United States v. Stockman, 011020 FED5, 18-20780

Docket Nº:18-20780
Opinion Judge:E. GRADY JOLLY, CIRCUIT JUDGE:
Party Name:UNITED STATES OF AMERICA, Plaintiff - Appellee v. STEPHEN E. STOCKMAN, Defendant-Appellant
Judge Panel:Before JOLLY, GRAVES, and HIGGINSON, Circuit Judges.
Case Date:January 10, 2020
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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UNITED STATES OF AMERICA, Plaintiff - Appellee

v.

STEPHEN E. STOCKMAN, Defendant-Appellant

No. 18-20780

United States Court of Appeals, Fifth Circuit

January 10, 2020

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

Before JOLLY, GRAVES, and HIGGINSON, Circuit Judges.

E. GRADY JOLLY, CIRCUIT JUDGE:

Stephen E. Stockman served four years in Congress and now faces ten years in prison. He seeks to avoid this career detour. He must admit that a jury convicted him on twenty-three felony counts after the government accused him, inter alia, of defrauding philanthropists and using their money to finance his personal life and political career. Acknowledging the convictions, Stockman argues, nevertheless, that prison should not be the next item on his résumé because the convictions were tainted by improper jury instructions and unsupported by the evidence. We affirm.

I.

Stockman served two nonconsecutive terms in the United States House of Representatives, first from 1995 to 1997 and then from 2013 to 2015. During his first term, Stockman began working with an organization called the "Leadership Institute," where he became acquainted with Jason Posey and Thomas Dodd, two members of its staff. His relationships with these two men would grow and then wither. Stockman employed Posey and Dodd as campaign staffers, congressional aides, and business consultants. Their most recent roles were as witnesses against Stockman.

Posey and Dodd worked with Stockman to raise money for various "nonprofit" entities between 2010 and 2014, the period in which Stockman is alleged to have orchestrated a criminal scheme to obtain charitable donations under false pretenses and to then enrich himself with the proceeds. Though initially named as codefendants, Posey and Dodd abandoned Stockman, pleaded guilty, and testified against him. Their testimony helped reveal the details of the scheme, which unfolded in four parts, targeted two donors, and ultimately netted over a million dollars for Stockman and his aides.

The 2010 Rothschild Donations

Stockman's scheme began in May 2010, when Stockman and Dodd started soliciting Stanford Z. Rothschild, Jr., an elderly donor acting through his foundation. Over the next five months, Stockman and Dodd managed to persuade Rothschild to donate $285, 000 to the Ross Center, a Section 501(c)(3)1nonprofit organization under Stockman's control. Rothschild was told that his money would fund "voter education material" for Jewish voters in Florida. Dodd testified that "voter education material[s]" are print publications that "educate voters in the general public about public policy positions and public policy issues." Specifically, Rothschild was pitched on a book about radical Islam that would be mailed to voters in the lead-up to the 2010 midterm elections.

The deal was finalized only after Stockman assured Rothschild that his money "was to be spent for public policy [and] voter education that was 100 percent compliant with 501(c)(3) rules." With this reference to the "501(c)(3) rules," Stockman appears to have promised that he would spend Rothschild's money primarily (if not exclusively) in furtherance of the educational goals laid out in the pitch. See 26 U.S.C. § 501(c)(3) (tax-exempt organizations must be operated "exclusively for . . . charitable . . . or educational purposes").

But this promise soon vanished. Instead of "voter education materials," Stockman spent the 2010 Rothschild funds charitably on himself, educating himself at Disneyland and other amusement parks, at spas, and riding in hot air balloons. Stockman's charity to himself was generous; it further included paying his business expenses, including an abortive venture in South Sudan on which Stockman spent about $13, 000 of the 2010 Rothschild funds. Stockman made the trip to South Sudan hoping to win a lucrative lobbying contract with a "performance bonus" that would allow him to take a percentage of any foreign aid appropriated by Congress.

Stockman failed to mail any "voter education material" as promised.

The 2011-2012 Rothschild Donations

Stockman and Dodd were not finished with Rothschild. In 2011, Stockman decided to run for a second term in Congress. This time, rather than pitch a "voter education" project aimed at indirectly influencing elections, Stockman and Dodd requested a loan for Stockman's campaign. Rothschild refused. Instead, he agreed to give in the same manner as before, i.e., to "mak[e] donations from his foundation . . . to be used for voter education in accordance with the 501(c)(3) rules." Stockman again promised to honor Rothschild's wishes, so Rothschild made another series of large donations, this time totaling $165, 000, to the Ross Center and Life Without Limits (another Stockman-controlled nonprofit entity).

As before, Stockman repurposed the funds. He spent thousands on personal goods, including airline tickets, fast food, and gasoline. He also diverted 80% of a $100, 000 donation to his congressional campaign account. It was later reported to the Federal Election Commission (FEC) that this deposit was a personal loan from Stockman to his own campaign.

Stockman agrees that most of the 2011-2012 Rothschild funds were, in the words of his brief, "transferred to other accounts controlled by Stockman, including the account for his campaign committee." Stockman nevertheless reported in a letter to Rothschild that the funds had "helped [Life Without Limits] educate many people last year in traditional American values." The nature of those "values" was not described.

The 2013 Uihlein Donation

In January 2013, Stockman, now a member of Congress, shifted his attention to Richard Uihlein, a Wisconsin businessman whose foundation has donated millions of dollars to nonprofit organizations that share his conservative values. Stockman and Dodd pitched Uihlein on "Freedom House," a prospective residential facility in Washington, D.C. that would house interns and provide a home base for a non-existent nonprofit called the "Congressional Freedom Foundation." Uihlein agreed to endow the project with $350, 000 in seed money. The seed was not planted as promised, and the project died in silence. But the seed money survived to promote a new development in Stockman's political career: he had decided to run for the United States Senate in 2014.

Thus, as with the Rothschild donations, Stockman used the 2013 Uihlein funds to meet his personal and (especially) his political needs. For example, Stockman spent over $40, 000 on a plan to surveil a conservative Texas politician whom Stockman believed to be a likely opponent in a future primary. Stockman also gave thousands of dollars to his cohorts, Dodd and Posey, so that they, in turn, could "donate" the money to Stockman's Senate campaign; the donations were falsely attributed to Dodd's mother and Posey's father in FEC filings. In sum, the 2013 Uihlein donation was spent in a long sequence of varying expenditures, including $5, 000 to pay the rent on Stockman's campaign office, more than $30, 000 to pay off Dodd's credit card debt, and over $20, 000 to patronize a publishing business owned by Stockman's brother.

Posey testified that no money was actually spent on the project pitched to Uihlein. Even Stockman agrees that no property was ever acquired for such a project. Nonetheless, Stockman's team reported to Uihlein that his generosity had allowed Life Without Limits to support Freedom House. The 2014 letter that makes this claim also goes on to advise Uihlein that his "continued support is crucial to our mission."

The 2014 Uihlein Donation

By early 2014, Stockman was in the midst of his primary challenge to incumbent United States Senator John Cornyn. Stockman met with Kurt Wagner, the president of a direct mail company, and the two men discussed Stockman's plan to mail Texas voters a faux newspaper called The Conservative News on the eve of the Republican primary. The Conservative News accuses Senator Cornyn of...

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