Court Opinion

ID: 3021307
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:24:32.49518+00
Date Added: 2024-06-11T11:47:27.772062
License: Public Domain

United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT

                                   ___________

                                   No. 97-4274
                                   ___________

United States of America,               *
                                        *
             Appellee,                  *
                                        *     Appeal from the United States
      v.                                *     District Court for the
                                        *     District of Nebraska.
Martin D. Perry,                        *
                                        *
             Appellant.                 *
                                   ___________

                               Submitted: April 14, 1998

                                   Filed: August 17, 1998
                                   ___________

Before WOLLMAN, BEAM, and MORRIS SHEPPARD ARNOLD, Circuit Judges.
                           ___________

WOLLMAN, Circuit Judge.

      Martin D. Perry appeals from his conviction in district court1 for conspiracy to
commit mail fraud and wire fraud in violation of 18 U.S.C. §§ 371, 1341, and 1343.
We affirm.

      1
       The Honorable William G. Cambridge, Chief Judge, United States District
Court for the District of Nebraska.
                                            I.

      Perry, a resident of Virginia, was the chief executive officer of Malachi
Marketing Group (Malachi), a multi-level marketing program headquartered in Virginia
Beach, Virginia. Malachi’s president was Gordon Whitten, a Nebraska resident.
William Fritz, also a Nebraska resident, promoted programs on behalf of Malachi. In
the spring of 1990, Perry and Fritz began discussing the possibility of developing a
bank that would benefit Malachi’s representatives. As the plan evolved, their
discussions resulted in a scheme that, as the familiar caveat says, would appear too
good to be true. Ultimately, the caveat proved correct.

        The three men began telling Malachi’s prospective sales representatives that the
bank would enable them to retire large mortgage loans at less than face value. In the
succeeding weeks, Fritz began to tell Whitten that the bank had in fact been
established. Whitten later learned that the bank was located on the Sac Fox Indian
Reservation near Cushing, Oklahoma. Meanwhile, during a number of seminars, Perry,
Fritz, and Whitten enticed prospective members with claims that Malachi members who
purchased silver coins could have their coins shipped to a bonded warehouse on
reservation land and afterwards use the silver as collateral to obtain credit at the bank.
An umbrella trust called the Precious Metals Cooperative Trust (the trust) was
supposed to contract with the bank to facilitate these transactions. Members of the
trust who purchased family estate trusts and deposited a qualifying number of silver
coins into the bank were eligible for “debt restructuring.”

      The men claimed that debt restructuring enabled trust members to obtain loans
from the bank and use those funds to pay off their existing mortgage debt. The
borrowers would then purportedly pay off their loans for an amount much less than face
value. Some members were informed, for instance, that they could pay a $100,000
loan off in seven years with total repayments, including principal and interest, of
approximately $42,000.

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       Fritz concluded that the bank’s initial capitalization would require approximately
$250,000. He devised a plan to raise the money by which “charter members” would
lend $25,000 to the trust in exchange for even more advantageous debt restructuring.
This plan was later modified to enable groups of five members to put up $5,000 each
to become charter members. Prospective charter members were led to believe that the
trust would repay these loans within one year and that they would be entitled to pay off
their mortgage debt at approximately 22 percent of face value.

        Between July and late November of 1990, Perry and his associates persuaded
78 persons to lend the trust a total of approximately $470,000. Although they told
members that the bank would be operational as early as September of 1990, the men
later claimed that many problems were delaying the commencement of operations. In
April of 1991, a newsletter was sent to members that stated that debt restructuring was
about to commence and that charter members would soon be reaping the benefits of
their loans.

       Inevitably, the house of cards collapsed. No debt restructuring was ever
undertaken. Only one of the charter members was repaid. Investigators later
determined that the bank had never existed and that authorities on the Sac Fox
Reservation had never entered any agreements with the trust. Most of the loan funds
were evidently deposited into a Nebraska account held by Fritz and later transferred by
the trust to Perry’s control in Virginia in the guise of loans to Malachi. Evidence
suggested that Perry and Malachi received approximately $344,000 from these
transfers.

      On December 13, 1995, Perry and Fritz were indicted for conspiracy to commit
mail and wire fraud.2 Because of Fritz’s failing health, the charges against him were

      2
      Whitten was neither charged in the conspiracy nor did he enter into a plea
agreement with the government. The government apparently made this decision after

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severed from those against Perry, and the case against Fritz has been continued
indefinitely. Perry was eventually tried and convicted. He was sentenced to a thirty-
month prison term and ordered to pay restitution in the amount of $446,725.

                                           II.

        On appeal, Perry argues that he was the target of selective prosecution and that
the district court erroneously denied him an evidentiary hearing on the matter. We
review the court’s decision for clear error. See United States v. Bell, 86 F.3d 820, 823
(8th Cir. 1996). To establish a prima facie case claim of selective prosecution, Perry
must demonstrate that others similarly situated to him were not prosecuted and that the
decision to enforce the law against him was motivated by discriminatory purpose. See
United States v. Armstrong, 517 U.S. 456, 465-66 (1996); Bell, 86 F.3d at 823. To be
entitled to discovery on his claim, Perry must present some evidence that tends to show
the existence of both elements. See Armstrong, 517 U.S. at 468-69. “The
justifications for a rigorous standard for the elements of a selective prosecution claim
thus require a correspondingly rigorous standard for discovery in aid of such claim.”
Id. at 468.

        Perry, who is black, argues that the government’s failure to indict Whitten and
its failure to proceed with Fritz’s prosecution, both of whom are white, were adequate
evidence to warrant an evidentiary hearing. We disagree. The government acted well
within its discretion in crediting Whitten’s claims that he was an innocent pawn in
Perry and Fritz’s scheme. See id. at 464. Fritz himself was indicted, and only his ill
health prevents his trial from going forward. We reject Perry’s unsupported allegation
that Fritz’s illness is feigned. In light of Perry’s inadequate showing of discriminatory
effect, coupled with his inability to produce any evidence of discriminatory purpose,

concluding that Whitten, who maintained the naive belief that debt restructuring would
work, was an unwitting facilitator to the scheme.

                                          -4-
we conclude that the district court did not commit clear error in rejecting Perry’s claim
of selective prosecution.

        On October 12, 1993, in a civil action brought by the Securities and Exchange
Commission (SEC), Perry, Fritz, and Whitten were found to be in violation of federal
securities laws. The default judgment enjoined the defendants from further violations
and held the men jointly and severally liable for the disgorgement of all profits gained
from sales or offers to sell interests in the trust. The judgment, including illegal profits
and prejudgment interest, totaled $347,117.06. Contending that the order was punitive,
Perry argues that his conviction in the present case was a violation of the Double
Jeopardy Clause of the Fifth Amendment. To resolve this contention, we must first
consider “whether the legislature, ‘in establishing the penalizing mechanism, indicated
either expressly or impliedly a preference for one label or the other.’” Hudson v. United
States, 118 S. Ct. 488, 493 (1997) (quoting United States v. Ward, 448 U.S. 242, 248
(1980)). If it is determined that the legislature has indicated an intention to establish
a civil sanction, the question then becomes whether the “statutory scheme was so
punitive either in purpose or effect,” as to “transfor[m] what was clearly intended as
a civil remedy into a criminal penalty.” Hudson v. United States, 118 S. Ct. at 493
(citations omitted); see Rex Trailer Co. v. United States, 350 U.S. 148, 154 (1956).

     In Securities & Exch. Comm’n v. Palmisano, 135 F.3d 860 (2d. Cir. 1998), the
Second Circuit was faced with a similar double jeopardy challenge to an SEC
disgorgement order. Applying the Hudson test, the Palmisano court held that the
disgorgement remedy was not a criminal punishment and thus did not implicate the
Double Jeopardy Clause. Concluding that Congress intended disgorgement to be a
civil remedy, the court observed that “[t]he disgorgement remedy, which has long been
upheld as within the general equity powers granted to the district court . . . has not been
considered a criminal sanction.” Id. at 865-66 (citations omitted). The court then
considered whether the punitive purpose or effect of disgorgement was sufficient to
override Congress’s intent. In holding that it did not, the court noted that: (1) the

                                            -5-
payment of monetary sums has traditionally been considered a civil sanction; (2)
monetary sanctions do not implicate an “affirmative disability or restraint”; and (3)
disgorgement serves several nonpunitive goals. Id. (quoting Hudson, 118 S. Ct. at
496).

      We find the Second Circuit’s analysis persuasive. We join it and the several
other circuits that have held that the SEC disgorgement remedies are not criminal
punishments. See id. at 866; United States v. Gartner, 93 F.3d 633, 635 (9th Cir.
1996); Securities & Exch. Comm’n v. Bilzerian, 29 F.3d 689, 696 (D.C. Cir. 1994);
United States v. Rogers, 960 F.2d 1501, 1507(10th Cir. 1992). Thus, we conclude that
Perry’s conviction in this action does not violate the Double Jeopardy Clause.

        Perry contends that the district court thus erred in ordering him to pay restitution
in the amount of $466,725. District courts are authorized to order the defendant to
make restitution to “any victim of such offense.” 18 U.S.C. § 3663(a)(1). “Amount
of loss is a factual determination that we review only for clear error.” United States v.
French, 46 F.3d 710, 715 (8th Cir. 1995). The government carries the burden to prove
the amount of loss. See id. at 716. The district court was presented with ample
evidence to support the restitution order. Whitten testified that as much as $470,000
was raised from charter members. Douglas Czepa, a United States Postal Inspector,
testified that as much as $462,000 had been funneled into accounts controlled by Fritz,
one of Perry’s co-conspirators. The district court was also authorized to base its loss
calculations on Perry’s presentence investigation report. The report included a detailed
list of the victims and their losses totaling $471,725. After subtracting $25,000 from
this total to reflect the repayment that had been made to one victim, the district court
set restitution in the amount of $446,725. We find no error in the court’s calculations.

      We reject Perry’s argument that he was entitled to a transfer of venue to the
Eastern District of Virginia pursuant to Rule 21(b) of the Federal Rules of Criminal
Procedure. The district court exercised its sound discretion to deny the transfer, given

                                            -6-
that: (1) the government’s chief witnesses and most of Perry’s victims resided in
Nebraska; (2) the bulk of the investigative work was done in Nebraska; (3) most of the
records used in the case were in Nebraska; (4) the PM Coop Trust was administered
in Nebraska; and (5) at the time of Perry’s motion for change of venue, Fritz, a
Nebraska resident, was still his co-defendant. See United States v. Green, 983 F.2d
100, 103 (8th Cir. 1992).

         Perry contends that the district court erroneously denied his motion to dismiss
based upon an alleged violation of the Sixth Amendment and the Jury Selection and
Service Act, 28 U.S.C. § 1861, et seq. He makes a largely unsupported argument that
the District of Nebraska’s use of voter registration lists, rather than driver’s license
lists, results in the underrepresentation of blacks in jury pools. We have consistently
approved the use of voter registration lists to select jury pools. See United States v.
Garcia, 991 F.2d 489, 492 (8th Cir. 1993); see also United States v. Einfeldt, 138 F.3d
373, 379 (8th Cir. 1998); Smith v. Copeland, 87 F.3d 265, 269 (8th Cir. 1996). “The
mere fact that one identifiable group of individuals votes in a lower proportion than the
rest of the population does not make a jury selection system illegal or unconstitutional.”
United States v. Clifford, 640 F.2d 150, 156 (8th Cir. 1981). Perry’s claim therefore
lacks merit.

       Perry’s next argument is that his prosecution was time-barred under 18 U.S.C.
§ 3282 because he was indicted more than five years after the fraudulent scheme was
completed. When a defendant is charged with conspiracy, as here, the limitations
period commences “from the occurrence of the last overt act committed in furtherance
of the conspiracy.” United States v. Dolan, 120 F.3d 856, 864 (8th Cir. 1997).
Mailings designed to “lull the victims into a false sense of security” and hide a
fraudulent scheme are considered an overt act in furtherance of a conspiracy. United
States v. Lane, 474 U.S. 438, 451 (1986); see also United States v. Wrehe, 628 F.2d
1079, 1083 (8th Cir. 1980).

                                           -7-
       Perry, who was indicted on December 13, 1995, contends that the conspiracy
ended sometime before December 13, 1990, when the last of the charter members’
money reached Malachi. However, the district court was presented with ample
evidence to demonstrate that the conspiracy continued well into 1991. Charter
members were mailed “lulling” letters on at least two different occasions during that
year. Perry also stipulated that money from Fritz’s account was wired to his Virginia
accounts as late as May 8, 1991. Accordingly, we conclude that Perry’s indictment is
not time-barred.

      Having examined the remaining issues raised by Perry, we conclude that they
lack merit and warrant no further discussion.

      The judgment is affirmed.

      A true copy.

             Attest:

                     CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

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