UNITED STATES COURT OF APPEALS

FIFTH CIRCUIT

 

No. 94-10052

 

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

CHARLES R. CROWELL,

Defendant-Appellant.

 

Appeal from the United States District Court

for the Northern District of Texas

(July 25, 1995)

Before REYNALDO G. GARZA, HIGGINBOTHAM, and PARKER, Circuit Judges.

ROBERT M. PARKER, Circuit Judge:

The defendant, Charles R. Crowell, was tried before a jury and

convicted on all 23 counts of a superseding indictment related to

a fraudulent investment scheme that spanned more than 5 years and

affected more than 160 victims. Crowell appeals the district

court's rejection of two negotiated plea agreements and the

sentence the district court imposed. Since we find that the

district court participated in plea discussions in violation of

Federal Rule of Criminal Procedure 11 (e)(1), but find that the

defendant received a fair trial, we affirm Crowell's conviction,

vacate his sentence, and remand for resentencing.
2

I. FACTS

Crowell was the president and chief operating officer of

Abacus and Associates, Inc. Abacus was in the business of

preparing income tax returns and providing related bookkeeping

services. In addition, Abacus held itself out as a manager of

investments. Beginning sometime in 1979, Crowell, through Abacus,

established the Abacus Retirement Management Trust, with Crowell as

Trustee. Crowell directed Abacus employees to identify potential

investment clients through their income tax returns. When

potential investors were identified, Crowell would convince them to

put their money into IRA accounts, pension plans, and other

investments that he purported to manage through Abacus Retirement

Management Trust.

Crowell represented to potential investors and clients that

their money would be invested in first lien mortgage notes,

municipal leases, church bonds, municipal bonds, and "safe" stocks.

What Crowell failed to tell investors and clients is that instead

of investing their money as he represented, he diverted, through

various bank accounts, much of the money for his own business and

personal use, including payroll, the purchase of personal property,

concrete for a swimming pool, utilities, cattle, credit card

charges, and legal fees not related to trust business. Crowell

periodically mailed fraudulent Statements of Account to his

investors, which indicated that their investments were doing well

and that the funds were readily available. In addition, at times

Crowell used new investor deposits to cover other investor's
3

withdrawals, preventing exposure of his fraudulent practices. As

a result of his fraudulent investment scheme, Crowell deprived more

than 160 victims of savings and retirement funds in the amount of

$1,818,668.77.

On August 11, 1992, Crowell was charged in a three-count

indictment with interstate transportation of money obtained by

fraud in violation of 18 U.S.C. § 2314, fraudulent sale of a

security as part of a pension plan in violation of 15 U.S.C. § 77q,

and conducting a financial transaction in proceeds of the

interstate transportation of money obtained by fraud in violation

of 18 U.S.C. § 1956(a)(1). All three charges related to

transactions that took place in August of 1987.

On November 6, 1992, pursuant to a plea agreement with the

government, Crowell pled guilty to Count 2 of the indictment. The

agreement provided that the other charges would be dropped and that

Crowell would make restitution to the victims through the sale of

property he owned, including land in Keller, Texas. The district

court accepted Crowell's guilty plea subject to a later

determination on whether to accept the plea agreement.

After reviewing the plea agreement and presentence

investigation report, the district court expressed concern

regarding the sentence allowable under the agreement. The charge

to which Crowell pled guilty would allow a maximum term of

imprisonment of five years, which was too light a sentence, in the

district court's opinion, considering the defendant's conduct. The

district court indicated, however, that if significant restitution
4

could be made under the agreement through the sale of the

defendant's property, then the overall effect of the agreement

would be acceptable. Defense counsel agreed that the plea

agreement contemplated significant restitution to the victims, not

just a "pie in the sky" promise.

Further investigation revealed that Crowell's property was

encumbered by multiple liens, including private security interests

and tax liens, and that it was the subject of adversary proceedings

in bankruptcy. The district court held multiple conferences with

counsel in an effort to determine the value of defendant's property

that would be available for restitution. In addition, the district

court monitored proceedings in the bankruptcy court for any sign

that the property would be available. Finally, in May of 1993, the

court determined that significant restitution would not be

available despite the efforts of the court and counsel. The

district court also decided that absent the actual ability to

provide the restitution contemplated by the agreement, the sentence

allowable under the plea agreement would not adequately reflect the

aggravated nature of Crowell's conduct or the harm to Crowell's

victims. Thus, the district court rejected the plea agreement, and

Crowell withdrew his guilty plea. The court entered a Memorandum

Opinion and Order reflecting this decision on May 25, 1993. Trial

was scheduled for June 1, 1993.

Following the rejection of this plea agreement, the government

moved for a continuance to allow additional charges to be presented

to the grand jury. This motion was granted, and on June 17, 1993,
 1. We note that clearly this is an inappropriate procedure.

Counsel should not have asked the court to give any opinion on the

proposed plea agreement until it had had an opportunity to review

the agreement in its entirety. To the extent we find that the

district court improperly participated in the plea discussions, we

also find that this error was invited by counsel's improper

inquiry.

 2. Supp. Rec. on Appeal, Vol. 8, p.5 (July 19, 1993).

5

Crowell was charged in a superseding indictment with interstate

transportation of money obtained by fraud in violation of 18 U.S.C.

§ 2314, 20 counts of mail fraud in violation of 18 U.S.C. § 1341,

and two counts of engaging in monetary transactions in property

derived from mail fraud in violation of 18 U.S.C. § 1957.

On July 19, 1993, the parties reached a tentative agreement

for defendant's plea of guilty to two counts of mail fraud under

the superseding indictment. Before the agreement was in final

form, and before the factual resume had been prepared, the parties

decided to contact the district court to inquire in advance whether

the court anticipated any problems with the plea agreement.1 The

court first, correctly, stated that it would have to see the plea

agreement and factual resume prior to making that determination.

The court continued, however, saying

My concern before, as I indicated, was I didn't think

that the sentence that could be imposed under the prior

plea agreement adequately addressed the defendant's

criminal conduct as contemplated -- and that I didn't

have any choice but to reject it under the policy

statement of the guidelines that governs what we'll do

when we are presented with a plea agreement.

I felt that a sentence significantly in excess of

what he likely would serve under the prior plea of guilty

and plea agreement would be required for the sentence to

adequately address his criminal conduct.2

Later that day, the parties submitted the completed plea agreement
6

and factual resume for the district court's review.

On July 20, 1993, pursuant to the second plea agreement,

Crowell pled guilty to two counts of mail fraud. The district

court again accepted the defendant's guilty plea and deferred its

decision on whether to accept the plea agreement. Because the mail

fraud counts to which Crowell pled guilty were based on conduct

after November 1, 1987, the court reviewed the plea agreement under

Section 6B1.2 of the Federal Sentencing Guidelines. The district

court determined that the likely guideline sentencing range, 37-46

months, would not adequately reflect the seriousness of Crowell's

actual offense behavior and that the agreement would undermine the

statutory purposes of sentencing. Thus, the district court

rejected the second plea agreement as well. Crowell again withdrew

his guilty pleas.

On July 26 and 27, 1993, Crowell was tried before a jury and

found guilty on all 23 counts of the superseding indictment. On

January 5, 1994, the district court held a sentencing hearing and

Sentenced Crowell to imprisonment for 60 months on each count 2

through 10, concurrently; 60 months on each count 11 through 21,

concurrently, but consecutive to the sentences imposed on counts 2

through 10; 120 months on counts 22 and 23, concurrently, and

concurrent to the sentences imposed on counts 2 through 21; and 10

years on count 1 (a pre-guidelines offense) to run consecutive to

the sentences imposed on counts 2 through 23. In addition, the

district court ordered $1,818,668.77 in restitution, as well as a

special assessment and a three-year term of supervised release
7

following imprisonment. This appeal followed.

II. DISCUSSION

On appeal, Crowell argues (1) that the district court

improperly participated in plea negotiations in violation of

Federal Rule of Criminal Procedure 11(e)(1), (2) that the district

court abused its discretion in rejecting the proposed plea

agreements, (3) that Crowell was denied a fair trial by being

required to make certain admissions at a plea hearing before the

district court decided to reject the negotiated plea agreement, (4)

that the district court erroneously calculated Crowell's total

offense level under the sentencing guidelines, and (5) that the

district court's upward departure from the guidelines was

unwarranted and unreasonable when imposed in addition to a

consecutive sentence on the pre-guidelines offense.

Crowell's first contention is that the district court

participated in the plea discussions in violation of Federal Rule

of Criminal Procedure 11(e)(1). Rule 11(e)(1) provides that the

attorney for the government and the attorney for the defendant, or

the defendant himself when acting pro se, may engage in discussions

with a view toward reaching a plea agreement. Relevant to this

appeal, the rule also provides that "[t]he court shall not

participate in any such discussions." We have previously

recognized that this rule "prohibits absolutely a district court

from `all forms of judicial participation in or interference with
 3. United States v. Miles, 10 F.3d 1135, 1139 (5th Cir. 1993)

(quoting United States v. Adams, 634 F.2d 830, 835 (5th Cir. Unit

A Jan. 1981)).

 4. Miles, 10 F.3d at 1140.

 5. Id. at 1139-40.

8

the plea negotiation process.'"3 We have also noted, however, that

a district court must actively participate in the discussions that

occur after a plea agreement is disclosed.

In fact, Rule 11 mandates it, to include: "addressing the

defendant personally in open court" to ensure "that the

plea is voluntary and not the result of force or threats

or promises apart from a plea agreement", Rule 11(d);

inquiring "as to whether the defendant's willingness to

plead guilty or nolo contendere results from prior

discussions between the attorney for the government and

the defendant or the defendant's attorney", id.; "making

such inquiry as shall satisfy it that there is a factual

basis for the plea", Rule 11(f); and either accepting or

rejecting the plea agreement and stating the reasons for

doing so, see Rule 11(e)(3).4

In United States v. Miles, we held that although the district

court may state its reasons for rejecting a plea agreement, it may

not also suggest the plea agreements that would be acceptable.

When a court goes beyond providing reasons for rejecting the

agreement presented and comments on the hypothetical agreements it

would or would not accept, it crosses over the line established by

Rule 11 and becomes involved in the negotiations.5 In Miles, we

held that the district court crossed that line. Crowell asks us to

find a similar violation here.

The defendant points to comments made by the district judge

after the first plea agreement was presented and before the court

determined that it had to be rejected. In evaluating the first
 6. Supp. Rec. on Appeal, Vol. 4, p. 3 (Feb. 11, 1993).

 7. See Miles, 10 F.3d at 1140.

9

agreement, the district court compared the possible sentence under

the agreement to the potential sentence if the defendant were

convicted on all counts of the indictment. On February 11, 1993,

in performing that comparison, the court noted that if Crowell were

convicted on all counts he "probably would end up with [a sentence]

of 15 or 20 years."6 Crowell argues that it was the court's

comments in this regard that the parties were attempting to address

in reaching the subsequent plea agreement, and that this indirect

influence constitutes the type of judicial participation in plea

discussions that is prohibited by Rule 11(e)(1). This argument

must fail.

The commentary to Rule 11 and our previous decisions make it

clear that the district court is expected to take an active role in

evaluating a plea agreement, once it is disclosed.7 We have no

doubt that this evaluation may include a consideration of the

punishment allowable under the agreement, as compared to the

punishment appropriate for the defendant's conduct as a whole.

Therefore, any such comments made during a discussion of the

effects of a plea agreement properly presented to the court do not

constitute improper participation in violation of Rule 11.

The comments made by the court on February 11, 1993, were made

in the context of an evaluation of the first plea agreement

properly presented by the parties. We note that at that time the

district court was three months away from a final determination
10

that the first plea agreement was unacceptable. We also note that

clearly the comments were not intended to suggest a sentencing

range that would be acceptable in a subsequent plea agreement.

That the parties called on the court's earlier comments in

fashioning the second plea agreement cannot be determinative. The

proper inquiry is whether the district court was actively

evaluating a plea agreement, as the court is required to do, or

whether the court is suggesting an appropriate accommodation for a

subsequent plea agreement, something this Court found prohibited in

Miles. The district court's comment's on February 11 must fall

into the former category.

However, on July 19, 1993, after the rejection of the first

plea agreement, and before the second plea agreement was in its

final form, the district court had another discussion with counsel

regarding the range of punishment that would be required. The

court's comments, quoted above, indicate the court's feeling that

a penalty significantly more severe than that allowed under the

first plea agreement would be necessary for an agreement to be

acceptable. The fact that this comment was injected into the

discussions while the parties were still preparing the second

agreement is critical. It is precisely this type of participation

that is prohibited by Rule 11. Although not as blatant as the

suggestion of particular terms of imprisonment in Miles, we find

that the court's comments on July 19 constituted a violation of

Rule 11.

Finding a violation of this rule does not end our inquiry,
 8. United States v. Johnson, 1 F.3d 296, 298 (5th Cir. 1993).

Fed. R. Crim. P. 11(h) provides "[a]ny variance from the procedures

required by this rule which does not affect substantial rights

shall be disregarded."

 9. Although the government did not argue that any error was

harmless, we proceed with our analysis because "harmless error" is

the appropriate standard of review. "If neither party suggests the

appropriate standard, the reviewing court must determine the proper

standard on its own." United States v. Vonsteen, 950 F.2d 1086,

1091 (5th Cir.) (en banc), cert. denied, 112 S. Ct. 3039 (1992).

See also Lufkins v. Leapley, 965 F.2d 1477, 1481-82 (8th Cir.)

(appellate court may raise harmless error analysis sua sponte in

certain circumstances), cert. denied, 113 S. Ct. 271 (1992).

 10. Johnson, 1 F.3d at 302 (quoting United States v.

Bachynsky, 934 F.2d 1349, 1360 (5th Cir.) (en banc), cert. denied,

502 U.S. 951 (1991)).

11

however. Recently, this Court held that a violation of Rule 11

would never require automatic reversal or vacatur. Rather, "when

an appellant claims that a district court has failed to comply with

Rule 11, we shall conduct a straightforward, two-question `harmless

error' analysis: (1) Did the sentencing court in fact vary from the

procedures required by Rule 11, and (2) if so, did such variance

affect substantial rights of the defendant?"8 Having answered the

first question, we must proceed to the second.9

In a case where the defendant was convicted by guilty plea

pursuant to an agreement, we would "examine the facts and

circumstances of the . . . case to see if the district court's

flawed compliance with . . . Rule 11 . . . may reasonably be viewed

as having been a material factor affecting [defendant]'s decision

to plead guilty."10 The focus of our inquiry must necessarily be

different where a plea agreement was rejected, the defendant pled

not guilty, and was convicted after a full trial. To determine
 11. See United States v. Adams, 634 F.2d 830, 841-42 (5th

Cir. Unit A Jan. 1981) ("Rule 11(e)(1)'s ban on judicial

participation in plea discussions does serve important prophylactic

purposes even in cases in which the defendant pleads not guilty: it

helps to insure that the trial judge is impartial throughout the

defendant's trial and sentencing, and avoids the dangers implicit

in the court's misrepresentation of its role in plea

negotiations.").

12

whether substantial rights were affected in this case, we must

examine whether the district court's participation might reasonably

be said to have affected the court's impartiality in the conduct of

the trial or sentencing.11

After he withdrew his guilty plea, Crowell was tried before a

jury. He does not challenge on appeal the sufficiency of the

evidence, trial procedure, evidence rulings, jury instructions, or

anything else relating to the conduct of the trial. In addition,

the court's improper comments related solely to the level of

punishment necessary for an acceptable plea agreement; they did not

reflect the court's view on the strength or weakness of the

evidence in the case or the government's ability to prove the

necessary elements of any particular charge. Thus, the court's

participation in the plea discussions, limited as it was, cannot

reasonably be said to have affected the court's ability to

impartially conduct the trial of this case. Since Crowell

ultimately entered a plea of not guilty, and since there is no

indication in the record that Crowell did not receive a fair trial,

we have no problem finding that the court's violation of Rule 11

was harmless with regard to Crowell's conviction.

However, we cannot say that the district court's participation
 12. Miles, 10 F.3d at 1139 (quoting Adams, 634 F.2d at 840).

13

in the plea discussions was harmless with regard to Crowell's

sentencing. With regard to the sentencing, there is no intervening

jury deliberation to satisfy us that the error was harmless.

Instead, the sentencing determination was made by the same judge

who had become involved in the plea discussions. One of the main

purposes of the rule against judicial involvement in plea

discussions is that "such involvement `is likely to impair the

trial court's impartiality.'"12

In this case, the district court's comments suggested, at the

very least, that it felt a sentence significantly more severe than

a five year pre-guidelines sentence would be required to make a

plea agreement acceptable. Although the second plea agreement was

rejected, the district court had to address the appropriate level

of punishment again at sentencing. The court's earlier comments,

however, create the appearance of a premature commitment to a

sentence of at least a certain level of severity. 

Given the potential effect the district court's improper

comments had on its duties at sentencing, in the absence of any

suggestion of harmless error by the government, we must find that

substantial rights of the defendant were affected. Therefore, we

cannot find the court's violation of Rule 11 harmless with regard

to Crowell's sentencing. We cannot conclude our discussion,

however, without addressing Crowell's other argument's relevant to

his conviction.

Crowell contends that the district court abused its discretion
 13. United States v. Foy, 28 F.3d 464, 472 (5th Cir.), cert.

denied, 115 S. Ct. 610 (1994).

 14. Id. (citing United States v. Bean, 564 F.2d 700, 704 (5th

Cir. 1977)).

 15. U.S.S.G. § 6B1.2(a) (1994). The same language is found

in the 1992 edition which was used in this case.

14

in rejecting the second plea agreement. A district court's

rejection of a plea agreement is reviewed only for abuse of

discretion.13 A court may properly reject a plea agreement based

on undue leniency.14 In addition, section 6B1.2 of the sentencing

guidelines provides that a court may accept such an agreement "if

the court determines . . . that the remaining charges adequately

reflect the seriousness of the actual offense behavior and that

accepting the agreement will not undermine the statutory purposes

of sentencing or the sentencing guidelines."15 The district court

made the determination, on the record, that a plea of guilty to two

counts of mail fraud with a likely sentencing guideline range of

37-46 months would not meet that standard. Given the large number

of victims and the protracted course of fraudulent activity, we

cannot find that the district court abused its discretion in this

determination.

Crowell also contends that the district court prejudiced his

right to a fair trial by conducting a plea hearing prior to

rejecting the second proposed plea agreement. In conducting the

plea hearing, the district court explored the factual basis for the

plea by addressing the defendant personally, as required by Rule 11
 16. See Fed. R. Crim. P. 11(c), (f).

 17. Fed. R. Crim. P. 11 (e)(6) provides

Except as otherwise provided in this paragraph, evidence

of the following is not, in any civil or criminal

proceeding, admissible against the defendant who made the

plea or was a participant in the plea discussions:

 (A) a plea of guilty which was later withdrawn;

 (B) a plea of nolo contendere;

 (C) any statement made in the course of any

proceedings under this rule regarding either of the

foregoing pleas; or

 (D) any statement made in the course of plea

discussions with an attorney for the government

which do not result in a plea of guilty or which

result in a plea of guilty later withdrawn.

However, such a statement is admissible (i) in any

proceeding wherein another statement made in the course

of the same plea or plea discussions has been introduced

and the statement ought in fairness be considered

15

of the Federal Rules of Criminal Procedure.16 Prior to questioning

the defendant, the district court asked Mr. Crowell "Do you

understand that you are now under oath and that if you answer any

of my questions falsely your answers may later be used against you

in a prosecution for perjury or giving a false statement?" Crowell

responded "Yes, sir."

Crowell argues that his confirmations under oath at the plea

hearing unjustly prevented him from testifying in his own defense.

Crowell does not explain how his previous admissions would have

prejudiced him if he had testified except to say that it would have

been like walking through a minefield. Rule 11(e)(6) of the

Federal Rules of Criminal Procedure precluded the use of any such

statements against Crowell in his criminal prosecution and would

have prevented the use of the same statements for impeachment

purposes had he testified.17 The rule does allow the use of such
contemporaneously with it, or (ii) in a criminal

proceeding for perjury or false statement if the

statement was made by the defendant under oath, on the

record, and in the presence of counsel.

 18. Because of our disposition, we need not address the

appellant's arguments regarding sentencing.

16

statements under certain circumstances in criminal proceedings for

perjury or false statement. However, to the extent this use was a

possibility, Crowell received a full warning prior to being asked

any questions. Moreover, the provision for use of a defendant's

statements in subsequent prosecutions for perjury or false

statement is an important check on the defendant's veracity under

oath, which is necessary to protect the integrity of the judicial

process. There was nothing improper in the procedure followed by

the district court at Crowell's plea hearing, and thus the

procedure cannot be said to have deprived him of a fair trial.

III. CONCLUSION

Since the district court's participation in the plea

discussions did not have any prejudicial effect on Crowell's

conviction, and because Crowell's other arguments relevant to his

conviction are without merit, the conviction must be AFFIRMED.

However, because the court's participation in the plea discussions

cannot be said to have been harmless with regard to Crowell's

sentence, the sentence must be VACATED.18 For the foregoing

reasons, this case is REMANDED for assignment to a different

district judge for resentencing.