United States v. William Mefford

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 10-3345
___________
United States of America, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota.
Carolyn M. Louper-Morris, *
*
Appellant. *
___________
No. 11-1021
___________
United States of America, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota.
William J. Morris, Jr., *
*
Appellant. *
___________
Submitted: October 21, 2011
Filed: March 2, 2012
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Before RILEY, Chief Judge, SHEPHERD, Circuit Judge, and WEBBER, District1
Judge.
___________
WEBBER, District Judge.
A jury convicted Carolyn M. Louper-Morris of conspiring to commit mail
fraud and wire fraud in violation of 18 U.S.C. § 371, aiding and abetting wire fraud
in violation of 18 U.S.C. § 1343, and aiding and abetting mail fraud in violation of
18 U.S.C. § 1341. A jury convicted William J. Morris, Jr., of conspiring to commit
mail fraud and wire fraud in violation of 18 U.S.C. § 371, aiding and abetting wire
fraud in violation of 18 U.S.C. § 1343, mail fraud in violation of 18 U.S.C. § 1341,
and making and subscribing a false tax return in violation of 26 U.S.C. § 7206(1).
Louper-Morris and Morris both appeal.
Louper-Morris raises six issues on appeal: 1) the district court erred by2
denying her motion to dismiss the indictment because the United States made a
material misrepresentation to the grand jury; 2) the district court erred in overruling
her objection under Batson v. Kentucky, 476 U.S. 79 (1986); 3) the evidence was
insufficient to support her convictions; 4) the United States intimidated one of her
witnesses thereby depriving her of the right to present a complete defense; 5) the
district court erred by enhancing her base level offense by four points for her role as
a leader or organizer of an activity involving five or more participants under United
States Sentencing Guidelines § 3B1.1; and 6) cumulative trial errors warrant reversal
or at least remand.
The Honorable E. Richard Webber, United States District Judge for the1
Eastern District of Missouri, sitting by designation.
The Honorable John R. Tunheim, United States District Judge for the2
District of Minnesota.
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Morris raises six issues on appeal: 1) the evidence was insufficient to support
his convictions; 2) the wire and mail fraud statutes, as applied to Morris, exceed
Congress’s authority to legislate in violation of the Tenth Amendment; 3) the district
court erred by not allowing the jury to view the live website at issue; 4) the district
court erred in overruling his objection under Batson, 476 U.S. at 79; 5) the district
court erred in enhancing his base offense level by four points for his role as a leader
or organizer of an activity involving five or more participants under U.S.S.G § 3B1.1
and by two points for the sophisticated-means enhancement under U.S.S.G. §
2B1.1(b)(9)(C); and 6) the district court’s restitution order improperly included
restitution to an entity that was already receiving compensation from a settlement
agreement.
Having jurisdiction under 28 U.S.C. § 1291, we affirm.
I. Background
We state the facts in the light most favorable to the jury’s verdict. United
States v. Johnson, 450 F.3d 366, 369 (8th Cir. 2006). Around 1996 in Washington,
D.C., Carolyn M. Louper-Morris, a former college professor, assisted in the
development of a software product entitled CyberStudy 101. CyberStudy 101
software allowed college students to enter their class notes into the program and the
program would generate quizzes from this data. As a software product, CyberStudy
101 never reaped a profit and the venture failed.
Louper-Morris then moved to Minneapolis, Minnesota to live with her son,
William J. Morris, who is an attorney. Louper-Morris and Morris (collectively,
“Appellants”) decided to try to sell CyberStudy 101over the internet using the website
cyberstudy101.com. Appellants formed the company, Cyberstudy 101, a Minnesota
corporation (hereinafter “CyberStudy”). Louper-Morris owned a 51 percent interest
in the company and Morris owned a 49 percent interest.
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Around 1998, Appellants learned of a Minnesota tax credit called the
Education Tax Credit. Enacted in 1997, the tax credit was available to low-income
Minnesota families who incurred out-of-pocket expenses for certain supplemental
educational opportunities for their children in elementary school, middle school, or
high school. In order to utilize the tax credit, Appellants changed the educational
content of CyberStudy 101 from a college curriculum to an elementary and secondary
school curriculum. Louper-Morris also met with employees of the Minnesota
Department of Education, the Minnesota Department of Revenue, and other agencies
to research the tax credit’s requirements in order to utilize the tax credit to expand
CyberStudy’s business opportunities.
One such individual with whom Louper-Morris met to discuss the tax credit
was Morgan Brown, the Director of the Partnership for Choice in Education (“PCE”).
PCE is a nonprofit organization that seeks to educate low-income families about the
educational opportunities available to them and advocates for additional educational
options. At the time, PCE focused on implementing the tax credit and improving its
accessibility. PCE had an informal relationship with the Minnesota Department of
Education and the Minnesota Department of Revenue. Because of the organization’s
goals, many individuals and groups contacted Brown to educate them on how to
utilize the tax credit.
At a December 1999 meeting, Brown described to Louper-Morris the two
available educational tax credits and their requirements. The first credit applied to
educational computer software or hardware, which allowed a family to claim up to
$200 in a tax credit for purchasing a qualified computer product. The other credit
applied to instruction or tutoring provided by a qualified instructor, which allowed
a family to claim up to $1000 for one child or $2000 for the family. Brown stressed
that the tutoring tax credit required an actual qualified instructor interacting with
students. He explained that static content would not satisfy the tax credit’s
requirements and any tutoring product must be interactive. Louper-Morris told
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Brown that she was interested in revising CyberStudy 101 to make it comply with the
tax credit requirements.
Brown also explained to Appellants that the tax credit could not be claimed
until the person had actually made the qualifying expenditure. Because many low-
income families have limited disposable income, Appellants discussed with Brown
financing options for potential CyberStudy customers. Although the tax credit
allowed financing, the tax credit prohibited the vendor of the service from also being
a lender. Only a separate third party could loan money to the taxpayer to pay for the
qualifying educational service or product.
Brown also had interactions with Morris in early 2000. According to Brown,
Morris functioned as CyberStudy’s legal counsel and was also involved in business
planning and development. Brown repeatedly discussed with Morris the requirements
of educational tax credits and how those requirements relate to CyberStudy’s product.
Brown met with Appellants on numerous occasions, and each time he reiterated the
requirements of the tax credit.
At some point, Brown learned that Appellants were marketing CyberStudy 101
by offering a free computer if a person signed up for the online tutorial program.
Appellants told Brown that they had negotiated with K-Mart for a certain number of
computers to offer with their program.
In May 2000, Brown was present at a meeting with the Minnesota Department
of Revenue and the Minnesota Department of Education in which Appellants
presented CyberStudy 101 in an effort to qualify the product for the tax credits. At
that meeting, it was clearly communicated to Appellants that tutors and interactivity
were necessary to qualify for the credit.
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Appellants began selling CyberStudy 101 on floppy disk for $999 for families
with one qualifying child, and $1499 for families with two or more qualifying
children. CyberStudy 101’s content was then placed online. Appellants informed
Brown that they were in the process of hiring retired teachers to satisfy the tax
credit’s interactivity requirement and the qualified instructor requirement.
Appellants marketed CyberStudy through their “break the digital divide”
campaign that promised a free computer and free internet access for life to everyone
who registered for the product. They distributed fliers to local churches, schools, and
community centers in African American, Somali, and Hmong communities.
Appellants also mailed fliers to individuals residing in low-income communities. The
fliers highlighted the free computer and did not mention the cost of the online tutorial
program. Fliers stated such things as, “Stop, break the digital divide and sign-up for
CyberStudy 101. Receive a new, fully-loaded complimentary free computer. No out-
of-pocket expense.” Because of this campaign, evidence shows that members of the
community thought CyberStudy was a charitable organization when, in fact, it was
a for-profit company. CyberStudy marketed the tutorial as an age-appropriate, online,
interactive tutorial course that included twenty-eight study tools in four languages.
In February 2000, the Minnesota Attorney General’s office received complaints
and inquiries relating to CyberStudy soliciting personal information from individuals
living in low-income communities and CyberStudy’s promise of giving away 100,000
free computers to low-income individuals. Deb Strafaccia, a consumer fraud
investigator for the Minnesota Attorney General, investigated the complaints.
Strafaccia became concerned when she learned that hundreds of individuals were
providing the relatively unknown CyberStudy with birth certificates, tax returns,
social security numbers, and children’s school records. Strafaccia spoke with Louper-
Morris who informed her that CyberStudy needed to enroll 100,000 applicants in
order to receive funding from investors. Louper-Morris indicated that the computers
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and internet access would be free, but the customer would have to pay for the online
tutorial.
Strafaccia was disturbed by the information from her initial investigation,
therefore, she posed as a customer and conducted an undercover investigation at a
CyberStudy enrollment event held at a St. Paul, Minnesota church. At the event,
Strafaccia spoke with individuals eager to get the free computer. She observed that
many of the individuals were from the Somali and Hmong communities and had
limited English-speaking skills. The individuals were convinced that the computer
was free and felt an urgent need to encourage others to enroll for the program in order
to hit the 100,000 customer requirement. Morris was at the event and he stated that
there would be no out-of-pocket expenses for the customers. He mentioned the
online tutorial. Strafaccia waited in line for two hours to enroll in the program. She
provided the necessary documents and signed the paperwork; however, she was not
allowed to take copies of the agreement with her. She left the event convinced that
consumers were being misled to believe that the computer and internet access was
completely free and that the consumer would not be required to make any personal
expenditure for the products.
After Straffacia’s investigation, assistant Attorney General Karen Olson
conducted an investigative meeting with Appellants. At the meeting, Appellants told
Olson that private investors were funding the program in order to give low-income
individuals free computers and free internet access “for life.” They told her that the
purpose of these free products was to facilitate access to the CyberStudy online
tutorial program. Appellants indicated that they needed 100,000 participants to go
forward and that cost would be approximately $1000 for each participant. Olson told
Appellants that if the participants were indeed signing loan documents, then in fact,
the computer and internet access were not free.
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Louper-Morris also recruited volunteers to staff CyberStudy by describing the
company’s product and Appellants’ efforts to “break the digital divide” to pastors of
African American churches in the area. One pastor, Reverend Jerry McAfee of the
New Salem Baptist Church, became particularly involved with CyberStudy: he let
Appellants operate CyberStudy from a building owned by the New Salem
congregation and he recruited congregation members to volunteer to enroll people
in the CyberStudy program. Rev. McAfee testified that he loaned Appellants $2500.
Contrary to the assertions on CyberStudy’s marketing materials, Appellants had
not secured promises from private investors to fund the program if they enrolled
100,000 customers. Appellants needed to secure financing for customers in order to
satisfy the tax credit’s pay-up-front requirement and to pay employees. Appellants
approached various banks, Catholic Charities, community organizations, and credit
card companies to secure a revolving line of credit or pool loan. Their endeavors
were not successful. At some point, Appellants eventually formed the idea of using
Rev. McAfee as a front for a lender of a “revolving pool loan” through the
organization Salem, Inc.3
Jacqueline Denita Hollie, a New Salem congregation member, was introduced
to Louper-Morris after hearing about CyberStudy from her father and her twin sister,
Jacqueline Benita Williams. She testified, “I heard about [CyberStudy] as the free
computer people.” Louper-Morris represented to Denita that she was the CEO and
The term “pool loan” is not defined by either party. We gather that the3
parties are referring to a loan that aggregates funds and allows individuals to borrow
from that pool of money. The borrowers then pay that money back into the pool and
other individuals may then borrow money. Regarding the pool loan, Morris testified
that “the pool didn’t have money for a one-to-one exchange. If we had that kind of
money and we had five million dollars . . ., we would never have needed a pool loan
to begin with. What we had was a pot of money that people could – that you could
access, that everybody could access if they had, you know, signed off on the
appropriate documentation.”
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president of CyberStudy and told her that the company could earn about three million
dollars from the tax credit. Denita began working part time in the evenings at
CyberStudy and then full time, organizing paperwork and assisting customers in
signing up for the program. Denita also created usernames and passwords for
customers. She expected to be paid for her work. She testified that customers did not
receive access to the tutorial and that the promise of a free computer lured people to
sign up for the CyberStudy 101 tutorial. Denita worked for CyberStudy from April
2000 until Appellants terminated her employment on July 13, 2001. At trial, Denita
testified that all the acts she committed at CyberStudy were “at the direction of the
owners of the company.” There was no evidence to suggest that the owners of
CyberStudy were anyone other than Appellants.
According to K-Mart executive, Lyman Locket, Appellants entered into a
contract with K-Mart on December 19, 2000 whereby K-Mart would provide
computers to CyberStudy. Locket had become interested in CyberStudy’s “break the
digital divide” campaign because he believed that the program would advance
K-Mart’s diversity initiative. The contract stated that CyberStudy agreed to purchase
4000 computers at $529.98 per unit, a value of 2.12 million dollars. Final payment
was due on February 28, 2001. Appellants received 2284 computers from K-Mart.
The contract contained no provision that would require K-Mart to provide free
internet access. However, at that time, K-Mart was offering limited free internet
access through BlueLight.com, an internal organization of K-Mart, to any K-Mart
customer. The computers that were provided to CyberStudy all contained a compact
disc from BlueLight.com, which would enable the owner to access the internet upon
installation of the software.
Shortly after the K-Mart computers were distributed, Appellants began to file
tax returns on behalf of customers. Denita Hollie, along with Appellants, filled out
the tax return forms. CyberStudy’s bank information was written on the forms as the
account to which any refund should be routed. CyberStudy filed hundreds of tax
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returns beginning December 31, 2000. The Department of Revenue returned many
of those forms to CyberStudy because the requisite power-of-attorney form had not
been completed. Louper-Morris instructed CyberStudy employees, including Denita
Hollie, Benita Williams, and Jennifer Davis, to forge customers signatures if
necessary. Louper-Morris told employees that the customer’s initial signature on the
customer contract provided them with sufficient authority to sign the customer’s
name on the power-of-attorney form.
In January 2001, after the Department of Revenue received many tax returns
claiming the educational tax credit from moneys paid to CyberStudy, it held a
meeting with Appellants to discuss details about its financing, specifically, who was
acting as the company’s third-party lender. The Department of Revenue wanted to
see evidence that the third-party loans had been provided to the taxpayer and that the
taxpayer then used that money to purchase CyberStudy’s services. At the meeting,
Appellants told the Department of Revenue that Rev. McAfee’s company, Salem,
Inc., was providing a pool loan for CyberStudy customers. Appellants stated that
they had received payment for the tutorial program from Salem, Inc., for each
customer that subscribed to the program. The Salem, Inc., lending arrangement was
only a paper transaction and amounted to a sham loan agreement.
In February 2001, Department of Revenue officials went to CyberStudy’s
office at the New Salem Baptist Church for the purpose of confirming details about
the pool loan. Denita, Morris, and Louper-Morris discussed the pool loan, but they
spoke in generalities. They stated that Salem, Inc., had paid CyberStudy for each
customer who signed up for the tutorial. At the meeting, Louper-Morris gave a
demonstration of the CyberStudy website, but she did not allow the Department of
Revenue representative to navigate the website.
At the request of the Department of Revenue, CyberStudy sent a letter to the
Department describing the lending arrangement. The letter was signed by Rev.
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McAfee. He testified that he did not draft the letter and he did not read the letter.
Denita Hollie also testified that the letter was drafted by Louper-Morris and reviewed
by Morris. The letter stated Salem, Inc., had loaned 4800 CyberStudy customers
either $999 or $1499.
Shortly thereafter, the Department of Revenue began releasing tax credit
money to Appellants. In February 2001, Appellants received $260,761 from the
Department of Revenue in tax-credit reimbursements. The money was routed to
CyberStudy’s custodial account operated by Wells Fargo Bank. Louper-Morris
purchased a new Mercedes Benz SUV with the money. She also purchased a fur coat.
Morris purchased a $650,000 home and used money derived from the tax credit funds
for a down payment.
CyberStudy did not receive tax credit money from each of its customers
because CyberStudy made filing errors, or a customer independently filed his or her
own tax return. In those cases, Appellants would threaten the customer with
collection efforts and warn the customer that such efforts would ruin his or her credit
score. Because many of the customers were from the Somali or Hmong communities,
Appellants threatened that they would report customers to federal deportation
authorities if the did not pay CyberStudy. Many customers took these threats
seriously and brought money to CyberStudy’s office. Appellants also used these
intimidating tactics to seek collection from customers who did not receive the full tax
credit.
Many individuals worked for CyberStudy. Denita Hollie, Benita Williams,
Jennifer Davis, and Cheryl Cardinal were hired as employees, but none of them
received any pay for their work. Outside tax preparers started assisting CyberStudy,
including Al Pennicks. CyberStudy also hired an information technology specialist,
Fong Xiong. His job was to train customers on using the computer and tutorial if they
purchased a support package.
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In April 2002, the Department of Revenue audited CyberStudy to assess
whether it qualified for the educational tax credit. It determined that CyberStudy
products did not meet the tax credit’s requirements. Between February 2001 and
May 2002, CyberStudy filed tax returns on behalf of over 1800 taxpayers, and
received approximately $2.35 million in tax credit payments from the Department of
Revenue.
K-Mart never received payment for the computers and filed a breach of
contract suit against CyberStudy. After a few years of litigation, CyberStudy entered
into a settlement agreement in which it was to pay K-Mart $610,000. CyberStudy
failed to make any payments, and in October 2003, a judgment for $1,211,134.03,
plus interest and attorney’s fees was entered against CyberStudy.
On February 27, 2008, a grand jury returned an indictment charging each
Appellant with one count of conspiracy to commit wire fraud and mail fraud in
violation of 18 U.S.C. § 371, nine counts of wire fraud in violation of 18 U.S.C. §
1343, seven counts of mail fraud in violation of 18 U.S.C. § 1341, and five counts of
promotion of money laundering in violation of 18 U.S.C. § 1956(a)(1)(A)(i). Morris
was also charged with one count of making and subscribing a false tax return in
violation of 26 U.S.C. § 7206(1). On January 7, 2010, the indictment was amended
to strike four of the wire fraud counts and all of the money laundering counts as to
both Appellants.
Before trial, Appellants moved to dismiss the indictment. The magistrate
judge denied the motion on the ground that the motion was untimely filed and also4
failed on the merits. The district court adopted the magistrate judge’s report and
recommendation.
The Honorable Janie S. Mayeron, United States Magistrate Judge for the4
District of Minnesota.
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A three-week trial was conducted. Numerous witnesses testified on behalf of
the United States including Morgan Brown; Deb Strafaccia; Karen Olson; Minnesota
Department of Revenue employees; an investigator from the Internal Revenue
Service; former K-Mart executive, Lyman Locket; and a United States Postal
Inspector. CyberStudy employees and volunteers testified including Denita Hollie;
her sister, Benita Williams; Carlos Granados, an accountant; Cheryl Cardinal; and
Rev. McAfee.
CyberStudy customers also testified including Juanita Jensen; Mohamud
Aideed, a Somali immigrant; Jurline Bryant; Kiin Farah, a Somali immigrant; Patricia
Marquez-Preston; Faith Pfeiffer; Tana Danz; Tina Brown; Cheryl Cardinal, also a
CyberStudy employee; Adrina Hobbs; Shirley Knudson; Tandalaya Jones-Paige;
Sonja Overbaugh; Farhiya Ali; Brenda Amponsah; Saeed Ali, a Yemeni immigrant;
Aimee Torres; Blong Pha, a member of the Hmong community; and Thi Huong
Keosongseng. Their testimony can be summarized as follows: the customers5
testified to signing contracts that they did not understand. They understood that they
were to receive a free computer and free internet access. They did not take out a loan
to finance the computer or sign any loan papers. Some customers did not know about
the educational tutorial. Once home with the computer, most customers did not have
internet access. If they had internet access, they could not access the tutorial. If they
could access the tutorial, the tutorial lacked educational content and the web page
would state that it was “under construction.” Some customers understood that
CyberStudy was going to complete their tax returns; however, those individuals
expected to receive any refund if the refund amount surpassed the tax credit amount.
In some cases, CyberStudy filed multiple tax returns on behalf of one customer
claiming the tax credit on each tax return. Some customers testified that Appellants
Blong Pha and Thi Huong Keosongseng both testified with the assistance of5
interpreters.
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threatened them with collection actions. Some customers filed complaints with the
Attorney General’s office or the Better Business Bureau.
Louper-Morris did not testify, but Morris did testify. He testified that he
drafted customer agreements and letters to customers threatening collection actions
and letters threatening federal immigration investigations. He testified that he helped
recruit customers at community centers and various churches. He also admitted
committing tax fraud.
The jury returned a verdict of guilty on all counts in the amended indictment
except Count 7, a mail fraud count, as to both Appellants, and Count 9, another mail
fraud count, as to Morris.
Appellants moved for a new trial. In their motion, they alleged that Michelle
Garcia-Strait, a potential defense witness, was intimidated by the United States. The
district court held an evidentiary hearing on the matter. After the hearing, the district
court issued an order denying the motion for a new trial. The district court expressly
found that the United States did not threaten Garcia-Strait, and that Appellants chose
not to call her as a witness. The district court noted that Garcia-Strait was concerned
about testifying because she could be cross-examined about pending state court fraud
and forgery charges. The district court concluded that the United States did not
impermissibly interfere with Garcia-Strait and a new trial was not warranted.
At sentencing, the United States sought many enhancements to Louper-
Morris’s base offense level including a four-level increase for her leadership role in
a criminal activity that involved five or more participants pursuant to U.S.S.G. §
3B1.1(a). Ultimately, her total offense level was 35 and her criminal history category
was I. Her U.S.S.G. sentencing range was 168 to 210 months imprisonment. The
district court sentenced Louper-Morris to 144-months imprisonment.
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The United States also sought many enhancements to Morris’s base offense
level including the leadership enhancement pursuant to U.S.S.G. § 3B1.1(a) and the
sophisticated-means enhancement pursuant to U.S.S.G. § 2B1.1(b)(9)(C). Morris’s
adjusted offense level was 35. His U.S.S.G. sentencing range was 168 to 210 months
imprisonment. The district court sentenced Morris to 132-months imprisonment. The
court ordered Louper-Morris and Morris, jointly and severally, to make restitution in
the amount of $2,351,368.71 to the Minnesota Department of Revenue and
$1,211,134.03 to Sears/K-Mart Corp. Neither Appellant objected to the restitution
order.
Louper-Morris and Morris now appeal. Louper-Morris raises six issues on
appeal: 1) the evidence was insufficient to support her convictions; 2) the district
court erred in overruling her objection under Batson, 476 U.S. at 79; 3) the district
court erred by denying her motion to dismiss the indictment because the United States
made a material misrepresentation to the grand jury; 4) the United States intimidated
one of her witnesses thereby depriving her of the right to present a complete defense;
5) the district court erred by enhancing her base level offense by four points for her
role as a leader or organizer of an activity involving five or more participants under
United States Sentencing Guidelines § 3B1.1; and 6) cumulative trial errors warrant
reversal or at least remand.
Morris raises six issues on appeal: 1) the evidence was insufficient to support
his conspiracy and wire fraud convictions; 2) the district court erred in overruling his
objection under Batson, 476 U.S. at 79; 3) the wire and mail fraud statutes, as applied
to Morris, exceed Congress’s authority to legislate in violation of the Tenth
Amendment; 4) the district court erred by not allowing the jury to view the live
website at issue; 5) the district court erred in enhancing his base offense level by four
points for his role as a leader or organizer of an activity involving five or more
participants under U.S.S.G § 3B1.1 and by two points for the sophisticated-means
enhancement under U.S.S.G. § 2B1.1(b)(9)(C); and 6) the district court’s restitution
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order improperly included restitution to an entity that was already receiving
compensation from a settlement agreement.
II. Appellants’ Joint Claims
A. Sufficiency of the Evidence
Appellants contend that the evidence was insufficient to support their
conspiracy, mail fraud, and wire fraud convictions. Specifically, Louper-Morris
states that the United States failed to prove that she harmed or intended to harm
anyone, that she made material false representations or promises, and that she
intentionally participated in a scheme to defraud. Morris only contends that the
United States failed to prove his intent to defraud.
We review de novo the sufficiency of the evidence to sustain a conviction.
United States v. Wiest, 596 F.3d 906, 910 (8th Cir. 2010). The evidence is viewed
most favorably to the verdict, giving it the benefit of all reasonable inferences. Id.
Reversal is appropriate only where no reasonable jury could find all the elements
beyond a reasonable doubt. Id. We do not weigh the credibility of the witnesses or
the evidence. Id. “The jury has the sole responsibility to resolve conflicts or
contradictions in testimony, and credibility determinations are resolved in favor of the
verdict.” Id. (quoting United States v. Honarvar, 477 F.3d 999, 1000 (8th Cir.
2007)).
To prove conspiracy to commit wire fraud, the United States must show that
1) there was a conspiracy, an agreement to commit wire fraud; 2) Louper-Morris and
Morris knew of the agreement; and 3) they intentionally joined in the conspiracy.
Johnson, 450 F.3d at 374. “The elements of conspiracy may be proved by direct or
circumstantial evidence, and the jury may draw reasonable inferences from the
evidence presented about what the defendant’s state of mind was when he did or said
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the things presented in the evidence.” United States v. Rodriguez-Ramos, 663 F.3d
356, 361 (8th Cir. 2011) (quoting United States v. Cervantes, 646 F.3d 1054, 1059
(8th Cir. 2011)).
To establish mail fraud pursuant to 18 U.S.C. § 1341, the United States must
prove: “(1) a scheme to defraud by means of material false representations or
promises, (2) intent to defraud, (3) reasonable foreseeability that the mail would be
used, and (4) [that] the mail was used in furtherance of some essential step in the
scheme.” United States v. Bryant, 606 F.3d 912, 917 (8th Cir. 2010) (quoting United
States v. Parker, 364 F.3d 934, 943 (8th Cir. 2004)). “[T]o constitute mail fraud, a
defendant’s misrepresentations must be material.” Id. at 917-18. “A
misrepresentation is material if it is capable of influencing the intended victim.” Id.
at 918; see also Preston v. United States, 312 F.3d 959, 961 (8th Cir. 2002) (per
curiam) (a material fact is “a fact that would be important to a reasonable person in
deciding whether to engage or not to engage in a particular transaction”).
The elements of wire fraud are virtually identical to mail fraud. To establish
wire fraud pursuant to 18 U.S.C. § 1343, the United States needed to prove beyond
a reasonable doubt that 1) Appellants joined a scheme to defraud; 2) they intended to
defraud; 3) it was reasonably foreseeable that interstate wire communications would
be used; and 4) the wires were, in fact, used. Johnson, 450 F.3d at 374.
Intent is an essential element of both wire fraud and mail fraud. United States
v. Flynn, 196 F.3d 927, 929 (8th Cir. 1999) (wire fraud); Bryant, 606 F.3d at 917
(mail fraud). “Fraudulent intent need not be proved directly and can be inferred from
the facts and circumstances surrounding a defendant’s actions.” Flynn, 196 F.3d at
929. Accordingly, the question before us is “whether the facts and circumstances of
this case, viewed in the light most favorable to the jury’s verdict, are sufficient to
establish intent to defraud. . . .” Id. (quoting United States v. Andrade, 788 F.2d 521,
527 (8th Cir. 1986)).
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Contrary to Louper-Morris’s assertions, the United States is not required to
show actual loss or harm to the victims of the fraud in order to prove wire fraud or
mail fraud. United States v. Williams, 527 F.3d 1235, 1245 (11th Cir. 2008). Rather,
“[t]he government merely needs to show that the accused intended to defraud his
victim and that his or her communications were reasonably calculated to deceive
persons of ordinary prudence and comprehension.” Id. (internal citations and
quotations omitted).
The record is replete with evidence of Appellants’ intent to defraud the State
of Minnesota, K-Mart, and CyberStudy customers through material
misrepresentations. Appellants intended to deceive the Department of Revenue about
the existence of a pool loan. Denita Hollie and Benita Williams testified that
Appellants were intentionally obtuse in their representations of the loan and led the
Department of Revenue to believe that Rev. McAfee through Salem, Inc., had loaned
over four million dollars to CyberStudy customers. In truth, Rev. McAfee had only
loaned CyberStudy less than $3000, and the pool loan did not exist. Appellants also
forged signatures on power-of-attorney forms and directed Denita, Benita, and
Jennifer Davis to do the same. Those forged forms were filed with customer’s state
tax returns thereby defrauding the Department of Revenue.
Appellants intended to deceive K-Mart. Lyman Locket testified that K-Mart
entered into a contract with CyberStudy in which K-Mart would provide computers
to CyberStudy customers at a reduced rate. Louper-Morris told Locket that
CyberStudy had over 100,000 customers and that two other computer companies were
currently providing computers to CyberStudy and deferring payment until the tax
credit reimbursement was released from the State in the following tax year. Locket
stated that K-Mart provided the computers believing that CyberStudy would provide
a comprehensive educational tutorial to low-income individuals, which would further
K-Mart’s diversity initiative. Numerous individuals testified, however, that the
tutorial lacked the advertised educational content. K-Mart also expected payment on
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the computers once CyberStudy began receiving tax credit reimbursements. After
Minnesota began depositing money in CyberStudy’s bank account, Appellants never
routed any of the funds to K-Mart. Locket’s testimony is sufficient to show that
Appellants intended to defraud K-Mart.
Perhaps Appellants’ most egregious behavior in their fraudulent scheme was
their joint intention to deceive CyberStudy customers, low-income individuals, many
who did not speak English. Numerous CyberStudy customers testified that
Appellants promised them a free computer. In fact, the computers were not free and
required customers to sign a service contract with CyberStudy and to assign their tax
credit refund to CyberStudy. CyberStudy customers testified that they were promised
a comprehensive educational tutorial with material in four languages. That content
never existed. Denita and Benita testified that Appellants had them prepare
CyberStudy customers’ tax returns for mailing on December 31, 2000 even though
the CyberStudy contract stated that tax returns would not be filed until April 15,
2001. When Appellants did not receive the full tax credit amount, Appellants in
many cases threatened legal action against the customers, including immigration
enforcement.
Despite Appellants’ repeated assertion that they were just trying to “break the
digital divide” and educate low-income individuals, the trial testimony shows that
Appellants intended to defraud others. The United States proved beyond a reasonable
doubt that Appellants made material misrepresentations and intended to defraud the
state of Minnesota, K-Mart, and CyberStudy customers. We conclude that evidence
was sufficient to support Appellants’ conspiracy, mail fraud, and wire fraud
convictions.
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B. Batson claim
Appellants assert that the district court erred in overruling their objection
under Batson v. Kentucky, 476 U.S. 79 (1986). During jury selection, the United
States used one of its peremptory strikes to strike juror number 41, an African-
American, from the venire panel. Appellants objected. The following side-bar
discussion occurred:
Mr. Kelly: Your Honor, defendants object to government’s
striking peremptory challenge of juror number 41. The record should
reflect that juror number 41 is the only African American left on this
panel, and there is no, as far as the defendants are concerned, no
justifiable reason for striking this juror other than race based.
Mr. Genrich: Well, Your Honor, clearly the issues in the case
include both school and nonschool based education instruction and
tutorial interactivity with respect to application of the education tax
credit, which among other things has a prong related to whether tutoring
services were provided by qualified instructors.
And we also struck, for example, juror number eight, who I will
refer to as the Alabama juror, who indicated she had tutoring experience,
and juror number [five] who worked in the special ed environment.
And we have a real concern that there could be a tendency among
jurors, particularly those who have tutored children in school settings,
to apply their own standards, their own legal standards or a matter of
human nature their own experiential standards to the facts of the case.
And that was the primary basis certainly on which we struck juror
number 41, and there was no race consideration to it. In fact, we struck
these other jurors for the same reason before we struck 41.
The Court: Anything else?
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Mr. Kelly: No, Your Honor. Well, Your Honor, I think that there
are, as the Court observed here, there are a number of jurors who are
connected to the educational system in one fashion or another, and this
particular juror is the only remaining African American. The Court
excused one other gentleman, the school bus driver, for employment
reasons.
And as coincidence, the only remaining potential juror, the only
one that was not seated, is the only other African American that is here.
So this gentleman, juror number 41, represents the sole member of the
race of both of the defendants. We think it’s important that the
defendants have representation from their race.
Mr. Genrich: Your Honor, I would note with respect to the racial
composition of the jury, that juror number 10 also comes from a
community of color and was struck by the defense, and the fact that 41
would have been the only remaining juror of color, at least by my
observation, is not solely exclusively a function of our strike.
The Court: Well, he does work in the educational setting. I
understand the rationale for it, and while I certainly in the grand
[scheme] of things would prefer to have a racially mixed jury, the Court
finds that the government has stated a sufficient reason for their strike,
which is not race based, but the issue is preserved if necessary for
appeal.
The Equal Protection Clause of the Fourteenth Amendment prohibits the use
of peremptory challenges to strike jurors solely on the basis of race. Batson, 476 U.S.
at 86. In order to succeed on a Batson challenge, a party must satisfy a three-part test.
Id. at 96. First, the objecting party must make a prima facie showing that a
peremptory challenge is race based. Id. Then, the party seeking to strike the juror
must show a race neutral justification that is “clear and reasonably specific” and
related to the case to be tried in order to overcome the objection. Id. at 98 n.20. The
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district court then decides whether the objecting party has shown purposeful
discrimination in light of all the evidence. Id. at 98. [T]he critical question in
determining whether [the objecting party] has proved purposeful discrimination at
step three is the persuasiveness of the prosecutor’s justification for his peremptory
strike.” Miller-El v. Cockrell, 537 U.S. 322, 324 (2003).
[T]he issue comes down to whether the trial court finds the prosecutor’s
race-neutral explanations to be credible. Credibility can be measured by,
among other factors, the prosecutor’s demeanor; by how reasonable, or
how improbable, the explanations are; and by whether the proffered
rationale has some basis in accepted trial strategy.
Id. at 339. Because “those factual findings turn largely on credibility evaluations,
they are due great deference[.]” United States v. Allen, 644 F.3d 748, 752 (8th Cir.
2011) (citing Batson, 476 U.S. at 98 n.21). Therefore, we review the district court’s
Batson ruling for clear error. Id.
“If a prosecutor’s proffered reason for striking a black panelist applies just as
well to an otherwise-similar nonblack who is permitted to serve, that is evidence
tending to prove purposeful discrimination to be considered at Batson’ s third step.”
Miller-El v. Dretke, 545 U.S. 231, 241 (2005). In this case, however, the United
States struck two other venire persons for the same reason as it struck an African
American venire person: these individuals all worked in educational settings. The
United States asserted that it was concerned that these individuals would apply their
own educational standards to the case. The district court found that the United States
exercised this strike for a legitimate reason. Reviewing the record, this finding is not
clearly erroneous. Appellants’ Batson challenge thus fails.
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III. Louper-Morris’s Claims
A. Allegation of Material Misrepresentation to the Grand Jury
Louper-Morris alleges that the district court erred by denying Appellants’ joint
motion to dismiss the indictment because the United States allegedly made a material
misrepresentation to the grand jury. “In reviewing the district court’s denial of a
motion to dismiss the indictment for alleged government misconduct, we review the
district court’s factual findings for clear error and its legal conclusions de novo.”
United States v. Pumpkin Seed, 572 F.3d 552, 557 (8th Cir. 2009) (internal citations
and quotations omitted).
Approximately two months after the deadline for filing pretrial motions,
Appellants moved to dismiss the indictment. They alleged that the United States
misinformed the grand jury by representing to the grand jury that no program
materials or educational content existed on the CyberStudy website in 2000.
The magistrate judge heard oral arguments on the motion. It concluded that
Appellants had no good cause for untimely filing the motion and also ruled that the
motion failed on the merits. Specifically, the magistrate judge found that the record
was devoid of any facts to support the proposition that the United States made any
misrepresentations in the indictment or to the grand jury. Thus, the magistrate judge
denied the motion.
We find no reversible error in the district court’s denial of the dismissal of the
indictment, “because even assuming that there were errors in the charging decision
that may have followed from the conduct of the prosecution, the petit jury’s guilty
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verdict rendered those errors harmless.” Id. (internal citation and quotation
omitted).6
B. Prosecutorial Misconduct Allegation
Louper-Morris asserts that the district court erred in denying Appellants’ joint
motion for a new trial because the United States allegedly intimidated one of
Appellants’ witnesses thereby depriving her of the right to present a complete
defense. We review a district court’s denial of a motion for new trial for an abuse of
discretion. United States v. Perez, 663 F.3d 387, 391 (8th Cir. 2011). “Reversal of
a denial of a motion for new trial is rare.” Perez, 663 F.3d at 39. (citation omitted).
In the motion for a new trial, Appellants alleged that Michelle Garcia-Strait,
a potential defense witness, was intimidated by the United States. Garcia-Strait had
sent a fax and an email to the district court describing her unplanned meeting with a
governmental agent. The district court conducted an evidentiary hearing on the
matter.
At the evidentiary hearing, Garcia-Strait testified to the following: on the day
she was to testify, someone who she believed to be from the United States Attorney’s
office spoke with her in a conference room outside of the courtroom. The
governmental agent summoned Garcia-Strait from the defense’s conference room to
the United States’s conference room. The door was left partially open. For
approximately five to ten minutes, the agent asked her about CyberStudy and some
checks she had written. Garcia-Strait said that she felt intimidated by the experience.
She did not recall telling either of Appellants’ attorneys that she was intimidated or
Moreover, we agree with the magistrate judge that the record is devoid of any6
facts that the United States made any misrepresentations in the indictment or to the
grand jury.
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unwilling to testify. When asked by the district court if the governmental agent had
threatened her or told her not to testify, Garcia-Strait replied that the agent had not
done either of those things. Garcia-Strait could not recall if Appellants’ attorneys
dismissed her before or after she had spoken with the governmental agent. She also
indicated that Appellants were debating whether to call her to testify because of
Garcia-Strait’s pending felony fraud and forgery charges on which she could be cross
examined. The following colloquy occurred between Garcia-Strait and Assistant U.S.
Attorney Timothy Rank:
Rank: You said that one of the things that [defense attorney] was
trying to figure out was whether you would get cross-examined on those
issues?
Garcia-Strait: Correct. This is exactly why I was afraid to testify,
yes.
Rank: You were afraid to testify because you could get cross-
examined on –
Garcia-Strait: By you, yes.
Rank: -- on issues related to your pending felony fraud and
forgery charges?
Garcia-Strait: Yes.
After the hearing, the district court issued an order denying the motion for a
new trial. The district court expressly found that the United States did not threaten
Garcia-Strait, and that Appellants chose not to call her as a witness. The district court
noted that Garcia-Strait was concerned about testifying because she could be cross-
examined about pending state court fraud and forgery charges. The district court
concluded that there was not any impermissible governmental interference and a new
trial was not warranted.
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In light of the record, Louper-Morris’s argument is unpersuasive. In fact, the
record directly refutes her argument. The record clearly shows that Garcia-Strait was
afraid to testify because of the possibility of being cross-examined on her pending
fraud and forgery charges. Moreover, Garcia-Strait admitted that she was not
threatened in any way or instructed not to testify. Garcia-Strait was available to
testify, but Appellants’ attorneys chose not to call Garcia-Strait as a witness. The
United States’s conduct did not prevent Garcia-Strait from testifying and, therefore,
the United States did not compromise Louper-Morris’s right to a fair trial. See Dodd
v. Nix, 48 F.3d 1071, 1075-76 (8th Cir. 1995) (finding no due process violation when
defense counsel chose not to call witness without consideration to the prosecution’s
conduct). The district court did not abuse its discretion in denying Appellants’
motion for new trial on the ground of witness intimidation.
C. Alleged Sentencing Error
Louper-Morris asserts that the district court erred by enhancing her base level
offense by four points for her role as a leader or organizer of a criminal activity
involving five or more participants under United States Sentencing Guidelines §
3B1.1. She argues that the United States failed to prove by a preponderance of the7
evidence that one of the persons identified in the pre-sentence investigation report as
a participant, Jennifer Davis, was criminally responsible for the offense. Therefore,8
she contends that the district court erred in applying the leadership enhancement
pursuant to § 3B1.1.
“When we review the imposition of sentences, whether inside or outside the
Guidelines range, we apply ‘a deferential abuse-of-discretion standard.’” United
The district court relied on the 2010 version of the United States Sentencing7
Guidelines Manual.
Louper-Morris does not challenge her role as a leader of the criminal activity.8
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States v. Hayes, 518 F.3d 989, 995 (8th Cir. 2008) (quoting Gall v. United States, 552
U.S. 38, 41 (2007)). “In reviewing for procedural error, we review the district court’s
application of the [G]uidelines de novo and its factual findings for clear error.”
United States v. Bennett, 659 F.3d 711, 714 (8th Cir. 2011) (citations & quotation
omitted). “‘Procedural error’ includes ‘failing to calculate (or improperly calculating)
the Guidelines range, treating the Guidelines as mandatory, failing to consider the §
3553(a) factors, selecting a sentence based on clearly erroneous facts, or failing to
adequately explain the chosen sentence—including an explanation for any deviation
from the Guidelines range.’” United States v. Feemster, 572 F.3d 455, 461 (8th Cir.
2009) (en banc) (quoting Gall, 552 U.S. at 51).
United States Sentencing Guidelines § 3B1.1(a) states, “Based on the
defendant’s role in the offense, increase the offense level as follows: ( a ) I f t h e
defendant was an organizer or leader of a criminal activity that involved five or more
participants or was otherwise extensive, increase by 4 levels.” (emphasis omitted).
In order for the district court to apply the § 3B1.1(a) leadership enhancement, the
United States needed to prove by a preponderance of the evidence that Louper-Morris
led or organized five or more participants in the CyberStudy fraud or that the
organization was otherwise extensive. United States v. Cosey, 602 F.3d 943, 947-48
(8th Cir. 2010); United States v. Rodriguez-Ramos, 663 F.3d 356, 365 (8th Cir. 2011)
(stating burden of proof). “A ‘participant’ is a person who is criminally responsible
for the commission of the offense, but need not have been convicted.” U.S.S.G. §
3B1.1 cmt. n.1.
The record conclusively shows that five or more individuals were participants
within the meaning of U.S.S.G. § 3B1.1. Denita Hollie testified Louper-Morris was
the leader of five or more “criminally responsible” individuals. She stated that in
addition to herself, Benita Williams, Morris, and Jennifer Davis all forged signatures
on the power-of-attorney forms in order for CyberStudy to receive the tax credit.
Benita Williams corroborated this testimony. Cheryl Cardinal also testified that she
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left the employment of CyberStudy because she no longer felt comfortable
“marketing something that wasn’t there”—that is, marketing CyberStudy 101 even
though it lacked educational content. Denita Hollie, Benita Williams, and Cheryl
Cardinal’s testimony all prove that Louper-Morris was the leader or organizer of five
or more participants who committed fraud either through forging signatures or
marketing CyberStudy 101's nonexistent educational content.
The leadership enhancement is also appropriate if the United States proves by
a preponderance of the evidence that the organization “was otherwise extensive.”
U.S.S.G. § 3B1.1(a). A four-level leadership enhancement pursuant to U.S.S.G. §
3B1.1(a) is appropriate if the trial testimony shows that “the criminal activity was
otherwise extensive.” See United States v. Brown. 627 F.3d 1068, 1073 (8th Cir.
2010) (internal quotation omitted). “In accessing whether an organization is
‘otherwise extensive,’ all persons involved during the course of the entire offense are
to be considered. Thus, a fraud that involved only three participants but used the
unknowing services of many outsiders could be considered extensive.” U.S.S.G. §
3B1.1 cmt. n.3.
Regarding the leadership enhancement, the district court stated:
As to the leadership role, I think there were many participants here. I
don’t know that we need to count to only five. There are many who
participated in one way or another to encourage people to participate in
this program, and I think the evidence was clear on that. So the four-
level increase as a leader and organizer is appropriate in this case.
We construe the district court’s statement as a finding that it believed not only that
the CyberStudy fraud involved more than five participants, but that the criminal
activity was otherwise extensive. The criminal activity “was otherwise extensive” in
that Louper-Morris recruited numerous individuals to assist in CyberStudy’s customer
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recruitment and tax form preparation. In addition, Rev. McAfee provided
“unknowing services” for CyberStudy by acting as a front for the pool loan.
Therefore, we conclude that the district court did not err in applying a four-level
leadership enhancement to Louper-Morris’s sentence pursuant to U.S.S.G. § 3B1.1(a)
because the criminal activity was otherwise extensive.
D. Claim of Cumulative Error
Lastly, Louper-Morris contends that cumulative trial errors warrant reversal or,
at least, remand. “We may reverse where the case as a whole presents an image of
unfairness that has resulted in the deprivation of a defendant’s constitutional rights,
even though none of the claimed errors is itself sufficient to require reversal.” United
States v. Montgomery, 635 F.3d 1074, 1099 (8th Cir. 2011) (quoting United States
v. Samples, 456 F.3d 875, 887 (8th Cir. 2006)). We have painstakingly considered
the record and find that there is not even a specter of unfairness much less any
deprivation of Louper-Morris’s constitutional rights. Any error was harmless error.
Louper-Morris’s claim of cumulative, reversible error is without merit.
IV. Morris’s Claims
A. Tenth Amendment Claim
Morris argues that the wire and mail fraud statutes, as applied to him, exceed
Congress’s authority to legislate in violation of the Tenth Amendment. Morris raises
this constitutional challenge for the first time on appeal. Defenses not raised or
litigated in the district court normally cannot be argued for the first time on appeal.
Gardner v. Meyers, 491 F.2d 1184, 1190 (8th Cir. 1974). “This rule, however, is one
of prudence and discretion.” Ward v. Resolution Trust Corp., 972 F.2d 196, 199 (8th
Cir. 1992).
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Typically, constitutional challenges to the charging statute can be raised during
pretrial motions, specifically, in a motion to dismiss the indictment. E.g. United
States v. Smith, 655 F.3d 839, 848 (8th Cir. 2011) (reviewing claim when defendant
raised constitutional challenge in a motion to dismiss the indictment). In this case,
presenting this argument to the district court would have been futile because, at the
time, this Court denied “Tenth Amendment prudential standing to individuals ‘absent
the involvement of a state or its instrumentalities.’” Id. (quoting United States v.
Hacker, 565 F.3d 522, 526 (8th Cir. 2009)). However, the Supreme Court recently
held that criminal defendants may challenge statutes as violative of the Tenth
Amendment. Id. (citing Bond v. United States, --- U.S. ----, 131 S.Ct. 2355, 2366-67
(2011)). Morris did not have prudential standing until after the Bond decision
conferred it upon him, and accordingly, he could not make this constitutional
challenge to the charging statute. Therefore, we will address the merits of his
argument.
We review federal constitutional questions, such as whether Congress had the
power to enact a statute, de novo. United States v. Sabri, 326 F.3d 937, 945 (8th Cir.
2003).
The Tenth Amendment provides that “powers not delegated to the United
States by the Constitution, nor prohibited by it to the States, are reserved to the States
respectively, or to the people.” U.S. Const. amend. X. A Tenth Amendment
challenge to a statute “necessarily” fails if the statute is a valid exercise of a power
relegated to Congress. United States v. Wright, 128 F.3d 1274, 1276 (8th Cir. 1997)
(finding challenged statute to be valid exercise of Congress’s power to regulate
commerce).
Article I, Section 8, Clause 7 of the United States Constitution authorizes
Congress “To establish Post Offices and post Roads[.]” The Postal Power allows
Congress to regulate the entire postal system. Ex Parte Rapier, 143 U.S. 110, 113
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(1892). “The overt act of putting a letter into the post office of the United States is
a matter that Congress may regulate. . . . Whatever the limits to its power, it may
forbid any such acts done in furtherance of a scheme it regards as contrary to public
policy, whether it can forbid the scheme or not.” Badders v. United States, 240 U.S.
391, 393 (1916) (internal citation omitted). Congress’s Postal Power provides the
jurisdictional basis for 18 U.S.C. § 1341, the mail fraud statute. United States v.
Elliott, 89 F.3d 1360, 1364 (8th Cir. 1996). Thus, Morris’s Tenth Amendment
challenge to the mail fraud statute “necessarily” fails because the mail fraud statute
is a legitimate exercise of Congress’s Postal Power. Wright, 128 F.3d at 1276.
Regarding Morris’s challenge to the wire fraud statute, 18 U.S.C. § 1343,
Morris ignores Article I, Section 8 of the United States Constitution, the Commerce
Clause, as a source of legislative authority. “[Section] 1343 [is] within the extensive
reach of the Commerce Clause.” United States v. Hook, 195 F.3d 299, 310 (7th Cir.
1999). Therefore, Morris’s Tenth Amendment challenge to the wire fraud statute also
“necessarily” fails. Wright, 128 F.3d at 1276.
B. Evidentiary Ruling Error
Morris asserts that the district court erred by not allowing the jury to view the
live CyberStudy website thereby denying him his Fifth and Sixth Amendment right
to a complete defense. “We review a district court’s evidentiary rulings for clear
abuse of discretion, reversing only when an improper evidentiary ruling affected the
defendant’s substantial rights or had more than a slight influence on the verdict.”
United States v. Watson, 650 F.3d 1084, 1088 (8th Cir. 2011) (quoting United States
v. Shields, 497 F.3d 789, 792 (8th Cir. 2007)).
At the beginning of the trial, Louper-Morris requested permission to introduce
the 2010 version of the online CyberStudy tutorial during her testimony. The district
court deferred the ruling until Louper-Morris was to testify. The district court again
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raised the issue before Louper-Morris’s opening statement. It instructed counsel that9
any demonstration of the tutorial should be done through “screen shots that can be
moved to on a shot by shot basis, much like clicking onto another site on the
Internet.” The district court expressed concern about the jury’s access to exhibits and
opined that the screen shots would enable the jury to review the exhibit at a later time.
Thus, the district court excluded admission of the live website. The United States
argued that the screen shots would not be representative of the website during the
relevant time period, 2000-2002. The district court noted the concern and stated that
the issue would be taken up later. Neither Louper-Morris nor Morris sought
admission of a screen-shot exhibit.
The district court did not abuse its discretion in precluding admission of the
live 2010 CyberStudy website. First, the district court was clearly concerned about
the jury’s access to exhibits, which is a legitimate reason to change the format of the
evidence. Second, Morris has not demonstrated how a screen-shot exhibit is inferior
to live website or how a screen-shot exhibit is prejudicial to him. Third, we cannot
ignore the fact that once the district court ruled to allow only the screen-shot exhibit,
Appellants abandoned their efforts to proffer any representation of the CyberStudy
website for the jury’s viewing. Finally, Appellants sought admission of the 2010
website, which, as the United States pointed out at trial and on appeal, would have
limited probative value of the 2000-2002 website. In light of the overwhelming
evidence against Appellants and the limited relevance of the 2010 CyberStudy
website, the district court did not abuse its discretion in denying admission of the live
2010 website.
Louper-Morris had deferred her opening statement until after the United9
States had presented its case.
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C. Sentencing Error
Morris contends that the district court improperly applied the two-level
sophisticated-means enhancement under U.S.S.G.§ 2B1.1(b)(9)(C) and the four-level
leadership enhancement under U.S.S.G. § 3B1.1(a). We apply “a deferential
abuse-of-discretion standard” when reviewing the imposition of sentences. Gall v.
United States, 552 U.S. at 41. “In reviewing for procedural error, we review the
district court’s application of the [G]uidelines de novo and its factual findings for
clear error.” Bennett, 659 F.3d at 714 (citations & quotation omitted).
Under the sophisticated-means enhancement, a defendant’s base offense level
may be increased by two levels if “the offense otherwise involved sophisticated
means.” U.S.S.G. § 2B1.1(b)(9)(C). “Sophisticated means” is defined as “especially
complex or especially intricate offense conduct pertaining to the execution or
concealment of an offense.” U.S.S.G. § 2B1.1(b)(9)(C) cmt. n.8(B). The
sophisticated-means enhancement is appropriate when the offense conduct, viewed
as a whole, “was notably more intricate than that of the garden-variety [offense].”
United States v. Hance, 501 F.3d 900, 909 (8th Cir. 2007). “Even if any single step
is not complicated, repetitive and coordinated conduct can amount to a sophisticated
scheme.” United States v. Fiorito, 640 F.3d 338, 351 (8th Cir. 2011) (quoting United
States v. Bistrup, 449 F.3d 873, 882 (8th Cir. 2006)).
Morris does not dispute the district court’s factual findings that formed the
basis of the sophisticated-means enhancement. Rather, he contends that the district
court erred in its legal conclusion that the fraud was sophisticated. We disagree. The
CyberStudy fraud involved a vast marketing scheme that included mobilizing various
community leaders. It involved lobbying state agencies including the Minnesota
Department of Revenue and the Minnesota Attorney General. The fraud required the
preparation of thousands of tax returns and power-of-attorney forms, endorsed with
fraudulent signatures. Cf. United States v. Septon, 557 F.3d 934, 937 (8th Cir. 2009)
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(affirming application of the sophisticated-means enhancement where a scheme
involved “submitting numerous loan applications to lenders containing forged
signatures, forged notary stamps, and falsified or altered [documents]”). Finally, the
fraud required the creation of a fake pool loan allegedly financed by Rev. McAfee’s
organization, Salem, Inc. This coordinated conduct amounts to a sophisticated
scheme. The district court did not err in applying the sophisticated-means
enhancement.
Morris also argues that the district court erred in applying the four-level
leadership enhancement pursuant to U.S.S.G. § 3B1.1(a) because he was “at worse,
. . . a manager or supervisor of the scheme[,]” and his mother, Louper-Morris, was the
true leader and figurehead of the organization. The district court considered and
rejected this argument. It stated:
As to the leader or organizer objection relative to paragraph 42, the
Court will overrule the defense objection. I have considered this
carefully and considered dropping this to an organizer or a manager, I
guess, rather than a leader/organizer which would be three points, but
having once again gone through the nature of the role that was played
by Mr. Morris in this, I just find that I cannot change that
recommendation that the probation office has made.
A leadership role is determined by “the nature of defendant’s role in the
offense, the recruitment of accomplices, the degree of participation in planning or
organizing the offense.” United States v. Williams, 605 F.3d 556, 570 (8th Cir. 2010)
(quoting United States v. Ortiz-Martinez, 1 F.3d 662, 677 (8th Cir. 1993)). A
defendant’s “decision-making authority. . . and the degree of control and authority
that the defendant exercised over others” is indicative of whether the defendant had
a leadership role in the offense. Id. (quoting United States v. Del Toro-Aguilera, 138
F.3d 340, 342 (8th Cir. 1998)). The leadership enhancement “does not apply solely
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to those who first instigated the criminal activity, and the defendant need not be the
only organizer or leader.” United States v. Bolden, 596 F.3d 976, 984 (8th Cir.
2010).
Like the district court, we disagree with Morris’s characterization of his role
in the CyberStudy fraud. Denita Hollie testified that Morris had a leadership position
with CyberStudy. She stated that although he did not generate many of the ideas that
propelled the scheme, he helped implement Louper-Morris’s ideas by instructing
employees. Morgan Brown, Denita Hollie, Benita Williams, and Lyman Locket each
testified that Morris acted as CyberStudy’s attorney. As the company’s attorney, he
had a degree of authority. He drafted all of the legal documents for the organization
including customer agreements and letters threatening collection actions and
immigration actions. He also negotiated the K-Mart–CyberStudy computer contract.
Carlos Granados testified that Morris was also in charge of all banking for the
company. Lastly, Morris, like Louper-Morris, took a substantial amount of money
from CyberStudy’s bank account for personal use. These facts support the district
court’s determination that Morris was a leader or organizer within the context
U.S.S.G. § 3B.1.1(a). The district court did not err by enhancing Morris’s sentence
by four levels for his leadership role.
D. Restitution Issue
Morris argues that the district court’s restitution order improperly included
restitution to K-Mart, who was already receiving compensation from a settlement
agreement. He asserts that the restitution order improperly “doubly compensates”
K-Mart through the civil settlement and criminal restitution.
After a few years of litigation, CyberStudy entered into a settlement agreement
in which it was to pay K-Mart $610,000 in compensation for breaching the computer
contract. CyberStudy failed to make any payments and, in October 2003, a judgment
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for $1,211,134.03 plus interest and attorney’s fees was entered against CyberStudy
for this failure. In this criminal case, the district court imposed mandatory restitution
in the amount of $3,562,502.74—$2,351,368.71 owed to the Minnesota Department
of Revenue and $1,211,134.03 owed to K-Mart. Appellants were held jointly and
severally responsible for the restitution payments. Morris admitted on cross-
examination that Appellants had not paid any amount on the civil judgment.
Ordinarily, we review restitution awards for an abuse of discretion. United
States v. Jefferson, 652 F.3d 927, 932 (8th Cir. 2011). Morris, however, did not
challenge the restitution order at sentencing. We therefore review the restitution
order for plain error. United States v. Piggie, 303 F.3d 923, 928 (8th Cir. 2002);
United States v. Riebold, 135 F.3d 1226, 1231 (8th Cir.1998). Plain error review is
“extremely narrow and is limited to those errors which are so obvious or otherwise
flawed as to seriously undermine the fairness, integrity, or public reputation of
judicial proceedings.” Piggie, 303 F.3d at 928 (quoting United States v. Beck, 250
F.3d 1163, 1166 (8th Cir. 2001)).
The Mandatory Victims Restitution Act (MVRA), 18 U.S.C. §§ 3663A - 3664,
requires individuals who are convicted of wire fraud to pay restitution to their
victims. United States v. Mancini, 624 F.3d 879, 882 (8th Cir. 2010); 18 U.S.C. §
3663A(c)(1)(A)(ii) (ordering mandatory restitution for victims of “an offense against
property under this title, . . . including any offense committed by fraud or deceit”).
The MVRA instructs that, “[a]ny amount paid to a victim under an order of restitution
shall be reduced by any amount later recovered as compensatory damages for the
same loss by the victim in-- (A) any Federal civil proceeding[.]” 18 U.S.C. §
3664(j)(2)(A). Although the purpose of the MVRA is to make victims whole and
compensate them for their losses, United States v. Frazier, 651 F.3d 899, 904 (8th
Cir. 2011), the MVRA does not allow victims to obtain double recovery or a windfall
through restitution. Id. at 910-11; United States v. Ruff, 420 F.3d 772, 775 (8th Cir.
2005) (Ruff I); see also United States v. Manzer, 69 F.3d 222, 230 (8th Cir. 1995)
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(finding that the MVRA’s precursor, the Victim and Witness Protection Act of 1982,
does not allow “double recovery for the same loss through both a restitution order and
a civil judgment”); United States v. Gaultier, 727 F.2d 711, 716 (8th Cir. 1984).
Nevertheless, Morris’s argument is without merit. By Morris’s own admission,
K-Mart has yet to receive any payments in satisfaction of the civil judgment.
Therefore, Morris has failed to show that enforcement of the restitution order would
result in double recovery for K-Mart. Cf. United States v. Ruff, 472 F.3d 1044, 1047
(8th Cir. 2007) (Ruff II) (finding that the district court did not plainly err in denying
Ruff’s request to offset the restitution amount with the forfeiture proceeds in part
because Ruff did not show that the victim was receiving double recovery). If either
Appellant begins to make payments on the civil judgment, either he or she may seek
in the district court a reduction of the restitution order to credit or offset amounts
recovered by K-Mart. Frazier, 651 F.3d at 910-11; Manzer, 69 F.3d at 230;
Gaultier, 727 F.2d at 716. Absent evidence of a double recovery, we can say that the
district court did not plainly err in awarding restitution to K-Mart even though
K-Mart can enforce a civil judgment against Appellants.
V. Conclusion
For the foregoing reasons, we affirm the judgment of the district court and
Appellants’ sentences.
______________________________
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