United States v. Turner, James M. ( 2005 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-1193
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
JAMES M. TURNER,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Central District of Illinois.
No. 00 CR 20046—Michael P. McCuskey, Chief Judge.
____________
ARGUED APRIL 9, 2004—DECIDED MARCH 3, 2005
____________
Before BAUER, EASTERBROOK, and KANNE, Circuit Judges.
BAUER, Circuit Judge. James Turner was indicted for
conspiracy to launder money, in violation of 18 U.S.C.
§ 1956(h), and conducting a monetary transaction with the
proceeds of a specified unlawful activity, in violation of
18 U.S.C. §§ 1957(a) and 2. After a jury trial, Turner was
found guilty of the conspiracy charge. His appeal includes
issues related to his conviction, sentence, and various
evidentiary rulings.
2 No. 02-1193
I. Background
James M. Turner was a friend of Clyde D. Hood who
masterminded the Omega fraud. We discussed the scheme
at length in United States v. Diamond, from which we now
quote.
In 1994, Clyde Hood, a man who claimed to be one
of only eight people experienced enough to trade in-
ternational “Prime Bank Notes” announced that he had
received a message from God who told him to use his
expertise in the secretive and lucrative trading of Prime
Bank Notes to “help the little people.” Accordingly,
Hood would allow investors to make as many hundred
dollar loans as they liked to Omega Trust and Trading,
Ltd. The money would be used to facilitate trades in
Prime Bank Notes. Each unit, at one hundred dollars a
piece, was promised a fifty to one return in less than a
year. Furthermore, an investor could roll over their
profits by reinvesting them into Omega, guaranteeing
millions of dollars in return for a small initial invest-
ment.
That was the pitch. Like most things that sound too
good to be true, it was; it was a scam. Hood was actu-
ally a retired electrician who had come up with the idea
for a Prime Bank Notes scam through his association
with other scam artists. Sad to relate, God had not
spoken to Hood. The whole thing was completely
fabricated.
Nevertheless, Hood worked hard in creating an image
of legitimacy. For example, he created a database of the
investors to facilitate communication between the
investors (more properly, victims) and himself. Later,
he set up a recorded message hotline to keep investors
up to date on the status of Omega. The status of Omega
was always the same; pay-out was just around the
bend. Other written communications stated the same,
No. 02-1193 3
often times including religious references and biblical
quotations.
To accomplish this fraud, Hood enlisted the help
of others. These individuals would market the scam and
explain to potential investors that they could join
Omega by sending their monies to Clyde Hood in cash,
money order, or cashier’s check. The investor would
then receive a “Private Party Loan Agreement” that
purported to represent their interest in the Omega
funds.
United States v. Diamond, No. 02-1070, 2004 WL 16402, at
*1 (7th Cir. Aug. 10, 2004).
The entire Omega conspiracy loss was estimated at
around thirteen million dollars. With all of this money,
Hood and the other conspirators needed a way to launder
the proceeds of the scam. They did so in a number of
ways. For one thing, they simply deposited Omega funds in
personal or business bank accounts controlled by Hood’s
associates. These associates would then, at Hood’s direction,
withdraw the funds in cash and give it to whomever Hood
designated. Another method of laundering Omega proceeds
was to give interest-free loans to various individuals. This
is how Defendant Turner entered the story.
In early 1997, Hood offered to lend Turner $97,000
interest free. Shortly after offering the loan, Hood presented
Turner with $15,000 in cash and nine $9,000 cashier’s
checks. The checks were payable to William Revelle but
Hood endorsed them over to Turner by signing Revelle’s
name to the checks. Hood gave Turner some advice—Turner
was not to deposit the checks in any of the local banks for
fear that those banks may question the source of the funds.
Hood also explained that any transaction over $10,000
would be reported to the Internal Revenue Service.
Upon receiving the money, Turner executed a Promissory
Note and Mortgage on 2913 Walnut, Mattoon, Illinois
4 No. 02-1193
(“Walnut property”), as security for the loan. The documents
named Patricia Hood, Hood’s wife, as the lender, who was
entitled to eight hundred dollars per month in repayment
of the loan. Turner regularly made these payments.
In late 1997, Hood again “loaned” Turner a large sum of
money to purchase land located at 3120 Marshall, Mattoon,
Illinois, and various trucks and equipment for Turner’s
landscaping business (“Marshall property”). Turner paid
$146,000 for the property, trucks, and equipment. The
interest-free loan was to be repaid on a monthly basis to
Patricia Hood in $1,300 increments.
In early 1999, Turner wanted to purchase a house at 3900
Western Avenue, Mattoon, Illinois (“Western property”). In
need of approximately $156,000, Turner again obtained an
interest-free loan from Hood. This time, Turner, Hood, and
Chris Engel, one of Hood’s co-conspirators, went to Hood’s
daughter’s house to get the funds. While there, Turner and
Engel watched as Hood removed approximately $156,000 in
cash from a safe in the garage. When he gave the money to
Engel, Hood informed him that he should take the cash to
an out-of-town bank and purchase a cashier’s check. Engel
ultimately obtained a check from a bank in Farina, Illinois
where he named the remittor as Advantage Information
Technologies. Turner then used the check to complete the
purchase of the Western property.
Turner wished to improve his property and hired Engel,
who was both a contractor and a co-conspirator in the
Omega scam, to build a bigger garage. Turner saw Hood
pay Engel $40,000 for this work. The Western property also
had an in-ground pool that needed repair and Hood gave
Turner $7,000 to fix it.
Hood testified that the money used for these loans
was obtained from Omega proceeds.
Turner’s involvement with Hood did not end with the
above-described transactions. In addition to the loans,
No. 02-1193 5
Turner allowed his name to be put on the titles of vari-
ous properties that Hood had purchased, performed collec-
tions for Hood, delivered thousands of dollars of Omega
money in cash to various persons, instructed others to
structure deposits to avoid the attention of the IRS, struc-
tured deposits into his own bank account, and instructed
others to destroy documents recording loans Hood had
made.
Turner was ultimately indicted together with nineteen
other individuals involved in the Omega scheme. Turner
and Arlene Diamond were the only two who pleaded not
guilty and went to trial. Turner was convicted of conspiracy
to commit money laundering. The district court sentenced
him to one-hundred-fifty-one months imprisonment and two
years supervised release. This sentence was based on the
entire amount of money involved in the Omega conspiracy.
Turner appeals.
II. Discussion
Turner takes a buckshot approach to this appeal, arguing
nine full issues with subparts. We will address only those
arguments which merit discussion.
A. Sufficiency of the Evidence to Convict for Conspiracy
to Launder Money
The first issue we address is an attack on the sufficiency
of the evidence. The relevant question on appeal is whether
any rational trier of fact could have found the essential
elements of the crime beyond a reasonable doubt. We
reverse only when the record contains no evidence, regard-
less of how it is weighed, from which a jury could find guilt
beyond a reasonable doubt.
To prove a conspiracy to launder money, the govern-
6 No. 02-1193
ment must “demonstrate that [the defendant] was know-
ingly involved with two or more people for the purpose
of money laundering and that he knew the proceeds used to
further the scheme were derived from an illegal activity.”
United States v. Gracia, 272 F.3d 866, 873 (7th Cir. 2001);
18 U.S.C. § 1956(h). To prove the substantive offense of
money laundering, the government must prove that
the defendant engaged or attempted to engage in a financial
transaction, knowing that the transaction involved the
proceeds of specified unlawful activity, and that the defen-
dant intended to promote the unlawful activity or knew that
the transaction was designed to conceal the source, nature,
location, ownership, or control of the proceeds. Gracia, 272
F.3d at 873; 18 U.S.C. § 1956.
As we noted in Diamond,
When a defendant joins a conspiracy, she joins an
agreement rather than a group. United States v.
Townsend, 924 F.2d 1385, 1390 (7th Cir. 1991). An
agreement need not be explicit; a tacit agreement is
sufficient to support a conspiracy conviction. United
States v. Clay, 37 F.3d 338, 341 (7th Cir. 1994). There
is no bar to using circumstantial evidence in proving
the agreement. Id. A conspiracy may be shown by
evidence which shows that the conspirator embraced
the criminal objective of the conspiracy. United States
v. Severson, 3 F.3d 1005, 1010 (7th Cir. 1993).
Diamond, 2004 WL 16402, at *17.
Within this legal framework, it is clear that Turner was
part of the conspiracy to launder money. Under this
court’s decision in United States v. Esterman, 324 F.3d 565(7th Cir. 2003), we know that certain types of transactions
may be indicative of a design to conceal. These include
transactions surrounded in unusual secrecy, structured
transactions, depositing ill-gotten funds into another’s bank
accounts, using third parties to conceal the real owner, or
No. 02-1193 7
engaging in unusual financial moves which culminate in a
transaction. Esterman, 324 F.3d at 573. Multiple acts show
that Turner was actively involved with Hood—and Engel to
a lesser extent—in concealing the source of Omega funds.
His convoluted, seller-financed and interest-free loan for the
Marshall property; allowing his name to be placed on the
titles of various pieces of real estate when the property
actually belonged to Hood; structuring deposits into his own
bank account; instructing others to structure deposits into
their bank accounts; and leaving town to conduct transac-
tions involving cashier’s checks all show that he was
attempting to hide the source of the funds. In showing that
Turner attempted to conceal the source of the funds, the
government proved that he embraced the criminal object of
the conspiracy.
Turner’s argument that the government failed to show
concealment because his name was often used in connection
with these transactions misses the mark. Turner’s identity
was not the one the conspiracy was attempting to conceal,
as he was not the source of the ill-gotten funds; it was Hood.
The entire reason for using Turner’s name was to conceal
Hood as the source of the funds.
The next relevant question is whether Turner knew
that the money involved in his various transactions
were the proceeds of an illegal act. Notice that the question
is not whether Turner knew the actual source of the funds,
merely whether he knew they were the proceeds of some
illegal activity. See United States v. Marzano, 160 F.3d 399,
400-01 (7th Cir. 1998). Knowledge may be actual or
constructive—by a showing of conscious avoidance of actual
knowledge. United States v. Rodriguez, 53 F.3d 1439, 1447
(7th Cir. 1995). Knowledge may be inferred from circum-
stantial evidence. Gracia, 272 F.3d at 874. Looking at all of
the evidence in this case when viewed in the light most
favorable to the government, it is clear that Turner had
knowledge of the illicit nature of the funds he was using.
8 No. 02-1193
Numerous transactions and aspects thereof show Turner’s
knowledge. First, the vast majority of the money involved
in the Walnut property loan came in the form of structured
checks made payable to William Revelle. Turner watched
Hood endorse these checks with Revelle’s name. Turner was
also instructed not to deposit the money in a local bank for
fear that local banks may have questioned the source of the
funds. He was also instructed to structure the deposits to
avoid scrutiny by the I.R.S. The convoluted nature of the
Marshall property transaction also illustrated that some-
thing was amiss. The Western property transaction was
similarly suspicious. Turner watched Hood remove $156,000
in cash from a safe in Hood’s daughter’s house. After
receiving this money, it was taken to another out-of-town
bank to be converted into a cashier’s check. There is more.
Along with other shady acts, such as repeatedly putting
the title of Hood’s property in Turner’s name, delivering
large sums of cash, installing bug-detection devices in
Hood’s Omega office, and instructing others to destroy
documents that evidenced Hood’s loans, evidence suggested
that Turner was actually aware of the Omega scam itself.
In fact, Turner was approached by investigators as early as
1997, and again in 1998. In April 1999, Turner arranged a
meeting between some individuals who had just returned
from testifying at grand jury proceedings investigating
Hood and Omega. At that time, Turner did not ask Hood
about Omega. When asked why Turner did not ask about
Omega, Hood testified that it was his belief that Turner
already knew what Omega was.
Looking at all of this evidence in combination, it is silly to
suggest that Turner did not know that he was dealing with
ill-gotten funds. Any reasonable person watching all of
these strange dealings would clearly believe something was
amiss.
No. 02-1193 9
B. Internal Revenue Service Agent Hinesley’s Testimony
1. Admissibility of Summaries and Underlying Bank
Records
Turner next says that “[t]he court erred in admitting
summaries of Turner’s bank records and ‘expert’ testimony
of I.R.S. Agent Hinesley.” Agent Hinesley analyzed the bank
records of Turner and his wife for the years 1995 through
2000. As such records were “voluminous,” Hinesley pre-
pared summary charts as permitted by Federal Rule of
Evidence 1006. During pre-trial proceedings, Turner
learned of the government’s intention to use such charts at
trial. At that time, Turner objected that the majority of
underlying records were irrelevant and that summaries
thereof would be unfairly prejudicial. The district court
ruled against him and ultimately allowed the summaries at
trial.
Claims of error in admitting evidence are reviewed
for abuse of discretion. United States v. Spiller, 261 F.3d
683, 689 (7th Cir. 2001). We will reverse only when there
has been a sure showing of abuse and resulting prejudice.
United States v. Conley, 826 F.2d 551, 560 (7th Cir. 1987).
Turner does not argue that the summaries were inac-
curate or that they were improperly created. Instead, he
continues to argue that the underlying bank records are
irrelevant and overly prejudicial. He buttresses this
argument by stating that the vast majority of the money
was totally unconnected to the Omega scheme. Suffice it
to say that the bank records were not irrelevant.
The case was one involving money laundering, or the
concealment of funds. Evidence which showed, for example,
that Turner’s unexplained cash deposits into his
bank accounts exceeded his reported income has a “ten-
dency to make the existence of any fact that is of con-
sequence to the determination of the action more probable
or less probable than it would be without the evidence.”
10 No. 02-1193
Fed. R. Evid. 401. As for the money being unconnected
to Omega, it is clear that much of the money Turner
dealt with came from Hood, who was intimately con-
nected to Omega. In other words, the summaries and
underlying data were circumstantial evidence of the charge.
Next, Turner argues that the summaries, and the under-
lying records were overly prejudicial under Federal Rule of
Evidence 403. Again, the driving force behind this argument
is that, according to him, the money in the accounts was
unconnected to Omega. As we have said, although the
money may not be directly traceable to Omega that does not
mean it was totally unconnected from Omega. The question
at issue was whether the money that Turner was launder-
ing represented the proceeds of some illicit activity.
Having found the evidence to be relevant and noting
that Turner does not claim that the records or summaries
were inaccurate, we find that the district court did not
abuse its discretion in admitting the summaries. We give
special deference to a district court’s assessment of the
balance between probative value and prejudice because that
court is in the best position to make such assessments.
United States v. Brown, 7 F.3d 648, 651 (7th Cir. 1993).
No. 02-1193 11
2. Expert Testimony under Federal Rule of Evidence 702
Turner argues that I.R.S. Agent Hinesley testified as
an expert when she testified that certain transactions
seemed to be structured to avoid I.R.S. reporting require-
ments and about a “typical money laundering conspiracy.”
There is no dispute that Hinesley was technically qualified
to testify as an expert; her qualifications are found
throughout her testimony. Turner’s complaint in this
respect is that the court failed to exercise its “gatekeeper”
function. Because the record indicates that there is no
question that Hinesley would have been accepted as an
expert, we find any error in tacitly admitting her as an
expert to be harmless.1
Turner’s next argument is that the testimony that
Hinesley gave amounted to nothing more than an opinion
of guilt. We treat this claim as an argument premised
on Federal Rule of Evidence 704 which allows testimony
that embraces the ultimate issue but prevents the expert
from giving an opinion as to whether the defendant pos-
sessed the required mens rea. Fed. R. Evid. 704. We review
the district court’s admission of evidence for a clear abuse
of discretion. Brown, 7 F.3d at 651.
Because Federal Rule of Evidence 704(a) allows testimony
which embraces the ultimate issue, we will look to Rule
704(b). That rule provides “[n]o expert witness testifying
with respect to the mental state or condition of a defendant
in a criminal case may state an opinion or inference as to
whether the defendant did or did not have the mental state
or condition constituting an element of the crime charged or
a defense thereto.” On review, the question is whether the
1
Turner failed to raise the issue of the government’s failure
to inform him of its intent to call an expert in his opening
brief. The issue is waived. United States v. Collins, 361 F.3d 343,
349 (7th Cir. 2004).
12 No. 02-1193
expert referred to the intent of the defendant. United States
v. Love, 336 F.3d 632, 647 (7th Cir. 2003). She did not do so.
The question that was posed was, “what is the I.R.S. term
used to describe the staging of these types of transactions?”
To which Hinesley responded, “we would refer to this as
structuring.” This testimony is generalized as to how the
I.R.S. would characterize such payments. It does not
speak specifically to Turner’s intent. In essence, Hinesley
was stating the transactions were of the type that looked
like structuring, not that they actually were structuring.
The remainder of Turner’s complaints with respect to
Hinesley’s testimony all go to the same issue; whether
certain questions were improper because they touched
on Turner’s mens rea. We decline to address these
issues beyond noting that Turner himself opened the door to
such questions on cross-examination.
C. Sentencing
Turner argues that the court erred in imposing his
sentence based on the entire Omega scam loss amount. We
review the factual findings for clear error and the ap-
plication of those facts to the Guidelines de novo. United
States v. Baker, 227 F.3d 955, 964 (7th Cir. 2000). We will
reverse for clear error when we are left with the firm and
definite conviction that a mistake has been made. Id.In determining relevant conduct under the Guidelines, a
defendant engaged in a jointly undertaken criminal activity
is liable for all reasonably foreseeable acts performed in
furtherance of the jointly undertaken criminal activity.
U.S.S.G. § 1B1.3. However, “[a] defendant’s relevant
conduct does not include the conduct of members of
a conspiracy prior to the defendant joining the conspir-
acy; even if the defendant knows of that conduct.” U.S.S.G.
§ 1B1.3, comment. (n.2(ii)). So, the relevant question asks
when Turner joined the conspiracy.
No. 02-1193 13
There is no evidence which points to Turner having
entered the Omega conspiracy at its outset in 1994. The
government’s argument about the “cumulative” evidence
does not support such a proposition. The cumulative
evidence supports the conviction; that he entered the
conspiracy at some point; that is not enough to hold Turner
liable for the entire Omega loss.
The district court presumed that the jury’s guilty ver-
dict for the money laundering conspiracy supported a
finding that Turner was engaged in the conspiracy dur-
ing its entire life span. The indictment for conspiracy
included over fifteen people. The fact that Turner was
convicted of participating in the conspiracy is not a find-
ing of precisely when he joined.
Subsequent to the briefing and oral argument in this case,
the Supreme Court ruled that the Sixth Amendment is
violated when a sentence that has been enhanced under the
Guidelines based on the sentencing judge’s determination
of a fact (other than a prior conviction) results in a sentence
that exceeds the maximum authorized by the facts estab-
lished by a guilty plea or a jury verdict. United States v.
Booker, No. 04-104 (U.S. Jan. 12, 2005). The Court also held
that the Guidelines are no longer mandatory, but advisory
in every case. Id.
In this case, Turner’s sentence was enhanced by the
judge’s findings that he obstructed justice, that the
money laundering was sophisticated, and that he was
accountable for the entire amount of money laundered in
the conspiracy. These enhancements exceeded the maxi-
mum authorized by the facts established by the jury’s
verdict. The judge treated the Guidelines as mandatory and
sentenced Turner accordingly.
Turner’s sentence is vacated and remanded for
resentencing because of the error in imposing his sentence
based upon the total amount of laundered money. Upon
14 No. 02-1193
remand, the court should resentence in light of the prin-
ciples set out in Booker.
The other issues raised by Appellant are without substan-
tive merit and will not be discussed.
AFFIRMED in part,
REVERSED and REMANDED in part
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—3-3-05