United States v. Scully

• Decision Date: 04 March 2020
• Docket Number: No. 16-51429,16-51429
• Citation: 951 F.3d 656
• Parties: UNITED STATES of America, Plaintiff - Appellee v. Robert Warren SCULLY, also known as Robert Scully, also known as Robert W. Scully, Defendant - Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

951 F.3d 656

UNITED STATES of America, Plaintiff - Appellee

v.Robert Warren SCULLY, also known as Robert Scully, also known as Robert W. Scully, Defendant - Appellant

No. 16-51429

United States Court of Appeals, Fifth Circuit.

FILED March 4, 2020

Joseph H. Gay, Jr., Assistant U.S. Attorney, U.S. Attorney's Office, Western District of Texas, San Antonio, TX, Zachary Carl Richter, Assistant U.S. Attorney, U.S. Attorney's Office, Western District of Texas, Austin, TX, for Plaintiff-Appellee.

Philip J. Lynch, San Antonio, TX, for Defendant-Appellant.

Before HIGGINBOTHAM, DENNIS, and HO, Circuit Judges.

JAMES L. DENNIS, Circuit Judge:

A jury convicted Robert "Bob" Scully of conspiracy to defraud the United States, conspiracy to commit wire fraud, and three substantive counts of wire fraud, relating to the operation of his company, Gourmet Express. Scully appeals his conviction and sentence, arguing that (1) the IRS agents’ search of his home office violated the Fourth Amendment; (2) the Government’s timing in its filing of the second superseding indictment violated due process; (3) the five-year delay between the indictment and trial violated his Sixth Amendment right to a speedy trial; (4) the evidence was insufficient to sustain his wire-fraud convictions; (5) his sentence was substantively unreasonable; and (6) the district court erred in imposing restitution. For the following reasons, we AFFIRM.

I. Facts & Procedural Background

Scully was the owner of Gourmet Express (Gourmet), a company that produced frozen meals. Gourmet’s other two partners—Scully’s nephew, Kevin Scully (Kevin), and Kenneth Sliz—shared ownership and management of the company along with Scully.

Initially, Gourmet bought shrimp for its frozen meals from U.S. brokers—firms that imported shrimp from overseas and resold them in the United States. Because this approach had high costs, Scully arranged for his sister-in-law in Thailand, Nataporn Phaengbutdee (Nataporn), to inspect shrimp there for one of Gourmet’s U.S.-based suppliers. Nataporn received a commission, which was incorporated into the price Gourmet paid. Even with the added cost of the commissions, the price Gourmet paid for shrimp was reduced from around $4.80 a pound to $3.50 a pound.

Nataporn, acting at Scully’s suggestion, created various companies to work as seafood inspectors for Gourmet. The first such company was Siam Star. Scully and Kevin each owned part of Siam Star for about six months, and Scully’s wife eventually controlled a majority of its shares. For tax reasons, Nataporn later operated the business through a different entity, a company called N&D, and later still, to a company she created, Groupwell. Gourmet was the only food import customer for Siam Star, N&D, and Groupwell. Nataporn’s companies did not physically possess the shrimp Gourmet purchased. Instead, these companies paid the shrimp producers to ship directly to Gourmet. Nataporn’s commission was for inspecting the product on location at the plant and providing "boots on the ground" to ensure that the shipment was uncontaminated and safe to sell to the customer, and for assuming the risk of a failed shipment.

Scully and Kevin received a portion of this commission, often through accounts in their wives’ names. Nataporn sent hundreds of thousands of dollars to her sister, Nunchanat, Scully’s wife, and Nataporn’s companies sent hundreds of thousands of dollars to Mika Kon, who was a relative of Kevin’s wife, Terumi.

Scully and Kevin did not disclose these payments on their federal tax returns, nor did they disclose them to their business partner Sliz. When the partnership between Sliz and Scully began to sour, Sliz started investigating and discovered that Gourmet was overpaying for its product and paying a premium to Nataporn’s companies. When Sliz asked Scully who owned or controlled the companies, Scully said that he did not know.

The dispute between the partners resulted in civil litigation. Around the time the lawsuit was filed, Scully deleted documents from a folder on his computer labeled "Siam Star" and testified at a hearing that he didn’t know how much Nataporn’s companies were paying for the shrimp the companies sold to Gourmet; Scully was in fact in touch with the shrimp producers and instructed Nataporn on how to negotiate prices with them. Kevin created spreadsheets tracking the difference between the price Nataporn’s companies paid for shrimp and the price those companies charged Gourmet.

The conflict among the partnership resulted in an outside investor, the Ilex Group, purchasing Gourmet. Scully and Kevin were paid millions for their interests in Gourmet and were able to stay on as executives and buy back in as minority shareholders in the company. Ilex bought Sliz’s share, and Sliz warned Ilex about the relationship between Gourmet and Nataporn’s company, Groupwell. Scully assured Ilex that "the only problem with Groupwell was not documenting the fact that my sister-in-law works there," that Groupwell was an independent entity, and that he and Kevin "weren’t really privy to" any financial interest in the company. Scully and Kevin not disclose to Ilex that Nataporn controlled Groupwell and that Groupwell’s only food import customer was Gourmet. Ilex later terminated Scully and Kevin after the two attempted to have a new Chief Operating Officer fired.

A. Search of Scully’s Home Office

Concerned that Gourmet had been involved in federal crimes while he owned it, Sliz went to the IRS, which launched an investigation. IRS agents secured a warrant to search 1015 East Cliff Drive, which was Scully’s residence and, according to a Gourmet company document, was also Gourmet’s "West Coast Regional Office." The affidavit submitted to the magistrate judge in support of the warrant explained that Scully "converted a small apartment behind the residence into an office" where he did work for Gourmet and that officers were looking for the sort of evidence that would be found in a home office. The affiant, Agent Gary Ploetz, stated that, in his experience, "business records are kept at addresses listed as a business office." The affidavit further stated that "the latest Gourmet employee phone directory and office listing" listed 1015 East Cliff Drive as an office, and that a phone and fax number were listed for the same address.

Before preparing the warrant, agents reviewed satellite images of the location and drove past it. IRS Agent Demetrius Hardeman prepared the warrant application, and Ploetz acted as the affiant. They had the warrant application reviewed and approved by local agents and the local U.S. Attorney’s Office. A federal magistrate judge reviewed and signed both the warrant and the affidavit in support. The agents involved in the seizure were each provided a copy of the warrant before the raid. While the affidavit in support of the warrant explained that Scully’s home office was in a building separate from the residence, the warrant included a physical description of the primary residence only.¹

Scully’s home office was in fact located at 1015½ East Cliff Drive, a separate building behind the primary residence and down a private sidewalk. The parcel of land contained three structures served by one driveway—the primary residence at 1015 East Cliff Drive, the home office behind the primary residence at 1015½ East Cliff Drive, and a structure to the left of the primary residence that was rented out. In addition to the primary residence, the agents searched the home office at 1015½ East Cliff Drive and seized from that location documents and an image of Scully’s computer hard drive. Agent Hardeman instructed Ploetz’s team to not search the third structure on the property because it was leased by someone else.

The agents also secured a warrant to search Kevin’s home, and inside a cooler hidden in the crawl space underneath the home, agents found records from a foreign bank documenting the transfers to Kevin’s wife from Nataporn’s companies. The agents also recovered documents tracking the commissions Scully and Kevin received.

The searches of both homes uncovered documents showing the commissions and the Scullys’ involvement with and monitoring of Nataporn and her companies.

B. Indictment and Trial

In July 2010, a grand jury indicted Scully for conspiracy to commit tax fraud and aiding in filing false tax returns.² A superseding indictment in November 2010, in addition to these charges, added one count of conspiracy to commit wire fraud and five individual counts of wire fraud, alleging that Scully and Kevin defrauded Sliz.

1. Motion to Suppress

Scully moved to suppress the evidence seized from his office, arguing that the search of the office was unreasonable under the Fourth Amendment because it had a separate street address not listed on the warrant and because the physical description of the property contained in the warrant described only the primary residence and not the separate home office. At a hearing, Scully presented evidence showing that Pacific Gas and Electric had the primary residence and home office listed as separate accounts at separate addresses. Agent Hardeman testified that while he knew there was a small apartment/office located behind the primary residence, he did not know that the buildings had separate addresses and did not investigate whether the separate buildings had separate addresses or utilities. Agent Ploetz did not check with the post office to see if the home office had a separate address. The agents explained that they had treated the front house and home office as part of the same location during the search, that they did not realize that there was such an address as 1015½, and that they had sought and executed the warrant in good faith. The district court denied Scully’s motion to suppress, finding that "law enforcement’s activities [were] reasonable within the Fourth Amendment" and "not in violation of the good faith exception."

2. Second Superseding Indictment

Beginning in ...