Court Opinion

ID: 2654058
Source: CourtListenerOpinion
Date Created: 2014-02-21 18:38:40.062664+00
Date Added: 2024-06-11T09:11:32.254176
License: Public Domain

FILED
                                                  United States Court of Appeals
                     UNITED STATES COURT OF APPEALS       Tenth Circuit

                             FOR THE TENTH CIRCUIT                       February 21, 2014

                                                                        Elisabeth A. Shumaker
                                                                            Clerk of Court
UNITED STATES OF AMERICA,

              Plaintiff - Appellee,

v.                                                           No. 13-2070
                                                   (D.C. No. 1:12-CR-01250-JAP-1)
DARYL J. HUDSON, III,                                        (D. N. Mex.)

              Defendant - Appellant.

                             ORDER AND JUDGMENT*

Before KELLY, ANDERSON, and MATHESON, Circuit Judges.

       Daryl J. Hudson appeals his convictions and the sentence imposed on seven

counts of wire fraud in violation of 18 U.S.C. § 1343. Mr. Hudson argues the district

court (1) abused its discretion in admitting other acts evidence under Fed. R. Evid.

404(b) at his jury trial; (2) erred in awarding restitution to victims not named in the

indictment; and (3) erred in failing to state its reasons for rejecting his request for a

       *
        After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
downward departure at sentencing. Exercising jurisdiction under 28 U.S.C. § 1291

and 18 U.S.C. § 3742(a), we affirm.

                  I. INDICTMENT, TRIAL, AND CONVICTION

      Because the litigation in the district court on the Rule 404(b) issue focused on

the similarity between the Government’s proposed evidence and the offense charged,

we begin with a summary of the indictment,1 which charged as follows:

      Mr. Hudson “designed and executed a scheme and artifice to defraud”

Bluenergy Solarwind, Inc. (“BSI”) and its president, Joel Goldblatt, “by falsely

representing his ready access to reliable sources of debt funding for BSI.” Aplt.

App., Vol. 1 at 18. In early 2011, Mr. Goldblatt “began actively seeking

approximately $80 million in debt funding in order to allow BSI to begin

manufacturing certain new solar wind turbines for subsequent sale.” Id. A third

party referred Mr. Goldblatt to Mr. Hudson “as someone who might be able to locate

the type of funding BSI needed.” Id. Mr. Goldblatt contacted Mr. Hudson to discuss

engaging Mr. Hudson’s company, Hampden Kent Group, LLC (“HKG”), to locate

and place the debt funding that BSI needed. Id.

      1
        The approach we take here—comparing the Rule 404(b) evidence to the
charged offense—is common in our case law. For example, in United States v.
Zamora, 222 F.3d 756, 762 (10th Cir. 2000), we explained: “This court has . . .
recognized the probative value of uncharged acts to show motive, intent, and
knowledge, whether the acts involved previous conduct or conduct subsequent to the
charged offense, as long as the uncharged acts are similar to the charged crime and
sufficiently close in time.”

                                         -2-
       Mr. Hudson provided background materials to Mr. Goldblatt, including an

HKG client brochure containing “descriptions of various structured and corporate

finance transactions supposedly undertaken by HKG between 1992 and 2010.” Id. at

19. Mr. Hudson told Mr. Goldblatt “that if BSI were to hire HKG, at that time HKG

would provide BSI with a ‘loan commitment’” and “that HKG would ‘attach to the

loan commitment, to show good faith, some treasuries on deposit with the New York

Federal Reserve Bank.’” Id.

       Mr. Hudson recommended against Mr. Goldblatt’s trying to close a loan with

the investor who owned these treasuries, indicating that he had a strong relationship

and a good closing history with another investor he would prefer to deal with. Id.

Mr. Hudson explained to Mr. Goldblatt that the loan commitment would represent a

“‘clear cut commitment’” and “that BSI could use this loan commitment to help

obtain customer orders and equity funding and that the loan commitment would be

provided ‘to assist [Mr. Goldblatt] in triggering the process.’” Id. at 20.

       Mr. Hudson provided Mr. Goldblatt with a draft Services Agreement, under

which BSI would pay HKG a retainer fee of $300,000, with half of the fee due

upfront and the remaining half due upon signing an agreement to receive the

$80 million in funding. Id. at 19-20. In exchange for this fee, “HKG agreed to ‘use

its best efforts to obtain finance in accordance with [BSI]’s financial and operational

objectives.’” Id. at 20. The Services Agreement also contained a clause requiring

the parties to arbitrate any disputes. Id.

                                             -3-
      After Mr. Hudson agreed that BSI could pay its upfront $150,000 retainer fee

in installments, BSI wired HKG a partial payment. Id. at 20-21. The parties then

executed the Services Agreement on July 21, 2011. Id. at 21. The next day,

Mr. Hudson emailed Mr. Goldblatt a copy of a document titled “Loan Commitment.”

Id. That document stated:

             We are including herewith a copy [of] our investor source’s safe
      keeping receipt from the Federal Reserve Bank of New York, verifying
      a deposit of US Treasuries in denominations of $500 million. The
      receipt term expires in 2015. We include this to make a good faith
      showing of our ability to perform.

Id.

      Mr. Hudson said he would provide the referenced document once BSI paid the

remainder of the first installment of the upfront retainer fee. Id. Later, on July 22,

after Mr. Hudson had received an additional payment from BSI, he “sent an email to

[Mr. Goldblatt] attaching a photocopy of a document entitled ‘Safekeeping Receipt’

(“SKR”),” which purported to be issued on Federal Reserve Bank of New York

letterhead. Id. The SKR appeared to represent that a valued client had U.S. Treasury

checks in denominations of $500 million on deposit with that bank, but it was “a

false and fraudulent document.” Id. at 22.

      Over the next few months, Mr. Goldblatt attempted to obtain the letters of

intent from prospective BSI customers that Mr. Hudson said were “necessary in order

to conduct an appropriate credit evaluation in anticipation of presenting the funding

request to HKG’s preferred funding source.” Id. Mr. Hudson “expressed mounting

                                          -4-
frustration” with Mr. Goldblatt’s failure to provide these letters, and Mr. Goldblatt

indicated his discomfort with the progress of the deal and Mr. Hudson’s way of

conducting business. Id. at 23.

      “Ultimately, in keeping with the design of [Mr. Hudson’s] scheme and artifice,

the business relationship between BSI and HKG deteriorated.” Id. Mr. Goldblatt

informed Mr. Hudson by phone on August 11, 2011, that BSI could no longer go

forward with HKG. Id. Mr. Goldblatt asked Mr. Hudson to return $60,000 of BSI’s

retainer fee. Id. Mr. Hudson refused that request and hung up. Id. That same day,

Mr. Goldblatt’s attorney sent Mr. Hudson a letter (1) stating that the Federal Reserve

Bank had confirmed that the SKR was a false and fraudulent document and

(2) seeking return of the full retainer fee paid by BSI. HKG did not respond to the

allegation that the SKR was fraudulent. Id. Instead, HKG’s attorney wrote a letter to

BSI’s attorney alleging BSI had breached the Services Agreement, including by

misusing the SKR. Id. The letter demanded arbitration and sought $965,000 in

damages from BSI. Id.

                                      * * * *

      The indictment charged that Mr. Hudson had committed wire fraud in

connection with seven telephone, email, or facsimile communications to

Mr. Goldblatt or BSI’s attorney that related to the Loan Commitment and/or the

SKR. A jury convicted Mr. Hudson on all seven counts of wire fraud.

                                          -5-
                                   II. DISCUSSION

                                 A. Rule 404(b) Evidence

1. Legal Background and Scope of Review

       Mr. Hudson argues that the district court abused its discretion by admitting

certain evidence under Fed. R. Evid. 404(b). That Rule provides:

       (b) Crimes, Wrongs, or Other Acts.

              (1) Prohibited Uses. Evidence of a crime, wrong, or other act is
       not admissible to prove a person’s character in order to show that on a
       particular occasion the person acted in accordance with the character.

             (2) Permitted Uses; Notice in a Criminal Case. This evidence
       may be admissible for another purpose, such as proving motive,
       opportunity, intent, preparation, plan, knowledge, identity, absence of
       mistake, or lack of accident.

District courts consider four factors in deciding whether to admit evidence under

Rule 404(b): “(1) whether the evidence is offered for a proper purpose, (2) its

relevancy, (3) that the probative value of the evidence is not substantially outweighed

by its prejudicial effect, and (4) a limiting instruction is given if the defendant so

requests.” United States v. Mares, 441 F.3d 1152, 1156 (10th Cir. 2006). See

Huddleston v. United States, 485 U.S. 681 (1988). If the uncharged acts are offered

for a permissible purpose, they are admissible “as long as [they] are similar to the

charged crime and sufficiently close in time.” Mares, 441 F.3d at 1157 (internal

quotation mark omitted). Although the other acts must be similar, they “need not be

identical.” Id.

                                           -6-
      “We review the district court’s admission of evidence under [Rule] 404(b) for

abuse of discretion.” Id. at 1156. “We will not reverse a district court’s ruling if it

falls within the bounds of permissible choice in the circumstances and is not

arbitrary, capricious or whimsical.” Id. (internal quotation marks and brackets

omitted).

2. Government’s Proffer

      Before trial, the Government served notice of its intent to introduce evidence

of similar transactions that Mr. Hudson had engaged in before and after his dealings

with Mr. Goldblatt and BSI.2 In making this proffer, the Government characterized

Mr. Hudson’s mode of doing business as an “advance fee scheme” and argued that

“the linchpin of [Mr. Hudson’s] fraud scheme was his ability to self-promote, and to

maintain and advance his image as an accomplished and reputable financier.” Aplee.

Supp. App., Vol. I at 19, 21.

      The Government’s proffered evidence consisted of testimony by four

individuals whose companies, like BSI, had signed agreements with Mr. Hudson and

paid retainer fees in return for his services in obtaining debt financing for various

business projects. The Government contended that the evidence was similar to the

charged conduct: (1) the witnesses entered into agreements with Mr. Hudson for him

to locate debt funding; (2) Mr. Hudson received substantial retainer fees in return for
      2
         The Government argued alternatively that some of this evidence was intrinsic
to the charges against Mr. Hudson. The district court, however, admitted the
evidence only under Rule 404(b).

                                          -7-
his promises to obtain such funding; (3) he failed to locate any funding;

(4) Mr. Hudson blamed the clients for the failure of the transactions; and (5) he

threatened legal action against the clients.

       The Government argued this testimony was relevant to Mr. Hudson’s intent to

defraud, his plan, and an absence of mistake or accident. More specifically, the

Government asserted this evidence would be relevant to disproving Mr. Hudson’s

anticipated defense that his interactions with Mr. Goldblatt were nothing more than a

failed business deal. Although the Government conceded that some good faith

transactions may legitimately conclude in a failure to obtain funding, the loss of a

client’s retainer fee, and the prospect of litigation, it argued that a factfinder could

conclude that the similar attributes of these five such transactions supported an

inference of fraud.

3. District Court’s Ruling

       The district court held that the proffered testimony regarding Mr. Hudson’s

other transactions was admissible under Rule 404(b). It concluded that the evidence

was offered for the proper purposes of proving Mr. Hudson’s fraudulent intent or

absence of mistake and was relevant because the other transactions occurred closely

in time and were similar to what happened between Mr. Hudson and Mr. Goldblatt.

The court also decided that the testimony’s probative value was not outweighed by

the potential for unfair prejudice because the jury could conclude, as Mr. Hudson

contended, that the evidence showed only several failed business transactions.

                                           -8-
Finally, the court instructed the jury regarding the proper, limited purpose for the

evidence.

4. Analysis

      Mr. Hudson argues the district court abused its discretion because the

uncharged acts were not sufficiently similar to the charges in the indictment. He

emphasizes that all of the wire fraud charges in this case involved the SKR, and he

maintains that, to be admissible under Rule 404(b), the uncharged acts must also have

involved an SKR. With an SKR missing from the other transactions, Mr. Hudson

contends that the evidence failed to satisfy the second Rule 404(b) factor: relevance.3

See United States v. Becker, 230 F.3d 1224, 1232-33 (10th Cir. 2000) (holding that

district court abused its discretion by admitting prior acts relating to

methamphetamine possession and trafficking to prove a common scheme of

manufacturing the drug).

      We disagree. Becker is distinguishable. We concluded there that prior acts

involving only possession and trafficking of methamphetamine were not—without

further factual development—relevant to proving the defendant’s motive or intent

regarding charges related to manufacturing that drug. Id. at 1232-33. Here, under

the wire fraud statute, the Government was required to prove that Mr. Hudson had
      3
        We note Mr. Hudson does not identify where he made this precise argument
about the SKR in the district court, and our review of the record has not found that he
did so. We nonetheless address the contention as a more specific version of the
relevancy argument he did advance. The Government does not argue this issue is
reviewable only for plain error.

                                           -9-
“devised or intend[ed] to devise any scheme or artifice to defraud, or for obtaining

money or property by means of false or fraudulent pretenses, representations, or

promises.” 18 U.S.C. § 1343; see also Aplt. App., Vol. V at 1406 (jury instruction

on elements of the charged offenses).

      The indictment alleged Mr. Hudson designed and executed a scheme and

artifice to defraud BSI and Mr. Goldblatt by falsely representing ready access to

reliable sources of debt funding for BSI. The proffered Rule 404(b) testimony to

prove Mr. Hudson’s intent to defraud related to other transactions in which he

allegedly pursued a similar scheme. Each witness’s proposed testimony concerned

Mr. Hudson’s alleged false or fraudulent pretenses, representations, or promises in

connection with one of these other transactions.4 The absence of an SKR in the other

transactions does not diminish the relevance of the evidence to prove Mr. Hudson’s

intent to defraud.

      The facts of this case are closer to decisions in which we affirmed the

admission of other acts evidence under Rule 404(b). See, e.g., United States v.

Grissom, 44 F.3d 1507, 1509, 1513 (10th Cir. 1995) (in prosecution for false

statements to a bank, district court did not abuse its discretion by admitting evidence

of defendant’s unrelated falsification of union payroll records to show defendant’s

      4
        Mr. Hudson attempted to controvert this evidence, but its relevance does not
depend on its being uncontroverted. Mr. Hudson does not argue that the jury could
not reasonably conclude that the other acts occurred and that Mr. Hudson was the
actor. See United States v. Reddeck, 22 F.3d 1504, 1509 (10th Cir. 1994).

                                         - 10 -
intent, knowledge, and lack of mistake); United States v. Bolt, 776 F.2d 1463, 1464,

1470-71 (10th Cir. 1985) (in prosecution for material false statements to a bank and

mail fraud, district court did not abuse its discretion by admitting evidence of the

general fraudulent nature of defendant’s business as relevant to defendant’s identity,

existence of a scheme to defraud, intent, and absence of mistake); United States v.

Bonnett, 877 F.2d 1450, 1452, 1460-61 (10th Cir. 1989) (in bank fraud prosecution

involving one bank, district court did not abuse its discretion by admitting evidence

of defendant’s accounts with insufficient funds at a different bank, which tended to

show intent, motive, and knowledge with respect to defendant’s fraudulent scheme);

United States v. Parnell, 581 F.2d 1374, 1378 (10th Cir. 1978) (in prosecution related

to scheme involving forged cashier’s checks, district court did not abuse its discretion

in admitting evidence of defendant’s previous check scheme which tended to show

defendant’s knowledge and absence of mistake).

      We cannot say the district court’s decision to admit the Rule 404(b) evidence

fell outside “the bounds of permissible choice in the circumstances,” or was

“arbitrary, capricious or whimsical.” Mares, 441 F.3d at 1156 (internal quotation

marks omitted). Accordingly, Mr. Hudson has not shown that the district court

abused its discretion.

                            B. Scope of Restitution Order

      Mr. Hudson next argues the district court misconstrued the Mandatory Victim

Restitution Act (“MVRA”) by ordering him to make restitution to victims other than

                                         - 11 -
Mr. Goldblatt and BSI, namely the victims of the other transactions described in the

Rule 404(b) testimony. The MVRA directs the district court to order the defendant to

“make restitution to the victim of the offense.” 18 U.S.C. § 3663A(a)(1).

Mr. Hudson emphasizes that the Rule 404(b) witnesses were not named as victims in

the indictment. But “victim” in the MVRA is defined more broadly as

      a person directly and proximately harmed as a result of the commission
      of an offense for which restitution may be ordered including, in the case
      of an offense that involves as an element a scheme . . ., any person
      directly harmed by the defendant’s criminal conduct in the course of the
      scheme.

Id. § 3663A(a)(2) (emphasis added). Although Mr. Hudson acknowledges that the

wire fraud statute includes a scheme to defraud as one of its elements, he contends

that the Rule 404(b) witnesses are not “victims” under the MVRA because none of

their losses occurred as a result of his conduct in the course of the particular scheme

alleged in the indictment.

      Mr. Hudson concedes he did not raise this objection in the district court, and

we therefore review his claim only for plain error. See United States v. Shengyang

Zhou, 717 F.3d 1139, 1152 (10th Cir. 2013). “To establish plain legal error,

Mr. [Hudson] must show [1] an error, [2] clear and obvious under current law, [3]

that affects substantial rights.” Id. at 1154. He must identify a “particularly

egregious or obvious and substantial legal error, which our failure to consider would

result in a miscarriage of justice.” Id. (internal quotation marks omitted).

                                         - 12 -
      Because Mr. Hudson does not show an error that is plain, he fails to satisfy the

second element. He quotes this court as stating that the MVRA “did not change the

general rule that restitution may only be ordered for losses caused by the offense of

conviction.” Aplt. Opening Br. at 30 (quoting United States v. Gordon, 480 F.3d
1205, 1211 (10th Cir. 2007)). But the very next sentence in Gordon, which

Mr. Hudson ignores, clarifies that “[i]n only two cases does the MVRA authorize

restitution to be paid to someone other than the victim . . . of the offense of

conviction. The first is where the criminal conduct involves a ‘scheme.’” 480 F.3d

at 1211 (quoting § 3663A(a)(2)). Moreover, neither Gordon nor any case

Mr. Hudson cites from other circuits supports his contention regarding the scope of

the term “scheme” as used in the MVRA. In each of these cases, the offense of

conviction did not involve as an element any “scheme.” See id.; United States v.

Davenport, 445 F.3d 366, 373-74 (4th Cir. 2006), abrogated on other grounds by

Irizarry v. United States, 553 U.S. 708 (2008); United States v. Frith, 461 F.3d 914,

920 (7th Cir. 2006); United States v. Newsome, 322 F.3d 328, 341-42 (4th Cir. 2003).

And at least one other court has rejected Mr. Hudson’s contention. See United States

v. Edwards, 728 F.3d 1286, 1293 (11th Cir. 2013) (holding that “when the crime of

conviction includes a scheme . . . as an element of the offense, the court may order

restitution for acts of related conduct for which the defendant was not convicted”

(internal quotation marks omitted)). Mr. Hudson has not identified an error that “is

clear or obvious under current law.” Shengyang Zhou, 717 F.3d at 1156 (internal

                                          - 13 -
quotation marks omitted). We therefore affirm the district court’s restitution order.

See id.

    C. District Court’s Alleged Failure to Explain Denial of Downward Departure

       In his final contention, Mr. Hudson alleges the district court failed to explain

why it denied his request for a downward departure at sentencing. He had sought a

sentence below his applicable range under the advisory Sentencing Guidelines to care

for his son, who has special health needs. At the sentencing hearing, Mr. Hudson

noted his objection to the Presentence Report’s (“PSR”) conclusion that a downward

departure was unwarranted.

       The district court calculated the applicable Guidelines range, finding a lower

offense level than that recommended in the PSR. The court then concluded, without

objection from Mr. Hudson, that the applicable Guidelines range was 70 to 87

months of imprisonment. After stating that a sentence of 70 months—the bottom of

the Guidelines range—was appropriate, the court discussed each of the sentencing

factors in 18 U.S.C. § 3553(a).

       Before the hearing concluded, the Government asked the district court to

confirm that it had found no basis for a departure or a variance. The court responded,

“That is correct. I have chose[n] not to depart, obviously, and I chose not to vary

downward from the guideline range.” Aplt. App., Vol. V at 1667. Mr. Hudson is

correct that, in explaining the bases for his sentence, the district court did not state

any reason for denying his request for a downward departure.

                                          - 14 -
       The Government argues that we lack jurisdiction to consider Mr. Hudson’s

claim. It maintains that we may review a sentencing court’s discretionary decision

not to depart downward from the Guidelines range only if the court unambiguously

stated that it lacked any discretion to do so. See United States v. Sierra-Castillo,

405 F.3d 932, 936 (10th Cir. 2005).

       But Mr. Hudson is not asking this court to review the district court’s

discretionary decision. Rather, he contends the district court failed to follow the

proper procedure in imposing his sentence. See United States v. Martinez, 512 F.3d
1268, 1275 (10th Cir. 2008). In the sentencing context, procedural error includes the

district court’s “fail[ure] to adequately explain the chosen sentence.” Id.; see also

18 U.S.C. § 3553(c) (requiring court to “state in open court the reasons for its

imposition of the particular sentence”). The Government cites no case holding that

we lack jurisdiction to review Mr. Hudson’s procedural reasonableness claim.

       The Government is correct, however, that Mr. Hudson did not raise this claim

in the district court. After the court stated that it had chosen not to depart,

Mr. Hudson failed to object that the court’s explanation of his sentence was not

adequate. We therefore review his claim only for plain error. See United States v.

Romero, 491 F.3d 1173, 1175, 1178 (10th Cir. 2007). Mr. Hudson fails to show any

error, much less plain error.

       If the district court imposes a sentence within the Guidelines range, it need not

provide more than “a general statement noting the appropriate guideline range and

                                          - 15 -
how it was calculated.” United States v. Cereceres-Zavala, 499 F.3d 1211, 1217

(10th Cir. 2007) (quotations omitted). The defendant in Cereceres-Zavala raised the

same contention that Mr. Hudson makes here. See id. at 1213. We held that

“[a]lthough the sentencing court provided no direct response at all to [the

defendant’s] requests for departure, its citation of the PSR’s calculation method and

recitation of the suggested imprisonment range amply fulfilled § 3553(c)’s

requirement.” Id. at 1217. We concluded that “the court must have believed there

was not much more to say.” Id. (internal quotation marks omitted). Similarly, in

United States v. Jarrillo-Luna, we rejected the defendant’s contention “that a district

court must address each and every argument for leniency that it rejects in arriving at

a reasonable sentence.” 478 F.3d 1226, 1229 (10th Cir. 2007), overruled on other

grounds by United States v. Lopez-Macias, 661 F.3d 485 (10th Cir. 2011). Rather, “a

district court’s duty to explain why it chose the given sentence does not also require

it to explain why it decided against a different sentence.” Id. at 1230.

       Mr. Hudson does not show that the district court erred by “fail[ing] to go

further and explain why it found [his] . . . arguments for leniency unpersuasive.” Id.

Moreover, even if he had shown plain error, he makes no attempt to argue that the

court’s failure to state its reasons for denying a downward departure affected his

substantial rights. See Romero, 491 F.3d at 1179. His procedural reasonableness

claim therefore fails.

                                         - 16 -
                            III. CONCLUSION

The judgment of the district court is affirmed.

                                           ENTERED FOR THE COURT,

                                           Scott M. Matheson, Jr.
                                           Circuit Judge

                                  - 17 -