Court Opinion

ID: 2975953
Source: CourtListenerOpinion
Date Created: 2015-09-22 17:43:03.110053+00
Date Added: 2024-06-11T11:43:59.397635
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                            File Name: 07a0873n.06
                            Filed: December 20, 2007

                                  Case Nos. 06-5061, 07-5421

                           UNITED STATES COURT OF APPEALS
                                FOR THE SIXTH CIRCUIT

 UNITED STATES OF AMERICA,                           )
                                                     )
           Plaintiff-Appellee,                       )
                                                     )      ON APPEAL FROM THE
                  v.                                 )      UNITED STATES DISTRICT
                                                     )      COURT FOR THE EASTERN
 GARY L. SLATER,                                     )      DISTRICT OF KENTUCKY
                                                     )
       Defendant-Appellant.                          )
 _______________________________________             )
                                                     )
                                                     )

BEFORE:          BOGGS, Chief Judge; McKEAGUE, Circuit Judge; and COHN*, District
                 Judge.

AVERN COHN, District Judge. This is a criminal case. Defendant-Appellant Gary L. Slater

(“Defendant”) appeals his convictions for mail fraud under 18 U.S.C. § 1341 and conspiracy to

commit money laundering under 18 U.S.C. §§ 1956(a)(1)(B)(i) and 1956(h). Defendant raises

two issues on appeal: (1) whether the convictions must be reversed because the government

failed to introduce evidence sufficient to prove the charges beyond a reasonable doubt, and (2)

whether the district court’s denial of Defendant’s motion for a new trial must be reversed because

of newly discovered evidence. For the reasons that follow, Defendant’s convictions will be

affirmed.

       *
       The Honorable Avern Cohn, United States District Judge for the Eastern District of
Michigan, sitting by designation.
                                         I. Background

       Defendant and his business associate, Bill Johnston (“Johnston”), incorporated Carol-

Dale Contracting Company, Inc. (“Carol-Dale”), in November 1997. Carol-Dale was in the

business of clearing out equipment from abandoned mines. In October 2001, Johnston secured a

workers’ compensation insurance policy for Carol-Dale with Kentucky Employers Mutual

Insurance (“KEMI”). Johnston and Defendant allegedly misrepresented the number of

employees on Carol-Dale’s payroll to KEMI in order to reduce the premiums due on the policy.

       In December 2001, a Criminal Fraud Specialist from KEMI, Tom Weir (“Weir”), audited

Carol-Dale. Carol-Dale raised suspicion at KEMI after reporting a large number of claims

relative to its reported number of employees. Based on his investigation, Weir concluded that

Carol-Dale had grossly underreported its number of employees. In January 2002, Weir sent a

letter stating that Carol-Dale owed KEMI $1.8 million in unpaid premiums. Carol-Dale failed to

pay, and KEMI cancelled the policy in February. Following the cancellation, Defendant called

Weir, and pursuant to this conversation Weir faxed Defendant a release granting KEMI

permission to request documents from the Kentucky Division of Unemployment Insurance in

order to verify the size of Carol-Dale’s payroll. Weir received no response to this fax.

       Defendant then allegedly devised a broader scheme to defraud insurance companies out

of workers’ compensation premiums. This was done by forming two corporations with similar

sounding names, only one of which was insured. The insured corporation would account for

only a fraction of the total workforce, while the uninsured corporation would account for the

remainder. The names of the entities were similar so that mine owners would not notice the

                                                 2
difference when presented with a certificate of insurance bearing the name of the covered entity

as proof that employees of both companies were covered for workers’ compensation purposes.

       Defendant and Johnston initiated the scheme when Johnston incorporated B & G

Contracting, Inc. (“B & G Contracting”) in January 2002. B & G Contracting was an employee-

leasing agency that provided coal miners to coal mining operations on a contract hourly rate

basis. A short time later, Defendant incorporated a second company with a similar name, B & G,

Inc. (“B & G”). The corporate documents for both entities listed Defendant’s former co-worker,

Bruce Hurley (“Hurley”), as president.

       On February 4, 2002, Defendant, Johnston, and Hurley flew to Pikeville, Kentucky to

obtain insurance from KEMI for B & G Contracting. Defendant allegedly hid his identity and

posed as Hurley during meetings because KEMI suspected him of fraud and misrepresentation in

connection with the Carol-Dale policy. KEMI ultimately refused to extend coverage because it

believed that B & G Contracting was simply a continuation of business by Carol-Dale under a

new name. However, B & G Contracting was able to secure insurance with American

International Group, Inc. (“AIG”) on February 20, 2002.

       AIG renewed B & G Contracting’s policy on February 20, 2003. During an on-site audit

conducted about two months later, AIG discovered that when the employees nominally employed

by B & G were taken into account, B & G Contracting had grossly underreported the size of its

payroll. Consequently, AIG substantially increased the premiums on the B & G Contracting

policy and declined to renew the policy at the expiration of the second term.

       Johnston formed another corporation, Cumberland Gap Contracting, Inc. (“Cumberland

Gap Contracting”), in 2002; Cumberland Gap Contracting obtained workers’ compensation

                                                3
insurance from KEMI in February 2004. Defendant then formed a second company, Cumberland

Gap, Inc. (“Cumberland Gap”) on March 4, 2004. Cumberland Gap was uninsured and was used

to hide the majority of the workforce and payroll.

       The Kentucky Department of Insurance investigated all four of these corporations after

receiving a fraud referral letter from KEMI. The investigation led to searches of Johnston’s

office, Hurley’s home, and Defendant’s home. The government seized two computers from

Johnston’s office, one black (“the black computer”) and the other white (“the white computer”).

The payroll accounts for both Cumberland Gap and Cumberland Gap Contracting were fully

documented in the white computer, while the black computer contained only abbreviated

portions of the accounts used for underreporting payroll to the insurance companies. Defendant

maintains that he and his wife, Carol Slater, used only the white computer, and that only

Johnston used the black computer. Defendant says that his wife used the white computer to

manage the company’s payroll and organize paperwork.

       During its searches, the government also found numerous checks signed by Defendant

and made out to Carolyn Gambrel (“Gambrel”) or a grocery store that she owned and operated,

Gambrel’s Food Mart. These checks were drawn on the accounts of two alleged “shell

companies,” Victory Trucking and Hurley Trucking. Defendant would allegedly transfer the

profits realized as a result of the workers’ compensation scheme from the contracting companies

to the trucking companies. Defendant or Hurley would then write checks to Gambrel or her store

on behalf of the trucking companies. In exchange, Gambrel would forge an invoice for goods or

services, cash the check, and return the cash less a “handling fee” to Defendant. Defendant

                                                4
maintains that he signed these checks at Johnston’s direction and believed the checks were tax

payments or insurance premiums.

       The government also found hundreds of thousands of dollars in cash in Defendant’s

house and barn. Defendant maintains that the cash was honestly earned savings, not from any

illicit source, and that he kept the money in his house because he distrusted banks.

       On March 3, 2005, a grand jury returned a nine-count indictment against Defendant,

Carol Slater, Hurley, Johnston and Gambrel. A superseding indictment was returned on May 5,

2005. Defendant entered a not guilty plea on both indictments. Hurley, Johnston, and Gambrel

entered into plea negotiations with the government, while Defendant and Carol Slater proceeded

to a trial by jury. Following the conclusion of the proofs, the district court denied Defendant’s

motion for a directed verdict and submitted the case to the jury. The jury returned a guilty

verdict on all counts. The district court sentenced Defendant to a total term of 108 months.

Defendant timely filed a notice of appeal.

       After initiating his appeal, Defendant discovered new evidence that he contends would

likely produce an acquittal if he were granted a new trial. Specifically, Defendant says that while

incarcerated he met an inmate named Darren Michael Edward Barrett (“Barrett”), who told him

that both Hurley and Johnston admitted to giving false testimony at Defendant’s trial. Defendant

was incarcerated at the Big Sandy Federal Prison Camp in Inez, Kentucky (“Big Sandy”), while

Hurley and Johnston were sent to the Federal Prison Camp in McCreary County, Kentucky

(“McCreary”). Defendant met Barrett while at Big Sandy. Barrett had previously been

imprisoned at McCreary, and told Defendant that while there he had spoken with Johnston and

Hurley. According to Barrett, Hurley and Johnston stated that they testified falsely at

                                                 5
Defendant’s trial for the purpose of reducing their own prison sentences. Hurley has submitted

an affidavit denying Barrett’s allegations.

       Based on his conversation with Barrett, Defendant filed a Motion for a New Trial. The

trial court denied that motion in a written opinion and order. The issues of sufficiency of the

evidence and newly discovered evidence have been consolidated for appeal.

                                 II. Sufficiency of the Evidence

                                     A. Standard of Review

       This court reviews de novo the district court’s denial of Defendant’s motion for acquittal

on grounds of insufficient evidence. U.S. v. Humphrey, 279 F.3d 372, 378 (6th Cir. 2002). “The

standard for evaluating claims that a conviction is not supported by sufficient evidence presents a

very difficult hurdle for the criminal appellant.” U.S. v. Maxwell, 160 F.3d 1071, 1077 (6th Cir.

1998). “[T]he relevant question is whether, after viewing the evidence in the light most

favorable to the prosecution, any rational trier of fact could have found the essential elements of

the crime beyond a reasonable doubt.” Jackson v. Va., 443 U.S. 307, 319 (1979) (emphasis in

original). The court thus “views all evidence in the light most favorable to the prosecution.”

U.S. v. Talley, 164 F.3d 989, 996 (6th Cir. 1999). “Circumstantial evidence alone is sufficient to

sustain a conviction and such evidence need not remove every reasonable hypothesis except that

of guilt.” U.S. v. Fortson, 194 F.3d 730, 735 (6th Cir. 1999).

       In particular, “[b]ecause direct evidence of a defendant's fraudulent intent is typically not

available, specific intent to defraud may be established by circumstantial evidence and by

inferences drawn from examining the scheme itself which demonstrate that the scheme was

reasonably calculated to deceive persons of ordinary prudence and comprehension.” U.S. v.

                                                 6
Winkle, 477 F.3d 407, 413 (6th Cir. 2007) (quoting U.S. v. Yoon, 128 F.3d 515, 523-24 (7th Cir.

1997)). “[T]he question of intent is generally considered to be one of fact to be resolved by the

trier of the facts . . . and the determination thereof should not be lightly overturned.” Winkle,
477 F.3d at 413.

       With respect to the conspiracy charge, “[t]he government need not show that a defendant

participated in all aspects of the conspiracy; it need only prove that the defendant was a party to

the general conspiratorial agreement.” U.S. v. Avery, 128 F.3d 966, 971 (6th Cir. 1997).

Moreover, “a defendant's knowledge of and participation in a conspiracy may be inferred from

his conduct and established by circumstantial evidence.” U.S. v. Martinez, 430 F.3d 317, 330

(6th Cir. 2005).

                                          B. Mail Fraud

       Defendant first argues that his mail fraud conviction was not supported by sufficient

evidence because the government failed to establish that he even knew about the insurance fraud

scheme, let alone that he devised or intended to devise the scheme. Rather, Defendant argues

that the evidence tends to show that he turned over his business affairs to Johnston, played only a

small role at Carol-Dale and the other companies, and remained largely unaware of the means by

which Johnston procured and paid for the workers’ compensation policies. He says that Hurley

and Johnston gave the only direct evidence that he had knowledge of the scheme and that both

Hurley and Johnston agreed to testify in exchange for a sentencing recommendation. By

Defendant’s account, the other evidence tending to suggest that he knew about the scheme was

merely circumstantial, and the government did not produce any credible evidence that he

“knowingly devised” the schemes, an essential element of the mail fraud offense.

                                                  7
        Taken in the light most favorable to the government, the record contains evidence more

than sufficient for the jury to conclude that Defendant possessed the requisite intent to defraud.

In large part, Defendant’s argument is an attack on Johnston and Hurley’s credibility. It is well-

settled, however, “that on appeal, there is no place for arguments regarding a government

witness’s lack of credibility...[i]t is for [jurors] and not for appellate courts to say that a particular

witness spoke the truth or fabricated a cock-and-bull story.” Talley, 164 F.3d at 996-97.

        Moreover, Defendant’s argument ignores the testimony of several disinterested witnesses

who suggested at trial that Defendant was knowingly involved with the mail fraud scheme. For

example, Weir, the Criminal Fraud Specialist from KEMI, testified that he had received several

altered documents misrepresenting the size of Carol-Dale’s payroll, all signed by Defendant.

Additionally, Kathy Nall (“Nall”), an agent of Elite Insurance, testified that she had a meeting

with Defendant in Pikeville, Kentucky on February 4, 2002 to discuss obtaining insurance

coverage for B & G contracting. Nall testified that during the meeting, Defendant disguised his

identity, misrepresenting himself as Hurley. Nall’s testimony raises the inference that Defendant

was attempting to deceive Nall in order to avoid suspicion, given that KEMI had already

cancelled its policy with Carol-Dale.

                          C. Conspiracy to Commit Money Laundering

        Defendant next argues that the government did not produce sufficient evidence that he

knew funds were allegedly being laundered though the shell companies and were the proceeds of

unlawful activity. He says that he signed the checks at Johnston’s direction and believed that the

payments were made in the ordinary course of lawful business.

                                                    8
       This argument also fails, as several witnesses gave testimony at trial tending to suggest

that Defendant knew that the transactions he carried out made use of funds that were proceeds of

unlawful activity. Gambrel’s testimony indicated that Defendant himself would often bring in

the fraudulent checks for her to cash. Gambrel testified that the “transactions” to which these

checks supposedly related were fabricated and that she would create false invoices to conceal the

true nature of the arrangement. Hurley and Johnston testified that Defendant knowingly

participated in the money laundering scheme. In addition, agents found false invoices hidden in

Defendant’s barn. Viewed in the light most favorable to the government, the testimony of these

witnesses provides ample evidence to support the conviction.

              III. Motion for a New Trial Based on Newly Discovered Evidence

                                        A. Legal Standard

       Pursuant to FED . R. CRIM . P. 33(a), a district judge may grant a new trial “if the interest of

justice so requires.” “The decision to grant or deny such a motion rests within the discretion of

the district court and should not be reversed absent a showing of abuse of discretion.” U.S. v.

Turner, 995 F.2d 1357, 1364 (6th Cir. 1993). In general, motions for a new trial are disfavored

and should be granted with caution. U.S. v. Seago, 930 F.2d 482, 488 (6th Cir. 1991). “No court

wishes a defendant to remain in jail if he has discovered evidence showing that he is not guilty,

but after a man has had his day in court, and has been fairly tried, there is a proper reluctance to

give him a second trial.” 3 CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE

§ 557 (3d ed. 2004).

       In order to merit a new trial based on newly discovered evidence, a defendant must

establish four elements: (1) that the evidence was discovered after the trial; (2) that the evidence

                                                  9
could not have been discovered earlier with due diligence; (3) that the evidence is material and

not merely cumulative or impeaching; and (4) that the evidence would likely produce an acquittal

if the case were retried. U.S. v. Barlow, 693 F.2d 954, 966 (6th Cir. 1982), cert. denied 461 U.S.
945 (1983).

                                           B. Analysis

       The government concedes that the first two elements of the Barlow test, that the evidence

was discovered after the trial and could not have been discovered earlier, are met because the

newly discovered evidence did not exist prior to the conclusion of the trial. Defendant argues the

evidence is material, and not merely cumulative or impeaching, because Hurley and Johnston

told Barrett that they, and not Defendant, were the sole operators of the scheme. Accordingly,

Defendant says that the evidence tends directly to exculpate him, not merely to undermine the

testimony that Hurley and Johnston gave at trial. Defendant also argues that the evidence would

likely produce an acquittal because without Johnston and Hurley’s testimony, the government

would be unable to prove that Defendant had knowledge of the fraud or money laundering.

       Defendant’s argument fails because the newly discovered evidence would be very

unlikely to produce an acquittal, and Defendant thus cannot satisfy the fourth prong of the

Barlow test. Hurley has submitted an affidavit directly refuting Barrett’s affidavit and denying

that he ever made the statements attributed to him. Moreover, there is overwhelming evidence of

Defendant’s guilt that is completely independent of Hurley and Johnston’s testimony. Weir,

Nall, and Gambrel all gave testimony suggesting that Defendant knowingly participated in the

insurance fraud and money laundering schemes. Defendant signed a false employment roster

submitted to KEMI. Investigators discovered hundreds of thousands of dollars in cash hidden in

                                                10
Defendant’s house and barn. False invoices were found in the same place as much of the cash.

The testimony of Johnston and Hurley tended to corroborate the claims against Defendant, but

their testimony was far from the only evidence of Defendant’s intent. At best, the newly

discovered evidence creates a “conflict in the evidence, but such conflicts do not amount to a

likelihood of acquittal.” Seago, 930 F.2d at 491.

                                        IV. Conclusion

       For the foregoing reasons, Defendant’s claims of error are denied, and the convictions are

AFFIRMED.

                                                11