drug Enforcement Administration ("DEA"). Agent Albrecht explained that "synthetic cannabinoids" are "designer drugs" developed from a nonorganic source and intended to produce effects similar to THC, the active ingredient in marijuana.⁴ By 2008, synthetic cannabinoids had become part of a designer drug market in the United States for smokable products intended to circumvent existing drug laws. According to Agent Albrecht, a cycle developed in which new drugs emerged quickly whenever an existing synthetic cannabinoid was added to the list of controlled substances under state or federal law, making it difficult for the laws to keep up. The newest drugs on the market could be sold for a huge profit. Thus, there was an industry incentive to develop and market the next "legal" smokableproduct before the drug was listed as a controlled substance. In the months preceding the July 9, 2012 effective date of the Synthetic Drug Abuse Prevention Act, which banned several synthetic drugs, the industry was already beginning to produce XLR11 and its close "chemical sister," UR 144, to replace a drug called AM2201 in an anticipation of the new law.⁵ XLR11 was temporarily listed as a Schedule I federally controlled substance on May 16, 2013, and was permanently scheduled on May 11, 2016.⁶

Agent Albrecht explained that the industry's shift to XLR11 as the newest synthetic designer drug did not escape the attention of law enforcement. Some states had already begun to ban the substance; in Florida, for instance, XLR11 became a listed controlled substance in December 2012. Albrecht testified that 99 percent of the time, XLR11 and all other synthetic cannabinoids were imported from China, and often ordered online. He stated, however, that as legislationdesigned to preclude the use of synthetic drugs increased, online ordering ceased, and the majority of the orders were placed by telephone and email instead, with payment sent by wire transfer.

In an effort to avoid detection and possible seizure at ports of entry, importers divided XLR11 into smaller packages, which were shipped to busy ports of entry with hopes of the substance having a better chance of passing through customs. Agent Albrecht also testified that XLR11 shipments were often mislabeled as detergent or research chemicals. Special Agent Christopher Marshall, with the United States Customs and Border Protection agency, testified that customs officers often inspected and seized packages of chemicals or drugs from China labeled with suspicious names such as pearl powder, clean powder, sodium dioxide, bora nitro, or other very generic chemical descriptions, knowing that illicit drugs were regularly being imported from China, usually with a false declaration or bill of lading. Marshall had seen these names repeatedly on packages from China and said that when inspected, the packages were found to contain XLR11 instead of the chemical or product listed. Neither Albrecht nor Marshall had seen any packages with XLR11 listed on the bill of lading, despite federal law requiring an accurate description of a package's contents.⁷

Agent Albrecht was also familiar with the industry-wide manner of processing XLR11 into a smokable retail product. He testified that after importing the XLR11, the designer drug manufacturers would dilute the XLR11 in acetone and mix it with an organic carrier, most often herbs or plant leaves, to make a final smokable product, which was then falsely marketed as herbal incense, potpourri, or "spice." The final product would routinely be labeled "not for human consumption" in an effort to circumvent federal Food and Drug Administration ("FDA") regulations and evade law enforcement. Lay witnesses testified that they had purchased the products to smoke and attested to their personal experiences with XLR11's harmful effects.⁸

Consistent with this industry model, the evidence at trial showed that ZenBio obtained XLR11 from China by importing it with false labels to avoid detection and seizure at the port of entry, and then manufactured smokable products by mixing the XLR11 with acetone and botanicals (organic material consisting of ground or shredded leaves of certain exotic plants, which are lawfulto possess, import, and sell).⁹ The designer drugs were then packaged for resale in Ziploc plastic baggies, disguised as herbal incense or potpourri, and shipped to convenience stores and smokeshops throughout the United States for retail sale.¹⁰ ZenBio's product labels included ZenBio's name and logo, the brand name of the product, and a caution, "not for human consumption." The labeling listed the botanical material and also sometimes listed chemicals that were not in the packet, but none of the labels listed XLR11 or indicated that the packet contained a smokable product. Witnesses at trial testified that despite the label, the product was understood to be smokable and in fact was purchased for smoking, not as incense or potpourri.

Prior to November 2012, ZenBio was known as Zencense Incense Works ("Zencense"). Zencense was based in Pensacola, Florida, and owned by Burton Ritchie. Zencense manufactured and distributed smokable synthetic cannabinoid products using XLR11 under the brand names Avalanche, Bizarro, Neutronium, Orgazmo, Posh, Shock Wave, and Sonic Zero. Crystal Henry was in charge ofaccounting for Zensence; Robert Biggerstaff was responsible for sales and production management; and Jason Way was described as the ultimate decision maker for the business. Ben Galecki initially coordinated Zensence's supply of XLR11, which he ordered through a middleman, either Jason Fox¹¹ or Adam Libby.¹² Gross supplied Zencense with botanicals through his company, Sanctuary Traders.

In August 2012, Anthony Nottoli, a smokeshop entrepreneur from California who was interested in purchasing Zencense, met with Ritchie, Henry, and Gross in Pensacola. Ritchie introduced Gross to Nottoli as Zencense's botanical supplier. By mid-November 2012, Nottoli had purchased Zencense and changed the company name to ZenBio, LLC, but he retained Zencense's key employees. ZenBio continued to manufacture the same product line as Zencense but moved the raw-materials storage and bulk manufacturing operations to a warehouse in Millbrae, California, where Tim Ortiz became head of production. ZenBio's administrative functions remained in Pensacola until December 2012, whenXLR11 was named as a scheduled controlled substance under Florida law (codified at Fla. Stat. § 893.03(1)(c)(152)), at which point ZenBio immediately left Florida and moved its administrative office to Robertsdale, Alabama.

When the administrative operations moved to Alabama in December 2012, Gross took over responsibility for obtaining and maintaining an adequate supply of XLR11 for ZenBio, and the record shows that he also purchased plastic Ziploc baggies from a company in China that were used to package ZenBio's products. Nottoli testified at trial that he was told that the chemicals were coming directly from China. According to Nottoli, Gross was paid two percent of ZenBio's profits, in addition to being reimbursed for the botanicals he supplied through Sanctuary Traders.¹³ Henry testified consistent with Nottoli that Gross was paid two percent for his work of "finding the materials and management." (Doc. 125, at 119-20). Similarly, Biggerstaff, head of sales, testified that although Gross never visited the Alabama office, he continued to order the necessary supply of XLR11 after the office moved to Alabama. He described Gross as "head of procurement" and knew him as the man who "we were buying the botanicals from to actually make the product, and that he was in charge [of] getting and securing the active ingredient for us as well." (Doc. 124, at 88-89). Biggerstaff had seen the packages that thechemicals arrived in and knew the writing to be Chinese or oriental, so he assumed they were coming from China.

Fox, a middleman supplier, also testified that Gross was responsible for ordering all of ZenBio's chemicals. He said Gross told him that he had taken over the job from Galecki....