United States v. Hodge , 295 F. App'x 597 ( 2008 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 06-5281
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
TERESA HODGE,
Defendant – Appellant.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Roger W. Titus, District Judge. (8:03-
cr-00133-RWT)
Submitted: September 11, 2008 Decided: October 3, 2008
Before TRAXLER, Circuit Judge, HAMILTON, Senior Circuit Judge,
and James C. DEVER III, United States District Judge for the
Eastern District of North Carolina, sitting by designation.
Affirmed in part; vacated and remanded in part by unpublished
per curiam opinion.
David Schertler, SCHERTLER & ONORATO, L.L.P., Washington, D.C.,
for Appellant. Rod J. Rosenstein, United States Attorney,
Baltimore, Maryland; Bryan E. Foreman, Assistant United States
Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Greenbelt,
Maryland, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Teresa Hodge (Hodge) appeals her convictions on six counts
of mail fraud, 18 U.S.C. § 1341, seven counts of interstate
transportation of property obtained by fraud, 18 U.S.C. § 2314,
and one count of money laundering, 18 U.S.C. § 1957(a). Hodge
also appeals her sentence of eighty-seven months’ imprisonment.
We affirm Hodge’s convictions in toto, but vacate her sentence
and remand for resentencing absent application of the sentencing
enhancement imposed pursuant to USSG § 3B1.1(c) (2000) in
calculating her advisory sentencing range under the United
States Sentencing Guidelines.
I.
In 2000, Hodge and Marcus Dukes founded the Financial
Warfare Club (FWC) as a Maryland nonprofit corporation. 1 The
pair, who are both African-Americans, purportedly created FWC to
generate wealth within the African-American community by
promoting investment literacy among those who typically lacked
knowledge of financial markets and by providing investment
1
FWC listed its principal office as 12138 Central Avenue,
Suite 233, Mitchellville, Maryland, 20721, which address
actually was the address for a mailbox at a Mailboxes, Etc.
location.
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opportunities in companies that would generate revenue that
would stay within the African-American community.
Hodge and Dukes primarily sought to grow FWC through live
presentations to African-American clergy and their respective
congregations. The pastor of the hosting church usually
introduced Hodge and Dukes to the attendees at the
presentations. The pair would then make material
misrepresentations to the attendees in order to induce them to
become a member of FWC at one of three membership levels.
The top level required a $2,550.00 investment, the middle
level a $1,050.00 investment, and the lowest level a $550.00
investment. The top level entitled the member to three
financial literacy courses; 2,000 shares of stock in each of
three infrastructure companies that Hodge and Dukes were
purportedly developing; and the opportunity to buy additional
shares of stock in those companies at reduced prices before
their initial public offerings (IPOs). The middle level
entitled the member to two financial literacy courses, 500
shares of stock in each of the three infrastructure companies,
and the same opportunity to purchase more shares at pre-IPO
prices. The least expensive level entitled the member to one
financial literacy course, 250 shares of stock in each of the
three infrastructure companies, and the opportunity to buy more
shares at pre-IPO prices.
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Among other items, Hodge claimed that the African-American
community had been intentionally locked out of achieving
financial success on Wall Street via the sophisticated investor
accreditation rules of the Securities and Exchange Commission of
the United States (the SEC). Hodge held out FWC as a mechanism
for African-Americans to bypass such rules. In this vein, Hodge
falsely told attendees at FWC presentations that if a potential
investor did not have an income of at least $200,000.00 during
the previous three years, the SEC’s sophisticated investor
accreditation rules prohibited such person from investing in an
initial public offering of stock (IPO).
Hodge also falsely told attendees at FWC presentations that
Dukes had considerable investment experience on Wall Street,
including having personally taken the retail clothing store
Today’s Man public. Hodge also knew that Dukes often falsely
told attendees at FWC presentations that he had given financial
advice to a church in Washington, D.C. and, as a result, the
church made $50,000 and two church members bought matching
Porsche automobiles with their profits.
Hodge, as well as others who introduced her during the
presentations, told attendees that she was a wealthy woman with
decades of business experience. Hodge also told the attendees
that she had personally invested $1,000,000.00 in FWC. The
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evidence at trial proved all of these representations to be
false and misleading.
After making numerous FWC presentations to African-American
churches in Maryland, Hodge and Dukes took FWC on the road,
giving presentations at numerous churches throughout Georgia,
Michigan, Ohio, New York, New Jersey, and Alabama. When it
became apparent that FWC’s promised benefits (financial literacy
courses and IPO profits) were not forthcoming, a number of FWC
members requested a refund of their investments. Only a handful
of members actually received a refund. When Dukes failed to
respond timely to some FWC members’ complaints, some of those
members complained about FWC to the Maryland Attorney General’s
Office.
On March 5, 2001, the Maryland Securities Commissioner
issued a cease-and-desist order (the Cease and Desist Order or
Exhibit Maryland 1) against Dukes, Hodge, and FWC, ordering them
to stop offering or selling unregistered securities, including
memberships in FWC, and to stop violating the anti-fraud
provision of the Maryland Securities Act, Md. Code Ann., Corps.
& Ass’ns §§ 11-101 to 11-805. Hodge received her copy of the
Cease and Desist Order on March 7, 2001.
Approximately one week later, on March 13, 2001, Dukes
incorporated a new FWC entity in Washington, D.C. Around the
same time, FWC moved out of its Maryland office.
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On April 10, 2002, Hodge and Dukes entered into a consent
decree with the Maryland Securities Commission (the Consent
Decree). Pursuant to the terms of the Consent Decree, Hodge and
Dukes admitted to certain facts, including the fact that they
had raised approximately $800,000.00 from about 800 FWC members,
they had provided no financial literacy courses to FWC members,
and none of the three infrastructure companies had any prospect
of going public. The Consent Decree also contained the Maryland
Securities Commission’s legal conclusions that Hodge and Dukes
had committed securities and investment fraud under the Maryland
Securities Act, which the pair neither admitted nor denied. In
the Consent Decree, the Commission also repeated its orders to
Hodge and Dukes to cease and desist from engaging in fraudulent
investment activities.
In December 2003, Hodge and Dukes were indicted by a
federal grand jury for mail fraud, interstate transportation of
property obtained by fraud, and money laundering. A fourteen-
count second superseding indictment naming only Hodge was
returned on November 28, 2005. The district court severed the
cases for purposes of trial.
On June 8, 2005, a jury convicted Dukes on all but three
counts, which three counts the district court had dismissed on
the government’s motion. On July 3, 2007, we affirmed Dukes’
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convictions, but remanded for resentencing. United States v.
Dukes, 242 Fed. Appx. 37 (4th Cir. July 3, 2007) (unpublished).
On June 6, 2006, following a three-week trial, the jury
convicted Hodge on all counts. The district court sentenced
Hodge to eighty-seven months’ imprisonment. 2 Hodge noted this
timely appeal.
II.
The first issue on appeal concerns the Cease and Desist
Order. Notably, Hodge premises several of her arguments with
respect to this issue upon her claim that the entirety of the
Cease and Desist Order, a.k.a., Exhibit Maryland 1, was sent to
the jury room for the jury’s consideration during its
deliberations. In contrast to Hodge’s version of events, in its
appellate brief, the government claimed the jury’s only exposure
to the text of the Cease and Desist Order occurred during the
direct testimony of government witness Ronald Wilson, when the
government read certain portions of such document into evidence
while the same portions appeared simultaneously before the jury
on a large video screen in the courtroom, known as the ELMO.
Ronald Wilson was a securities fraud investigator with the
2
The district court used the 2000 version of the United
States Sentencing Guidelines Manual (effective November 1, 2000)
in calculating Hodge’s advisory sentencing range.
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Maryland Attorney General’s Office during the time that Hodge
and Dukes operated FWC. As part of his investigation of FWC,
Ronald Wilson attended a FWC presentation at a church in
Maryland. He also served the Cease and Desist Order on Dukes.
After the completion of all appellate briefing, we remanded
this case to the district court for a factual finding concerning
the extent of the jury’s actual exposure to the contents of the
Cease and Desist Order (Exhibit Maryland 1) during Hodge’s trial
and ordered this appeal held in abeyance pending further order
of this court. On remand, the district court agreed with the
government’s version, finding that the Cease and Desist Order
did not go to the jury room during deliberations, and that the
jury only heard the portions of the Cease and Desist Order read
into evidence by the government and put on the ELMO for the
jury’s viewing during the government’s direct examination of
Ronald Wilson.
This appeal is now back before us. The following portions
of the Cease and Desist Order are the only portions of such
order presented to the jury which are potentially troublesome
from a Federal Rule of Evidence 403 (Rule 403) perspective.
Those portions are: (1) “ORDERED, that Financial Warfare, Hodge
and Dukes and anyone under their direction . . . cease and
desist from violating the anti-fraud provisions of the
[Maryland] Securities Act,” (J.A. 506); (2) “ORDERED that
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respondents cease and desist from engaging in material
misrepresentations or omissions in connection with the offer or
sale of securities in this State,” (J.A. 516); and (3) “ORDERED
that respondents cease and desist from engaging in material
misrepresentations or omissions in connection with the offer of
investment advice in this State.” (J.A. 517).
Without the Cease and Desist Order having been sent to the
jury room, Hodge is left with her arguments that the portions of
the Cease and Desist Order that were read into the record and
simultaneously put on the ELMO violated her right to confront
witnesses against her under the Sixth Amendment to the United
States Constitution, as articulated in Crawford v. Washington,
541 U.S. 36 (2004). Alternatively, she argues that the portions
of the Cease and Desist Order that were read into the record and
simultaneously put on the ELMO violated Rule 403. Neither
argument has merit.
A. Confrontation Clause Argument.
The Sixth Amendment guarantees that “[i]n all criminal
prosecutions, the accused shall enjoy the right . . . to be
confronted with the witnesses against him.” U.S. Const. amend.
VI. In Crawford, the Supreme Court held that the Confrontation
Clause prohibits the “admission of testimonial statements of a
witness who did not appear at trial unless he was unavailable to
testify, and the defendant had had a prior opportunity for
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cross-examination.” Crawford, 541 U.S. at 53-54. “Only
[testimonial] statements . . . cause the declarant to be a
‘witness’ within the meaning of the Confrontation Clause. It is
the testimonial character of the statement that separates it
from other hearsay that, while subject to traditional
limitations upon hearsay evidence, is not subject to the
Confrontation Clause.” Davis v. Washington, 547 U.S. 813, 821
(2006) (citation omitted).
Hodge’s Confrontation Clause argument is without merit.
First, in the form of allegations and orders, the language of
the Cease and Desist Order is obviously not testimonial in
nature. Second, the allegations and ordering language are not
hearsay because the government did not introduce them for the
truth of the matter asserted, see Fed. R. Evid. 801(c), but
rather to establish that Hodge was on notice of the allegations
and the ordering language set forth in the Cease and Desist
Order, and nonetheless, continued uninterrupted in her active
role in recruiting FWC members. Such evidence was probative of
Hodge’s fraudulent intent.
B. Rule 403 Argument.
In relevant part, Rule 403 provides that “[a]lthough
relevant, evidence may be excluded if its probative value is
substantially outweighed by the danger of unfair prejudice
. . . .” Fed. R. Evid. 403. According to Hodge, the portions
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of the Cease and Desist Order heard by the jury and put on the
ELMO for the jury’s viewing “created an extreme danger that the
jury would infer guilt on the part of Hodge in light of the fact
that the Cease and Desist Order made it appear that the State of
Maryland had already made such findings.” (Hodge’s Reply Br. at
10).
We disagree. Even if we assume arguendo that the district
court erred under Rule 403 in allowing the jury to see or hear
any portion of the Cease and Desist Order, we can say with fair
assurance that, without stripping the assumed erroneous
admission from the whole, the jury’s verdict was not
substantially swayed by the error. United States v. Curbelo,
343 F.3d 273, 286 (4th Cir. 2003). Accordingly, any error would
be harmless. In reaching this conclusion, we are mindful that
we rejected, on the same rationale, Dukes’ evidentiary challenge
to the admission of the entirety of the Consent Decree during
his trial, which decree having contained the Maryland Securities
Commission’s legal conclusions that Hodge and Dukes had
committed securities and investment fraud under the Maryland
Securities Act, contained far more prejudicial information than
the Cease and Desist Order. See United States v. Dukes, 242
Fed. Appx. 37, 48 (4th Cir. July 3, 2007) (unpublished).
In sum, we hold the district court did not commit
reversible error when it allowed the government to read certain
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portions of the Cease and Desist Order into the record and to
put the same portions on the ELMO for the jury’s viewing, all
during the direct testimony of government witness Ronald Wilson. 3
III.
With respect to her sentence, Hodge first argues that the
district court engaged in impermissible double-counting when it
increased her offense level by two levels, pursuant to USSG
§ 2F1.1(b)(4)(C) (2000), and increased her offense level by
another two levels, pursuant to USSG § 2F1.1(b)(6)(A) (2000).
According to Hodge, these two sentencing enhancements
impermissibly punish the same conduct in her case.
When determining a sentence, the district court must
calculate the appropriate advisory guideline range under the
United States Sentencing Guidelines (the Guidelines) and
consider it in conjunction with the factors set forth in 18
U.S.C. § 3553(a). Gall v. United States, 128 S. Ct. 586, 596
(2007). In reviewing the district court’s application of the
3
We have also carefully reviewed and reject as without
merit Hodge’s remaining two challenges to her convictions: (1)
that the district court committed reversible error by denying
her motion for a mistrial based upon the government’s brief
reference to Timothy McVeigh during its rebuttal closing
argument; and (2) that the testimony of securities law expert
Michael Ferraro should have been excluded as irrelevant and
unfairly prejudicial. Neither argument warrants further
discussion.
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Guidelines, we review findings of fact for clear error and
questions of law de novo. United States v. Green, 436 F.3d 449,
456 (4th Cir. 2006).
Hodge’s double-counting argument is without merit. USSG
§ 2F1.1(b)(4)(C) provides for a two-level increase if the
offense involved “a violation of any prior, specific judicial or
administrative order, injunction, decree, or process not
addressed elsewhere in the guidelines . . . .” Id. (emphasis
added). See also USSG § 2F1.1(b)(4)(C) (2000), comment. (n.6)
(“This enhancement does not apply if the same conduct resulted
in an enhancement pursuant to a provision found elsewhere in the
guidelines.”). USSG § 2F1.1(b)(6)(A) (2000) provides for a two-
level increase if “the defendant relocated, or participated in
relocating, a fraudulent scheme to another jurisdiction to evade
law enforcement or regulatory officials . . . .” Id.
Here, the district court increased Hodge’s offense level by
two levels, pursuant to USSG § 2F1.1(b)(4)(C) (2000), based upon
Hodge’s violation of the Cease and Desist Order by continuing to
make sales presentations and to accept new members in FWC (with
membership applications directed to a mailing address for FWC in
Maryland) after she received the Cease and Desist Order. The
district court then increased Hodge’s offense level by two
levels, pursuant to USSG § 2F1.1(b)(6)(A) (2000), based upon her
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and Dukes’ relocation of FWC to Washington, D.C., to evade the
jurisdiction of the Maryland Securities Commission.
Contrary to Hodge’s position, the district court based
these two enhancements on different conduct. Notably, in
sentencing Dukes, the district court applied these same two
enhancements, and we rejected Dukes’ identical double-counting
argument on the same basis. See Dukes, 242 Fed. Appx. at 51.
In sum, we reject Hodge’s double-counting argument as without
merit.
IV.
Hodge further contends the district court erred when it
increased her offense level by two levels, pursuant to USSG
§ 3B1.1(c) (2000), for her alleged aggravating role in the
offense. The government concedes that Hodge’s sentence should
be vacated and the case remanded for Hodge’s resentencing absent
the two-level increase in her offense level imposed pursuant to
USSG § 3B1.1(c)(2000). We agree.
USSG § 3B1.1(c) (2000) provides for a two-level increase
“[i]f the defendant was an organizer, leader, manager, or
supervisor in any criminal activity . . . .” Id. Application
Note 2 to this guideline makes clear that “[t]o qualify for an
adjustment under this section, the defendant must have been the
organizer, leader, manager, or supervisor of one or more other
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participants.” USSG § 3B1.1(c) (2000), comment. (n.2).
Application Note 1 defines “participant” as “a person who is
criminally responsible for the commission of the offense, but
need not have been convicted.” Id. comment. (n.1).
Here, the district court based its application of USSG
§ 3B1.1(c) (2000) on Hodge’s recruitment and supervision of
church leaders, in particular Pastor Samuel Hairston and Bishop
Ralph Dennis. However, as the government concedes, at Dukes’
resentencing on October 12, 2007, the district court found that
Pastor Samuel Hairston and Bishop Ralph Dennis were not “other
participants” in Dukes and Hodge’s scheme to defraud, within the
meaning of USSG § 3B1.1(c) (2000), comment. (n.2). Thus, the
basis upon which the district court applied USSG § 3B1.1(c)
(2000) in sentencing Hodge is infirm. Accordingly, we vacate
Hodge’s sentence on this basis and remand for resentencing
absent application of the two-level increase pursuant to USSG
§ 3B1.1(c) (2000). 4
4
We have carefully reviewed and find without merit Hodge’s
two remaining challenges to her sentence: (1) that the district
court erred in increasing her offense level by two levels,
pursuant to USSG § 3C1.1 (2000), for obstruction of justice; and
(2) that the district court erred by using the preponderance of
the evidence standard instead of the more rigorous beyond a
reasonable doubt standard in making its factual findings for
purposes of calculating her advisory sentencing range under the
Guidelines. Neither argument warrants further discussion.
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V.
In conclusion, we: (1) affirm Hodge’s convictions in toto;
and (2) vacate her sentence and remand for resentencing absent
application of a two-level increase in her offense level
pursuant to USSG § 3B1.1(c) (2000).
AFFIRMED IN PART;
VACATED AND REMANDED IN PART
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