Court Opinion

ID: 2997451
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:36:28.572123+00
Date Added: 2024-06-11T11:45:34.076611
License: Public Domain

In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

Nos. 03-2660, 03-2707 & 03-3010
UNITED STATES OF AMERICA,
                                                 Plaintiff-Appellee,
                                                  Cross-Appellant,
                                 v.

BRENDA J. CUMMINGS and DAVID S. MORRIS,
                                          Defendants-Appellants,
                                                Cross-Appellees.

                          ____________
           Appeals from the United States District Court
       for the Northern District of Illinois, Eastern Division.
            No. 99 CR 719—Joan B. Gottschall, Judge.
                          ____________
  ARGUED SEPTEMBER 8, 2004—DECIDED JANUARY 13, 2005
                    ____________

  Before BAUER, MANION, and KANNE, Circuit Judges.
  KANNE, Circuit Judge. A jury convicted Brenda Cummings
and David Morris on two separate counts—count one, con-
spiracy to commit fraud using unauthorized access devices
in violation of 18 U.S.C. § 1029(a)(2), and count two, con-
spiracy to violate the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. § 1962(d). The district
court sua sponte ordered a new trial for the defendants on
the RICO count, but we reversed because the district court
2                          Nos. 03-2660, 03-2707 & 03-3010

did not have jurisdiction to order the new trial. On remand,
the district court granted the defendants’ motions for down-
ward departure and imposed aggregate sentences without
differentiating the punishment attributable to the respec-
tive counts. The defendants appeal their RICO convictions
and also seek a remand for resentencing in light of Blakely
v. Washington, 124 S. Ct. 2531 (2004), and United States v.
Booker, 375 F.3d 508 (7th Cir. 2004), cert. granted, 125 S. Ct.
11 (2004) (No. 04-104). The government cross-appeals the
district court’s downward departure in the defendants’ sen-
tences. We reverse the defendants’ RICO conviction and
remand for resentencing on the remaining count.

                  I. Background Facts
  In the often high-stakes game of consumer finance, most
debtors repay their creditors, and everyone is satisfied. Un-
fortunately, some debtors fail to make good on their finan-
cial obligations and then, to make matters worse, drop out
of sight. At such times, creditors may turn to other players,
such as collection agencies, which specialize in finding and
collecting from debtors. Because some debtors are especially
difficult to locate, collection agencies sometimes employ
individuals known as “skip tracers,” who specialize in find-
ing such individuals.
   Skip tracing is relatively uncomplicated. Collection
agencies provide skip tracers with identifying information,
such as debtors’ names and social security numbers. The
skip tracers then use their particular talents to discover the
debtors’ whereabouts. The skip tracers pass this informa-
tion back to the collection agencies, which may then contact
the debtors or their employers to attempt collection of the
debt through garnishment of wages or otherwise. Much of
this tracing information may be found in publicly accessible
sources, but collection agencies often prefer to hire skip
tracers because of the time and expense involved in doing
it themselves.
Nos. 03-2660, 03-2707 & 03-3010                              3

   The Illinois Department of Employment Security (“IDES”)
administers Illinois’s unemployment insurance program,
under which it collects premiums from employers and pays
benefits to qualified individuals. Employers submit to the
IDES quarterly reports containing their employees’ names,
social security numbers, and earnings information. The IDES
maintains this confidential financial and employment infor-
mation in a computer database. The database contains the
very sort of information that is valuable to a skip tracer, and
it is conveniently located in one place and easily retrievable
by those with the proper computer access. Standing be-
tween this gold mine of information and prospecting skip
tracers, however, are Illinois law and IDES policies, which
protect the confidentiality of the information in the data-
base and forbid its disclosure except for officially sanctioned
purposes.
  Although skip tracing is not necessarily illegal, some skip
tracers stray across the line in their efforts to track down
their quarry. David Morris was one such skip tracer. Morris
started work at the IDES sometime in the 1970s, and then,
in the late 1980s, Morris began working at Chicago’s
Department of Human Relations. From the early 1980s,
however, Morris had been augmenting his salary by oper-
ating a skip tracing business on the side. By the early 1990s,
his services were, by all accounts, highly sought after by
collection agencies. But Morris owed a good portion of his
success to certain associates working at the IDES. These
associates—Brenda Cummings, James Duniver, and Jerry
Harris—all had access to IDES computers and the wealth
of tracing information stored therein. Morris approached
each of these individuals separately and proposed to pay
them in exchange for pulling up debtors’ employment infor-
mation from the database, and each agreed to the ar-
rangement.
  Despite having access to the IDES’s computers, Morris’s
friends were relatively low-level employees in the IDES
4                         Nos. 03-2660, 03-2707 & 03-3010

hierarchy. For example, Cummings worked in the purchas-
ing department of IDES. She played no role in administer-
ing unemployment compensation benefits, and thus her job
duties did not require her to access the database frequently.
Duniver was an IDES client service supervisor. In carrying
out his duties, Duniver sometimes would be required to
access the data, but he had no special responsibility to
maintain the data or its confidentiality (beyond the general
duty that all IDES employees shared to keep the information
confidential). Harris was another client service supervisor,
and, like Duniver, he only infrequently accessed the desired
data as part of his duties. No evidence suggests that any of
Morris’s accomplices had any managerial or supervisory
control over the IDES itself. It appears that Morris ap-
proached the three individuals because of his friendship
with them and their ability to access the data, not because
of any particular influence or authority they may have had
in the IDES hierarchy.
  The scheme was simple. Morris’s collection agency clients
provided him lists of debtors’ names and social security
numbers, and Morris passed the lists to Cummings, Duniver,
and Harris. Each list contained about 30 to 35 debtors.
Morris’s accomplices entered the debtors’ identifying in-
formation into the IDES computers and printed or copied
down the confidential wage and employer data for listed
debtors that happened to turn up in the IDES database.
They passed the information on to Morris, who then sup-
plied it back to the collection agencies.
  Per their agreements, Morris paid his friends about $10
for each debtor list they processed, sometimes by check and
sometimes by cash. Over the course of the scheme, Morris’s
friends racked up tidy sums for running thousands of com-
puter inquiries and producing the desired information. From
1988 through 1993, Cummings earned at least $63,636,
paid mostly by check, for the computer inquiries she ran for
Morris. Harris opted for cash payments only and made at
Nos. 03-2660, 03-2707 & 03-3010                           5

least $3000 for his endeavors. Duniver took cash and check
payments totaling about $2000. As for Morris, it is uncer-
tain how much he profited under the arrangement, but his
tax returns from 1987 to 1993 indicate $228,284 in skip
tracing earnings, and he likely earned thousands more in
unreported income.
   The scheme ran smoothly until federal agents got wind of
it in 1993 from a disgruntled former employee of one of the
collection agencies. In early 2000, all four participants in
the scheme were charged in a superseding indictment for
conspiracy to defraud using multiple unauthorized access
devices (debtors’ social security numbers) to obtain some-
thing of value (the confidential earnings and employment
information) in violation of 18 U.S.C. § 1029(a)(2). The
defendants also were indicted for conspiring to engage in a
pattern of racketeering activity consisting of multiple acts
involving bribery and official misconduct in violation of
RICO, 18 U.S.C. § 1962(d).

 II. Defendants’ Trial and Post-Trial Proceedings
  Duniver and Harris pled guilty to the first count (viola-
tion of § 1029(a)(2)) and agreed to cooperate with the gov-
ernment in its prosecution of Morris and Cummings. At the
close of the government’s case, Morris and Cummings made
oral motions for judgment of acquittal pursuant to Federal
Rule of Criminal Procedure 29(a), but the district court
reserved ruling on the motions and submitted the case to the
jury. On March 3, 2000, the jury returned guilty verdicts on
both counts.
  A long series of post-trial motions and rulings ensued for
over a year, in which the district court repeatedly denied
various defense motions for acquittal or for a new trial.
Nevertheless, the district court continually expressed doubt
6                         Nos. 03-2660, 03-2707 & 03-3010

as to the defendants’ guilt on the RICO charge and reluc-
tance to sentence the defendants in accordance with the
jury’s verdict of guilty.
  Finally, at a hearing on November 5, 2001, the district
court announced that the conduct of the defendants was
outside the “heartland” of RICO cases and sua sponte ordered
a new trial on the RICO charge. The government appealed
the order, and we reversed and remanded for sentencing
because the district court did not have jurisdiction to order
a new trial more than seventeen months after the return of
the guilty verdict. See United States v. Morris, No. 01-4151,
40 Fed. Appx. 248, 2002 WL 1453408 (7th Cir. July 1,
2002). On remand, the defendants jointly filed a renewed
Rule 29 motion for judgment of acquittal. The district court
did not rule on this motion, but instead appointed addi-
tional counsel for Morris. Morris thereafter filed a motion
to reconsider an earlier Rule 29 motion, and the district
court denied Morris’s motion. In so doing, the district court
stated:
    Based on its research to date, albeit with little engage-
    ment on the merits by the government, the court is
    inclined to believe that defendant Morris (as well as
    defendant Cummings) is legally innocent of the RICO
    charge set forth in Count II of the indictment on which
    he was convicted. Specifically, there was no evidence
    that any of the coconspirators exercised any control or
    direction over the enterprise (or conspired to do so) or
    that anyone agreed to facilitate the activities of any
    person who exercised direction or control. Nor did the
    alleged coconspirators have any agreement or intent to
    affect the enterprise by means of the alleged acts.
Nevertheless, the district court observed that our remand
order “bar[red] any further inquiry into the merits” because
the court “had no power . . . to order a new trial.” As a con-
sequence, the district court concluded, “it must follow that
[the court] cannot grant a judgment of acquittal.”
Nos. 03-2660, 03-2707 & 03-3010                             7

  On June 6, 2003, the district court at last proceeded to
sentencing. The defendants moved for downward departure
under the sentencing guidelines; the court granted the mo-
tions, again opining that the defendants’ offenses were “out-
side the heartland of RICO.” The court also concluded that
Cummings “was not a typical RICO defendant” and that
Morris’s gain from the crime overstated its seriousness. The
court imposed aggregate sentences on each defendant
rather than specifying separate sentences for each of the
two counts on which the defendants were convicted. In all,
the court granted an eight-level downward departure to
Cummings and sentenced her to a four-month prison term.
The court granted a six-level downward departure to Morris
and sentenced him to a twenty-one-month prison term.
   On appeal, the defendants argue that there was insuffi-
cient evidence to support their convictions on the RICO count.
The defendants do not, however, challenge their convictions
on count one. They also seek a remand for resentencing in
light of the Blakely and Booker decisions, which cast doubt
on the constitutionality of the federal sentencing guidelines.
The government cross-appeals the defendants’ sentences,
contending that the district court erred in departing down-
ward.

                     III. Discussion
  Morris and Cummings argue that the evidence adduced
at trial was insufficient to support their RICO convictions.
Specifically, the defendants contend that the government
failed to establish that anyone in the charged RICO con-
spiracy exercised the required level of direction over the
enterprise as required by Reves v. Ernst & Young, 507 U.S.
170 (1993). The defendants also claim that the government
failed to establish that the predicate acts committed by the
defendants had the requisite nexus with the affairs of the
charged enterprise.
8                          Nos. 03-2660, 03-2707 & 03-3010

   We review a sufficiency of the evidence challenge by
considering the evidence in the light most favorable to the
government, deferring to the credibility determinations of
the jury, and we overturn a verdict only when “the record
contains no evidence, regardless of how it is weighed, upon
which a rational trier of fact could find guilt beyond a
reasonable doubt.” United States v. Starks, 309 F.3d 1017,
1021 (7th Cir. 2002); see also United States v. Torres, 191
F.3d 799, 807 (7th Cir. 1999). But the government contends
that defendants did not timely raise the sufficiency of the
evidence challenge before the district court and that we
therefore must review the defendants’ appeal under the
plain error standard, which places an even greater burden
on the defendants. Under this standard, we will reverse
“only if the record is devoid of evidence pointing to guilt, or
if the evidence on a key element of the offense was so ten-
uous that a conviction would be shocking.” United States v.
Meadows, 91 F.3d 851, 855 (7th Cir. 1996). The defendants
respond that they properly preserved their challenge to the
sufficiency of the evidence, but even if plain error review
applies, the verdict cannot stand because the government’s
evidence failed to satisfy Reves.
   Before turning to these arguments, a brief review of the
relevant RICO provisions and caselaw is in order. The
defendants were convicted under 18 U.S.C. § 1962(d) for
conspiracy to violate § 1962(c). Section 1962(c) provides that
“[i]t shall be unlawful for any person employed by or as-
sociated with any enterprise engaged in, or the activities of
which affect, interstate or foreign commerce, to conduct or
participate, directly or indirectly, in the conduct of such
enterprise’s affairs through a pattern of racketeering activ-
ity or collection of unlawful debt.” Thus, the basic elements
of a § 1962(c) violation are (1) conduct (2) of an enterprise
(3) through a pattern (4) of racketeering activity. See
Brouwer v. Raffensperger, Hughes & Co., 199 F.3d 961, 967
(7th Cir. 2000).
Nos. 03-2660, 03-2707 & 03-3010                               9

  The statutory language itself does not illuminate what it
means “to conduct or participate.” Nevertheless, Supreme
Court precedent teaches that this language “indicates some
degree of direction,” Reves, 507 U.S. at 178, so that a person
charged to have conducted or participated in the enter-
prise’s affairs within the meaning of § 1962(c) must have
had “some part in directing those affairs.” Id. at 179; see also
Goren v. New Vision Int’l, Inc., 156 F.3d 721, 727 (7th Cir.
1998) (“[M]ere participation in the activities of the enter-
prise is insufficient; the defendant must participate in the
operation or management of the enterprise.”). Regarding
persons outside the enterprise, the Court noted that “[a]n
enterprise might be operated or managed by others asso-
ciated with the enterprise who exert control over it as,
for example, by bribery.” 507 U.S. at 184 (internal quotes
omitted).
  Although Reves did not specifically address § 1962(d), its
operation or management test is applicable in the conspir-
acy context. In Brouwer, we clarified that for a conspiracy
to violate § 1962(d), the “agreement must be to knowingly
facilitate the activities of the operators or managers to whom
[§ 1962(c)] applies. . . . It is an agreement, not to operate or
manage the enterprise, but personally to facilitate the
activities of those who do.” 199 F.3d at 967. Thus, in the
conspiracy context, the Reves test clarifies that the person
charged must “knowingly agree to perform services of a
kind which facilitate the activities of those who are operat-
ing [or managing] the enterprise in an illegal manner.” Id.;
see also Frost Nat’l Bank v. Midwest Autohaus, Inc., 241
F.3d 862, 869-70 (7th Cir. 2001); United States v. Swan, 250
F.3d 495, 499 (7th Cir. 2001) (“[T]he jury need[ ] only to find
that [the person charged] knowingly agreed to facilitate the
activities of those operators or managers to whom § 1962(c)
can apply. . . .”).
  In the present case, the IDES was the charged RICO
enterprise. The prosecution’s theory was that the defendants
conspired to participate in the conduct of the IDES’s affairs
10                         Nos. 03-2660, 03-2707 & 03-3010

through a pattern of racketeering activity. The charged
racketeering activity was bribery—Morris paid Cummings
and the others in exchange for the confidential information
contained in the IDES database. The defendants candidly
concede that their scheme likely violated state bribery and
official misconduct laws as well as IDES policies. But
defendants argue that the government failed to show that
any of the scheme’s participants directed or managed the
enterprise as Reves requires, and thus the evidence cannot
support their convictions on the RICO count.
  We agree. Regardless of which standard of review applies,
the record is devoid of evidence that the defendants con-
spired knowingly to facilitate the activities of anyone to
whom § 1962(c) would apply—namely, an operator or man-
ager of the IDES, the charged RICO enterprise. Cf. United
States v. Warneke, 310 F.3d 542, 547 (7th Cir. 2002) (noting
that a defendant may violate § 1962(d) by “join[ing] forces with
someone else who manages or operates the enterprise.”)
(emphasis in original). In this regard, none of Morris’s
accomplices fits the bill. True, Duniver and Harris held
customer service “supervisor” positions at the IDES, but
nothing in the record explains the scope of their duties or the
relevance of their duty titles to the RICO conspiracy with
which Morris and Cummings were charged. Likewise,
Cummings held a minor position in the IDES’s purchasing
department, and no evidence indicates that she held any
position by which it may be said that she operated or
managed the IDES. No evidence indicates that any of these
defendants was an operator or manager of the IDES,
whether by official duty position or by means of some de
facto control over the agency’s affairs. Cf. Warneke, 310
F.3d at 548 (“Reves and Swan hold that to violate RICO the
person [conducting the enterprise’s affairs] must have a real
operational (or managerial) role . . . .”). Certainly, nothing
in the record provides any basis for the jury to have con-
cluded that Morris’s associates met the Reves operation or
Nos. 03-2660, 03-2707 & 03-3010                             11

management test or that Morris and Cummings conspired
to facilitate the activities of anyone else who might meet
that test.
  Notwithstanding this evidentiary shortcoming, the gov-
ernment also tries to characterize Morris—an outsider—as
the enterprise’s operator or manager. After all, Reves envi-
sioned that an enterprise may be operated or managed by
an outsider who “exert[s] control over it as, for example, by
bribery.” 507 U.S. at 184. Moreover, a lower level defendant
“may conspire to violate § 1962(c) even if that defendant
could not be characterized as an operator or manager of a
RICO enterprise under Reves.” MCM Partners, Inc. v.
Andrews-Bartlett & Assocs., Inc., 62 F.3d 967, 979 (7th Cir.
1995). Thus, the government contends that Morris’s bribery
of the IDES employees satisfies Reves because the employ-
ees’ acceptance of bribes amounted to their agreement to
facilitate Morris’s control of the enterprise. Even though
there is no evidence that Morris exercised control over the
IDES, the government explains that “an outsider who bribes
a public official rarely, if ever, obtains full control of the
government agency in question; rather, the purpose of the
bribe is to affect the exercise of a particular function of the
agency in a particular situation.” (Gov’t Br. at 26.)
  While we cannot fault this proposition as it applies to
bribery generally, the government’s argument is inappli-
cable in the RICO context. No evidence adduced at trial re-
veals that Morris conspired to operate or manage the affairs
of the IDES through the bribery of his IDES associates. The
undisputed purpose of Morris’s bribes reinforces this
conclusion. Morris bribed his friends at the IDES in return
for confidential information to be used in his skip tracing
business. He did not pay bribes in order to exert control
over the IDES’s core functions of collecting insurance pre-
miums and paying of unemployment benefits. This would be
an entirely different ball game if, for example, Morris had
bribed his accomplices to make payments of unemployment
12                         Nos. 03-2660, 03-2707 & 03-3010

benefits to unqualified recipients or to falsify payment of
premiums by employers. In these hypothetical situations,
the bribery schemes at issue would look more like a
prototypical RICO conspiracy, in which low-level gov-
ernment employees are bribed to facilitate an outsider’s
illegal control over the enterprise. See, e.g., United States v.
Conn, 769 F.2d 420 (7th Cir. 1985) (affirming RICO con-
viction of a traffic court clerk who accepted bribes to influ-
ence the disposition of traffic cases).
  Despite this fundamental flaw in its RICO case, the gov-
ernment maintains that Morris’s repeated bribes of
Cummings, Harris, and Duniver allowed Morris to “control
their performance of a particular aspect of their jobs—
namely, their ability to control the confidentiality of the
[IDES] information. . . .” (Gov’t Br. at 27.) This assertion
begs the question because it sidesteps the substance of the
Reves test altogether. It assumes that Morris operated or
managed the IDES by exercising control over a particular
aspect of his accomplices’ jobs—“their duty to maintain the
confidentiality of the information.” Moreover, it assumes
that when Cummings and the others took time out from
performing their official duties in order to run Morris’s in-
quiries, they necessarily agreed to facilitate Morris’s control
over the enterprise.
  At most, however, the evidence shows that Morris “con-
trolled” his accomplices to the extent they took time out of
any given workday to run computer inquiries. The evidence
does indicate that Cummings, Duniver, and Harris spent
several hours on some workdays running database inquiries
for Morris. But at most this fact indicates the degree to
which Morris operated or managed his accomplices, not how
much (or whether) Morris controlled IDES with respect to
the agency’s function of collecting premiums and paying
benefits. In short, no evidence shows that Morris somehow
operated or managed IDES itself or conspired to do so, and
bribery alone cannot substitute for Reves’s operation or
Nos. 03-2660, 03-2707 & 03-3010                             13

management requirement. Cf. Reves, 507 U.S. at 185 (“[T]o
conduct or participate . . . in the conduct of such enterprise’s
affairs, . . . one must participate in the operation or man-
agement of the enterprise itself.”) (internal quotations
omitted); accord United States v. Allen, 155 F.3d 35, 42-43
(2d Cir. 1998) (“[T]he commission of crimes by lower level
employees of a RICO enterprise may be found to indicate . . .
operation or management but does not compel such a find-
ing[,]” thus the existence of a bribery scheme does not
necessarily render the employees liable under RICO.).
  The government’s theory would transform all garden-
variety bribery into RICO violations, irrespective of whether
anyone in the scheme satisfied Reves. It is true that lower-
level participants in an enterprise may violate RICO if it
can be shown that they have “facilitate[d] the activities of
those who are operating the enterprise in an illegal man-
ner[,]” Brouwer, 199 F.3d at 967, through bribery or other-
wise. See Reves, 507 U.S. at 184. The fundamental question
remains whether Morris or the others operated or managed
the IDES’s affairs through bribery. The answer, on the evi-
dence contained in the record, is no. Thus, it does not matter
whether, as the government contends, the bribery scheme
deprived the IDES of the “honest services” of three of its
employees or that the scheme ran contrary to the IDES’s
policies designed to keep the information in its database
confidential. As with virtually all government bribery
schemes, this one was not without harm, cost, or conse-
quence to the agency employing those bribed. Certainly any
bribe of a government employee can be said to deprive the
government of some degree of honest services, which is one
of the reasons why the law forbids bribery in the first place.
But a bribery scheme alone does not amount to a RICO
conspiracy unless it satisfies specific additional require-
ments, and it is evident that the bribery scheme in this
case, on the evidence adduced at trial, does not do so.
14                         Nos. 03-2660, 03-2707 & 03-3010

  In sum, the government failed to show that the defendants
satisfied the Reves operation or management test, and thus
we conclude that there is insufficient evidence to support
the RICO convictions of Morris and Cummings under
§ 1962(d), notwithstanding ample evidence of likely viola-
tions of various state bribery and official misconduct laws.
We might conclude differently if, for example, the govern-
ment had charged Morris’s skip tracing business as the RICO
enterprise. Then the operation or management test would
be satisfied and there might well be sufficient evidence to
support a RICO conspiracy conviction. The government
instead charged IDES as the RICO enterprise, so we reach
the conclusion we do today—at most, the defendants’ scheme
amounted to bribery, not a RICO conviction.
  For the reasons given, we reverse defendants’ conviction
on count two. Because there is insufficient evidence to sup-
port the defendants’ RICO conviction, we need not address
the parties’ remaining RICO arguments or whether the dis-
trict court’s downward departure with regard to the RICO
convictions was appropriate. One remaining wrinkle, how-
ever, is the fact that the district court without explanation
imposed aggregate sentences for the two separate counts on
which the defendants were convicted. It therefore is unclear
whether, for example, the district court agreed with the
government’s recommendation that the two counts should
be grouped as closely related counts under U.S.S.G.
§ 3D1.2(a), or whether the district court imposed separate
terms of imprisonment to be served concurrently. Under
U.S.S.G. § 5G1.2, it appears that the district court should
have imposed separate sentences on each count, to be served
concurrently. See United States v. De la Torre, 327 F.3d 605,
609 (7th Cir. 2003). In any event, it is unclear what sentence
the district court imposed as to the remaining count of con-
viction, which the defendants do not challenge. We there-
fore remand the case to the district court for resentencing
on count one in accordance with the Supreme Court’s latest
Nos. 03-2660, 03-2707 & 03-3010                        15

pronouncement on the effect, if any, of Blakely and Booker
on the federal sentencing guidelines.

                    IV. Conclusion
  For the reasons given, we REVERSE the defendants’ RICO
convictions and REMAND the case for resentencing on count
one.

A true Copy:
      Teste:

                       ________________________________
                       Clerk of the United States Court of
                         Appeals for the Seventh Circuit

                  USCA-02-C-0072—1-13-05