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United States v. Hazelwood

United States District Court, E.D. Tennessee, Northern Division, Knoxville

May 25, 2017

MARK HAZELWOOD, et al., Defendants.


          Amul R. Thapar United States District Judge.

         The government charges the defendants with, among other things, wire fraud and conspiracy to commit mail and wire fraud. R. 97 ¶¶ 1-31. The defendants move to dismiss those charges on due-process grounds, arguing that "they are based on a [prosecution] theory inconsistent with [the] prosecutors' theory as to different defendants charged with the same crime." R. 82 at 1. Because they are not, the Court will adopt Magistrate Judge Guyton's recommendation that the motion be denied.

         I. Background

         The defendants worked sales at Pilot, which operates hundreds of truck stops across the country. Those hundreds of truck stops sell billions of gallons of fuel a year. R. 97 ¶ 1. A truck stop would be of little use if it did not. According to the indictment, [1] the defendants tried to leverage trucking companies' constant need for fuel into more customers for Pilot, conspiring "to increate Pilot's market share, " "to maximize Pilot's profit, " "to maximize" their own commissions, and to “achieve recognition among each other. Id. ¶ 25. As stated, there is nothing wrong with those goals. But, allegedly, there is something wrong with how the defendants went about achieving them: by “identifying trucking companies” that were “unlikely to detect” false promises, “inducing” them to buy their fuel from Pilot through the promise of discounts, withholding portions of those discounts, and then covering their tracks with false explanations. Id. ¶ 26.

         The defendants apparently had numerous co-conspirators in Pilot's sales department; the indictment lists seven in specific. Id. ¶ 12.[2] These seven have also been indicted- although in separate cases-and have already pled guilty. Their plea agreements mirror the indictment in this case, detailing the discount scheme, the withholding, the false excuses, and so on. As an example, the plea agreement for Chris Andrews, a Pilot regional sales manager, states that he “conspired and agreed with other Pilot employees to commit” mail fraud by “approv[ing] the sending of fraudulently reduced rebate checks” and to commit wire fraud by assuring victim customers that they “were in fact receiving their agreed upon diesel price discount” when they in fact were not. United States v. Andrews, 3:13-CR-173, D.E. 13 ¶ 3(1) (E.D. Tenn.). Andrews took “numerous overt acts” to further the conspiracy, but the lawyers who negotiated the plea bargain decided not to kill too many trees; instead they highlighted two instances: one where Andrews had an underling explain to a customer via email that Pilot's failure to give the customer its full rebate was “inadvertent[], ” and another where Andrews was required to attend a “break-out session” with a Pilot sales director who taught Andrews the tricks of the fraud trade, so to speak. Id. ¶ 3(m).

         Although these seven other defendants have “acknowledge[d] that the[ir] sentencing determination will be based upon the entire scope of the[ir] criminal conduct, ” id. ¶ 5(c), their pleas did include a carrot. Normally defendants are sentenced based on the “reasonably foreseeable” losses that they “knew” or “should have known” would result from the offense. U.S.S.G. § 2B1.1 cmt. n.3(A)(iv). When their offense is a conspiracy, their sentence will be based on the losses that resulted from the entire conspiracy, not just their contributions to it. See id. § 1B1.3(a)(1)(B) (defining “relevant conduct” as all the reasonably foreseeable acts of the co-conspirators); United States v. Bandy, 172 F.3d 49, at *2 (6th Cir. 1999) (table) (“Pursuant to USSG § 2B1.1, the amount of loss is determined in accordance with USSG § 1B1.3, the relevant conduct provision[.]”). But for the seven bargainers, “the United States will seek to hold [them] responsible” for a more “limited” sphere-specifically, those losses in which they personally had a hand, not “every [loss] caused by the entire conspiracy.” Andrews, 3:13-CR-173, D.E. 13 ¶ 3(n). Likewise, the government will seek to hold them responsible for only the particular victims whom they personally duped. Id. ¶ 3(o).

         Some would say those defendants struck a pretty good deal, all things considered. The defendants here say the deal creates a due-process violation-not for the plea bargainers, but for the defendants who have not pled. The Sixth Circuit has assumed, without deciding, “that the use of inconsistent theories of prosecution amounts to a denial of Due Process.” United States v. Gravley, 587 F. App'x 899, 913 n.8 (6th Cir. 2014). But see id. (“Whether the use of inconsistent theories of prosecution amounts to a denial of Due Process has not been settled.”). The defendants here argue that the government is guilty of inconsistency by leniency. The argument runs like this: the “linchpin” of the government's conspiracy theory “is that all [the instant] defendants participated with others, including seven [who have pled], in a single conspiracy”; yet in its plea agreements with the seven, the government appears to concedes that their “role in the conspiracy was quite limited”; and it is “entirely inconsistent” to say (in an indictment) that a group of Pilot employees joined in a conspiracy while saying (in plea agreements) that members of that group joined in a more limited way. R. 82 at 1-2. The defendants in this case therefore moved to dismiss the parts of the indictment accusing them of wire fraud and conspiracy to commit wire fraud. Id.; R. 100.

         Magistrate Judge Guyton recommends denying their motion. R. 141. He gives two grounds: one categorical, the other more case-specific. First, “an inconsistency between a defendant's charges in an indictment and the government's sentencing recommendations with regard to a coconspirator cannot, ” he concludes, “constitute a violation of due process.” Id. at 5 (emphasis added). Second, he concludes that, at any rate, the government “has not espoused inconsistent theories of prosecution” here. Id. (emphasis added). Both grounds are thoroughly supported and well-reasoned. The defendants object to both. R. 150.

         II. Discussion

         The Court reviews de novo those portions of a magistrate judge's recommendation to which a defendant objects. Fed. R. Crim. P. 59(b)(3).

         But the Court will not review more than it needs to. In their first two objections, the defendants debate the categorical ground, contending that an inconsistency between a plea agreement and an indictment can violate due process. R. 150 at 5. If the government has not pursued inconsistent theories in these specific cases, however, it has not violated due process, regardless of whether it could have done so. The Court will therefore just cut to the chase: Has the government pursued inconsistent theories of prosecution against the defendants here and the seven defendants who have pled?

         It has not. As discussed, the government has charged the defendants in this case with bilking Pilot customers through the promise of discounts at those customers never enjoyed (or at least, never fully enjoyed). At the same time, the government has convinced Andrews, one of their seven alleged co-conspirators, to plead guilty to the exact same kind of conduct. See Andrews, 3:13-CR-173, D.E. 13 ¶¶ 3(a)-(m). And the other six pleas are just like his. See United States v. Ralenkotter, 3:13-CR-63, D.E. 13 ¶¶ 3(a)-(q) (E.D. Tenn.); United States v. Stinnett, 3:13-CR-68, D.E. 12 ¶¶ 3(a)-(q) (E.D. Tenn.); United States v. Radford, 3:13-CR-69, D.E. 7 ¶¶ 3(a)-(m) (E.D. Tenn.); United States v. Clark, 3:13-CR-70, D.E. 16 ¶¶ 3(a)-(k) (E.D. Tenn.); United States v. Welch, 3:13-CR-78, D.E. 12 ¶¶ 3(a)-(1); United States v. Holden, 3:13-CR-175, D.E. 7 ¶¶ 3(a)-(j) (E.D. Tenn.). Of course, each agreement contains a slightly different account of the facts; each conspirator has his own role to play. But they are all alike in this important way: They show that the government prosecuted Pilot employees for the same conspiracy in those cases that it is prosecuting Pilot employees for here.

         It is true that the government discusses limiting the loss amount and victim population only in the seven other defendants' plea agreements, not the instant defendants' indictment. But that limit stems from a theory of punishment, not a theory of prosecution. To prosecute is “[t]o institute and pursue a criminal action against” someone. Prosecute, Black's Law Dictionary (10th ed.), Westlaw (database updated 2014). To institute and pursue a criminal action against someone for mail or wire fraud, the government must charge-then prove- that he “willfully participated in a scheme to defraud, ” used the mail or an interstate wire to carry out that scheme, and intentionally “deprive[d] a victim of money or property.” United States v. Rogers, 769 F.3d 372, 376 (6th Cir. 2014) (quoting United States v. Faulkenberry, 614 F.3d 573, 581 (6th Cir. 2010)). Loss amounts and numbers of victims have nothing to do with it, which explains why the government would not spend its time calculating these numbers in an indictment. To be sure, the government must calculate those numbers at some point. But that point comes after it proves its charges. Then it must recommend a sentence that accords with the Sentencing Guidelines, and one in particular: Guideline 2B1.1, under which a sentence must account for the loss amount and number of victims.

         One might argue that a prosecutor's job does not stop until a defendant is behind bars, that “prosecution” thus extends through sentencing, and that theories of punishment are also theories of prosecution. An interesting semantic argument, but not one that needs addressing here. The courts that control this one have only gone so far as to hold-and many times they have merely assumed-that inconsistent prosecution theories imperil due process when the government uses them to convict. See Berger v. United States, 295 U.S. 78, 88 (1935) (“It is as much [the prosecutor's] duty to refrain from improper methods calculated to produce a wrongful conviction as it is to use every legitimate means to bring about a just one.”) (emphasis added); see also Bradshaw v. Stumpf, 545 U.S. 175, 186-87 (2005) (finding no “prosecutorial inconsistencies, ” where the government accused two men of a shooting, since “the precise identity of the triggerman was immaterial to [the defendant's] conviction for aggravated murder” (emphasis added)); United States v. Collins, 799 F.3d 554, 582 (6th Cir. 2015) (finding no “inconsistent criminal theories” and no due-process violation (emphasis added)); Coley ...

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