Court Opinion

ID: 3188122
Source: CourtListenerOpinion
Date Created: 2016-03-23 17:05:18.398314+00
Date Added: 2024-06-11T14:36:01.024931
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION
                               File Name: 16a0168n.06

                                   Nos. 14-3870 and 14-3871                           FILED
                                                                                Mar 23, 2016
                                                                            DEBORAH S. HUNT, Clerk
                          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
KENNETH T. EMBRY and DEON D. LEVY,                      )
                                                                NORTHERN DISTRICT OF
                                                        )
                                                                OHIO
       Defendants-Appellants.                           )
                                                        )
                                                        )

BEFORE:        BATCHELDER, MOORE, and ROGERS, Circuit Judges.

       ALICE M. BATCHELDER, Circuit Judge. Sometime in 2007, Deon Levy decided to

move his commercial development business, Ameribuild, from Cleveland, Ohio, to Charlotte,

North Carolina. In order to fund the transition, he and a handful of others devised and executed a

mortgage fraud scheme. The scheme worked as follows. The conspirators arranged to purchase a

house in Charlotte using a home loan. In addition to paying for the house itself, the loan

agreement included $350,000 for home improvements. The escrow company wired these funds

from North Carolina to Ohio, into an account held by Wolfco, a company owned by co-

conspirator Kenneth Embry, which had provided the lender with an invoice for the work to be

done on the house. Wolfco did not do any improvements, however. Instead, it distributed the

funds to Levy, Embry, and others. Mortgage payments ceased soon after closing, and the bank

that owned the mortgage foreclosed on the home, incurring a loss of $539,348.
Nos. 14-3870 & 14-1871
United States v. Embry, et al.

         A federal grand jury indicted Embry, Levy, and Camille Harris (the home’s titular owner)

for conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering.

After a trial, a jury found Defendants guilty of all counts. All three timely appealed, and we

consolidated their cases.        However, we recently determined that Harris, who had been

representing herself on appeal, is entitled to court-appointed counsel. We therefore severed her

appeal and granted her leave to begin it anew. Today’s decision thus concerns only Embry and

Levy.

                                       I. Factual Background

         Levy’s first step in arranging the fraud was contacting a Charlotte-area real estate broker

named Somer Bey who specialized in “equity payout” deals.              The two settled on a new

construction at 1920 Smarty Jones Lane in Waxhaw, North Carolina. When discussions turned

to financing, Levy told Bey that he owed a lot of money to the IRS and that the title and

mortgage loan would need to be placed in Harris’s name. Harris, Levy said, was the president of

Ameribuild.

         Levy submitted fraudulent loan documents on Harris’s behalf, stating that Harris had a

much higher income and net worth than she in fact did. This allowed Levy and Bey to secure a

$1,162,500 loan in Harris’s name through Fairway Independent Mortgage Corporation (the

mortgage company).

         Prior to closing, Bey received an invoice from Wolfco for $340,000, purportedly for

improvement work to be done on the Smarty Jones property. Bey sent the invoice to the Gary

Wood, the property’s erstwhile owner (who was aware of the fraud), for approval before sending

it to the closing attorney.

                                                 -2-
Nos. 14-3870 & 14-1871
United States v. Embry, et al.

         The loan closing documents were signed and notarized, and they bore Harris’s name and

signature. The loan application stated (falsely) that Harris would be paying the down payment

from her checking and savings accounts; in fact these expenses were paid by an outside investor

who was not aware of the scheme.

         The investor wired a down payment of $155,089 to the escrow company, American

Home Closings, in Charlotte, North Carolina. Two days later, the escrow company made a wire

transfer of $340,000 from Charlotte, North Carolina, to an account in the name of “Wolfco dba

Kenneth T. Embry” in Woodmere, Ohio.

         Wolfco then issued a $181,000 check to “cash,” and Embry then sent a $180,000

cashier’s check to the investor. Embry’s name appeared on the cashier’s check under the

heading “remitter.” Wolfco also transferred $150,000 to Ameribuild and issued two checks for

$2,500, which Embry cashed for himself. Ameribuild then issued a check for $80,000 to Harris,

which she deposited into her personal account on January 9, 2008. Harris also signed a check

payable to Bey for $3,000.

         Levy then moved into the Smarty Jones house and lived there until the latter part of 2008.

The loan money did not go to any renovations except for $1,500 for flooring repairs. Soon

thereafter, the house entered foreclosure.       And the bank that owned the mortgage lost

$539,348.63.

                                   II. Procedural Background

         Inquiry into the scheme began in August 2008, when the Fraud Division of the Ohio

Department of Insurance came across evidence of the fraud while investigating an unrelated fire

insurance claim Harris had filed in connection with a residence she owned in Cleveland. The

state agency issued an administrative subpoena to Microsoft for the contents of Levy’s email

                                                -3-
Nos. 14-3870 & 14-1871
United States v. Embry, et al.

account on June 17, 2009. And on July 16, 2009, it issued a subpoena to Google for the contents

of Embry’s email account. Among the subpoenaed emails was a copy of the Wolfco invoice.

         A federal grand jury eventually returned an indictment charging Levy, Harris, and Embry

with Conspiracy to Commit Wire Fraud (Count I), Wire Fraud (Count II), and Conspiracy to

Commit Money Laundering (Count III). The indictment alleged that Defendants had made false

representations to Fairway, the lender, relating to the Smarty Jones property and that Defendants

had extracted funds from the loan proceeds through a fictitious invoice. The “manner and

means” sections of the indictment were based in large part on the email communications

subpoenaed by the Ohio officials.

         Embry and Levy filed a joint pretrial motion to suppress “all evidence derived from

and/or related to” the emails the government had obtained pursuant to administrative subpoenas

to Google (Embry’s account) and Microsoft (Levy’s account) and a search warrant for Levy’s

emails. The district court granted the motion.

         Two days after this ruling, and some five months before trial, the government filed a

supplemental trial brief, which sought, among other things, to get some of the excluded email

correspondence into court under the independent source exception. The brief explained that Bey,

the government’s key witness, had forwarded email correspondence from Levy and Embry to the

mortgage corporation and that this correspondence was lawfully obtained via a June 4, 2009

administrative subpoena of the mortgage company’s records.          According to the brief, this

subpoena predated the Google and Microsoft subpoenas.          No one objected on suppression

grounds.

         Three days before trial, the government filed an exhibit index, which included the Wolfco

Invoice. Defendants did not object to the list and did not object on suppression grounds during

                                                 -4-
Nos. 14-3870 & 14-1871
United States v. Embry, et al.

the trial when the invoice was admitted through the CEO of the escrow company. The jury, a

few members of which had trouble staying awake during the trial, convicted Defendants on all

counts. After trial, Defendants filed a joint Rule 29 Motion for Judgment of Acquittal and Rule

33 Motion for a New Trial. The district court denied both motions.

                                            III. Analysis

         On appeal, Embry and Levy contend that the district court erred in denying their Motion

for a Judgment of Acquittal and that it committed plain error in admitting the Wolfco invoice and

in redacting portions of the indictment. Embry also argues that the district court committed

reversible error in not dismissing the sleeping jurors, in denying his eleventh-hour request for

new counsel, and in calculating the loss amount at sentencing. Levy contends that he was denied

effective assistance of counsel. We consider each argument in turn.

                                 A. Motion for Judgment of Acquittal

         This court reviews de novo a district court’s denial of a Rule 29 motion for judgment of

acquittal based on the insufficiency of the evidence. United States v. Clay, 667 F.3d 689, 693

(6th Cir. 2012). “The Court must construe the evidence in the light most favorable to the

government, and then determine whether any rational trier of fact could have found the essential

elements of the crime beyond a reasonable doubt.” Id. Defendants “bear a very heavy burden”

in challenging the sufficiency of the evidence. Id.

         Wire Fraud. Embry contends that the government failed to prove that he committed wire

fraud because there was no evidence that he used or caused to be used an interstate wire

communication “in furtherance of the scheme.” United States v. Faulkenberry, 614 F.3d 573,

581 (6th Cir. 2010); see also 18 U.S.C § 1343. This argument is not well taken. All the

government must prove is that the defendant did some act with knowledge that the use of the

                                                 -5-
Nos. 14-3870 & 14-1871
United States v. Embry, et al.

wires would follow in the ordinary course of business or that such use, though not actually

intended, was reasonably foreseeable. United States v. Calandrella, 605 F.2d 236, 253 (6th Cir.

1979). We live in the age of electronic banking, and it was reasonably foreseeable that the wires

would be used to send money across state lines given the geographic distance between the North

Carolina lender and Embry’s Wolfco bank account in Ohio. And while Embry is correct that the

Wolfco invoice listed a North Carolina address, it is equally true that Wolfco used an Ohio bank

account. It was reasonably foreseeable that the payment would be made directly to that account,

and his argument thus fails.

         Levy contends for his part that the government never proved that he had any involvement

with the wire fraud conspiracy, noting that there is not a single instance in the record of his using

the interstate wires with intent to deprive an entity involved in this case of money or property.

He argues that nothing aside from Bey’s testimony, secured via a plea deal, ties Levy to

Ameribuild and that the government contended that he was “Director of Operations for

[Ameribuild],” without ever introducing any evidence that he in fact held such a position.

         These arguments are meritless. As mentioned, there is no requirement that the defendant

himself use the wires so long as their use was reasonably foreseeable. According to Bey, whose

credibility we may not question on appeal, Levy was in on the entire deal: he wanted to buy a

house where he “could pull the money out of the property” to use for Ameribuild. He knew

“how the deal needed to be structured” in order to do so. And it was Levy who provided the

documentation for the loan’s approval, which Harris signed. A crucial part of Levy’s scheme

was the use of the Wolfco invoice to get the funds from the lender. And while it does appear that

the government never proved that Levy was the “Director” of Ameribuild, the title is of little

importance. What matters is that, as Bey testified, the company belonged to Levy.

                                                -6-
Nos. 14-3870 & 14-1871
United States v. Embry, et al.

         Conspiracy to Commit Money Laundering. Embry and Levy have a better argument with

respect to money laundering. This is because the money laundering statute is a concealment

statute, not a spending statute. United States v. Warshak, 631 F.3d 266, 321 (6th Cir. 2010); 18

U.S.C. § 1956(a). Proving a violation requires more than showing that some transaction had a

concealing effect or “that the transaction was structured to conceal the nature of illicit funds.”

Faulkenberry, 614 F.3d at 586 (emphasis omitted). “Concealment—even deliberate

concealment—as mere facilitation of some other purpose [e.g., fraud], is not enough . . . . What

is required, rather, is that concealment be an animating purpose of the transaction.”          Id.

(emphasis omitted).

         The deception involving the “Wolfco dba Kenneth T. Embry” account thus falls short of

proving conspiracy to commit money laundering. The purpose of that deception was to conceal

from the lender that the money would be paid to those participating in the fraud rather than to

fund work on the house. It was not a ploy to disguise the nature, location, source, ownership, or

control of the proceeds—indeed, Embry’s name was on the account. See United States v.

McGahee, 257 F.3d 520, 528 (6th Cir. 2001); United States v. Blankenship, 382 F.3d 1110,

1128-31 (11th Cir. 2004) (setting up a “dba” bank account to be able to liquefy fraudulently

obtained funds is not covered by the wire fraud statute).

         The subsequent transactions disbursing the funds were not designed to conceal either.

See Faulkenberry, 614 F.3d at 586; 18 U.S.C. § 1956(a). Nor was the disbursement plan

complex enough that “a reasonable juror [could] infer that the transactions were made for the

purpose of concealment.”         Warshak, 631 F.3d at 321.     As the district court concluded at

sentencing, this scheme was not “a multi-tiered conspiracy.”

                                                -7-
Nos. 14-3870 & 14-1871
United States v. Embry, et al.

         Neither the individual transactions disbursing the fraudulently obtained funds nor the

disbursement plan as a whole was designed to conceal the nature, location, source, ownership, or

control of the funds. The convictions for conspiracy to commit money laundering hence cannot

stand.

                                     B. The Wolfco Invoice

         As mentioned above, Embry and Levy successfully moved to suppress all evidence

stemming from or related to the illegal searches of their email accounts, including the copy of the

Wolfco invoice discovered therein. At trial, the government nevertheless introduced the Wolfco

invoice through the testimony of the escrow company’s CEO.

         The core of Embry and Levy’s argument is that the invoice and related testimony were in

fact suppressed by the district court and that the government misled the district court and

Defendants about the independent source of the invoice introduced at trial. This invoice was,

according to Defendants, the fruit of a poisonous tree, discovered as a result of the illegal search

of the email accounts.

         Because there was no objection at trial, we review this evidentiary decision for plain

error. United States v. Marrero, 651 F.3d 453, 470 (6th Cir. 2011). To show plain error,

Defendants must demonstrate that the error was clear or obvious; that it affected their substantial

rights; and that it seriously affected the fairness, integrity, or public reputation of the judicial

proceedings. Id.

         Embry and Levy have failed to show any obvious error. The record reveals that the copy

of the invoice admitted at trial could have been admitted under the independent source exception

or the inevitable discovery doctrine. Bey testified that she had received a copy of the invoice

                                                -8-
Nos. 14-3870 & 14-1871
United States v. Embry, et al.

from Embry and then forwarded it to Gary Wood. It was then submitted to the closing attorney.

And a copy of the invoice eventually found its way into the possession of the escrow company.

         A subpoena of the mortgage company’s records, which was issued before the illegal

subpoenas of the email accounts, resulted in the discovery of documents identifying the escrow

agent. These documents also contained the names of Robert Mahaney, a mortgage broker who

received a kickback for helping Levy and Bey with the fraudulent loan application, and Gary

Wood, the original owner of the Smarty Jones property, who was also in on the fraud.

         It is not obvious error to think that these clues would have eventually led to the escrow

agent and, from thence, to the invoice. Moreover, the email was also discovered in the course of

a separate, parallel investigation of the Smarty Jones property. “So long as a later, lawful seizure

is genuinely independent of an earlier, tainted one . . . there is no reason why the independent

source doctrine should not apply.” Murray v. United States, 487 U.S. 533, 542 (1988).

                                 C. Redaction of the Indictment

         Felony prosecution must begin with an indictment, and a defendant can be convicted only

of crimes for which he was indicted. See United States v. Weinstock, 153 F.3d 272, 278 (6th Cir.

1998). But alterations of an indictment are problematic only when they either “modify essential

elements of the offense charged such that there is a substantial likelihood that the defendant may

have been convicted of an offense other than the one charged” or when a change “affect[s] a

substantial right of the defendant.” United States v. Kuehne, 547 F.3d 667, 683 (6th Cir. 2008).

         Defendants have not shown either. The indictment’s redacted paragraphs were simply

other factual allegations that could have triggered the jurisdictional requirement of the wire fraud

statute, i.e., that the Defendants caused an interstate wire transfer to occur. Removal of these

                                                -9-
Nos. 14-3870 & 14-1871
United States v. Embry, et al.

paragraphs did not alter the elements of the crime—it merely narrowed the indictment, which is

permissible. See United States v. Miller, 471 U.S. 130, 136 (1985).

                                        D. Sleeping Jurors

         According to the record, more than one juror fell asleep on at least four occasions: First,

during the direct examination of Michelle Minich, a government witness. Second, during the

defense’s cross-examination of FBI Agent McGovern, a government witness. Third, during

Levy’s closing argument. And fourth, during the government’s closing argument.               Embry

contends that he should get a new trial as a result. We disagree.

         Sleeping jurors obviously cannot be expected to perform their duties fairly and

impartially.     United States v. Warner, 690 F.2d 545, 555 (6th Cir. 1982).         But automatic

dismissal is not the rule, and we afford district courts considerable discretion in handling

sleeping jurors—“overturning the verdict is appropriate only if the defendant was deprived of his

Fifth Amendment due process rights or his Sixth Amendment right to an impartial jury.” United

States v. Cook, 550 F. App’x 265, 270 (6th Cir. 2014) (internal quotation marks omitted)

(unpublished).

         This is a high bar, and we cannot say that the sleeping in this case meets it. Following a

colloquy with the defense attorneys regarding whether a sleeping juror should be dismissed, the

district court declined to dismiss the sleeping jurors because Harris’s attorney did not agree to

the dismissal. Because the district court’s colloquy with counsel was not transcribed, we do not

know the content of the request from Harris’s counsel for the jurors to remain, or if remaining

defense counsel eventually agreed. Significantly, defense counsel did not raise any objections at

trial, despite the jurors falling asleep during closing arguments. See United States v. Wheaton,

517 F.3d 350, 361 (6th Cir. 2008) (“Notably, Wheaton’s attorney did not object in any way to

                                                -10-
Nos. 14-3870 & 14-1871
United States v. Embry, et al.

the district court’s treatment of the juror misconduct, which suggests that the misconduct was not

perceived to be a serious concern at the time.”). Under these circumstances, it was not an abuse

of discretion for the district court to retain the jurors, despite the troublesome level of sleeping

that appears in the record.

                     E. Embry’s Eleventh-Hour Request for Substitute Counsel

         Embry sent the district court two letters just prior to trial, explaining that he was

dissatisfied with his lawyer. When a criminal defendant asks for appointment of a new attorney,

the district court must conduct an adequate inquiry into the reasons for the defendant’s

dissatisfaction. United States v. Jennings, 945 F.2d 129, 132 (6th Cir. 1991).

         Embry contends that the district court failed to conduct an adequate inquiry and that he

should have been appointed a new attorney. We review “a district court’s decision regarding an

indigent defendant’s motion for substitute counsel under the abuse-of-discretion standard.”

United States v. Vasquez, 560 F.3d 461, 466 (6th Cir. 2009). The following factors inform our

analysis: (1) the timeliness of the motion, (2) the adequacy of the court’s inquiry, (3) the extent

of the attorney-client conflict and “whether it was so great that it resulted in a total lack of

communication preventing an adequate defense,” and “(4) the balancing of these factors with the

public’s interest in the prompt and efficient administration of justice.” Id.

         With respect to the first factor, Embry argues that he wrote as soon as he knew that his

attorney was unprepared. This seems likely enough, but it is equally true that the letters came

less than a week before trial and that “the granting of the defendant’s request would almost

certainly [have] necessitate[d] a last-minute continuance.” United States v. Whitfield, 259 F.

App’x 830, 834 (6th Cir. 2008) (unpublished) (per curiam). In such situations, we have said that

“the trial judge’s actions are entitled to extraordinary deference.” Id.

                                                -11-
Nos. 14-3870 & 14-1871
United States v. Embry, et al.

         Embry next contends that the judge did not provide an adequate on-the-record inquiry,

but rather relied on two ex parte conversations between her judicial assistant and defense

counsel. Embry points out that the on-the-record discussion regarding his request happened

immediately before the prospective jurors were brought into the courtroom, and he argues that

the way the district court handled the matter left no doubt from the start that no additional

information would change the court’s mind.

         “[T]o meet th[e] [second] requirement, the district court simply must allow a defendant

the opportunity to explain the attorney-client conflict as he perceives it.” United States v.

Marrero, 651 F.3d 453, 465 (6th Cir. 2011). While the discussion could have been more

thorough, the district court did allow Embry to speak every time he asked for permission to do so

and allowed him to describe the conflict as he saw it. The court also told Embry that he could

represent himself.

         With respect to the third factor, Embry points out that the on-the-record colloquy

centered on whether Embry’s attorney was prepared for trial, not on the state of the attorney-

client relationship. However, the transcript does show that Embry and his attorney were, in fact,

communicating.

         The fourth factor—the public’s interest in the prompt and efficient administration of

justice—weighs decidedly in the district court’s favor. Delaying the trial just days before it was

set to begin would have been costly and inconvenient, and it would have further delayed justice

in a case that had been pending since 2012 and dealt with facts from 2007–08. Moreover, this

                                              -12-
Nos. 14-3870 & 14-1871
United States v. Embry, et al.

was not the first time Embry had become dissatisfied with his attorney. 1 We therefore conclude

that the district court did not abuse its discretion in denying Embry’s request.

                                            F. Loss Calculation

         Embry argues that the district court’s loss calculation violated his Fifth and Sixth

Amendment rights. As he acknowledges, this court rejected this argument in United States v.

Smith, 749 F.3d 465, 487 (6th Cir. 2014). We are bound by Smith and therefore affirm the

district court’s loss calculation.

                                  G. Ineffective Assistance of Counsel

         Levy argues that he was denied effective assistance of counsel at trial. Federal habeas

corpus review is “the preferred mode for raising a claim of ineffective assistance of counsel.”

United States v. Ferguson, 669 F.3d 756, 762 (6th Cir. 2012). Though this court “may choose to

hear the issue on direct appeal if we find that the parties have adequately developed the record,”

we see no reason to do so here. Id.

                                               IV. Conclusion

         We find no merit in Defendants’ claim that the cumulative weight of the errors in this

case independently warrants reversal. For the reasons discussed, we reverse the district court’s

decision that the government failed to prove that Defendants were guilty of conspiracy to commit

money laundering and remand for resentencing. We affirm in all other respects.

1
 Embry’s attorney at this stage was not court appointed. Embry had originally asked for a court-appointed attorney
and received one. After he became dissatisfied with that attorney, he hired his own. This caused the court to
continue the final pretrial conference and the trial.

                                                      -13-