United States v. Dennis Bowden , 542 F. App'x 299 ( 2013 )

Case: 12-10795 Document: 00512381251 Page: 1 Date Filed: 09/20/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
September 20, 2013
No. 12-10795 Lyle W. Cayce
Clerk
UNITED STATES OF AMERICA,
Plaintiff - Appellee
v.
DENNIS WOODS BOWDEN,
Defendant - Appellant
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:10-CR-152-1
Before JOLLY, DeMOSS, and SOUTHWICK, Circuit Judges.
PER CURIAM:*
Dennis Bowden appeals his convictions and sentences on four counts of
securities fraud and five counts of mail fraud. Bowden raises two errors at trial
and two errors in his sentencing. Because the district court’s rulings at trial did
not constitute error and because the district court correctly calculated Bowden’s
sentencing level under the United States Sentencing Guidelines (U.S.S.G.), we
affirm.
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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I.
Bowden owned American Eagle Acceptance Corp. (American Eagle), an
automobile dealership specializing in the sale of used cars. Bowden desired to
expand his business and endeavored to raise capital through the sale of
short-term secured debt obligations (SDOs). Bowden used two companies,
collectively known as AmeriFirst, to issue SDOs that promised an average
return of seven and a half percent. Bowden enlisted the help of a long-time
business associate, Jeffrey Bruteyn, to market the SDOs, which became popular
with retirees searching for an equally safe, yet higher yielding alternative to
traditionally low-yielding certificates of deposit. Upon purchase, investors
received the SDO itself and a Servicing Agreement (SA) that contained several
fraudulent representations regarding the security of their investment. Three of
the most prominent misrepresentations included statements that each SDO was
(1) guaranteed by a commercial bank, (2) secured by certain collateral, and (3)
insured against loss. A fourth statement mentioned the existence of a fiduciary
relationship between the issuer of the SDOs and the investors. All of these
representations were categorically false and they formed the basis of the charges
against Bowden.
The financial condition of Bowden’s companies began rapidly to deteriorate
despite the large influx of capital from the initial issuance of SDOs. Bowden
hired Dallas law firm Godwin Gruber and the firm’s Securities Section chairman
Phil Offill to create an entity to raise capital on behalf of American Eagle in a
second wave of sales. Those sales never took place as Bowden’s companies were
placed into receivership once it became clear that Bowden had defrauded
investors.
A grand jury returned an indictment charging Bowden with nine counts
of securities fraud and nine counts of mail fraud. Although he had raised
approximately fifty-eight million dollars through the SDO offerings, only
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eighteen million was secured by collateral as promised; the rest of the money
was used to purchase apartments, condominiums, airplanes, and sports cars,
usually in the name of the corporations. Other amounts were put in CDs and
other low-yield investments. Despite Bowden’s obvious mismanagement of
investors’ funds, the indictments against him were based solely upon the
fraudulent representations in the SAs.
After a trial, the jury returned a guilty verdict on four of the nine counts
of securities fraud and five of the nine counts of mail fraud. Bowden filed a
timely notice of appeal.
II.
Bowden first argues that the district court erred when it refused to give
the jury his requested advice-of-counsel instruction. An appellant’s objection to
a jury instruction is reviewed under an abuse of discretion standard. United
States v. Santos, 589 F.3d 759, 764 (5th Cir. 2009). A trial court is afforded
“substantial latitude in describing the law to the jurors.” Id. That latitude is
properly exercised where the district court refuses an advice-of-counsel
instruction “[that] incorrectly states the law, is without foundation in the
evidence, or is stated elsewhere in the instructions.” United States v. Tannehill,
49 F.3d 1049, 1057 (5th Cir. 1995). A district court's refusal to give a requested
jury instruction constitutes reversible error “only if the instruction 1) was a
substantially correct statement of law, 2) was not substantially covered in the
charge as a whole, and 3) concerned an important point in the trial such that the
failure to instruct the jury on the issue seriously impaired the [party’s] ability
to present a given [claim].” Kanida v. Gulf Coast Med. Pers. L.P., 363 F.3d 568,
578 (5th Cir. 2004) (quoting United States v. McClatchy, 249 F.3d 348, 356 (5th
Cir. 2001)) (internal quotation marks omitted).
Bowden asserts that Phil Offill, the attorney he hired to handle the second
round of capital-raising, expressly approved of the way that Bowden was using
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investors’ money and advised Bowden that he could use the money in any
fashion so long as investors could be repaid. Bowden also asserts that, because
Offill had copies of all of AmeriFirst’s securities related documentation from the
first issuance of SDOs, he reasonably assumed that all those documents were
within the bounds of the law. Because of Offill’s silence and Bruteyn’s
assurances that everything related to the SAs was legal,1 Bowden argues that
the jury should have received an advice-of-counsel instruction.
The district court properly found that there was “no proof that advice [of
counsel] was given at all” with regard to the charges at issue. ROA 1999. While
Bowden did testify that Offill gave him some advice, that advice was limited to
how Bowden could spend investors’ funds. Offill’s advice was unrelated to the
fraudulent statements that formed the sole basis for Bowden’s conviction.
Bowden’s reliance on Offill’s silence likewise failed to give an evidentiary basis
upon which an advice-of-counsel instruction could be based. Even if there had
been a sufficient evidentiary basis to support such an instruction, the jury’s
receipt of a good faith instruction “adequately covered” any reliance Bowden
would have had on his counsel. Tannehill, 49 F.3d at 1058. The district court
did not abuse its discretion in refusing Bowden’s request.
III.
Bowden’s second issue on appeal involves a government witness at trial.
Mary Collins, one of AmeriFirst’s accountants, testified about the companies’
financial performance. Collins, in the weeks leading up to trial, told the
government that Bowden was well aware of AmeriFirst’s poor financial
condition, but once in court, her testimony conflicted with what she had
previously told the government. The government’s counsel then impeached
Collins with her own previous statements. Following her testimony, a
1
Bowden testified that Bruteyn was Offill’s normal point of contact within AmeriFirst.
ROA 1793.
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government agent confronted Collins outside the courtroom and asked her about
the inconsistency in her statements; this encounter was a direct violation of the
court’s sequestration order regarding witnesses. In response to the violation,
Bowden’s attorney requested that the judge prohibit rebuttal or exclude
impeachment testimony from Collins. The judge denied the request, but allowed
Bowden’s counsel to speak with Collins privately. After Bowden’s counsel spoke
with Collins, the judge asked if the counsel requested any further relief and
Bowden’s counsel stated that he did not.
Bowden argues the district court erred in not excluding Collins’s testimony
and by not providing “other relief” following the government’s violation of the
sequestration order. If Bowden’s request that the court exclude Collins’s
impeachment testimony was properly preserved on appeal, Bowden must
“demonstrate an abuse of discretion and sufficient prejudice to warrant reversal
on account of such testimony.” United States v. Ortega-Chavez, 682 F.2d 1086,
1089 (5th Cir. 1982). For any objections that Bowden’s counsel failed to
adequately preserve, this panel reviews the district court’s decision for plain
error. Puckett v. United States, 556 U.S. 129, 135 (2009).
This court need not make a finding whether Bowden properly preserved
his objections, because the district court’s actions were not error. The district
court handled this violation appropriately by speaking directly with Collins and
allowing Bowden’s counsel the opportunity to talk to Collins privately. Collins
was not a crucial government witness. She was one of several witnesses who
testified to the poor financial condition of Bowden’s companies. The questioning
of Collins by the government agent was merely cumulative and took place after
Collins had been impeached by her prior inconsistent statements. Bowden has
not shown that he was “sufficiently prejudice[d]” nor was the district court’s
decision to allow Collins’s testimony an abuse of discretion. Ortega-Chavez, 682
F.2d at 1089.
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IV.
Bowden next argues that the district court miscalculated the loss
attributable to his fraud. Bowden’s pre-sentencing report reflected a total
offense level of forty-five and a Guidelines range of upward to a life sentence.
At his sentencing hearing, Bowden’s counsel argued for a reduction in the total
offense level based upon the pre-sentencing report’s improper calculation of loss
attributable to his fraud.
The offense level for crimes involving fraud can be increased based upon
either the amount of loss actually inflicted by the defendant or the amount of
loss the defendant intended to inflict. See U.S.S.G. § 2B1.1(b)(1). “Actual loss”
is defined as the reasonably foreseeable pecuniary harm that resulted from the
offense, while “intended loss” is defined as “the pecuniary harm that was
intended to result from the offense.” U.S.S.G. § 2B1.1, cmt. n.3(A)(i)-(ii). At
sentencing, the district court found that there was “sufficient evidence at trial,
and in the record for sentencing” that Bowden was “chargeable with intending
the loss that occurred.” ROA 2164. The pre-sentencing report calculated the
intended loss from Bowden’s fraud as $52,836,947, the total amount of SDOs
that Bowden sold through the fraudulent offering. Bowden argues that the
district court should have used the actual loss suffered by the investors, an
amount totaling $23,245,674.46, rather than intended loss in its calculation.
As an initial matter, Bowden’s argument is moot. While Bowden’s total
offense level was calculated to be forty-five, the level was reduced to forty-three
at sentencing. U.S.S.G. § 5(A)(3) (“An offense level of more than 43 is to be
treated as an offense level of 43.”). If the district court had used the actual loss
amount of roughly twenty-three million instead of intended loss, it would have
resulted in a decrease in only two levels, still leaving Bowden at a level of forty-
three. To the extent that Bowden argues the actual loss should be lower than
twenty-three million because of the receiver’s allegedly exorbitant fees, that
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argument is meritless. The record reflects that the receivership was handled
appropriately.
Calculating the loss resulting from a fraud is a fact-intensive inquiry and
the Guidelines instruct a court to defer to a district court’s loss calculation.
United States v. Morrison, 713 F.3d 271, 284 (5th Cir. 2013) (citing U.S.S.G. §
2B1.1 app. n. 3(C) (“The sentencing judge is in a unique position to assess the
evidence and estimate the loss based upon that evidence. For this reason, the
court’s loss determination is entitled to appropriate deference.”)). While this
court reviews the district court’s method of determining the amount of loss de
novo, the factual finding of whether or not a defendant “intended” to cause a loss
is a factual finding subject to review for clear error. United States v. Harris, 597
F.3d 242, 250-51 (5th Cir. 2010).
Bowden argues that he did not intend a loss of the full amount invested
with him because he intended to repay the investors through his legitimate used
car business. Bowden points to several cases to support his argument. Harris,
597 F. 3d at 254 (“[W]here the defendant intends to repay a [fraudulently
obtained] loan or replace the property, the intended loss is zero.”) (quoting
United States v. Henderson, 19 F.3d 917, 928 (5th Cir. 1994)) (internal quotation
marks omitted); United States v. Sanders, 343 F.3d 511, 527 (5th Cir. 2003)
(“[I]n the absence of facts indicating an intent not to repay the loan, the actual
loss must be used to calculate the defendant’s offense level.”); United States v.
Middlebrook, 553 F. 3d 572, 578 (7th Cir. 2009) (“In determining the intended
loss amount, the district court must consider the defendant’s subjective intent.”)
(internal citations omitted). Indeed, this court has held that the Government
must “prove by the preponderance of the evidence that the defendant ha[d] the
subjective intent to cause the loss that is used to calculate his offense level.”
Sanders, 343 F.3d at 527. Although a subjective intent to cause the loss is
necessary, that subjective intent may be inferred from a defendant’s
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recklessness. Harris, 597 F.3d at 254. A defendant’s “actions and conscious
indifference [that] put[s] his victims at risk for the entire loss” can be enough for
a court to infer a subjective intent to cause the full amount of a loss. United
States v. Wimbish, 980 F.3d 312, 316 (5th Cir. 1992).
While Bowden’s authorities make reference to the requirement that a
defendant have the “subjective intent” to cause an intended loss, they “do not
prohibit sentencing courts from inferring intent from a defendant’s
recklessness.” Harris, 597 F.3d at 254. In Bowden’s case, “the district court
could [have] reasonably infer[red] intended loss from [Bowden’s] reckless acts,
regardless of [any] evidence of actual intent.” Id. at 255. Bowden continued to
solicit investors with his fraudulent SDOs while his business lost substantial
sums of investor money. Evidence at trial showed that Bowden failed to
collateralize a majority of the funds, positioning the investors as general
unsecured creditors and exposing them to a complete loss of all money invested
with Bowden.
Even though Bowden testified that it was “absolutely not” his intention or
desire to cause investors to lose their money, the facts show that AmeriFirst was
bleeding money at the time it was placed into receivership. The government’s
intervention cut short the total loss of investor funds. This court recognizes that
district courts cannot “automatically assess [an] intended loss.” Id. at 260.
Instead, there must be a “factual background” that evidences a defendant’s
intent “to cause a certain amount of loss by recklessly jeopardizing property
worth that amount.” Id. Such a factual background exists in this case.
Bowden’s willful blindness toward his companies’ alarming financial condition
constitutes recklessness and supports an inference that he intended to cause a
loss of the full fifty-three million invested with him. The district court did not
err in selecting intended loss in calculating Bowden’s offense level.
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V.
Bowden’s fourth and final argument challenges the district court’s
imposition of a “leader” enhancement of four levels. See U.S.S.G. § 3B1.1(a) (“If
the defendant was an organizer or leader of a criminal activity that involved five
or more participants or was otherwise extensive, increase by 4 levels.”). The
district court’s finding that Bowden was a leader of the criminal scheme is
examined for clear error. United States v. Gonzalez,436 F.3d 560, 584 (5th Cir.
2006). The record is rife with evidence of Bowden’s power and influence over
AmeriFirst. Bowden was president and director of the companies. He received
all the companies’ documentation, controlled the bank accounts where investors’
money was held, put together the fraudulent SDO offering, signed all offerings
and paid brokers to sell the SDOs. Bowden’s arguments that he should not have
been considered a “leader” of the criminal scheme are meritless.
CONCLUSION
Because the district court did not err with respect to its decisions at trial
or with respect to Bowden’s offense level under the U.S.S.G., we AFFIRM.
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