Court Opinion

ID: 160097
Source: CourtListenerOpinion
Date Created: 2010-08-14 06:38:07+00
Date Added: 2024-06-11T09:41:43.881822
License: Public Domain

F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit
                      UNITED STATES COURT OF APPEALS
                                                                         AUG 22 2000
                                   TENTH CIRCUIT
                                                                     PATRICK FISHER
                                                                             Clerk

 UNITED STATES OF AMERICA,
          Plaintiff - Appellee,                         No. 98-4227
 v.                                             (D.C. No. 96-CR-256-02-B)
 MERRILL W. HARWARD,                                     (D. Utah)
          Defendant - Appellant.

                             ORDER AND JUDGMENT *

Before TACHA, McKAY, and HENRY, Circuit Judges.

      Defendant-Appellant Merrill W. Harward was convicted following a jury

trial on one count of conspiracy to defraud, twenty-three counts of mail fraud, and

nineteen counts of wire fraud in violation of 18 U.S.C. §§ 371, 1341, and 1343.

The convictions were based on his participation with several co-defendants in a

fraudulent telemarketing scheme that operated through a succession of companies.

The companies offered financial self-help programs to the public and patient-

development services to dentists and orthodontists. On appeal Defendant argues

      *
       This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
that the district court improperly admitted generalized, conclusory, and

speculative testimony regarding Defendant’s knowledge about the fraudulent

nature of the enterprise. Defendant further contends that the court erroneously

enhanced his sentence for his role as an organizer, leader, manager or supervisor

in a criminal activity.

      We begin with Defendant’s challenge to the district court’s evidentiary

rulings which we review for abuse of discretion. See United States v. Begay, 144

F.3d 1336, 1338 (10th Cir. 1998). Defendant objects to general “conclusionary

statements by witnesses as to who [knew] what.” Appellant’s Br. at 17. Much of

the testimony elicited at trial concerned misrepresentations in company materials

and the failure to provide promised personal “coaching” or consultation services

and guaranteed money-back refunds. Tr., Vol. IV at 682 (found in R., Vol. VI).

Defendant contends that testimony that he knew about “the use of fictitious

names” on company materials, id., “the particulars of complaints that were

presented to the company,” id., Vol. VII at 1174 (found in R., Vol. VI), and “the

design and purpose of the guarantee” made to investors was speculative. Id., Vol.

IV at 691 (found in R., Vol. VI); Vol. VII at 1174 (found in R., Vol. VI).

Defendant also objects to testimony of management meeting discussions regarding

fraudulent activities because it indicated that Defendant attended those meetings

only about “a quarter of the time.” Id., Vol. III at 517 (found in R., Vol. III).

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Defendant asserts that nothing ties these discussions to the particular meetings

when he was present.

      The admissibility of evidence is governed by the Federal Rules of

Evidence. In general, “[a]ll relevant evidence is admissible.” Fed. R. Evid. 402.

“‘Relevant evidence’ means evidence having any tendency to make the existence

of any fact that is of consequence to the determination of the action more

probable or less probable than it would have been without the evidence.” Fed. R.

Evid. 401. However, “relevant[] evidence may be excluded if its probative value

is substantially outweighed by the danger of unfair prejudice,” Fed. R. Evid. 403,

and opinion testimony by lay witnesses “is limited to those opinions or inferences

which are (a) rationally based on the perception of the witness and (b) helpful to a

clear understanding of the witness’ testimony or the determination of a fact in

issue.” Fed. R. Evid. 701.

      Having reviewed the record, we conclude that the district court did not

abuse its discretion in admitting the challenged testimony. Co-defendant Michael

Smith, the overall operations manager of the organizations involved in this

scheme, testified that he had personal knowledge of the flow of information in the

overall organization and of the individuals to whom certain types of information

were distributed. See Tr., Vol. VII at 1173 (found in R., Vol. VI). He testified

that Defendant was a member of a five-member “management team” and was

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“privy to the particulars of complaints that were presented to the company.” Id.

at 1171, 1174.

       Another co-defendant, Richard Allen, testified that Defendant was one of

six principals in the businesses and that he was familiar with the duties performed

by the individuals employed in the businesses. See id., Vol. IV at 663, 666

(found in R., Vol. VI). He stated that he had “observe[d] Mr. Harward at his

duties such as interfacing with Mr. Smith or participating in management

meetings,” “discuss[ed] with Mr. Harward from time to time his duties such as

those relating to the refund committee,” and “interface[d] with Mr. Harward

personally with respect to his duties as a coach.” Id. at 667. Mr. Allen testified

that any staff member dealing with complaints and refunds, including Defendant

who headed the department that handled disgruntled customers, would be aware

of the use of fictitious names. See id. at 682-83. He also testified that

Defendant, “who dealt with refunds,” would have been aware of the “design and

purpose of the [refund] guarantee.” Id. at 691.

       A third co-defendant, Thomas Pentelute, testified that he attended

management meetings during the last six months of his employment. He stated

that complaints were discussed at every meeting and that Defendant attended

about one-quarter of the meetings. See id. at 619; Vol. III at 517 (found in R.,

Vol. III).

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      This testimony certainly reveals Defendant’s knowledge of the fraudulent

scheme. It is relevant, and its probative value is not outweighed by any danger of

unfair prejudice. See United States v. Bonds, 12 F.3d 540, 567 (6th Cir. 1993)

(“Unfair prejudice does not mean the damage to a defendant’s case that results

from the legitimate probative force of the evidence.” (citations omitted)). To the

extent that it represents opinion testimony, it is based on “first-hand knowledge”

and is “helpful in resolving [the] issues.” Fed. R. Evid. 701 Advisory Committee

Notes. The district court did not abuse its discretion in admitting this testimony.

      We turn now to Defendant’s argument that there was insufficient evidence

to support the district court’s finding that he was an organizer, leader, manager,

or supervisor under § 3B1.1 of the United States Sentencing Guidelines. 1 We

review a district court’s factual findings supporting a sentence enhancement for

clear error. See United States v. Cruz Camacho, 137 F.3d 1220, 1223 (1998). We

give “due deference to the district court’s application of the guidelines to the

facts,” id. at 1224 (quoting 18 U.S.C. § 3742(e)), “reviewing the district court’s

      1
        “To support a conclusion that a defendant is an organizer or leader, a
district court must make findings in the record that describe the defendant’s
exercise of control or decision making authority.” United States v. Spears, 197
F.3d 465, 469 (10th Cir. 1999), cert. denied, 120 S. Ct. 1548 (2000). While the
district court made specific findings regarding Defendant’s knowledge, its
findings describing Defendant’s control and decision making are less clear.
Defendant, however, did not question the adequacy of the district court’s findings
and has waived that issue. See id.

                                         -5-
conclusion that a defendant is a leader or organizer under § 3B1.1(a) for clear

error.” United States v. Tagore, 158 F.3d 1124, 1130 (10th Cir. 1998). 2

      Section 3B1.1 designates a two-level enhancement for a “defendant [who]

was an organizer, leader, manager, or supervisor in any criminal activity other

than [more extensive activities detailed in subsections (a) and (b)].” U.S.S.G.

§ 3B1.1(c). Under the guidelines commentary, “the defendant must have been the

organizer, leader, manager, or supervisor of one or more participants” or, if he

was not, he must have “exercised management responsibility over the property,

assets, or activities of a criminal organization.” Id. § 3B1.1, comment. (n.2).

      The record indicates that Defendant headed the coaching staff and the

refund committee. Mr. Smith identified Defendant as part of the management

team, and Mr. Allen testified that Defendant was one of the principals in the

business. Having reviewed the record, we conclude that the evidence was

sufficient to establish that Defendant exercised management responsibility over

the activities of the fraudulent telemarketing scheme.

      Because an enhancement under § 3B1.1 can be based on either a

defendant’s exercise of control over another participant or his management

      2
        Precedent in this circuit on the appropriate standard for reviewing the
determination that a defendant is a leader or organizer under § 3B1.1 is somewhat
confusing. For a discussion of this issue, see Cruz Camacho, 137 F.3d at 1223-
24. We follow the decision in Cruz Camacho determining that review for clear
error is the appropriate standard. See id.

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responsibility, we need not determine whether Defendant exercised control over

another participant. The district court did not clearly err in enhancing

Defendant’s sentence based on his role as an organizer, leader, manager, or

supervisor in the criminal activity. The judgment of the district court is

AFFIRMED.

                                               Entered for the Court

                                               Monroe G. McKay
                                               Circuit Judge

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