U.S. v. Shotts

Page 1289

145 F.3d 1289

11 Fla. L. Weekly Fed. C 1583

UNITED STATES of America, Plaintiff-Appellee, v. Jesse Woodrow SHOTTS, Defendant-Appellant.

No. 96-6634.

United States Court of Appeals Eleventh Circuit.

July 10, 1998.

Nathan Z. Dershowitz, Amy Adelson, Dershowitz & Eiger, New York City, John A. Lentine, Wooten & Lentine, P.C., Birmingham, AL, for Defendant-Appellant.

C. Douglas Jones, U.S. Atty., Michael V. Rasmussen, Asst. U.S. Atty., Birmingham, AL, for Plaintiff-Appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before BLACK, Circuit Judge, and HILL and HENDERSON, Senior Circuit Judges.

HILL, Senior Circuit Judge:

Jessee W. Shotts appeals his convictions and sentences on various counts of mail fraud and obstruction of justice. For the following reasons, we affirm in part and reverse in part.

I.

Jessee W. Shotts is a criminal defense attorney in Birmingham, Alabama. In the 1980's, he also ran a bail bond business called J & J Bonding Co. In 1990, the Alabama Supreme Court promulgated a rule that prohibited attorneys from having an interest in a bail bond business. Shotts closed J & J Bonding Co., and a new corporation called JC Bail Bonds, Inc. ("JC") was formed. Shotts' wife, Jerri Grant, was the sole shareholder. Subsequently, she transferred her shares to Donald Long, who later transferred his shares to David Pettus. At no time did Shotts own any stock in JC.

Shotts directed his secretary, Kandy Kennedy, to mail applications and money to various municipalities to obtain licenses for the business. These applications named Long as the owner of the business. Shotts also directed Kennedy to prepare the annual certification, which stated that Long was the owner of the company and that no lawyer had any interest in the company.

The new firm began to operate in the fall of 1990. On three occasions, Shotts took Long to Judge Jack Montgomery's house. Montgomery was a state district court judge in Birmingham. On each occasion, Shotts would go into Judge Montgomery's house alone and return with bonds signed by Montgomery, but otherwise blank. Shotts referred to these pre-approved bonds as "Jack" bonds. They were used as appearance bonds by JC, but without showing JC as the surety. If the defendant did not appear in court as required, JC had no liability on the bond.

In 1992, the Federal Bureau of Investigation (FBI) began an investigation into allegations of corruption on the part of Judge Montgomery and obtained a wire tap of his home phone. In late 1992, the FBI intercepted a phone call from Shotts to Judge Montgomery in which Shotts asked him to sign a bond for a prisoner in another county. When Montgomery responded that he didn't know if he could sign the bond because he had no jurisdiction in that county, Shotts said he "had 5,000 reasons to try." Montgomery then told Shotts to come to his house.

That evening, the FBI executed a search warrant on Judge Montgomery's house. They found $31,000 in the house. The next day, Montgomery resigned from office. ¹

After the search of Montgomery's house, Shotts was called to testify before a grand jury investigating Montgomery. He was asked whether he owned JC Bail Bonds, Inc. He answered that he did not. He was also asked whether he had any interest in or was associated with a bail bond business, but he invoked his Fifth Amendment privilege and refused to answer.

In November of 1995, Shotts was indicted and charged with conspiracy to commit mail fraud in violation of 18 U.S.C. § 371 (Count 1) and fifteen counts of substantive mail fraud, in violation of 18 U.S.C. § 1341 (Counts 2-16). The indictment also charged five counts of bribery (of Montgomery) in violation of 18 U.S.C. § 666 (Counts 17-21), and six counts of obstruction of justice--one charging that Shotts made false statements to the grand jury in violation of 18 U.S.C. § 1623 (Count 26) and the remainder based upon witness tampering (Counts 22, 23, 24, 25 and 27), in violation of 18 U.S.C. § 1512. On February 23, 1996, a jury convicted Shotts on Counts 1-16, conspiracy to commit mail fraud and mail fraud, and three of the obstruction of justice counts. ²

Shotts appeals each of his convictions. He challenges the legal sufficiency of the mail fraud counts and the constitutionality of the obstruction of justice counts. He also contends that the evidence was insufficient to convict him on any of the obstruction of justice counts. Finally, he asserts errors in his sentences.

II.

Shotts claims that Counts 1-17 must be reversed because the allegations of mail fraud are insufficient as a matter of law. The mail fraud statute prohibits the use of the mails in furtherance of "a scheme to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises." 18 U.S.C. § 1341. In McNally v. United States, 483 U.S. 350, 360, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), the Supreme Court rejected the government's argument that the statute protects intangible rights, and held that the government must allege and prove that the victim was deprived of money or property. Shortly thereafter, the Court further explained that the statute extends to intangible property, but reiterated that Section 1341 is "limited in scope to the protection of property rights." Carpenter v. United States, 484 U.S. 19, 26-27, 108 S.Ct. 316, 98 L.Ed.2d 275 (1987) (citing McNally, 483 U.S. at 360, 107 S.Ct. 2875).

Shotts was charged in Count 1 with conspiracy to commit mail fraud. The indictment alleges that "[i]t was a part of the conspiracy that the defendant and his co-conspirators would ... cause to be delivered by mail ... business licenses, license renewal notices, [and] payments for licenses...." Counts 2-17 allege substantive violations of mail fraud and charge that "[i]t was a part of the scheme that the business and the defendant's nominees and agents would then obtain and renew licenses from various municipalities to do business as professional bondsmen." All of the substantive mail fraud counts allege either the mailing of a bail bond license renewal notice with a check or the receipt back in the mail of the license itself.

The government's theory was that these business licenses were property as contemplated by McNally and Carpenter. During the trial, the government argued that the business licenses were property. The government requested and the court instructed the jury that "[a] business license may be considered property." Therefore, Shotts' convictions for mail fraud and conspiracy to commit mail fraud may be affirmed only if the licenses he obtained were "property" under Section 1341. ³ We review de novo a challenge to the legal sufficiency of the indictment. United States v. Shenberg, 89 F.3d 1461, 1478 (11th Cir.1996).

This is an issue of first impression in this circuit and one on which the other circuits are divided. The majority of the circuits have held that a business license is not property and cannot support a Section 1341 mail fraud conviction. See e.g., United States v. Schwartz, 924 F.2d 410 (2d Cir.1991) (export license); United States v. Granberry, 908 F.2d 278 (8th Cir.1990) (school bus driver permits); Toulabi v. United States, 875 F.2d 122 (7th Cir.1989) (taxi operator license); United States v. Kato, 878 F.2d 267 (9th Cir.1989) (private pilot license); United States v. Murphy, 836 F.2d 248 (6th Cir.1988) (license to conduct bingo game). Most of these courts have reasoned that a business license represents nothing more than an "expression of the government's regulatory imprimatur." Schwartz, 924 F.2d at 418. For example, the Second Circuit held that "[t]he government's power to regulate does not a fortiori endow it with a property interest in the license." Id. at 417. ⁴ On the other hand, some circuits have held that a business license is sufficient property to support a mail fraud conviction. United States v. Salvatore, 110 F.3d 1131,1140 (5th Cir.1997) (video poker license); United States v. Bucuvalas, 970 F.2d 937 (1st Cir.1992) (liquor license); United States v. Martinez, 905 F.2d 709 (3d Cir.1990) (medical license).

This division among the circuits is not surprising since neither McNally nor Carpenter define the "property" protected by the mail fraud statute. Both merely teach that the term is "to be interpreted broadly," McNally, 483 U.S. at 356, 107 S.Ct. 2875, but not so broadly as to include "intangible rights." Carpenter, 484 U.S. at 25, 108 S.Ct. 316.

In Carpenter, however, the Supreme Court relied upon two of its prior opinions to hold that confidential business information is property. Id. at 26, 108 S.Ct. 316 (citing Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1001-1004, 104 S.Ct. 2862, 81 L.Ed.2d 815 (1984) and Dirks v. S.E.C., 463 U.S. 646, 653 n. 10, 103 S.Ct. 3255, 77 L.Ed.2d 911 (1983)). Both of these opinions relied exclusively upon state law to define property. In Monsanto, the Court noted the "basic axiom that '[p]roperty interests ... are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law.' " 467 U.S. at 1001, 104 S.Ct. 2862 (quoting Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 101 S.Ct. 446, 66 L.Ed.2d 358 (1980) (quoting Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972))).

Three years later, in considering whether a cable television franchise is Section 1341 property, the Seventh Circuit held that, under Carpenter, it must look for the answer in state law. Borre v. United States, 940 F.2d 215, 219 (7th Cir.1991) ("It is logical, therefore, for this court to look to state law in determining whether a cable television franchise constitutes 'property' for purposes of the mail fraud statute"). The First Circuit agrees. Bucuvalas, 970 F.2d at 944 (noting the Supreme Court's "consistent resort to state common law...