Court Opinion

ID: 3042131
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:07:59.017409+00
Date Added: 2024-06-11T12:23:53.570948
License: Public Domain

United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
___________

No. 06-2584
___________

United States of America,               *
                                        *
             Appellee,                  *
                                        *
      v.                                *
                                        *
William D. Pierce,                      *
                                        *
             Appellant.                 *

___________
                                            Appeals from the United States
No. 06-2585                                 District Court for the
___________                                 District of Minnesota.

United States of America,               *
                                        *
             Appellee,                  *
                                        *
      v.                                *
                                        *
Shirley Best Pierce,                    *
                                        *
             Appellant.                 *

                                    _________

                            Submitted: January 12, 2007
                                Filed: March 8, 2007
                                    _________
Before WOLLMAN and MELLOY, Circuit Judges, and NANGLE,1 District
Judge.
                         ___________

NANGLE, District Judge.

       After a jury trial, Defendant-Appellants William Pierce and Shirley Pierce,
husband and wife, were convicted of one count of conspiracy against the United
States, in violation of 18 U.S.C. § 371; three counts of filing false tax returns, in
violation of 26 U.S.C. § 7206(1); four counts of mail fraud, in violation of 18 U.S.C.
§ 1341; and, five counts of wire fraud, in violation of 18 U.S.C. § 1343. The district
court2 sentenced Shirley Pierce to a thirty-month term of imprisonment, to be followed
by three years of supervised release, and sentenced William Pierce to a thirty-seven
month term of imprisonment, to be followed by three years of supervised release. The
court further ordered Appellants to pay $489,239.65 in restitution to the State of
Minnesota.

       Appellants jointly appeal their convictions and the amount of the restitution
order, raising three points of error. Appellants allege the court erred in: (1) instructing
the jury that it “should,” rather than “may,” find each defendant vicariously liable for
the substantive crimes of his/her co-conspirator, if certain circumstances were proven,
under Pinkerton v. United States, 328 U.S. 640 (1946); (2) denying the Appellants’
request for a special verdict form; and (3) ordering Appellants to pay $489,239.65 in
restitution. Appellants urge this Court to remand the case for a new trial and a new
restitution hearing. We affirm.

      1
        The Honorable John F. Nangle, United States District Judge for the Eastern
District of Missouri, sitting by designation.
      2
      The Honorable Michael J. Davis, United States District Judge for the District
of Minnesota.
                                            -2-
      I. BACKGROUND

       The convictions at issue in this appeal arise out of the Pierces’ management of
a not-for-profit charter school, Right Step Academy, which William Pierce established
in June 1995 by entering into a charter agreement with St. Paul Public Schools.3
William Pierce was the executive officer of Right Step Academy, and Shirley Pierce
served on the Board of Directors. Pursuant to the charter agreement, William Pierce
was to operate the school in accordance with Minnesota state charter law; as officers
and directors, the Pierces were subject to fiduciary duties. Minn. Stat. Ann. §§
317A.251, 317A.361(2006). Right Step Academy was funded by the state and federal
governments, and was subject to the same financial audits, audit procedures, and audit
requirements as a public school district.

       In their operation of Right Step Academy, the Pierces engaged in a number of
self-dealing activities, which defrauded the state of Minnesota, as well as the federal
government. For over four years, the Pierces diverted funds from Right Step
Academy, either directly or indirectly through sham invoices for services allegedly
provided by Right Group.4 Furthermore, the Pierces failed to include the diverted
funds as income in their joint tax returns, and falsely characterized personal expenses
as business expenses.

     In addition to the fraudulent transactions conducted between Right Step
Academy and Right Group, and the falsehoods and omissions in their tax preparation,

      3
       St. Paul Public Schools is a public school district with authority under state law
to sponsor charter schools.
      4
        William and Shirley Pierce jointly owned this entity. Payments made to Right
Group were not fully disclosed to the Board of Directors of Right Step Academy. The
Pierces also failed to inform the Board that William was a co-owner of Right Group
and, therefore, operating under a conflict of interest.
                                           -3-
the Pierces committed numerous other acts which comprised the heart of the
conspiracy charged in the indictment. For instance, they spent school funds on
personal items such as car and credit card payments. They also failed to properly
operate the school in accordance with the charter agreement, as revealed by an audit
of the school performed by St. Paul Public Schools in early 2000. The audit found that
the school had many issues with regard to its operation. These issues included a lack
of textbooks, educational materials and curriculum, the failure to provide safe
transportation, the maintenance of irreconcilable financial records, and the
accumulation of debt. As a result of the delinquencies exposed by the audit, in August
2000, St. Paul Public Schools refused to renew Right Step Academy’s charter, and
Right Step Academy ceased operations.

       The grand jury issued an indictment charging the Pierces with a number of
counts arising out of their scheme to divert money from Right Step Academy for their
own use and benefit, and their failure to report this additional income on their federal
tax returns. The Pierces pled not guilty to each charge, and the case went to trial.

       Before the case was submitted to the jury, the parties jointly submitted proposed
jury instructions. The Pierces unsuccessfully objected to the government’s proposed
Pinkerton instruction on co-conspirator vicarious liability, Jury Instruction No. 9. The
Pierces also requested that a special verdict form be submitted for the conspiracy
charge, which would require the jury to specify which object offense(s) the Pierces
conspired to commit. However, the district court denied the request and instead gave
a specific unanimity instruction.

       The jury convicted both defendants of all counts. The district court sentenced
Shirley Pierce to thirty months in prison and three years of supervised release, and
William Pierce to thirty-seven months in prison and three years of supervised release.
The court also ordered the Pierces to jointly and severally make restitution to the State
of Minnesota Department of Education (“DOE”) in the amount of $489,239.65.

                                           -4-
       II. DISCUSSION

       A. Pinkerton Instruction
       Appellants allege that the trial court committed reversible error in its instructions
to the jury regarding the vicarious liability of co-conspirators under Pinkerton v.
United States, 328 U.S. 640 (1946). We review jury instructions for abuse of
discretion, and “[i]n so doing, we do not consider portions of a jury instruction in
isolation, but rather consider the instructions as a whole to determine if they fairly and
adequately reflect the law applicable to the case.” United States v. Turner, 189 F.3d
712, 721 (8th Cir. 1999).

       The Pierces were charged with conspiring to commit offenses against the United
States or defraud the United States in violation of 18 U.S.C. § 371.5 They were also
charged in counts two through thirteen with the substantive offenses of filing false tax
returns, mail fraud, and wire fraud. In addition to instructing the jury with respect to
each substantive offense charged against each defendant individually, the court
delivered a Pinkerton instruction which provided:

       A defendant who has entered into a criminal conspiracy is responsible for
       offenses committed by fellow conspirators if the defendant was a member
       of the conspiracy when the offense was committed and if the offense was
       committed in furtherance of and as a foreseeable consequence of the

       5
        18 U.S.C. § 371 states in relevant part:

       If two or more persons conspire either to commit any offense against the
       United States, or any agency thereof in any manner or for any purpose,
       and one or more of such persons do any act to effect the object of the
       conspiracy, each shall be fined under this title or imprisoned not more
       than five years, or both.

                                            -5-
      conspiracy. Therefore, if you find a defendant guilty of the conspiracy
      charged in Count 1 and if you find beyond a reasonable doubt that while
      the defendant was a member of the conspiracy, a fellow conspirator
      committed an offense charged in Counts 2 through 13 in furtherance of
      and as a foreseeable consequence of that conspiracy, then you should find
      the defendant guilty of that offense as well.

      Jury Instructions, Instruction No. 9. Appellants assert that the court’s use of the
word “should,” rather than “may,” in the last sentence of the above-quoted language
was prejudicial error requiring reversal of their convictions. Specifically, Appellants
argue that the instruction invaded the province of the jury and misstated the relevant
law. Appellants further assert that, but for the erroneous Pinkerton instruction, both
Pierces would not have been found guilty of each substantive offense. We disagree.

       The seminal case establishing the co-conspirator vicarious liability doctrine at
issue in this appeal is Pinkerton v. United States, 328 U.S. 640 (1946). In Pinkerton,
the Supreme Court held that the overt act of one member of a conspiracy is
attributable to all other members of the conspiracy. Id. at 646. This Court has held
that Pinkerton co-conspirator liability is applicable where the government proves
beyond a reasonable doubt the existence of a conspiracy, that the substantive offense
was committed in furtherance of the conspiracy, and that the substantive offense was
reasonably foreseeable as a natural “outgrowth of the conspiracy.” United States v.
Navarrete-Barron, 192 F.3d 786, 792-793 (8th Cir. 1999).

       Appellants argue that the pattern jury instructions of the Fifth, Ninth, Tenth and
Eleventh Circuits, which use permissive language and instruct the jury that it “may”
convict a defendant for the substantive acts of his/her coconspirator if the Pinkerton
factors are proven, in contrast to the mandatory instruction given in this case, correctly
apply the Pinkerton doctrine. While each of these Circuits has in fact approved of
such permissive language, as has this Court, see e.g., United States v. DeLuna, 763
F.2d 897, 918 (8th Cir. 1985) (overruled on other grounds), each has also approved

                                           -6-
instructions containing mandatory language similar to that used by the district court
in this case. For instance, in United States v. Basey, 816 F.2d 980 (5th Cir. 1987), the
Fifth Circuit cited with approval language instructing the jury that if “they were
satisfied beyond a reasonable doubt that a conspiracy existed and that a defendant was
one of the members of it, then that defendant assumed the responsibility for the acts
and statements of all other members made in furtherance of the conspiracy.” Id. at
998 (citation omitted); see also United States v. Thomas, 348 F.3d 78, 84 (5th Cir.
2003) (finding that the charge correctly stated the law and court committed no error
where instruction used mandatory language).

       Similarly, the Ninth, Tenth, and Eleventh Circuits have each either approved
of a mandatory Pinkerton charge or interpreted Pinkerton as requiring a jury to find
a co-conspirator vicariously liable when the Pinkerton factors are met. United States
v. Kato, 878 F.2d 267, 270-71 (9th Cir. 1989) (holding that the mandatory Pinkerton
charge was not erroneous); United States v. Willis, 102 F.3d 1078, 1083 (10th Cir.
1996) (stating that under Pinkerton, “the co-conspirator has criminal responsibility
unless” the substantive offense committed by a co-conspirator fell outside the scope
of the conspiracy or was not a reasonably foreseeable consequence of the conspiracy);
United States v. Broadwell, 870 F.2d 594, 602, n.18 (11th Cir. 1989) (characterizing
Pinkerton as holding “that each member of a conspiracy is criminally liable for all
reasonably foreseeable crimes committed during the course and in furtherance of the
conspiracy.”) (emphasis added).

      Therefore, while the pattern instructions of other Circuits may indicate a
preference for permissive language in those Circuits,6 the law of the Circuits does not,
as argued by Appellants, establish precedent standing for the proposition that

      6
       We note that the Seventh Circuit’s Pinkerton pattern jury instruction employs
the mandatory language “should” rather than “may.” Fed. Crim. Jury Instr. 7th Cir.
5.10 (1999).

                                          -7-
mandatory Pinkerton instructions are erroneous.7 Rather, the instructions and cases
illustrate that both mandatory and discretionary Pinkerton instructions are fair
statements of the law, so long as each element of the Pinkerton doctrine is included
in the instruction. Furthermore, this Court has affirmed a lower court’s decision
where the court’s Pinkerton instructions contained both permissive and mandatory
language. United States v. Hayes, 391 F.3d 958, 963 (8th Cir. 2004).8

       We find that the instructions issued by the district court in this case, which
incorporated the key elements of Pinkerton liability,9 correctly and adequately stated

      7
        Appellants also cite to United States v. Blackmon, 839 F.2d 900 (2d Cir. 1988)
as support for their proposition that mandatory Pinkerton instructions are erroneous.
In Blackmon, the Second Circuit stated that it “seem[ed]” the discretionary instruction
was a correct statement of the law. Id. at 910. However, the court also noted the
existing “lack of clarity in the cases as to the mandatory/discretionary dichotomy,”
and did not explicitly hold that a mandatory instruction was erroneous. Id. at 910,
n.12. Rather, the court found that “it was clearly prejudicial error to [first] give a
discretionary Pinkerton instruction at the close of the trial, upon the basis of which
defense counsel made their summations, and then switch to a mandatory charge in
response to an inquiry by the jury during its deliberations.” Id. at 910. Such facts and
resulting prejudice are not present in this case, and Appellants’ interpretation of and
reliance upon Blackmon is misplaced.
      8
        We recognize that in Hayes we were not deciding the Pinkerton issue presently
before this Court. However, in Hayes we approved of the district court’s Pinkerton
instruction to the jury, which stated in part that “the jury . . . may consider acts
knowingly done . . . by a defendant’s co-conspirators . . .[A] person who knowingly,
voluntarily and intentionally joins an existing conspiracy is responsible for all of the
conduct of the co-conspirators from the beginning of the conspiracy.” Hayes, 391
F.3d at 963 (emphasis added).
      9
        The court instructed the jury that “[a] defendant who has entered into a
criminal conspiracy is responsible for offenses committed by fellow conspirators if
the defendant was a member of the conspiracy when the offense was committed and
if the offense was committed in furtherance of and as a foreseeable consequence of
the conspiracy.”
                                          -8-
the relevant applicable law, and were given within the sound discretion of the trial
court. In any event, considering the totality and thoroughness of the instructions given
to the jury, the use of the word “should” instead of “may” therein, would, at most,
amount to harmless error.

      B. Special Verdict Form

       Appellants contend the district court erred when it declined to give the jury a
special verdict form for count one, the multiple-object conspiracy charge. We review
a district court’s decision to deny a request for a special verdict form under an abuse
of discretion standard. United States v. Lamoreaux, 422 F.3d 750, 756 (8th Cir.
2005).10 “As a general rule, courts avoid using special verdict forms because of their
potential for confusing a jury.” United States v. Williams, 902 F.2d 675, 678 (8th Cir.
1990).

       At trial, the Pierces requested that a special verdict form be submitted for count
one, which would require the jury to specify which object offense(s) the jurors
unanimously agreed the Pierces conspired to commit. The court denied the request
and, instead, gave a specific unanimity instruction as follows:

      The indictment charges a conspiracy to commit three separate
      crimes or offenses. It is not necessary for the Government to
      prove a conspiracy to commit all of those offenses. It would be
      sufficient if the Government proves, beyond a reasonable doubt,
      a conspiracy to commit one of those offenses; but, in that event,
      in order to return a verdict of guilty, you must unanimously agree
      upon which of the three offenses was the subject of the
      conspiracy. If you cannot agree in that manner, you must find the
      defendant not guilty.

      10
         Upon review of the record, we find that because Shirley Pierce failed to object
to the use of a general verdict form for count one, we review this issue for “plain error
resulting in a miscarriage of justice” with respect to Shirley Pierce. United States v.
Manzer, 69 F.3d 222, 229 (8th Cir. 1995).
                                           -9-
         Jury Instructions, Instruction No. 13. The Pierces contend that the court’s
failure to employ a special verdict form, in conjunction with the alleged erroneous
Pinkerton instruction, allowed the jury to convict both Pierces of each substantive
charge, via Pinkerton vicarious liability, without a unanimous finding of guilt with
respect to each object of the conspiracy. The Pierces argue that this error is
prejudicial because Pinkerton liability only applies to the substantive acts committed
in furtherance of the object(s) of the conspiracy for which the jury found the Pierces
guilty.11

         Appellants’ contention is without merit. First, Appellants misstate the
proposition for which United States v. Walker, 97 F.3d 253 (8th Cir. 1996), stands,
arguing that we favorably noted a court’s use of a special verdict form when
instructing the jury on a multiple-object conspiracy count. While it is true that the
lower court in Walker gave both a unanimity instruction as well as a special verdict
form, nothing in Walker suggests that a special verdict form is required or favored.
Id. at 255.

      In the instant case, the court cured any risks inherent in count one by instructing
the jury that they must be unanimous on at least one object of the conspiracy in order
to find the defendants guilty of count one. See United States v. Rabinowitz, 56 F.3d
932, 933 (8th Cir. 1995). “We assume, as we must, that the jury followed these
instructions.” United States v. Nattier, 127 F.3d 655, 658 (8th Cir. 1997) (citation
omitted).

      Second, as discussed above, the Pinkerton instruction given in this case was not
erroneous. Appellants’ claim that a special verdict form was required in count one
is based on an underlying contention that Pinkerton liability only applies to the

      11
        We note that Appellants cite no law in support of their contention that
Pinkerton vicarious liability applies only to the substantive offenses related to the
object offense that the jury found them guilty of conspiring to commit.
                                          -10-
substantive acts in furtherance of the objects of the conspiracy that formed the basis
of the conspiracy convictions. Conspiracy defendants are not entitled to limit their
potential Pinkerton vicarious liability to only those substantive offenses they believe
are directly related to the object offense underlying the conspiracy conviction. A
conspiracy conviction triggers potential Pinkerton liability, which encompasses all
reasonably foreseeable acts committed in furtherance of the conspiracy. United States
v. Pinkerton, 328 U.S. 640 (1946). Here, the jury convicted Appellants of entering
into an unlawful agreement to defraud the United States and commit offenses against
the United States in violation of 18 U.S.C. § 371. Each of the three sets of object
offenses—fraudulent tax returns, mail fraud and wire fraud—further the general
agreement and are multiple facets of one conspiracy.12 Consequently, the Pinkerton
instruction was applicable to each substantive offense because these acts, counts two
through thirteen, were committed in furtherance of the single conspiracy.

         Even assuming that Appellants’ contention has merit, any conceivable error
resulting from the refusal to use a special verdict form is harmless. Accordingly, we
find that the district court did not abuse its discretion or commit plain error in denying
Appellants’ request for a special verdict form.

      12
         We disagree with Appellants’ assertion that the tax fraud object was “very
distinct” from the mail and wire fraud objects. The tax returns were fraudulent because
they concealed and mischaracterized the income acquired by means of mail and wire
fraud. We find that the acts of tax, mail and wire fraud were part of a larger
conspiracy to defraud the Government by misappropriating funds from Right Step
Academy for the Pierces’ own personal use. See 16 American Jurisprudence § 11
(2d.) (explaining that “[t]he principal considerations in determining the number of
conspiracies proven are the existence of a common goal, the nature of the scheme, and
the overlapping of the participants in various dealings . . . Where there is one overall
agreement among the various parties to perform different functions in order to carry
out the objectives of the conspiracy, the agreement constitutes a single conspiracy
even though every coconspirator does not take part in every conspiracy transaction.”).
                                           -11-
           C. Restitution

         On appeal, the Pierces do not contest the district court’s decision to order
restitution. Rather, Appellants’ argument centers around the amount of restitution
ordered and the evidentiary basis of the award. The district court found that the State
of Minnesota was a victim of the Pierces’ fraud, and, pursuant to 18 U.S.C. §
3663A(a)(1),13 ordered the Pierces to pay $489,239.65 in restitution. Appellants
argue that the district court erred in calculating the amount of loss the DOE suffered.
 We review the district court’s decision to order restitution for an abuse of discretion.
United States v. French, 46 F.3d 710, 715 (8th Cir. 1995). The district court’s factual
determinations underlying an order for restitution are reviewed for clear error. United
States v. Oslund, 453 F.3d 1048, 1062 (8th Cir. 2006). The burden is on the
government to prove the amount of restitution based on a preponderance of the
evidence. Id.14 To satisfy the preponderance of the evidence standard “simply requires
the trier of fact to believe that the existence of a fact is more probable than its
nonexistence.” In re Winship, 397 U.S. 358, 371(1970) (citation omitted).

         Prior to sentencing, based on the DOE’s Victim Impact Statement, the
probation office prepared a presentence report delineating the amounts claimed for
restitution.15 The Pierces objected to the claim for restitution made by the DOE.

      13
         Section 3663A(a)(1) requires that a court order restitution when a defendant
has been convicted of an offense against property, including an offense committed by
fraud or deceit. 18 U.S.C. §§ 3663A(a)(1), (c)(1)(A)(ii).

      14
        We have determined that the evidentiary standard in restitution cases is
unchanged by United States v. Booker, 543 U.S. 220 (2005). United States v. Miller,
419 F.3d 791, 792 (8th Cir. 2005).

      15
       According to the Victim Impact Statement, the DOE paid state and federal
funding aid to Right Step Academy for the purpose of educating students.
                                           -12-
Thereafter, the court held an evidentiary hearing to assess the amount of restitution to
be imposed.

        At the hearing, Audrey Bomstad of the DOE’s Program Finance Division
detailed how the DOE arrived at its figures, and testified that the State suffered a loss
of $489,239.65. Ms. Bomstad testified that at the end of each fiscal year, the DOE
conducts a reconciliation process, which compares monies distributed to a school with
the school’s actual expenditure of those funds. The school is responsible for
submitting its financial information, including its revenues, expenditures, and fund
balances to the DOE to facilitate the reconciliation process. Based on the
reconciliation process, the DOE determines whether it overpaid or underpaid the
school, and corrects funding as necessary. If a school fails to submit the required
audit reports or financial records documenting the expenditure of certain funds, the
DOE will deem those funds to be an overpayment. This policy is due to the fact that
without proper financial data the DOE cannot verify whether the DOE funds were
spent for valid expenditures.

         In this case, Right Step Academy failed to maintain accurate financial records,
and failed to submit audit reports as required. Therefore, information was unavailable
to determine whether the expenditures of certain funds were legitimate or fraudulent,
and those funds were included as overpayments in the DOE’s calculation.
Furthermore, Right Step Academy mistakenly received funds it was not entitled to,
and failed to return the funds to the State.

        Appellants contend that Ms.Bomstad based her calculations upon Right Step
Academy’s lack of documentation, rather than the DOE’s actual loss. Appellants
argue that, although, Right Step Academy was unable to supply the DOE with audited
proof that the funds were put to legitimate uses, the funds were properly used.
Curiously, at the evidentiary hearing Appellants did not put forth any evidence

                                          -13-
detailing how Right Step Academy appropriately spent funding it received from the
State of Minnesota.16

         This Circuit has held that “[t]he district court has wide discretion in ordering
restitution.” United States v. Ross, 210 F.3d 916, 924 (8th Cir. 2000); United States
v. Manzer, 69 F.3d 222, 229 (8th Cir. 1995). In Manzer, we upheld a $2.7 million
restitution award based on the evidence and analysis that supported calculation of
amount of loss for sentencing purposes. Manzer, 69 F.3d at 230. Referring to
U.S.S.G. § 2F1.1, we stated that “[t]he district court’s calculation of the amount of
loss, however need not be precise . . .The court need only make a reasonable estimate
of the range of loss, given the available information.” Id. at 228 (citing U.S.S.G §
2F1.1, comment. (n.8)).

         In this case, the difficulty in calculating a precise amount of loss is attributable
to the lack of sufficient financial records documenting the manner in which Right Step
Academy utilized the funds granted to the school by the DOE. The St. Paul Public
School’s audit revealed that Right Step Academy was delinquent in submitting audited
financial statements and maintained irreconcilable financial records. In response to
the auditors’ request for complete financial records, Shirley Pierce directed employees
to prepare false and fraudulent documents to justify certain payments. Furthermore,
the facts, as found by the district court, indicate that Right Step Academy received
most of its funding from the State of Minnesota, and the Pierces fraudulently used
these funds for their personal benefit.

       16
         We acknowledge that it was not the Pierces’ burden to submit rebuttal
evidence at the evidentiary hearing, however we note that the Pierces relied solely on
the testimony solicited through cross-examination of Ms. Bomstad to rebut the DOE’s
claim for restitution.
                                            -14-
         Therefore, given the available information and the district court’s wide
discretion in ordering restitution, we hold that the district court did not err in ordering
defendants to pay restitution in the amount of $489,239.65.

      III. Conclusion

        Accordingly, we affirm the judgment of the district court.
                     ______________________________

                                           -15-