Opinion ID: 2810258
Heading Depth: 2
Heading Rank: 1

Heading: The Dealings of Pulgar and Schmidt

Text: Pulgar met Schmidt through a mutual friend in 2002. At the time, Pulgar lived near Chicago, Illinois, and Schmidt lived in Bloomington, Illinois. Not long after their initial meeting, Pulgar sold cocaine to Schmidt. Pulgar continued to sell cocaine to Schmidt at fairly regular intervals—once every month or so, with the exception of a few, brief hiatuses—until March 2013. The quantities varied, but they trended upward over time. For example, the first transaction between Pulgar and Schmidt resulted in a sale of 4.5 ounces for approximately $2,600. By 2005, the amount increased to nearly half a kilo- 4 No. 14-3503 gram (over 16 ounces) for $12,000 to $16,000—depending on market demand. By 2010, the amount increased again, this time to three-quarters of a kilogram (over 26 ounces) for approximately $27,700. Just as the quantity and price varied, so too did the place of purchase. Sometimes Schmidt purchased cocaine from Pulgar in Chicago, other times in Joliet. Sometimes the deals occurred at Wendy’s, other times at Best Buy, and still other times “just off the interstate.” It was not unusual, moreover, for the meeting place to suddenly change on the way to the deal. Schmidt never knew what type of vehicle Pulgar would arrive in—that changed as well. 2 Wherever they met, one fact appeared to be consistent: Schmidt paid Pulgar in full for the cocaine at the time he received it. After Drug Enforcement Agency (“DEA”) agents arrested Schmidt, he told them that Pulgar never fronted him drugs and that he always paid for the drugs at the time of the transaction. This statement is reflected in the reports of DEA Agents Weiss and Bonnett, who wrote that Schmidt “always pays for the cocaine when he gets it, and the cocaine is never fronted to Schmidt by Pulgar.” In fact, no lawenforcement reports mention anything to the contrary. And Agent Bonnett testified to the cash-up-front arrangement be- 2 Despite this evidence, the government argued at trial—and suggests on appeal—that the deals between Pulgar and Schmidt were standardized. Even if these transactions were standardized, which they were not, our analysis of the alleged conspiracy would not change. See United States v. Brown, 726 F.3d 993, 999 (7th Cir. 2013) (observing many standardized transactions are “equally consistent” with a mere buyer-seller arrangement). No. 14-3503 5 fore the grand jury, stating Schmidt “was one of those guys that wanted to pay for everything up front, didn’t want to owe anybody anything.” B. Trial Evidence - The Government’s Case-in-Chief
At Pulgar’s trial, Schmidt changed his story and testified that Pulgar fronted him cocaine. The only example of fronting that Schmidt could remember, though, occurred during a sham deal that he arranged for the DEA. Schmidt, having been arrested one month before Pulgar, had been cooperating with the DEA during that deal. Schmidt testified that Pulgar wanted to drop off cocaine while on his way to traffic court in Lincoln, Illinois, and then pick up the money for the cocaine after his hearing. Pulgar wisely did not want to bring the payment required for the cocaine—over $27,000 in cash—into court with him. So he set up this alternative arrangement with Schmidt to delay payment for a few hours. This is the only concrete example of fronting that the government introduced at trial. As it happens, Pulgar never received the money from that transaction; DEA agents arrested him after he dropped off the cocaine. The jury acquitted Pulgar of this conduct, which formed the basis of the distribution charge in Count 2. Schmidt seemed to vaguely recall other evidence of fronting. He just could not remember when: “I mean there was probably a couple times that he fronted them to me. But like I said, I can’t remember every single time.” Notwithstanding 3 We use the term “fronting” interchangeably with “credit transaction.” 6 No. 14-3503 the vague nature of this testimony, the government assigns it great weight. The government claims it means Pulgar sold large amounts of cocaine to Schmidt, multiple times, on credit—a persuasive combination that has established a drugdistribution conspiracy in other cases. See United States v. Brown, 726 F.3d 993, 1002 (7th Cir. 2013) (observing “multiple, large-quantity purchases on credit” are considered “sufficient proof” of conspiracy), cert. denied, 134 S. Ct. 1876 (2014). Additionally, the government argues that this evidence is supported by recorded phone calls between Pulgar and Schmidt, where Pulgar at least initially discussed fronting cocaine to Schmidt. The government emphasizes the fact that one of these discussions actually “resulted in a wholesale distribution on credit.” Remarkably though, that discussion, which indeed resulted in an instance of fronting, also resulted in Pulgar’s arrest. For as we mentioned above, it was precipitated by Schmidt’s cooperation with the DEA. The government acknowledged as much during its closing argument, but maintained the example could still count against Pulgar: “You heard evidence of a credit transaction. … [T]he plan was to leave the money behind and pick it up on the way back. Didn’t work out that way, but that was the plan.” Aside from what we just detailed, the government offered no other evidence of credit transactions between Pulgar and Schmidt. So the government turned its focus to other facts that it believed helped prove the conspiracy: returns of cocaine and a burgeoning friendship between Pulgar and Schmidt. No. 14-3503 7
During direct examination of Schmidt, the government introduced evidence of an alleged return policy between him and Pulgar: A. Okay. The cocaine, if it was real bad, I could give it back to him. Q. Was this some sort of … return policy or some- thing? A. Yeah, I guess you could say that -- call it that. Q. How many times would you say that happened during your relationship? A. Maybe just a couple. Two or three. The government relies heavily on this testimony. It also points out that Pulgar screened the cocaine for quality before he sold it to Schmidt. A return policy, the government argues, demonstrates that “no transaction between Schmidt and Pulgar was final until Schmidt resold the drugs.” That in turn means that Pulgar held a “stake in the venture” of Schmidt’s downstream sales, which in turn demands an inference of conspiracy to distribute cocaine. Or so the argument goes. Not so, contends Pulgar. For he reads Schmidt’s testimony differently. Pulgar first notes that evidence of a return policy—like evidence of fronting—did not surface until Schmidt testified at trial. And when it did surface, the government’s introduction of the phrase “return policy” seemed to catch Schmidt by surprise: “Yeah, I guess you could say that -- call it that.” Thus, Pulgar contends that the alleged “return policy” is little more than a rebranding effort by the 8 No. 14-3503 government to help support its conspiracy case. As he puts it, “2-3 returns of poor quality cocaine over 11 years surely do not constitute a return policy.” The stakes on this point are high. For when a “seller permits the buyer to return unsold drugs,” he stands on the precipice of a consignment sale. Brown, 726 F.3d at 999. And consignment sales are “quintessential evidence” of a drugdistribution conspiracy. Id. (citing Johnson, 592 F.3d at 755 n.5)). But other factors are typically involved in consignment sales. A middleman is usually present, and profits are delayed “until the middleman distributes the drugs to others.” Johnson, 592 F.3d at 755 n.5 (explaining that, in a consignment sale, “the supplier will not get paid until the middleman resells the drugs.”) (citations omitted). We address this point in greater detail below. The last piece of government evidence worth mentioning is that of a bourgeoning friendship between Pulgar and Schmidt. This friendship, the government argues, shows a trusting, close-knit relationship between Pulgar and Schmidt from which a rational jury could infer conspiracy. But the evidence is not overwhelming. It consists of two vacations, one baby shower, and one house renovation. Specifically, Schmidt testified that their families went on joint vacations to Mexico and Jamaica. Schmidt also testified that he attended Pulgar’s baby shower, and that Pulgar helped renovate his house. “All of this suggests,” the government argues, “the men were not a buyer and seller dealing solely at arm’s- length.” No. 14-3503 9
Based on all of Schmidt’s testimony, which to recap described multiple transactions of large-quantity cocaine, one example of fronting, two or three returns of lousy cocaine over an eleven-year period, and a burgeoning friendship between Pulgar and Schmidt, the government pieced together its conspiracy case against Pulgar. To be sure, the government introduced other evidence besides Schmidt’s testimony. It introduced recordings. It introduced the testimony of Agent Bonnet, for example. But there is no doubt that Schmidt played the leading role in the government’s case. We turn now to Pulgar’s case-in-chief, which, unsurprisingly, also relied on Schmidt’s testimony. C Trial Evidence - The Defendant’s Case-in-Chief Schmidt played an equal—if not greater—role for the defense. Indeed, he played two: slimy criminal and independent businessman. The former is straightforward. During cross-examination, Pulgar impeached Schmidt by introducing his multiple felony convictions. Schmidt’s record features four drug convictions, one firearm conviction, and one DUI conviction. Pulgar further impeached Schmidt with his prior inconsistent statements regarding fronting (recall he flipflopped on that issue) and marijuana transactions. Regarding the marijuana transactions, Schmidt initially told agents that Pulgar was his only source for marijuana (when he was not in the mood for cocaine), but he later admitted that he had other sources for marijuana. Schmidt also admitted that he enjoys marijuana so much that his email address is a shortened version of “bud sack” spelled backward. 10 No. 14-3503 Schmidt’s other role—independent businessman—is also straightforward. With considerable frequency, Schmidt offered testimony that he was his own man—a fact at odds with the alleged drug-distribution conspiracy. The following excerpt is a good example: Q. If you made $4 million or nothing, that had noth- ing to do with [Pulgar], did it? A. No. Q. That’s all on you? Your customers, your business; correct? A. Yes. Vexing the government, Schmidt did not stop there. He testified that he did not consult with Pulgar on any of his deals. He testified that once he purchased the cocaine, the task of selling it was his and his alone. He also testified that he never introduced any of his customers to Pulgar. Michael Myers, the other member of the alleged conspiracy, was Schmidt’s sole “guy.” And Myers was “totally separate and apart from anything Schmidt had going on with Pulgar.” Schmidt also testified that Pulgar did not force him to share his profits after the sales. Pulgar contends this evidence, juxtaposed against the government’s case, shows nothing more than a buyer-seller arrangement between him and Schmidt. But there is more. Sometimes evidence not introduced can be just as powerful as evidence introduced. Accordingly, Pulgar highlights the following missing pieces in the government’s case: (1) no evidence that Pulgar or Schmidt warned each other about threats to their business; (2) no evidence that Pulgar provisioned Schmidt with any cell phones, cutting agents, scales, bags for packaging, or any other tools No. 14-3503 11 or supplies to further Schmidt’s drug sales; (3) no evidence that, when Schmidt did return cocaine, Pulgar refunded his money or gave him a credit for other cocaine; and (4) no evidence that Pulgar and Schmidt were ever on the same side of a transaction. Needless to say, Pulgar contends the government’s silence on these matters is significant. With these facts in mind, we turn to the merits.