Court Opinion

ID: 2997661
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:38:05.201016+00
Date Added: 2024-06-11T15:03:05.469140
License: Public Domain

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

No. 03-3345
UNITED STATES OF AMERICA,
                                           Plaintiff-Appellee,
                              v.

DAVID HAMPTON TEDDER,
                                       Defendant-Appellant.

                        ____________
           Appeal from the United States District Court
              for the Western District of Wisconsin.
      No. 02-CR-105-C-01—Barbara B. Crabb, Chief Judge.
                        ____________
    ARGUED FEBRUARY 23, 2005—DECIDED APRIL 6, 2005
                    ____________

 Before CUDAHY, EASTERBROOK, and WILLIAMS, Circuit
Judges.
  EASTERBROOK, Circuit Judge. For using his law license to
help offshore gambling businesses conceal their identities
and income, David Tedder has been convicted of conspiring
to defraud the United States, see 18 U.S.C. §371, by assisting
a wagering enterprise that violated 18 U.S.C. §1084, plus
three counts of money laundering, see 18 U.S.C. §1956(h),
§1957. No longer a member of the bar, Tedder is serving a
sentence of 60 months’ imprisonment and has been fined
more than $1 million; the district court also ordered almost
$2.8 million to be forfeited. (Tedder resigned from the
California bar to forestall resolution of disciplinary charges.
2                                                 No. 03-3345

He has been enjoined from practicing law in Florida, which
he had done there despite his lack of a license. Florida Bar
v. Tedder, 790 So. 2d 1110 (2001) (table).)
  Section 1084(a) is a simple statute, providing: “Whoever
being engaged in the business of betting or wagering know-
ingly uses a wire communication facility for the transmission
in interstate or foreign commerce of bets or wagers or in-
formation assisting in the placing of bets or wagers on any
sporting event or contest, or for the transmission of a wire
communication which entitles the recipient to receive money
or credit as a result of bets or wagers, or for information
assisting in the placing of bets or wagers,” commits a crime.
Tedder created and operated a business called Clear Pay to
move money between gamblers in the U.S. and a Curacao
business called Gold Medal Sports, which Tedder’s clients
operated as a sports book. The Attorney General of Florida
had warned Western Union not to wire funds to Gold Medal
Sports; Clear Pay offered a solution by preventing Western
Union (and other intermediaries) from learning the funds’
ultimate destination. Tedder also created Bahamian shell
corporations, purportedly engaged in software development,
to help his clients hide their involvement, and wired the
gambling business’s profits to nominee accounts of which he
was the custodian, plus other foreign investments with a
patina of legitimacy.
  Tedder told his clients that the disguise would be im-
penetrable. He was wrong. The clients (Duane Pede and
Jeff D’Ambrosia) were caught, pleaded guilty, and testified
against Tedder—who contended that he had been so mistaken
that he had not appreciated the legal problem. Although he
was a lawyer, knew about §1084, and even knew about crim-
inal prosecutions of similar ventures (after which he whipped
up still more layers in a futile attempt to shield his clients),
Tedder told the jury that he thought that Gold Medal Sports
and Clear Pay were upstanding businesses operated in com-
pliance with all laws. This was essentially the tax protester’s
No. 03-3345                                                  3

defense that he just didn’t think that the law, however clear,
applied to his endeavors. See Cheek v. United States, 498
U.S. 192 (1991). The district judge gave appropriate instruc-
tions to the jury, which did not believe Tedder’s professions
of ignorance and convicted him. Tedder maintained that he
drew his understanding of federal law from observing con-
duct—Gold Medal Sports was not the only offshore gambling
enterprise—as if the existence of bank robberies shows that
it is lawful to steal money at gunpoint. Testimony about
this curious approach to legal “research” did more to
demonstrate Tedder’s mendacity than to make out a
defense. His multifarious endeavors to hide the source and
disposition of Gold Medal Sports’ funds revealed his true
beliefs.
  Tedder does not contest the sufficiency of the evidence.
Instead he contends that the district judge erred in rulings
about evidence. His lead argument is that the judge should
have allowed him to present additional witnesses who would
have testified that they do not think that §1084 prohibits
the sort of transactions in which Tedder engaged.
(Section 1084 is not itself a specific-intent crime, but only a
person who knows that the money has an unlawful source
commits the offense of money laundering.) Tedder did not
propose to present an advice-of-counsel defense based on
what other persons told him. Had he done that, he would
have been required to waive the attorney-client privilege
and allow the prosecutor access to everything he said to his
advisers and what they told him in return. Instead he
wanted to show only that his (asserted) belief was widely
shared by lay persons. How non-lawyers’ misunderstand-
ings could have reflected on a lawyer’s legal analysis puz-
zled the district judge—it was at best weak circumstantial
evidence about how the statute was understood. So the judge
exercised her authority under Fed. R. Evid. 403 to curtail
tangential or cumulative evidence and said that she would
limit to two (or one plus Tedder himself, should he testify,
4                                                No. 03-3345

as he did) the number of such witnesses. Tedder replied that
two witnesses on this subject would suffice, thus waiving
the argument he now advances.
   By testifying, Tedder put his veracity at issue. To address
that subject, the prosecutor called three witnesses who tes-
tified that Tedder is not a truth-teller. Under Fed. R. Evid.
608(a), this evidence had to take “the form of opinion or rep-
utation” rather than specific instances of deceit. One witness,
a lawyer, testified that Tedder’s reputation for truthfulness
in the legal community was “poor.” Tedder’s brothers were
the other two witnesses; both testified that they had low
opinions of his honesty. He contends that the family had
been estranged for so long that the brothers’ views were out
of date, but honesty is more like climate than like weather:
it is a stable attribute even though subject to daily varia-
bility. Rule 608(a) does not contain a time limit, so the fact
that Tedder had not spoken with his brothers for a decade
did not compel the judge to block them from testifying. See
United States v. Pacione, 950 F.2d 1348, 1354 (7th Cir. 1991).
The long break in family relations was a subject for cross-
examination and argument by counsel. As for the fact that
the questions and answers used the word “honesty” rather
than “truthfulness” (the language of Rule 608): lay jurors
would be unlikely to perceive a difference, and neither did
Tedder’s lawyer, who failed to object. Using the vernacular
was not plain error. See United States v. Manske, 186 F.3d
770, 775-76 (7th Cir. 1999).
  The district judge told the jury to consider character evi-
dence “in the same way as all the other evidence in the case.”
That came from instruction 3.06 in the circuit’s pattern jury
instructions, captioned “Character and Reputation of
Defendant.” Tedder says that the judge instead should have
used instruction 3.12, captioned “Character of a Witness.”
Tedder was both a witness and the defendant, so both ver-
sions could be apt. But the two instructions are materially
identical. Instruction 3.12 would have told the jury to “con-
No. 03-3345                                                 5

sider this evidence in deciding what weight you will give to
Tedder’s testimony.” Both 3.06 and 3.12 are uninformative;
their only use is in implying no special rules govern char-
acter and reputation evidence. See United States v. Burke,
781 F.2d 1234, 1238-42 (7th Cir. 1985). The jury got that
message, and there was no other to convey, so the two in-
structions were equally good (or equally inconsequential).
  Tedder proposed to call a reputation witness of his own on
rebuttal. The district judge said no, because the only witness
Tedder tendered had been in the courtroom during the trial,
and the judge had entered an order forbidding testimony by
anyone who had listened to other witnesses. See
Fed. R. Evid. 615. Tedder now says that the judge should
have disregarded that order, but she did not abuse her dis-
cretion in sticking to it. Cf. Wardius v. Oregon, 412 U.S. 470
(1973) (enforcement of alibi-notice rule is compatible with
due process even when it leads to preclusion of main
defense evidence); Taylor v. Illinois, 484 U.S 400 (1988). If
Tedder wanted this witness available for rebuttal, he should
have kept him out of the courtroom. Or counsel could have
called someone else—if there was anyone else who would
testify under oath that Tedder had a good reputation for
truthfulness.
   We turn to sentencing and start with the fine. Although
the Guidelines’ fine table prescribes a maximum of $100,000
for someone with Tedder’s offense level, there is an exception
when the statute authorizes a fine exceeding $250,000. See
U.S.S.G. §5E1.2(c)(4). Money laundering in violation of §1957
is such a statute, as the Sentencing Commission recognized.
See U.S.S.G. §5E1.2 Application Note 5. Section 1957(b)(2)
authorizes a fine “of not more than twice the amount of the
criminally derived property involved in the transaction.”
This governs whether the offense is money laundering or
conspiracy to commit money laundering, for the conspiracy
statute provides: “Any person who conspires to commit any
offense defined in this section or section 1957 shall be sub-
6                                                No. 03-3345

ject to the same penalties as those prescribed for the offense
the commission of which was the object of the conspiracy.”
18 U.S.C. §1956(h). One of the counts on which Tedder has
been convicted entailed conspiring to launder $280,070 in
proceeds, and another entailed the substantive offense of
laundering $250,000. Doubling these produces a statutory
maximum high enough to authorize the fine, without need-
ing to consider the $250,000 maximum fines available on
the other counts.
   Tedder submits that adding the caps from the two counts
is a form of double counting, but we do not see why. He does
not contend that the counts are multiplicitous or that cumu-
lative punishment is inappropriate under Blockburger v.
United States, 284 U.S. 299 (1932). Conspiracy and the com-
pleted offense are separate crimes. That all money launder-
ing counts were grouped under §3D1.1 for the purpose of
determining Tedder’s offense level (and thus his imprison-
ment) is irrelevant. Although the fine table normally links
the fine to the offense level, §5E1.2(c)(4) breaks that linkage
whenever a statute authorizes a fine exceeding $250,000.
See United States v. Ming Hong, 242 F.3d 528, 533 (4th Cir.
2001). The grouping rules therefore do not constrain
Tedder’s fine. Both the statutes and the guidelines autho-
rized the judge to proceed as she did.
  The jury determined that Tedder had received funds that
are subject to forfeiture under 18 U.S.C. §982, and it liqui-
dated the forfeitable proceeds at about $7.3 million. Later
the district judge concluded that errors in the instructions
had led the jury to miscalculate, and she reduced the for-
feiture to roughly $2.8 million. About $1.7 million of this
comes from funds held by Challenge Realty, one of the vessels
that Tedder had created to hold the venture’s profits, and
the rest stands as a personal money judgment against
Tedder to be satisfied out of assets that he had purchased
with the tainted proceeds. See United States v. Ginsburg,
773 F.2d 798 (7th Cir. 1985) (en banc) (discussing tracing
No. 03-3345                                                 7

and substituted assets in the law of forfeiture). Tedder in-
sists that the alteration of the jury’s award deprived him of
his right to a jury trial, but the sixth amendment does not
apply to forfeitures. See Libretti v. United States, 516 U.S.
29, 49 (1995); United States v. Vera, 278 F.3d 672 (7th Cir.
2002). (There is no statutory maximum forfeiture, so
Apprendi v. New Jersey, 530 U.S. 466 (2000), and its suc-
cessors, including United States v. Booker, 125 S. Ct. 738
(2005), do not alter this conclusion. See United States v.
Swanson, 394 F.3d 520, 526 (7th Cir. 2005); United States
v. Messino, 382 F.3d 704, 713 (7th Cir. 2004).)
  Although Fed. R. Crim. P. 32.2 offers the defendant a jury
trial, this provision (unlike the sixth amendment) is limited
to the nexus between the funds and the crime; Rule 32.2 does
not entitle the accused to a jury’s decision on the amount of
the forfeiture. Even if it did, the rule would not foreclose
what amounts to summary judgment or remittitur; as those
procedures are compatible with the seventh amendment’s
jury-trial right in civil cases, see Fidelity & Deposit Co. v.
United States, 187 U.S. 315, 319-21 (1902); Arkansas Valley
Land & Cattle Co. v. Mann, 130 U.S. 69 (1889), they must
be compatible with a jury-trial right that rests on a rule of
procedure alone. Thus the judge has the power to reduce
the jury’s excessive award without offering Tedder a new
trial—but the final award still must find support in the
preponderance of the evidence.
  According to Tedder the forfeiture is untenable because
he is jointly and severally liable with Pede and D’Ambrosia,
who agreed to forfeit more than $3 million as part of their
own criminal punishment. Credit that against what Tedder
owes and the balance is zero. The district court thought
otherwise because the forfeiture ordered against Pede and
D’Ambrosia rests on the Racketeer Influenced and Corrupt
Organizations Act rather than on the money laundering stat-
utes. That’s not a sufficient reason, if Pede and D’Ambrosia
already have coughed up the full profits of the venture. For-
8                                                No. 03-3345

feiture reaches proceeds themselves and any traceable
substitute assets. 18 U.S.C. §853(p)(2), §982(b)(1). It differs
in this respect from a fine. If the United States already has
all of the boodle, having collected it from Pede and
D’Ambrosia, then the funds in Tedder’s hands (or Colonial
Realty’s accounts) cannot also be traceable proceeds.
   But if Pede and D’Ambrosia have surrendered all of the
venture’s profits, as Tedder insists, what does the
$1.7 million in the Colonial Realty account represent? Both
the jury and the district judge concluded that it is gambling
proceeds that Tedder had squirreled away, and he does not
now argue that this finding is inadequately supported. And
if Pede and D’Ambrosia have disgorged all of the venture’s
profits, how could Tedder himself hold $1.1 million that, the
judge found, is traceable to gambling profits? The district
judge’s concrete findings establish that the $2.8 million for-
feited in this prosecution is distinct from the assets that
Pede and D’Ambrosia have surrendered. The judge rejected
the prosecutor’s argument that funds passed from Pede or
D’Ambrosia to Tedder could be forfeited twice (this was the
flaw in the jury’s award); the $2.8 million represents only
proceeds that came to rest with Tedder or one of the entities
he controls. There is no reason to disturb the district judge’s
disposition of the forfeiture question.
  The sentence of 60 months’ imprisonment is near the high
end of a range (51 to 63 months) that the Guidelines
prescribe for someone with offense level 24 and criminal
history category I, where the district judge placed Tedder.
Three of the offense levels are contested. The district judge
added two under U.S.S.G. §2S1.1(b)(2)(B) because Tedder
had been convicted under §1956, which forbids conspiracy
to commit money laundering. This is one level more than
§2S1.1(b)(2)(A) prescribes for someone convicted under §1957,
the substantive laundering offense. Tedder contends that he
should have been treated as a substantive offender under
No. 03-3345                                                 9

§2S1.1(b)(2)(A). And if he prevails on that issue two more
levels must be deducted. Guideline 2S1.1(b)(3) adds two
levels if the laundering was sophisticated (as the district
judge found) and the increase under subsection (b)(2)(B) also
has been applied. Knock out the extra level from subsection
(b)(2)(B), and two levels from subsection (b)(3) go as well.
Then Tedder’s offense level would be 21 and the guideline
range would be 37 to 46 months’ imprisonment.
  Avoiding the application of subsection (b)(2)(B) seems hard
to do, because Tedder has been convicted of conspiracy to
commit money laundering, and subsection (b)(2)(B) there-
fore applies according to its terms. But did the Sentencing
Commission really prescribe a two-level increase for all who
conspire to launder criminal proceeds? Application Note 3(C)
to §2S1.1 reads: “Non-Applicability of Enhancement.—
Subsection (b)(2)(B) shall not apply if the defendant was
convicted of a conspiracy under 18 U.S.C. §1956(h) and the
sole object of that conspiracy was to commit an offense set
forth in 18 U.S.C. §1957.” That describes Tedder’s situation
precisely: he has been convicted under §1956(h), and the
sole object of that conspiracy was the substantive offense
specified in §1957.
  Declining to apply Application Note 3(C), the district judge
deemed it limited to cases in which the base offense level is
unrelated to any other crime. How the district judge reached
this conclusion requires a bit of background.
   Guideline 2S1.1(a) specifies the base offense level. Here
it is:
    (1) The offense level for the underlying offense from
        which the laundered funds were derived, if (A)
        the defendant committed the underlying offense
        (or would be accountable for the underlying
        offense under subsection (a)(1)(A) of §1B1.3
        (Relevant Conduct)); and (B) the offense level
        for that offense can be determined; or
10                                                No. 03-3345

     (2) 8 plus the number of offense levels from the
         table in §2B1.1 (Theft, Property Destruction,
         and Fraud) corresponding to the value of the
         laundered funds, otherwise.
Application Notes 2 and 3 correspond to subsections (a)(1)
and (a)(2). To provide context, we reproduce them in full:
     2. Application of Subsection (a)(1).—
     (A) Multiple Underlying Offenses.—In cases in which
         subsection (a)(1) applies and there is more than
         one underlying offense, the offense level for the
         underlying offense is to be determined under the
         procedures set forth in Application Note 3 of
         the Commentary to §1B1.5 (Interpretation of
         References to Other Offense Guidelines).
     (B) Defendants Accountable for Underlying Of-
         fense.—In order for subsection (a)(1) to apply,
         the defendant must have committed the under-
         lying offense or be accountable for the underlying
         offense under §1B1.3(a)(1)(A). The fact that the
         defendant was involved in laundering criminally
         derived funds after the commission of the un-
         derlying offense, without additional involvement
         in the underlying offense, does not establish that
         the defendant committed, aided, abetted, coun-
         seled, commanded, induced, procured, or will-
         fully caused the underlying offense.
     (C) A p p l i c a t i o n of  Chapter         Three
         Adjustments.—Notwithstanding §1B1.5(c), in
         cases in which subsection (a)(1) applies, applica-
         tion of any Chapter Three adjustment shall be
         determined based on the offense covered by this
         guideline (i.e., the laundering of criminally de-
         rived funds) and not on the underlying offense
         from which the laundered funds were derived.
No. 03-3345                                                 11

   3. Application of Subsection (a)(2).—
   (A) In General.—Subsection (a)(2) applies to any
       case in which (i) the defendant did not commit
       the underlying offense; or (ii) the defendant com-
       mitted the underlying offense (or would be ac-
       countable for the underlying offense under
       §1B1.3(a)(1)(A)), but the offense level for the
       underlying offense is impossible or impractica-
       ble to determine.
   (B) Commingled Funds.—In a case in which a trans-
       action, financial transaction, monetary transac-
       tion, transportation, transfer, or transmission
       results in the commingling of legitimately
       derived funds with criminally derived funds,
       the value of the laundered funds, for purposes
       of subsection (a)(2), is the amount of the crimi-
       nally derived funds, not the total amount of the
       commingled funds, if the defendant provides
       sufficient information to determine the amount
       of criminally derived funds without unduly com-
       plicating or prolonging the sentencing process.
       If the amount of the criminally derived funds is
       difficult or impracticable to determine, the
       value of the laundered funds, for purposes of
       subsection (a)(2), is the total amount of the
       commingled funds.
   (C) Non-Applicability       of    Enhancement.—
       Subsection (b)(2)(B) shall not apply if the defen-
       dant was convicted of a conspiracy under 18
       U.S.C. §1956(h) and the sole object of that
       conspiracy was to commit an offense set forth in
       18 U.S.C. §1957.
The district judge concluded that because Application
Note 3(C) is under the caption “Application of Subsection
(a)(2)” it governs only when the base offense level derives
from that subsection. Tedder’s funds came from a gambling
12                                               No. 03-3345

offense, so subsection (a)(1) furnished the base offense level
even though, according to the indictment, the sole object of
the §1956(h) conspiracy was a violation of §1957. That
meant, the district court concluded, that Application Note
3(C) dropped out of the picture, because subsection (a)(2)
had not been used to generate the base offense level.
  The problem is that the substance of Application
Note 3(C)—the rule that the two-level enhancement under
subsection (b)(2)(B) does not apply if the “sole object of [the
charged] conspiracy” is money laundering—includes some
prosecutions that lead to the use of subsection (a)(1) as well
as all prosecutions in which resort to the fallback subsection
(a)(2) is required. It is hard to imagine why application of
the rule in Note 3(C) should turn on which subdivision of
subsection (a) was used to derive the base offense level: the
United States offers no reason in its appellate brief, and the
Sentencing Commission was silent on the subject. The other
five sub-parts of Application Notes 2 and 3 explicitly refer to
subsection (a)(1) or (a)(2); Note 3(C) alone does not, and its
text suggests a more general application. It is hard to resist
the feeling that someone hit the tab key and produced an
indent (and hence a subsection (C)) when a new Application
Note under its own heading would have been called for.
  Our job is to interpret and apply the enacted rules rather
than to improve on them. But interpretation covers only the
rules’ text. Titles, headings, and captions may help disam-
biguate adopted texts, but they are not themselves rules of
law. See, e.g., INS v. St. Cyr, 533 U.S. 289, 308-09 (2001);
Pennsylvania Department of Corrections v. Yeskey, 524 U.S.
206, 212 (1998). The text of Application Note 3(C) is
unambiguous and covers Tedder’s situation; consideration
of its heading not only would not help us to understand the
language but also would defeat its evident purport. We read
Application Note 3(C) to say that the Sentencing Commis-
sion has decided not to use whatever leeway it possesses to
prescribe different penalties for money laundering and
No. 03-3345                                              13

money-laundering conspiracies, but instead wants courts to
impose the same punishment for these two offenses. (We
say “whatever” leeway advisedly. Section 1956(h) provides
that money-laundering conspirators are “subject to” the same
sentence as those who commit the substantive offense, and
our reading of the Note 3(C) means that we need not decide
whether “subject to” just incorporates a maximum penalty
from elsewhere or instead means that conspirators must
receive the same sentence as those who complete the crime.
Cf. United States v. Haehle, 227 F.3d 857, 862 (7th Cir.
2000); United States v. Monem, 104 F.3d 905, 907-08 (7th
Cir. 1997).) Throughout the Sentencing Guidelines inchoate
offenses either are treated identically to the corresponding
substantive crimes, or are treated as less serious. See
U.S.S.G. §2X1.1. To repeat, the prosecutor does not contend
that the Sentencing Commission made a specific decision to
depart from that norm for §1956(h), or that it would have
had any reason to do so. So Application Note 3(C) applies,
which leads to an offense level of 21 rather than 24 for
Tedder.
  Whether this conclusion will benefit Tedder in the end is
a question for the district judge. Booker provides district
judges with additional discretion, so on remand the judge
might reimpose the 60-month sentence if she thinks it the
most appropriate response to Tedder’s crimes and risks of
recidivism; appellate review after Booker is for reasonable-
ness. But our holding makes the range of 37 to 46 months’
imprisonment available without any need to justify depar-
ture from the Guidelines.
  The judgment is affirmed except with respect to the term
of imprisonment. That aspect of the judgment is vacated,
and the case is remanded with instructions to resentence
Tedder in light of Booker and this opinion.
14                                       No. 03-3345

A true Copy:
      Teste:

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

               USCA-02-C-0072—4-6-05