Court Opinion

ID: 167981
Source: CourtListenerOpinion
Date Created: 2010-08-14 10:07:49+00
Date Added: 2024-06-11T09:41:58.239982
License: Public Domain

UNITED STATES CO URT O F APPEALS

                                TENTH CIRCUIT

 U N ITED STA TES O F A M ER ICA,

              Plaintiff-Appellee,

 v.                                                      No. 05-8067

 VALERIE L. SCHULER,

              Defendant-Appellant.

                           OR DER ON REHEARING
                            Filed November 15, 2006

Before KELLY, M cKA Y, and O’BRIEN, Circuit Judges.

      In her combined petition for rehearing and rehearing en banc, Appellant has

raised three issues. First, Appellant argues that, in determining whether the trial

court should have stricken allegedly prejudicial surplusage from the superceding

indictment, the panel incorrectly applied a plain error standard rather than the

appropriate abuse of discretion standard. Second, Appellant argues that under the

Supreme Court’s decision in United States v. Booker, 543 U.S. 220 (2005), the

district court abused its discretion by allowing inclusion of “sentencing

enhancement allegations” in the indictment and by submitting them to a jury.

Third, Appellant argues that her due process rights were violated by the district

court’s submission to the jury of these sentencing allegations and by its admission
of summary exhibits.

      The panel grants rehearing on the first issue. W e conclude that because w e

overlooked Appellant’s pre-trial motion to strike “sentencing enhancement

allegations” from the indictment, we erroneously reviewed the district court’s

ruling under a plain error standard, rather than under an abuse of discretion

standard. Under the abuse of discretion standard, we will only disturb the district

court’s ruling if we have “a definite and firm conviction that the lower court made

a clear error of judgment or exceeded the bounds of permissible choice in the

circumstances.” M oothart v. Bell, 21 F.3d 1499, 1504 (10th Cir. 1994) (quoting

M cEwen v. City of Norman, 926 F.2d 1539, 1553-54 (10th Cir. 1991)). A trial

court’s actions are subjected to a higher degree of scrutiny under abuse of

discretion than under plain error. However, having review ed the ruling again

under the correct standard, we are satisfied that the district court did not abuse its

discretion in refusing to strike the objected-to language from the indictment.

      In all other respects, the petition for rehearing is denied. The suggestion

for rehearing en banc was circulated to the panel members and the active judges

of the court. No member of the panel nor judge in active service on the court

having requested a poll, the suggestion for rehearing en banc is denied.

                                                Entered for the Court

                                                M onroe G. M cKay
                                                Circuit Judge

                                          -2-
                                                                       F I L E D
                                                                United States Court of Appeals
                                                                        Tenth Circuit
                                    PU BL ISH
                                                                       August 14, 2006
                   UNITED STATES CO URT O F APPEALS                Elisabeth A. Shumaker
                                                                       Clerk of Court
                                TENTH CIRCUIT

 UNITED STATES OF AM ERICA,
       Plaintiff-Appellee,
 v.                                                      No. 05-8067
 VALERIE L. SCHULER,
       Defendant-Appellant.

         A PPE AL FR OM T HE UNITED STATES DISTRICT COURT
                   FOR T HE DISTRICT OF W YOM ING
                          (D.C. No. 04-CR-205-B)

Robert T. M oxley, P.C., Cheyenne, W yoming, for D efendant-Appellant.

Lisa E. Leschuck, Assistant United States Attorney (M atthew H. M ead, United
States Attorney, with her on the brief), District of W yoming, Cheyenne,
W yoming, for Plaintiff-Appellee.

Before KELLY, M cKA Y, and O’BRIEN, Circuit Judges.

M cK A Y, Circuit Judge.

      “Credit Services guarantees that you will receive Credit Cards with a total

credit limit over $10,000.00 . . . . Plus receive your choice of a guaranteed
unsecured Visa, M astercard or both. No credit check or security deposit. No turn

downs! Our banks are waiting!” And so M s. Schuler’s promises rang, enticing

individuals through advertisements in various tabloid publications. M s. Schuler’s

business consisted of three related business entities, Schuler Financial Services,

Summit Financial Group, and Credit Services, Inc. Credit Services, Inc., was

incorporated in W yoming. The overall business was conceived as a for-profit,

mass-marketing business to assist individuals w ith poor credit in obtaining credit

cards.

         M s. Schuler purchased demographically-specific mailing lists for use in

mass mailings to individuals identified as having bad credit. She also bought

advertising space in national, tabloid-type weekly periodicals such as the National

Enquirer, Star, and the W eekly W orld News. Her advertisements, by mail and

publication, “guaranteed” that persons responding would receive “unsecured”

M astercard or Visa credit cards. Customers were instructed to send M s. Schuler

(via one of her companies) a sum of money–typically $39.95–by mail. W yoming-

based mailing addresses and forwarding services were used to collect the

responses generated by her solicitations, which were then forwarded to her home

in W isconsin. Some of the advertisements contained the following guarantee: “I

understand that if I’m not approved by the card issuing bank, I will receive a

FU LL REFU ND.”

         After sending in their money, customers did not receive a credit card.

                                           -2-
Instead, M s. Schuler would send them a letter containing a list of banks

(including their addresses and phone numbers) purported to issue unsecured credit

cards, though a number of the banks listed were no longer in business. The letter

explained that M s. Schuler’s company was not affiliated with the listed banks and

cautioned customers: “Do NOT insist that a particular bank has to issue a credit

card to you. They each have their own underwriting guidelines that you need to

meet to be approved.” In addition, M s. Schuler’s refund policy was enumerated:

“Credit Services guarantees you a full refund if you are not approved by TH ESE

card issuing banks. Refunds require three rejections within 90 days of payment.”

A coupon for an inexpensive Las Vegas vacation often accompanied this letter.

      In 2000, complaints began to come into the W isconsin Department of

Financial Institutions regarding M s. Schuler’s business. The Department of

Financial Institutions turned its investigation over to the W isconsin Department of

Justice for pursuit of civil remedies. Ultimately, the State of Wisconsin issued a

Consent Judgment (to which M s. Schuler agreed), which permanently enjoined

her from operating any “credit services” business in the State of W isconsin

without first registering with the proper authorities. The jury in M s. Schuler’s

W yoming trial w as told of this consent judgment.

      In August 2003, the Postal Inspection Service sent M s. Schuler a “cease

and desist” letter regarding her ongoing activities in W yoming. W ithin days of

receiving the “cease and desist” letter, M s. Schuler moved her dropbox (where

                                         -3-
she received the customer mail) from Jackson, W yoming, to Cheyenne, W yoming.

By September 2003, a criminal investigation of M s. Schuler w as underw ay.

Agents from the IRS-Criminal Investigation Division and the Postal Inspection

Service conducted a “trash run” at her M ilwaukee, W isconsin, residence. They

found a journal which she had been keeping. The journal detailed her reaction to

the “cease and desist” letter, which included the following entry on August 12,

2003:

        But I also had time to mull things over and think a little more clearly.
        I had some pretty bad feelings about the misleading mailings,
        knowing full well that people had expectations that weren’t being
        met. I feel M UCH better about the CS [Credit Services] letter, and
        once that’s cleared up and a disclaimer has been added to the Vegas
        coupon I will truly be good to go. This was a necessary step, I guess,
        to clean up my act. Luckily, the show will go on!

In December 2003, a search warrant was executed at M s. Schuler’s residence and

at her business location in M ilwaukee, W isconsin. Other journals were found as

well as numerous financial records and marketing materials. Also located were

deposit tickets with accompanying customer money orders or personal checks that

were awaiting deposit at the bank. Cash totaling $489 was found, but there was

no corresponding deposit ticket for it. One of M s. Schuler’s journal entries, dated

September 25, 2003, explains her preference for customers sending cash:

        You know w hat I really like about the CS [Credit Services] mailings?
        W hen people send in cash! I never have to go to the tyme [ATM ]
        machine anymore. [smiley face symbol] And once I have CS mailing
        going out all the time I will always have cash in my pocket. [smiley
        face symbol]

                                           -4-
      After a jury trial, M s. Schuler was convicted of twenty-four counts of mail

fraud under 18 U.S.C. § 1341. Twenty-four individuals testified at her trial that

they had received neither unsecured credit cards nor refunds. M s. Schuler was

also convicted of eleven counts of money laundering under 18 U.S.C. §

1956(a)(1)(A)(I). She was sentenced to sixty months’ imprisonment followed by

tw o years’ supervised release. M s. Schuler appeals her conviction and sentence.

She claims that the district court erred in (1) sustaining her mail fraud conviction,

as a matter of law, (2) failing to strike surplusage from her indictment, (3)

admitting character and summary evidence, (4) declining to give her proposed

jury instructions, and that (5) cumulative error in her trial deprived her of due

process.

      In determining whether the evidence presented at trial is sufficient to

support a jury verdict, we review the record de novo “and ask only whether,

taking the evidence–both direct and circumstantial, together with the reasonable

inferences to be drawn therefrom–in the light most favorable to the government, a

reasonable jury could find the defendant guilty beyond a reasonable doubt.”

United States v. Voss, 82 F.3d 1521, 1526 (10th Cir. 1996) (quotation omitted).

      M s. Schuler claims that her business did not violate the mail fraud statute

because she made no “material” misrepresentations to her customers and, if

anything, only had a “defective product.” A ppellant’s Brief at 23. M s. Schuler’s

argument is vague and does not specifically address the elements of mail fraud.

                                          -5-
W e have articulated: “The elements of federal mail fraud as defined in 18 U.S.C.

§ 1341 are (1) a scheme or artifice to defraud or obtain property by means of false

or fraudulent pretenses, representations, or promises, (2) an intent to defraud, and

(3) use of the mails to execute the scheme.” United States v. Welch, 327 F.3d

1081, 1104 (10th Cir. 2003).

      As to the first element, the scheme or artifice to defraud, we have stated

that the scheme must be described with particularity and that “it is not sufficient

in this regard to merely plead the statutory language.” United States v. Curtis,

506 F.2d 985, 990 (10th Cir. 1974). It is necessary that “the nature of the

schemes or artifices is identified or described, including the particular pretenses,

representations or promises claimed to have been false.” Id. In the indictment of

M s. Schuler, a full four pages allege in great detail the nature of her scheme. The

jury was also carefully instructed on the meaning of the first element of mail

fraud. Instruction No. 33 explained that mail fraud may be proved either by

“executing and attempting to execute a scheme to defraud” or “for obtaining

money by means of false and fraudulent pretenses, representations and promises.”

The instruction concludes:

      Thus, in order for you to find the Defendant, Valerie L. Schuler
      guilty of Counts [ ], of the Superseding Indictment, you must find
      beyond a reasonable doubt that at least one of these two purposes
      were the objects of such crimes, but you need not find that both of
      these purposes were objects of such offenses.

      In Welch, we discussed what the second element–intent to defraud–means

                                          -6-
in terms of mail fraud:

      Because direct proof of fraudulent intent often is unavailable, courts
      have long permitted fact finders to rely on a variety of circumstantial
      evidence, including evidence of actual or contemplated harm, to infer
      such intent. . . . Intent to defraud may be inferred from the
      defendant’s misrepresentations, knowledge of a false statement as
      well as whether the defendant profited or converted money to his
      own use.

327 F.3d at 1105 (quotation omitted). In this case, the evidence of M s. Schuler’s

intent to defraud was vast. In her recovered journal and diaries, she admitted that

she was misleading people who were not getting what they expected: “guaranteed

approval” for Visa/M asterCard credit cards at stated unsecured limits as contained

in her solicitations and advertisements. M s. Schuler’s W isconsin Consent

Judgment put her on notice that her business had problems and that she could no

longer operate in W isconsin. M oreover, the jury was entitled to infer that M s.

Schuler’s relocating her business address at various points w as an attempt to

evade investigation by authorities. Finally, M s. Schuler made material

misrepresentations by stating in advertisements and in mailings that “our banks

are waiting” and “no turn-downs”– statements likely to induce customers to send

her money. See United States v. Lawrence, 405 F.3d 888, 901 (10th Cir. 2005)

(stating that the jury must decide whether a statement is material, that is, whether

the statement “has a natural tendency to influence, or is capable of influencing a

decision or action by another”).

      M s. Schuler concedes the use of the mails in this case. Thus, we determine

                                          -7-
that the jury had sufficient evidence on each of the three elements to convict for

mail fraud.

      M s. Schuler also contests various individual counts of mail fraud, claiming

that the testimony of individuals could not sustain her conviction on these counts.

Her argument appears to be that the individuals who testified could have obtained

a refund but simply did not choose to do so. For our purposes, it is irrelevant

whether these individuals could have obtained a refund. M s. Schuler violated the

mail fraud statute in each of these instances in her intent to defraud these

individuals (her customers), by a scheme, through use of the mail. In addition,

M s. Schuler’s reliance on her argument that the testifying customers could have

obtained a refund is curious, since mail fraud “does not require successful

completion of the scheme to defraud.” United States v. Stewart, 872 F.2d 957,

960 (10th Cir.1989). Indeed, “actual showing of loss is not required; the [mail

fraud] statute prohibits schemes intended to deprive victims of money or

property.” Id. at 960-61 (citation omitted).

      M s. Schuler next argues that the superseding indictment contained

prejudicial surplusage. In the superseding indictment, the prosecution states in

“Allegations Common to Counts O ne Through Twenty-Nine”:

      VALERIE L. SCHULER . . . knowingly devised and intended to
      devise a scheme and artifice to defraud and to obtain money by
      means of false and fraudulent pretenses, representations, and
      promises, in an amount totaling $400,000.00 and involving in excess
      of 250 victims, which scheme was furthered by the use of the United

                                          -8-
      States mail.

At trial, however, only twenty-four individuals testified that they had been duped

by her scheme. In M s. Schuler’s brief, she states: “A fortiori, the sentencing

allegations in the Superceding Indictment herein, which magnified the counts

themselves by hundred-folds, were inflammatory and prejudicial.” A ppellant’s

Brief at 40.

      Federal Rule of Criminal Procedure 7(d) reads: “Surplusage. Upon the

defendant’s motion, the court may strike surplusage from the indictment or

information.” W e have held: “Acting in its discretion, a district court may strike

as surplusage allegations not relevant to the charge at issue and inflammatory and

prejudicial to the defendant.” United States v. Collins, 920 F.2d 619, 631 (10th

Cir. 1990). However, a review of the record shows that M s. Schuler did not file a

pre-trial motion requesting dismissal of the surplusage from the superseding

indictment; thus we review for plain error.

      “Plain error occurs when there is (1) error, (2) that is plain, which (3)

affects substantial rights, and which (4) seriously affects the fairness, integrity, or

public reputation of judicial proceedings.” United States v. Gonzalez-Huerta, 403

F.3d 727, 731 (10th Cir. 2005) (quotation omitted). W e do not determine that the

surplusage in the superseding indictment constitutes plain error. See United

States v. Peters, 435 F.3d 746, 753 (7th Cir. 2006) (“Thus, the surplusage in the

superseding indictment did not lead the jury to convict . . . where otherwise it

                                          -9-
would not, and we find no plain error in the superceding indictment.”). Indeed,

we have often held surplusage in an indictment may be disregarded. See, e.g.,

Dye Constr. Co. v. Occupational Safety & H ealth Review Comm’n, 698 F.2d 423,

426 (10th Cir. 1983); United States v. Henry, 504 F.2d 1335, 1338-39 (10th Cir.

1974). W e note M s. Schuler’s reliance on United States v. Zabawa, 39 F.3d 279,

285 (10th Cir. 1994), where we held that it was w ithin the district court’s

discretion to strike “6,708 victims” from an indictment when the prosecution had

identified only thirty. However, our holding in Zabawa affirmed the district

court’s discretion to strike inflammatory surplusage from an indictment after a

Rule 7(d) motion was made; it does not lead us to find plain error where no such

motion was made at trial and where the surplusage was less (by a factor of ten)

inflammatory.

      As to the rest of M s. Schuler’s claims that the district court erred in

evidentiary rulings, we review for abuse of discretion. United States v. Curtis,

344 F.3d 1057, 1067 (10th Cir. 2003). “U nder that standard, we w ill not disturb

an evidentiary ruling absent a distinct showing that it was based on a clearly

erroneous finding of fact or an erroneous conclusion of law or manifests a clear

error in judgment.” United States v. Jenkins, 313 F.3d 549, 559 (10th Cir. 2002).

      It is difficult to discern M s. Schuler’s exact objection to the summary

exhibits used by the prosecution in her trial. In her brief, her counsel states that

“[t]here is no basis, other than grade-school math, for the assertion that because

                                          -10-
24 persons with bad credit could not obtain a credit card, as charged in the

individual counts, then every person who obtained Valerie Schuler’s services

must also be a ‘victim.’” A ppellant’s Brief at 41-42. The summary exhibits

presented in her trial represented the distillation of thousands of pages of

financial records and documents pertaining to M s. Schuler. Ultimately, the

summaries aided the jury by enumerating by date, by customer name and location,

and by the amount of money received by M s. Schuler. An IRS Special Agent

created the summary exhibits, and he explained to the jury their contents and his

method of compilation. He testified as to his efforts to ensure that no bounced

checks w ere included in the summary. The Special A gent was also subject to

cross-examination.

      Federal Rule of Evidence 1006 allows the use of summaries when “[t]he

contents of voluminous writings, recordings, or photographs . . . cannot

conveniently be examined in court . . . .” W e have further observed that while

“[t]he materials upon which the summary is based need not themselves be

admitted into evidence[,] . . . [a]dmission of summaries, however, is conditioned

on the requirement that the evidence upon which they are based, if not admitted,

must be admissible.” United States v. Samaniego, 187 F.3d 1222, 1223 (10th Cir.

1999) (citation omitted). Use of summary exhibits was proper in light of the

voluminous financial records which they summarized. Importantly, the

underlying financial records w ere admissible and were in fact admitted into

                                         -11-
evidence. All such financial records w ere made available to M s. Schuler in

advance of trial. Therefore, we conclude that the district court did not err in

allow ing the use of summary exhibits.

      M s. Schuler next contends that her cross-examination on previous instances

of credit card fraud and identity theft was improper under Federal Rule of

Evidence 404(b) as it constituted the improper use of character evidence and of

uncharged crimes. At trial, M s. Schuler was cross-examined about her use of a

false tax return to secure financing for her home as well as providing a false

social security number as part of her application for credit cards.

      Once a defendant takes the stand, her credibility is at issue as with any

other w itness. United States v. Girdner, 773 F.2d 257, 261 (10th Cir. 1985).

Consequently, under Federal Rule of Evidence 608(b), it is within the discretion

of the district court to decide whether a defendant may be cross-examined about

prior conduct concerning her character for truthfulness, subject always to the

balancing test of Federal Rule of Evidence 403. In addition, Rule 608(b) states:

“Specific instances of the conduct of a witness, for the purpose of attacking or

supporting the witness’ character for truthfulness [a collateral matter] . . . may not

be proved by extrinsic evidence.” W e have observed that “[a] matter is collateral

if it could not have been introduced in evidence for any purpose other than

impeachment.” United States v. Olivio, 80 F.3d 1466, 1471 (10th Cir. 1996)

(citing United States v. Walker, 930 F.2d 789, 791 (10th Cir. 1991)). In this case,

                                         -12-
the false tax return and credit card applications were not collateral because they

had already been admitted into evidence by stipulation of M s. Schuler and

through another witness. It was, therefore, not improper for the prosecution to

question M s. Schuler about this extrinsic evidence.

      The last of M s. Schuler’s evidentiary arguments is that she was denied the

opportunity to confront M s. Kathryn M cK ee, who testified as the prosecution’s

sole rebuttal witness. M s. M cKee testified via telephone. Her testimony was

quite short and simply concerned the numerical digits contained in her social

security number. The prosecution apparently introduced this testimony to

impeach M s. Schuler’s credibility because she had previously used a social

security number matching M s. M cKee’s in order to obtain a credit card. M s.

Schuler contends that M s. M cKee’s testimony violates the Confrontation Clause

because M s. M cKee was not present in the courtroom during her testimony.

      The Confrontation Clause guarantees to all criminal defendants “‘[t]he right

physically to face those who testify against him, and the right to conduct cross-

examination.’” United States v. Sunrhodes, 831 F.2d 1537, 1543 (10th Cir. 1987)

(quoting Pennsylvania v. Richie, 480 U.S. 39, 51 (1987)). Alleged errors based

upon the Confrontation Clause are subject to harmless-error analysis. United

States v. Toles, 297 F.3d 959, 967-68 (10th Cir. 2002). To preserve the right for

constitutional harmless error review, a defendant must lodge an objection based

upon her Sixth Amendment right to confrontation. United States v. Lott, 310 F.3d

                                         -13-
1231, 1241 n.6 (10th Cir. 2002).

      M s. Schuler did not object to M s. M cKee’s testimony at trial, although the

matter was addressed during a jury instruction conference. Nevertheless, it was

not error for M s. M cKee to testify by telephone because she took an oath, was

subject to cross-examination, and critically, her testimony (the digits of her social

security number) was uncontroverted and subject to a finding of “absolute proof”

by the district court. In such an instance, there was no harm in denying the

opportunity for face-to-face confrontation.

      W e have endeavored to parse M s. Schuler’s arguments as to the

insufficiency of the jury instructions given at her trial. “W e review a jury

instruction de novo, when an objection is made at trial . . . .” United States v.

Fabiano, 169 F.3d 1299, 1302 (10th Cir. 1999). In conducting this review, we

consider the jury instructions as a whole to determine whether they “cover the

issues presented by the evidence” and accurately state the law. United States v.

Davis, 953 F.2d 1482, 1492 (10th Cir. 1992). Reversal of a conviction is

warranted only where the failure to give an instruction is prejudicial in view of

the entire record. United States v. M artin, 18 F.3d 1515, 1519 (10th Cir. 1994).

      M s. Schuler claims that the district court generally and improperly rejected

her “theory of defense” and “burden of proof” instructions. But she has not

identified which specific “theory of defense” instruction(s) she believes the

district court erred in not giving, nor does she provide any legal argument with

                                         -14-
respect to why her tendered “theory of defense” instruction(s) were (1) proper

statements of the law, (2) not covered by other instructions actually given by the

court, and (3) w ere not impermissibly argumentative.

      As best as can be determined from M s. Schuler’s brief, she is concerned

with the instructions which were discussed at the instruction conference. Her

proposed instructions “Nos. 8 and 9” concern how the jury should consider her

consent judgment in W isconsin. The district court gave an instruction on this

issue, Instruction No. 20, which is quite adequate. M s. Schuler also has not

provided any argument concerning why the court’s instructions on the W isconsin

judgment were in any respect inaccurate or prejudicial. Given the district court’s

substantial discretion in fashioning jury instructions, see United States v. Wolny,

133 F.3d 758, 765 (10th Cir. 1998), we do not see how this instruction either

misstated the facts or law, or was in any other respect unfair to M s. Schuler.

      M s. Schuler’s proposed instruction No. 10 concerns her relocation of some

portion of her business from W isconsin to W yoming. This instruction is

“argument” and not instruction: “[T]he government cannot use the move of M s.

Schuler’s business to W yoming as evidence of guilty knowledge, if that move to

W yoming could be motivated by an innocent or legitimate purpose.” This is

nothing more than a recapitulation of the evidence in the light most favorable to

M s. Schuler. Such an instruction is not appropriate, and the district court

committed no error in rejecting the proposed instruction. See Davis, 953 F.2d at

                                         -15-
1492.

        M s. Schuler argues that the district court failed to give her instruction on

the meaning of “guarantee.” This is so. Nevertheless, the term itself is not a

technical one, and it does not require a specific definition in the instructions in

order for the jury to understand its usage in this case. See, e.g., United States v.

Robinson, 435 F.3d 1244, 1249-50 (10th Cir. 2006) (noting that it was not plain

error for the court to refuse including in instructions terms of general and

common understanding).

        In sum, while M s. Schuler may fly-speck the instructions on the bases that

the court did not ultimately give all of the ones she submitted or that some w ere

not w orded in precisely the fashion she might have preferred, she has not shown

that the district court’s refusal to give even one of her instructions was incorrect

as a matter of law , or was prejudicial or unfair.

        Last, M s. Schuler claims that the effect of cumulative error at her trial

mandates that her conviction be reversed. “A cumulative-error analysis merely

aggregates all the errors that individually have been found to be harmless, and

therefore not reversible, and it analyzes whether their cumulative effect on the

outcome of the trial is such that collectively they can no longer be determined to

be harmless.” United States v. Rivera, 900 F.2d 1462, 1470 (10th Cir. 1990). In

our analysis, we review “only actual errors to determine their cumulative effect.”

Id. O ur review of M s. Schuler’s appeal does not yield instances of error, thus w e

                                           -16-
do not determine that there was cumulative error.

      Consequently, we A FFIR M the judgment of the district court.

                                       -17-