United States v. Lord

• Decision Date: 15 February 2019
• Docket Number: No. 17-30486,17-30486
• Citation: 915 F.3d 1009
• Parties: UNITED STATES of America, Plaintiff-Appellee v. Michael A. LORD; Randall B. Lord, Defendants-Appellants
• Court: U.S. Court of Appeals — Fifth Circuit

915 F.3d 1009

UNITED STATES of America, Plaintiff-Appellee

v.Michael A. LORD; Randall B. Lord, Defendants-Appellants

No. 17-30486

United States Court of Appeals, Fifth Circuit.

FILED February 15, 2019

Joshua K. Handell, U.S. Department of Justice, Criminal Division, Appellate Section, Washington, DC, Camille Ann Domingue, Assistant U.S. Attorney, U.S. Attorney's Office, Western District of Louisiana, Lafayette, LA, Carol Mignonne Griffing, Assistant U.S. Attorney, U.S. Attorney's Office, Western District of Louisiana, Shreveport, LA, for Plaintiff-Appellee.

Paul J. Carmouche, Stroud, Carmouche & Buckle, P.L.L.C., Shreveport, LA, for Defendants-Appellants.

Before STEWART, Chief Judge, and DENNIS and WILLETT, Circuit Judges.

CARL E. STEWART, Chief Judge:

Michael A. Lord and his father, Randall B. Lord, (collectively, "the Lords") pleaded guilty, pursuant to written agreements, to conspiracy to operate an unlicensed money servicing business ("MSB") (Count One). Michael also pleaded guilty to conspiracy to distribute and possess Alprazolam, a Schedule IV controlled substance, with the intent to distribute (Count Fifteen). After entering into their guilty pleas, the Lords filed a joint motion to withdraw their guilty pleas. They stated that after they entered their guilty pleas, they learned from other bitcoin¹ dealers and from the State of Louisiana Office of Financial Institutions ("OFI") that they did not need an MSB license. The district court denied the Lords' motion to withdraw their guilty pleas as to Count One. The court found that the Lords' motion contained no argument relative to Michael's plea to Count Fifteen and that, in any event, he was not entitled to withdraw his plea. The Lords appeal the district court's denial of their motion to withdraw their guilty pleas, as well as their sentences. For the reasons below, we AFFIRM the district court's judgment as to Michael Lord and Randall Lord, with the exception that we REVERSE and REMAND for resentencing as to Michael Lord's maintaining a premises for the purpose of manufacturing or distributing a controlled substance enhancement and special skills enhancement.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

The Lords were charged in a single indictment with 14 counts relating to their bitcoin business. Michael was charged with one count for a drug offense. The Lords pleaded guilty, pursuant to written agreements, to conspiracy to operate an MSB (Count One). Michael also pleaded guilty to conspiracy to distribute and possess Alprazolam, a Schedule IV controlled substance, with the intent to distribute (Count Fifteen).

MSBs are subject to 18 U.S.C. § 1960, which criminalizes the failure to obtain a state license, when required, and to comply with federal registration requirements. The statute provides that an MSB is unlicensed if it:

(A) is operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or a felony under State law, whether or not the defendant knew that the operation was required to be licensed or that the operation was so punishable;

(B) fails to comply with the money transmitting business registration requirements under section 5330 of title 31, United States Code, or regulations prescribed under such section; or

(C) otherwise involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity.

18 U.S.C. § 1960. Other regulations require MSBs to register with the Financial Crimes Enforcement Network ("FinCEN") within 180 days of the date the business is established. 31 C.F.R. § 1022.380(b)(3).

The indictment charged that the Lords, as part of their conspiracy, began operating a bitcoin exchange business in 2013; the Lords and their companies did not obtain licenses to engage in the business of money transmission by the State of Louisiana; between 2013 and November 10, 2014, they did not register with the United States Treasury Department; and they did not register as an MSB with FinCEN until November 2014, by which time they had exchanged approximately $ 2.6 million for bitcoin.

The Lords entered their guilty pleas on April 19, 2016. The initial presentence reports ("PSRs") were prepared on June 16, 2016. The Lords filed objections to their PSRs in July 2016, asserting, inter alia, that they believed that they were not required to obtain a Louisiana license. In support, they attached a February 17, 2016 letter from the OFI stating the same to an applicant whose business involved "cryptocurrency." On August 29, 2016, the Lords filed a joint sentencing memorandum arguing that their guilty pleas were not knowing because the law surrounding bitcoin was confusing and had stymied their efforts to comply with the law. On February 21, 2017, the Lords filed a joint motion to withdraw their guilty pleas. The Government opposed the motion, conceding that the State of Louisiana does not require virtual currency exchangers to have a state license, but arguing that they could be convicted on the alternative basis that they had failed to register timely with FinCEN.

The district court denied the Lords' motion to withdraw their guilty pleas. The district court sentenced Randall below the guidelines range to 46 months of imprisonment and three years of supervised release. It sentenced Michael within the guidelines range to 46 months on Count One, 60 consecutive months on Count Fifteen, and three years of supervised release.

II. DISCUSSION

A. Withdrawal of Guilty Pleas

1. Standard of Review

A district court's denial of a motion to withdraw a guilty plea is reviewed for abuse of discretion. United States v. Powell , 354 F.3d 362, 370 (5th Cir. 2003). "[A] district court abuses its discretion if it bases its decision on an error of law or a clearly erroneous assessment of the evidence." Id. (quotation omitted) (brackets in original).

2. Applicable Law

A defendant does not have an absolute right to withdraw his guilty plea. Id . (citation omitted). Instead, the district court may, in its discretion, permit withdrawal before sentencing if the defendant can show a "fair and just reason." Id . at 370. The burden of establishing a "fair and just reason" for withdrawing a guilty plea remains at all times with the defendant. United States v. Still , 102 F.3d 118, 124 (5th Cir. 1996).

In considering whether to permit withdrawal of a plea, the district court should address the seven factors set forth in this court's opinion in United States v. Carr , 740 F.2d 339, 343–44 (5th Cir. 1984). These include: (1) whether the defendant asserted his actual innocence; (2) whether withdrawal would prejudice the Government; (3) the extent of the delay, if any, in filing the motion to withdraw; (4) whether withdrawal would substantially inconvenience the court; (5) whether the defendant had the benefit of close assistance of counsel; (6) whether the guilty plea was knowing and voluntary; and (7) the extent to which withdrawal would waste judicial resources. Id ."[N]o single factor or combination of factors mandates a particular result," and "the district court should make its determination based on the totality of the circumstances." Still , 102 F.3d at 124. The district court is not required to make explicit findings as to each of the Carr factors. Powell , 354 F.3d at 370.

3. Analysis

a. Assertion of Innocence

The Lords argue they asserted their innocence by stating that while they were operating their bitcoin business, they believed that they did not have to obtain a Louisiana license. They acknowledge that § 1960 allows the Government to convict if an MSB fails to register but argue that they registered with FinCEN in November 2014 and "have defenses available to them with respect to this element."

The district court found that the Lords did not assert their actual innocence. The court reasoned that the failure to obtain a state license was but one theory on which Count One was based and that the evidence presented at the Lords' re-arraignment was sufficient to prove that they were an MSB and that they failed to register timely with FinCEN.

The Lords' arguments do not go to their factual innocence; rather, they amount to an assertion of their legal innocence based on perceived potential defenses to the offense. In Carr , the defendant argued his legal innocence, asserting that he was entitled to withdraw his guilty plea because trial counsel failed to inform him that he could use an "advice of counsel" defense to the conspiracy charge he faced. 740 F.2d at 343. The court found that, although the defendant had asserted his innocence, "this claim alone is far from being sufficient to overturn denial of a withdrawal motion. Otherwise, the mere assertion of legal innocence would always be a sufficient condition for withdrawal, and withdrawal would effectively be an automatic right." Id . at 344. Likewise, the Lords' proffered legal innocence, realized after their pleas, is not grounds to withdraw their pleas. See id . ; United States v. McKnight , 570 F.3d 641, 649 (5th Cir. 2009) (finding that an assertion of innocence was not supported by claims of "legal innocence based on insanity and entrapment"); United States v. Meza-Jacquez , 671 F. App'x 340, 341 (5th Cir. 2016) (per curiam) (unpublished) (finding no abuse of discretion where innocence claim was based on "a ‘colorable defense’ to the charged offense").

b. Prejudice to the Government

The Lords argue that "it is difficult to understand" how the Government would be prejudiced by their plea withdrawal because the Government is required to prove the indictment's allegations in every trial. The district court found that the Government would suffer "some" prejudice if the Lords' motion were granted because it would require the Government to prove the indictment allegations at trial. Regardless of whether the Government would suffer prejudice, " Carr made clear...