Court Opinion

ID: 43501
Source: CourtListenerOpinion
Date Created: 2010-04-25 21:57:02+00
Date Added: 2024-06-11T17:17:02.754326
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           IN THE UNITED STATES COURT OF APPEALS
                                                          FILED
                  FOR THE ELEVENTH CIRCUIT
                                           U.S. COURT OF APPEALS
                   ________________________ ELEVENTH CIRCUIT
                                                        July 06, 2005
                          No. 04-10789               THOMAS K. KAHN
                    ________________________              CLERK

                  D. C. Docket No. 00-00260-CR-1-1

UNITED STATES OF AMERICA,

                                                       Plaintiff-Appellee-
                                                         Cross Appellant,

                              versus

CURTIS COLWELL,

                                                     Defendant-Appellant-
                                                          Cross Appellee.
                    ________________________

                          No. 04-11111
                    ________________________

                  D. C. Docket No. 00-00260-CR-2-1

UNITED STATES OF AMERICA,

                                                       Plaintiff-Appellant,

                              versus

DOUGLAS L. COLWELL,

                                                      Defendant-Appellee.
                              ________________________

                                    No. 04-14758
                              ________________________

                           D. C. Docket No. 00-00260-CR-2-1

UNITED STATES OF AMERICA,

                                                                          Plaintiff-Appellee,

                                            versus

DOUGLAS L. COLWELL,

                                                                      Defendant-Appellant.

                              ________________________

                     Appeals from the United States District Court
                         for the Northern District of Georgia
                            ________________________

                                        (July 6, 2005)

Before BLACK and HULL, Circuit Judges, and HODGES*, District Judge.

PER CURIAM:

       Defendants Curtis and Douglas Colwell appeal their criminal convictions

for participation in a conspiracy to commit mail and wire fraud in violation of 18

       *
         Honorable William Terrell Hodges, United States District Judge for the Middle District
of Florida, sitting by designation.
                                              2
U.S.C. § 371. Curtis Colwell also appeals his convictions for wire fraud, in

violation of 18 U.S.C. § 1341, and mail fraud, in violation of 18 U.S.C. § 1343.

The government appeals the district court’s grants of a four-level downward

departure to Curtis Colwell and a three-level downward departure to Douglas

Colwell.1 After review and oral argument, we affirm the defendants’ convictions

and sentences.

                                   I. BACKGROUND

       The defendants in these cases defrauded various insurance companies in

obtaining worker’s compensation insurance for the defendants’ businesses. By

law, employers in Georgia are required to carry worker’s compensation insurance

for all employees. The employer’s premium is determined by the number of

employees, the amount of payroll, the employees’ jobs, and the employer’s loss

history. The defendants defrauded the insurance companies by submitting false

paperwork regarding the number of employees, the amount of the payroll, the type

of work the employees were to perform, and the companies’ loss history. We thus

begin by discussing the details of the defendants’ insurance fraud.

A.     The Fraudulent Conduct

       1
         Curtis Colwell filed the first appeal from his conviction (Appeal No. 04-10789). The
government filed a cross appeal from the sentences for both Curtis and Douglas Colwell (Appeal
No. 04-11111). The two appeals were consolidated on March 26, 2004. Douglas Colwell
initiated a separate appeal from his conviction (No. 04-14758) on August 26, 2004. We hereby
consolidate Appeal No. 04-14758 with Appeal Nos. 04-10789 and 04-11111.
                                                   3
      1.        Fireman’s Fund

      Defendants Curtis and Douglas Colwell operated several granite

quarry/road paving companies in Georgia. William Plemons was the Colwells’

insurance agent and Russell Smith provided the Colwells with accounting

services. Beginning in April 1989, Curtis Colwell, Plemons, and Smith provided

inaccurate job classification and understated payroll information to Fireman’s

Fund Insurance Company (“Fireman’s Fund”) to avoid paying the worker’s

compensation premium that would have otherwise been due. Plemons submitted

the insurance application to Fireman’s Fund and Smith provided inaccurate

information in the annual audits through April 1995. In total, the Colwell

businesses defrauded Fireman’s Fund out of an estimated $740,849 in lost

premiums.2

      In March 1995, Curtis Colwell, Plemons, and Bob Carr met to discuss how

to handle worker’s compensation coverage after Fireman’s Fund ceased providing

coverage. Plemons suggested that a new employee leasing company, essentially a

shell company, be formed to enable the Colwell businesses to avoid paying higher

premiums due to the Colwell businesses’ loss history. Curtis Colwell suggested

that Douglas Colwell set up the employee leasing company.

      2
          In 1995, Fireman’s Fund ceased writing this type of insurance in Georgia.
                                                4
      2.     Douglas Colwell Joins the Conspiracy

      On March 30, 1995, Plemons, Carr, and Curtis and Douglas Colwell met to

discuss their insurance needs. Prior to the meeting, the Colwells had set up a shell

company named Wildhorse Land Development (“Wildhorse”). Plemons brought

an insurance application to the meeting and instructed Carr to write in the number

of Wildhorse employees as 11 and the payroll amount as $245,000. In reality, the

actual number of employees of the Colwell businesses was over 100 with a total

payroll of approximately $2.4 million.

      The insurance application also indicated that the Wildhorse employees were

engaged in buying, selling, and developing land, when in fact many Colwell

employees were quarry and road workers. In addition, the application indicated

that Wildhorse had no employee exchange agreements with any other company,

when in fact the Wildhorse business was the shell company used to lease

employees to Colwell businesses.

      Douglas Colwell signed the insurance application during the meeting and

submitted it to Granite States Insurance Company (“Granite States”), which

provided insurance to Wildhorse. On the Georgia state tax registration, Douglas

Colwell was listed as Wildhorse’s president and his personal address was listed as

the business location. In contrast to the insurance application, the tax registration

                                          5
indicated that Wildhorse would have 100 employees at full operation.

B.    Insurance Investigations

      Granite States asked Jim Adkins, a loss control consultant, to investigate

Wildhorse. During a telephone call with Douglas Colwell in July, 1995, Douglas

Colwell told Adkins that Wildhorse was a sole proprietorship, that he was in

charge of the company, that Wildhorse had seven employees, and that the

employees were laborers who cleaned up around the entrance of a development.

Douglas Colwell also told Adkins that Wildhorse was going to grade land for a

condominium complex, that there was nothing going on at present, that Wildhorse

would probably hire subcontractors in the future, and that it was not necessary for

Adkins to visit the business location. Douglas Colwell explained that the reason

Wildhorse had such limited activity was because he had been sick and hospitalized

for a period of time.

      Tim Wilson, an insurance auditor, sent a letter to Douglas Colwell in

connection with conducting a “pre-audit” of Wildhorse. Upon receiving the letter,

Douglas Colwell brought the letter to Carr. Douglas Colwell also called Plemons

about the letter and was told to call Smith.

      On September 8, 1995, Wilson met Douglas Colwell outside a convenience

store in Blairsville, Georgia. Wilson completed an audit questionnaire during the

                                          6
meeting in which he indicated that Douglas Colwell verified the payroll and job

classification information that had been provided in the insurance application.3

Douglas Colwell told Wilson that Wildhorse was a new land development

business that was going to concentrate on land development activities (such as

grading roads and lots and doing building-site preparation for land to be sold for

subdivisions), that he was the sole officer, and that he supervised all of the

operations. Douglas Colwell also took Wilson to some property and let Wilson

take pictures of the property so that Wilson would believe that Wildhorse was in

the business of buying, grading, preparing, and subsequently selling land.4

       In December 1995, Granite States asked Wildhorse to provide an IRS

payroll report (a “941 Form”) for the third quarter of 1995. Smith prepared an

inaccurate 941 Form. Carr, who was then working undercover as a government

informant, brought the 941 Form to Douglas Colwell, who refused to sign it.

Curtis Colwell signed the form, and Carr then showed it to Douglas Colwell.

       3
        Douglas Colwell provided payroll amounts of $1,712 for the second quarter of 1995 and
$2,751 for the third quarter
       4
         Plemons was arrested on unrelated insurance fraud charges. In October 1995, a family
meeting was convened between Curtis and Douglas Colwell, and their father – Carleton Colwell
– at which time it was decided that the Colwells would terminate the relationship with Plemons
as their insurance broker. However, on November 7, 1995, during a subsequent meeting in
Helen, Georgia, attended by Curtis and Douglas Colwell, Carr, Plemons, and another Colwell
employee, Plemons touted his prior accomplishments on behalf of the Colwells, such as saving
$2.2 million in worker’s compensation premiums, and convinced the Colwells to keep him as
their agent.
                                                7
      In 1996, Curtis Colwell and Plemons decided to purchase insurance

coverage from three carriers. In addition to the policy that Wildhorse had with

Granite States, one of the Colwell companies, Colwell Construction, obtained

coverage through Liberty Mutual, while a new Colwell company, Appalachian

Environmental Material Consultants, obtained coverage through National

American Insurance Company. In the applications, all three insurance companies

were provided false information on the number of employees, the payroll amounts,

and the job classifications of the employees. The total amount of lost premiums

was $453,028 to Granite States, $19,228 to Liberty Mutual, and $81,146 to

National American.

C.    The Criminal Proceedings

      On April 19, 2000, a federal grand jury returned an indictment charging five

defendants in a total of six counts. Douglas and Curtis Colwell were charged with

conspiracy to commit mail and wire fraud, in violation of 18 U.S.C. § 371, as part

of the scheme to defraud worker’s compensation insurance carriers. Curtis

Colwell was also charged with one count of wire fraud, in violation of 18 U.S.C.

§ 1341, and one count of mail fraud in violation of 18 U.S.C. § 1343. The

Colwells entered not guilty pleas and went to trial. Smith and Plemons, two of

their co-defendants, plead guilty and testified at the Colwells’ trial.

                                           8
      1.     The Prior Fraud Testimony

        The Colwells’ trial commenced on May 28, 2003. Both Smith and

Plemons, on direct examination, admitted that they had partaken in similar

fraudulent conduct not involving the Colwell businesses on previous occasions

over a period of years. During Plemons’s cross-examination, counsel for Curtis

Colwell attempted to elicit the identities of the persons with whom Plemons had

previously engaged in the similar fraudulent conduct. The government objected

on relevancy grounds. Noting that the evidence raised “a very plain 403 problem,”

the district court sustained the objection, stating that:

      given the considerable evidence that points to bias, interest and the
      like, and his own admission that he has done this on many other
      occasions over an extended period of time. . . I’m going to sustain the
      government’s objection to that evidence.

      The district court, however, did permit defense counsel for Curtis Colwell to

inquire into the nature of the prior fraudulent activity, stating that “[i]f you want to

inquire of him [Plemons] more to confirm that it is the same sort of activity in

terms of matters that deal with premium reductions, false premium reductions, I’ll

permit you to do that.” The district court also gave Curtis Colwell the opportunity

to proffer what information he expected to elicit were the unidentified persons

called to testify. Counsel for Curtis Colwell proffered that the witnesses would

                                            9
testify that they were unaware that Plemons was submitting inaccurate information

to insurance companies and that Plemons hid the fraudulent conduct from them.5

       Following a four-week trial, a jury convicted the Colwells on all counts.

       2.      Sentencing

       At the sentencing hearing, Ted Robertson, an IRS investigating officer,

testified that the Colwell businesses had paid Fireman’s Fund $353,708 in

premiums and that Fireman’s Fund anticipated paying a total of $633,344 in

claims. Robertson testified that no worker’s compensation claims were filed

against (or paid by) Granite States, Liberty Mutual, or National American during

the period that they provided worker’s compensation insurance to the Colwell

businesses.

       Carlton Colwell, the father of the defendants, testified that Curtis Colwell

had run Colwell Construction for approximately 30 years, that only Curtis was

capable of running the company, and that if Curtis was unable to run the

businesses, they would fail. Robbie McClure, an office manager for the Colwell

businesses, testified that the businesses employed fifty-eight full-time employees

and that if Curtis Colwell were not able to manage the businesses, they “would go

       5
        At the close of Smith’s testimony, Curtis Colwell renewed the argument that he be
permitted to learn the identities of the individuals with whom Plemons and Smith had previously
engaged in similar fraudulent conduct, and the district court again declined to permit inquiry into
the identities of these persons.
                                                  10
under.” In addition, McClure testified that approximately eleven trucking

companies (employing seventy-seven people) and approximately ten paving

companies (employing approximately 135 people) rely on Colwell Construction

for all or nearly all of their business. He also testified that private contractors,

which provide approximately 45% - 50% of the Colwell business, would not want

to do business with the Colwell businesses if Curtis Colwell was not running the

businesses.

      The district court determined that the loss attributable to Curtis Colwell’s

conduct was $1,170,000 — $740,000 in unpaid premiums to Fireman’s Fund and

$430,000 in unpaid premiums to Granite States, Liberty Mutual, and National

American. Curtis Colwell’s base offense level of 6 was increased by (a) 11 levels

due to this loss amount, and (b) 2 levels because the offense involved more than

minimal planning. This resulted in a total offense level of 19. Based on a criminal

history of category I and a total offense level of 19, the guidelines range was 30 to

37 months’ imprisonment.

      The district court then granted Curtis Colwell a 4-level downward departure

to offense level 15, which reduced the guidelines range to 18 to 24 months’

imprisonment. The district court based the departure on its finding that the loss

amount of $1,170,000 as to Curtis Colwell overstated the seriousness of his

                                           11
offenses and that Curtis Colwell’s imprisonment would have a detrimental effect

on the Colwell businesses and thus the employees of those businesses. The

district court sentenced Curtis Colwell to 18 months’ imprisonment, the low end

of the guidelines range.

      The district court determined that the loss attributable to Douglas Colwell’s

conduct was $400,000 in unpaid premiums to Granite States. Douglas Colwell’s

base offense level of 6 was increased by (a) 9 levels due to this loss amount, and

(b) 2 levels because the offense involved more than minimal planning. The

district court then subtracted 4 levels due to Douglas Colwell’s minimal role in the

offense. This resulted in a total offense level of 13. Based on a criminal history of

category I and a total offense level of 13, the guidelines range was 12 to 18

months’ imprisonment.

      The district court then granted Douglas Colwell a 3-level downward

departure to offense level 10, which reduced the guidelines range to 6 to 12

months’ imprisonment. The district court based the departure on its finding that

the loss amount as to Douglas Colwell overstated the seriousness of his offense.

The district court sentenced Douglas Colwell to 6 months’ home confinement.

      Curtis and Douglas Colwell appeal their convictions. The government

appeals both of their sentences.

                                         12
                                     II. DISCUSSION

       After review and oral argument, we conclude that the government has not

shown reversible error as to the sentences of defendants Curtis Colwell or Douglas

Colwell.6 We further conclude that the defendants’ appeals of their convictions

clearly lack merit. In fact, only two of the issues in this case warrant further

discussion: (1) the sufficiency of the evidence to support Douglas Colwell’s

conviction; and (2) the evidentiary ruling regarding the prior fraudulent conduct of

witnesses Plemons and Smith.

A.     Douglas Colwell’s Conviction

       We first explain why we reject Douglas Colwell’s contention on appeal that

there was insufficient evidence to support his jury conviction for conspiracy to

commit mail and wire fraud in furtherance of the scheme to defraud the worker’s

compensation carriers.7

       6
        Neither party raises any issue of a violation of the Sixth Amendment or any issue under
United States v. Booker, 125 S. Ct. 738 (2005). Instead, the defendants do not challenge their
sentences at all, and the government challenges only the downward departures.
       7
         Count I of the indictment charged the defendants with conspiracy to commit both mail
and wire fraud. The district court instructed the jury that they must unanimously agree on what
substantive offense or offenses that the defendants conspired to commit but that the government
was not required to prove both substantive offenses. The jury returned a general verdict finding
the defendants guilty of “Count I — Alleged Conspiracy.” Because the verdict was not limited to
conspiracy to commit only mail fraud or only wire fraud, the implication from the general verdict
form is that the jury found the defendants guilty of the conspiracy as charged in the indictment.
However, the “Judgment” entered by the district court described the nature of the offense in
Count I as “Conspiracy to Commit Wire Fraud” and does not mention mail fraud. We need not
resolve any inconsistency between the indictment/general verdict documents and the Judgment
                                                 13
       For a defendant to be convicted of a conspiracy, the government must

demonstrate, beyond a reasonable doubt: “(1) an agreement among two or more

persons to achieve an unlawful objective; (2) knowing and voluntary participation

in the agreement; and (3) an overt act by a conspirator in furtherance of the

agreement.” United States v. Hasson, 333 F.3d 1264, 1270 (11th Cir. 2003), cert.

denied, 541 U.S. 1056, 124 S. Ct. 2195 (2004). An agreement may “be proved by

circumstantial as well as direct evidence.” United States v. Hernandez, 921 F.2d

1569, 1575 (11th Cir. 1991) (quotation marks and citation omitted). It may be

based upon the reasonable inferences from the relationship of the parties, their

overt acts and concert of action, and from the totality of their conduct. United

States v. Guerra, 293 F.3d 1279, 1285 (11th Cir. 2002), cert. denied, 537 U.S.

1141, 123 S. Ct. 934 (2003).

       To prove wire or mail fraud, the government must show that the defendant

(1) intentionally participated in a scheme or artifice to defraud, and (2) used the

United States mails or an interstate wire to further that scheme or artifice. See

Hasson, 333 F.3d at 1270 (wire fraud); United States v. Waymer, 55 F.3d 564, 568

(11th Cir. 1995) (mail fraud).

document as it is not material to any issues before this Court on appeal.
                                                 14
      To reverse a jury verdict based on the insufficiency of the evidence, the

defendant must show that a reasonable trier of fact could not find the defendant

guilty of the offense beyond a reasonable doubt. United States v. Vera, 701 F.2d

1349, 1356-57 (11th Cir. 1983). In evaluating such a claim, the record is viewed

in the light most favorable to the jury verdict, drawing all reasonable inferences

and resolving all questions of credibility in favor of the government. Id. The

verdict is affirmed if a reasonable juror could conclude that the evidence

establishes guilt beyond a reasonable doubt. See id at 1357. It is not necessary

that the evidence exclude every reasonable hypothesis of innocence. Id. “A jury

can choose among reasonable constructions of the evidence.” Id. (quotation marks

and citation omitted).

      It is also not necessary for the government to show that Douglas knew every

detail or all participants in the conspiracy. United States v. Pedrick, 181 F.3d

1264, 1272 (11th Cir. 1999). He is a member of the conspiracy if he “participates

in some affirmative conduct designed to aid in the success of the venture with

knowledge that h[is] actions would further the venture.” Id. (citation omitted). In

addition, a defendant may be convicted of conspiracy even though he joined the

conspiracy later and played a minor role in it. United States v. Knowles, 66 F.3d

1146, 1155-57 (11th Cir. 1995).

                                         15
      After considerable record review, we conclude that there was ample

evidence of Douglas Colwell’s agreement to commit mail and wire fraud in

furtherance of the scheme to defraud the worker’s compensation carriers. For

example, there was evidence that Douglas Colwell signed the draft of the

Wildhorse insurance application which contained gross inaccuracies as to the

number of employees and annual payroll and which falsely stated that Wildhorse

had no employee exchange agreements. There was also evidence that he provided

false information to Jim Adkins during an insurance investigation. In addition,

there was evidence that Douglas Colwell provided false information to Tim

Wilson during a pre-audit and took Wilson to see a property in an effort to

corroborate the false information contained in the insurance application.

      The evidence also showed that Douglas Colwell agreed to continue to work

with Plemons after Plemons reminded him of the frauds which had been

perpetuated. Although Douglas Colwell might not have been so sophisticated as

to know all of the particulars of the conspiracy, and even though he needed to call

Plemons to learn the details as to what misrepresentations were made on the

insurance application prior to meeting with Wilson, the fact that he called Plemons

                                        16
suggests, if anything, that he knew enough about the scheme to realize that he had

to call Plemons to determine what should be disclosed to Wilson.8

       While there may not have been any smoking guns, there was a substantial

body of evidence from which a reasonable juror could find that Douglas Colwell

participated in the conspiracy beyond a reasonable doubt.

B.     The Challenged Evidentiary Ruling

       Both defendants argue that the district court erred when it precluded inquiry

into the identities of the unnamed persons with whom Plemons and Smith had

previously engaged in similar frauds.

       A district court enjoys wide discretion in determining whether to admit or

exclude evidence. Hamling v. United States, 418 U.S. 87, 108, 94 S. Ct. 2887,

2903 (1974). To challenge a verdict on an incorrect evidentiary ruling, a

defendant must demonstrate that the objection was adequately preserved, that the

district court abused its discretion in interpreting or applying the evidentiary rule,

and that the error affected a substantial right. United States v. Stephens, 365 F.3d

967, 974 (11th Cir. 2004). Moreover, “a conviction will not be overturned on the

basis of a violation of Rule 403 absent a clear abuse of discretion.” United States

       8
         Douglas appears to argue that when he refused to sign the 941 form in December 1995,
he withdrew from the conspiracy and that this somehow negated his earlier participation in it.
Whether he withdrew has been disputed by the parties throughout these proceedings, but is of no
moment for purposes of determining whether there was sufficient evidence that Douglas
participated in the conspiracy in the first place for at least some period of time.
                                                   17
v. Cross, 928 F.2d 1030, 1051 (11th Cir. 1991) (citation omitted). We readily

conclude that the district court did not clearly abuse its discretion in relying on

Rule 403 to exclude certain evidence related to separate frauds not involving the

Colwells.

      Federal Rule of Evidence 403 provides in pertinent part that relevant

evidence “may be excluded if its probative value is substantially outweighed by

the danger of unfair prejudice, confusion of the issues, or misleading the jury, or

by considerations of undue delay, waste of time, or needless presentation of

cumulative evidence.” Fed. R. Evid. 403. In determining whether to admit

evidence under Rule 403, a district court may consider the amount of time it would

have taken the parties to present the evidence, how the evidence would affect the

focus of the trial, and whether it would have “diverted the jury’s attention from the

real issue in the case.” United States v. Gilliard, 133 F.3d 809, 815-16 (11th Cir.

1998).

      The district court did not clearly abuse its discretion for several reasons.

First, the district court allowed the jury to know that Plemons and Smith were

involved in prior insurance fraud. However, the nature of the dealings between

Plemons and Smith and their earlier clients had nothing to do with Plemons’s and

Smith’s dealings with the Colwells. Thus, the probative value of Plemons’s and

                                          18
Smith’s separate frauds was extremely attenuated. Indeed, the prior acts evidence

was not offered to show Plemons and Smith were aware of the fraud in this case

but to show the Colwells were aware of the fraud in this case, even though the

Colwells were undisputedly not involved in the prior fraud. Moreover, even

assuming the Colwells could elicit testimony concerning Plemons’s and Smith’s

ability to engage in fraud undetected by others, it only provides a weak inference,

at best, that the Colwells were unaware of Plemons’s and Smith’s fraud in this

case. Thus, the probative value of such evidence was rather unsubstantial.

      Second, allowing this type of inquiry would undoubtedly protract an already

lengthy trial and confuse the jury as the government and defense counsel put on

competing witnesses as to Plemons’s and Smith’s prior frauds. Fuller inquiry into

Plemons’s and Smith’s prior frauds would have resulted in a mini-trial about their

prior frauds. Evidence about whether their prior clients knew about the frauds

would have necessarily involved not only the identities of the clients but also more

evidence about the nature of the prior transactions. Such a mini-trial may have

confused jurors into believing that the mini-trial was the main event. Because any

potential probative value of the evidence was substantially outweighed by the

                                         19
dangers of confusion of the issues, misleading the jury, and undue delay, the

district court did not clearly abuse its discretion.9

       The Colwells rely heavily on United States v. Cohen, 888 F.2d 770 (11th

Cir. 1989). The Colwells’ case, however, is significantly different from Cohen in

several respects. First, unlike the Cohen brothers, the jury that convicted the

Colwells was fully aware that the Colwells’ co-conspirators, Plemons and Smith,

had committed prior fraudulent acts over an extended period of time.10 The

existence of the prior frauds by Plemons and Smith was elicited during direct

examination by the government, and the district court permitted the defendants to
       9
         Alternatively, even if we assume arguendo that the district court abused its discretion in
this evidentiary ruling, the defendants have failed to show that the ruling affected their
substantial rights. “[A]n erroneous evidentiary ruling is a basis for reversal only if the defendant
can demonstrate that the error probably had a substantial influence on the jury’s verdict.” United
States v. Stephens, 365 F.3d 967, 977 (11th Cir. 2004) (internal citation and punctuation
omitted). The evidence that both defendants knew that insurance companies were being
defrauded is supported by documentary evidence and substantial testimony from employees and
insurance auditors and investigators. Moreover, Curtis Colwell’s argument is belied by his
position during sentencing that he relied on Plemons’s and Smith’s statements that if they were
caught, they would face only civil liability.
       10
           In Cohen, Jerry Faw, the Cohen brothers’ co-conspirator, testified that the Cohen
brothers agreed to purchase a financially distressed company on condition that they could “steal a
little” from the company, and that they subsequently did so through an arrangement whereby
service providers overcharged the company in exchange for kick-backs which were shared
among Faw and the Cohen brothers. Cohen, 888 F.2d at 772-73. During cross-examination, the
defendants sought to question Faw about a prior business arrangement involving cash sales
which was perpetuated by Faw without the knowledge of the company’s previous president. The
district court precluded the evidence on grounds that it was outside the scope of direct
examination and irrelevant. Reversing, this Court, noting that the evidence was “crucial to the
defense” theory that Faw was capable of concocting and managing a fraudulent scheme without
the Cohen brothers’ participation, and that Faw was “an essential government witness,”
concluded that the evidence was relevant to the issue of the Cohen brothers’ guilt and that its
exclusion deprived them of a fair trial. Id. at 776-77.
                                                  20
confirm that the prior fraudulent activities that Plemons and Smith admitted to

involved the same sort of activity at issue in this case.

       Second, unlike co-conspirator Faw in Cohen, Plemons and Smith, as co-

conspirators, were not the essential link in establishing the Colwells’ participation

in the fraudulent scheme. Whereas Faw in Cohen testified that he received the

kickbacks and passed a share on to the Cohen brothers, here the economic benefits

of the fraud inured directly to the Colwells in the form of lower insurance

premiums.11 Third, unlike the Cohen case, the Colwells were not accused of

starting the scheme at issue. It is uncontroverted that Plemons and Smith engaged

in similar conduct in the past and had the wherewithal to do so again. Thus,

nothing in Cohen shows that the district court abused its discretion in its

evidentiary ruling in this case.

                                   III. CONCLUSION

       For the foregoing reasons, we affirm the convictions of defendants Curtis

and Douglas Colwell, and affirm both defendants’ sentences.

       AFFIRMED.

       11
        We also note that the Colwells’ theory — that unknown to the Colwells, Plemons and
Smith surreptitiously reduced their clients’ insurance premiums, clearly lacks merit.
                                                 21