US v. Teresa Hodge

Filing 920081003

Opinion

UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 06-5281

UNITED STATES OF AMERICA, Plaintiff - Appellee, v.

TERESA HODGE, Defendant ­ Appellant.

Appeal from the United States District Court for the District of Maryland, at Greenbelt. Roger W. Titus, District Judge. (8:03cr-00133-RWT)

Submitted:

September 11, 2008

Decided:

October 3, 2008

Before TRAXLER, Circuit Judge, HAMILTON, Senior Circuit Judge, and James C. DEVER III, United States District Judge for the Eastern District of North Carolina, sitting by designation.

Affirmed in part; vacated and remanded in part by unpublished per curiam opinion.

David Schertler, SCHERTLER for Appellant. Rod J. Baltimore, Maryland; Bryan Attorney, OFFICE OF THE Maryland, for Appellee.

& ONORATO, L.L.P., Washington, D.C., Rosenstein, United States Attorney, E. Foreman, Assistant United States UNITED STATES ATTORNEY, Greenbelt,

Unpublished opinions are not binding precedent in this circuit.

PER CURIAM: Teresa Hodge (Hodge) appeals her convictions on six counts of mail fraud, 18 U.S.C. § 1341, seven counts of interstate

transportation of property obtained by fraud, 18 U.S.C. § 2314, and one count of money laundering, 18 U.S.C. § 1957(a). Hodge

also appeals her sentence of eighty-seven months' imprisonment. We affirm Hodge's convictions in toto, but vacate her sentence and remand for resentencing absent application of the sentencing enhancement calculating imposed her pursuant to USSG § 3B1.1(c) under (2000) the in

advisory

sentencing

range

United

States Sentencing Guidelines.

I. In 2000, Hodge and Marcus Dukes founded the Financial The

Warfare Club (FWC) as a Maryland nonprofit corporation. 1

pair, who are both African-Americans, purportedly created FWC to generate wealth within the African-American community by

promoting investment literacy among those who typically lacked knowledge of financial markets and by providing investment

FWC listed its principal office as 12138 Central Avenue, Suite 233, Mitchellville, Maryland, 20721, which address actually was the address for a mailbox at a Mailboxes, Etc. location.

1

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opportunities

in

companies

that

would

generate

revenue

that

would stay within the African-American community. Hodge and Dukes primarily sought to grow FWC through live presentations congregations. introduced Hodge to African-American The pastor of clergy the to would and their respective usually at the

hosting the

church

and

Dukes pair

attendees make

presentations.

The

then

material

misrepresentations to the attendees in order to induce them to become a member of FWC at one of three membership levels. The top level required a $2,550.00 investment, the middle level a $1,050.00 investment, and the lowest level a $550.00 investment. The top level entitled the member to three

financial literacy courses; 2,000 shares of stock in each of three infrastructure companies that Hodge and Dukes were

purportedly developing; and the opportunity to buy additional shares their of stock in those companies at reduced The prices middle before level 500

initial the

public member

offerings to two

(IPOs).

entitled

financial

literacy

courses,

shares of stock in each of the three infrastructure companies, and the same opportunity to purchase more shares at pre-IPO

prices.

The least expensive level entitled the member to one

financial literacy course, 250 shares of stock in each of the three infrastructure companies, and the opportunity to buy more shares at pre-IPO prices. - 3 -

Among other items, Hodge claimed that the African-American community had been intentionally locked out of achieving

financial success on Wall Street via the sophisticated investor accreditation rules of the Securities and Exchange Commission of the United States (the SEC). Hodge held out FWC as a mechanism In this vein, Hodge

for African-Americans to bypass such rules.

falsely told attendees at FWC presentations that if a potential investor did not have an income of at least $200,000.00 during the previous three years, the SEC's sophisticated investor

accreditation rules prohibited such person from investing in an initial public offering of stock (IPO). Hodge also falsely told attendees at FWC presentations that Dukes had considerable having investment taken experience the retail on Wall Street, store

including

personally

clothing

Today's Man public.

Hodge also knew that Dukes often falsely

told attendees at FWC presentations that he had given financial advice to a church in Washington, D.C. and, as a result, the church made $50,000 and two church members bought matching

Porsche automobiles with their profits. Hodge, as well as others who introduced her during the

presentations, told attendees that she was a wealthy woman with decades of business experience. that she had personally invested Hodge also told the attendees $1,000,000.00 in FWC. The

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evidence

at

trial

proved

all

of

these

representations

to

be

false and misleading. After making numerous FWC presentations to African-American churches in Maryland, Hodge and Dukes took FWC on the road, giving presentations at numerous churches throughout Georgia, When it

Michigan, Ohio, New York, New Jersey, and Alabama.

became apparent that FWC's promised benefits (financial literacy courses and IPO profits) were not forthcoming, a number of FWC members requested a refund of their investments. of members actually received a refund. Only a handful

When Dukes failed to

respond timely to some FWC members' complaints, some of those members complained about FWC to the Maryland Attorney General's Office. On March 5, 2001, the Maryland Securities Commissioner

issued a cease-and-desist order (the Cease and Desist Order or Exhibit Maryland 1) against Dukes, Hodge, and FWC, ordering them to stop offering or selling unregistered securities, including memberships in FWC, and to stop violating the anti-fraud

provision of the Maryland Securities Act, Md. Code Ann., Corps. & Ass'ns §§ 11-101 to 11-805. Hodge received her copy of the

Cease and Desist Order on March 7, 2001. Approximately one week later, on March 13, 2001, Dukes

incorporated a new FWC entity in Washington, D.C. same time, FWC moved out of its Maryland office. - 5 -

Around the

On April 10, 2002, Hodge and Dukes entered into a consent decree with the Maryland Securities Commission (the Consent

Decree).

Pursuant to the terms of the Consent Decree, Hodge and

Dukes admitted to certain facts, including the fact that they had raised approximately $800,000.00 from about 800 FWC members, they had provided no financial literacy courses to FWC members, and none of the three infrastructure companies had any prospect of going public. The Consent Decree also contained the Maryland

Securities Commission's legal conclusions that Hodge and Dukes had committed securities and investment fraud under the Maryland Securities Act, which the pair neither admitted nor denied. In

the Consent Decree, the Commission also repeated its orders to Hodge and Dukes to cease and desist from engaging in fraudulent investment activities. In December 2003, Hodge and Dukes were indicted by a

federal grand jury for mail fraud, interstate transportation of property obtained by fraud, and money laundering. count second superseding indictment naming only A fourteenHodge was

returned on November 28, 2005. cases for purposes of trial.

The district court severed the

On June 8, 2005, a jury convicted Dukes on all but three counts, which three counts the district court had dismissed on the government's motion. On July 3, 2007, we affirmed Dukes'

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convictions, but remanded for resentencing.

United States v.

Dukes, 242 Fed. Appx. 37 (4th Cir. July 3, 2007) (unpublished). On June 6, 2006, following a three-week trial, the jury convicted Hodge on all counts. The district court sentenced Hodge noted this

Hodge to eighty-seven months' imprisonment. 2 timely appeal.

II. The first issue on appeal concerns the Cease and Desist Order. Notably, Hodge premises several of her arguments with

respect to this issue upon her claim that the entirety of the Cease and Desist Order, a.k.a., Exhibit Maryland 1, was sent to the jury room for the jury's consideration during its

deliberations.

In contrast to Hodge's version of events, in its

appellate brief, the government claimed the jury's only exposure to the text of the Cease and Desist Order occurred during the direct testimony of government witness Ronald Wilson, when the government read certain portions of such document into evidence while the same portions appeared simultaneously before the jury on a large video screen in the courtroom, known as the ELMO. Ronald
2

Wilson

was

a

securities

fraud

investigator

with

the

The district court used the 2000 version of the United States Sentencing Guidelines Manual (effective November 1, 2000) in calculating Hodge's advisory sentencing range.

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Maryland Attorney General's Office during the time that Hodge and Dukes operated FWC. Ronald Wilson attended As part of his investigation of FWC, a FWC presentation at a church in

Maryland.

He also served the Cease and Desist Order on Dukes.

After the completion of all appellate briefing, we remanded this case to the district court for a factual finding concerning the extent of the jury's actual exposure to the contents of the Cease and Desist Order (Exhibit Maryland 1) during Hodge's trial and ordered this appeal held in abeyance pending further order of this court. On remand, the district court agreed with the

government's version, finding that the Cease and Desist Order did not go to the jury room during deliberations, and that the jury only heard the portions of the Cease and Desist Order read into evidence by the government and put on the ELMO for the jury's viewing during the government's direct examination of

Ronald Wilson. This appeal is now back before us. The following portions

of the Cease and Desist Order are the only portions of such order presented to the jury which are potentially troublesome from a Federal Rule of Evidence 403 (Rule 403) perspective.

Those portions are: and Dukes and

(1) "ORDERED, that Financial Warfare, Hodge under the Act," their direction . . . cease of and the that

anyone

desist

from

violating

anti-fraud (J.A. - 8 506);

provisions (2)

[Maryland]

Securities

"ORDERED

respondents

cease

and

desist

from

engaging

in

material

misrepresentations or omissions in connection with the offer or sale of securities in this State," (J.A. 516); and (3) "ORDERED that respondents cease and desist from engaging in material

misrepresentations or omissions in connection with the offer of investment advice in this State." (J.A. 517).

Without the Cease and Desist Order having been sent to the jury room, Hodge is left with her arguments that the portions of the Cease and Desist Order that were read into the record and simultaneously put on the ELMO violated her right to confront witnesses against her under the Sixth Amendment to the United States Constitution, as articulated in Crawford v. Washington, 541 U.S. 36 (2004). Alternatively, she argues that the portions

of the Cease and Desist Order that were read into the record and simultaneously put on the ELMO violated Rule 403. Neither

argument has merit. A. The Confrontation Clause Argument. Sixth Amendment accused guarantees shall that the "[i]n right all criminal to be

prosecutions,

the

enjoy

. . .

confronted with the witnesses against him." VI.

U.S. Const. amend.

In Crawford, the Supreme Court held that the Confrontation

Clause prohibits the "admission of testimonial statements of a witness who did not appear at trial unless he was unavailable to testify, and the defendant had had a prior opportunity for

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cross-examination." [testimonial]

Crawford, . . .

541 cause

U.S. the

at

53-54. to

"Only be a

statements

declarant

`witness' within the meaning of the Confrontation Clause.

It is

the testimonial character of the statement that separates it from other hearsay upon that, while subject is not to traditional to the

limitations

hearsay

evidence,

subject

Confrontation Clause."

Davis v. Washington, 547 U.S. 813, 821

(2006) (citation omitted). Hodge's Confrontation Clause argument is without merit.

First, in the form of allegations and orders, the language of the Cease and Desist Order is obviously not testimonial in

nature.

Second, the allegations and ordering language are not

hearsay because the government did not introduce them for the truth of the matter asserted, see Fed. R. Evid. 801(c), but rather to establish that Hodge was on notice of the allegations and the ordering language set forth in the Cease and Desist Order, and nonetheless, continued uninterrupted in her active role in recruiting FWC members. Hodge's fraudulent intent. B. In Rule 403 Argument. relevant part, Rule 403 provides that "[a]lthough Such evidence was probative of

relevant, evidence may be excluded if its probative value is substantially . . . ." outweighed by the danger of unfair prejudice

Fed. R. Evid. 403.

According to Hodge, the portions - 10 -

of the Cease and Desist Order heard by the jury and put on the ELMO for the jury's viewing "created an extreme danger that the jury would infer guilt on the part of Hodge in light of the fact that the Cease and Desist Order made it appear that the State of Maryland had already made such findings." 10). We disagree. Even if we assume arguendo that the district (Hodge's Reply Br. at

court erred under Rule 403 in allowing the jury to see or hear any portion of the Cease and Desist Order, we can say with fair assurance admission that, from without the stripping the the jury's assumed verdict erroneous was not

whole,

substantially swayed by the error. 343 F.3d 273, 286 (4th Cir. 2003). be harmless.

United States v. Curbelo, Accordingly, any error would

In reaching this conclusion, we are mindful that

we rejected, on the same rationale, Dukes' evidentiary challenge to the admission of the entirety of the Consent Decree during his trial, which decree having contained the Maryland Securities Commission's committed legal conclusions and that Hodge and Dukes the had

securities

investment

fraud

under

Maryland

Securities Act, contained far more prejudicial information than the Cease and Desist Order. See United States v. Dukes, 242

Fed. Appx. 37, 48 (4th Cir. July 3, 2007) (unpublished). In sum, we hold the district court did not commit

reversible error when it allowed the government to read certain - 11 -

portions of the Cease and Desist Order into the record and to put the same portions on the ELMO for the jury's viewing, all during the direct testimony of government witness Ronald Wilson. 3

III. With respect to her sentence, Hodge first argues that the district court engaged in impermissible double-counting when it increased her offense level and by two levels, her pursuant offense to USSG by

§ 2F1.1(b)(4)(C)

(2000),

increased

level

another two levels, pursuant to USSG § 2F1.1(b)(6)(A) (2000). According to Hodge, these two sentencing enhancements

impermissibly punish the same conduct in her case. When calculate United determining the a sentence, advisory the district range court under must the and

appropriate Sentencing

guideline (the

States

Guidelines

Guidelines)

consider it in conjunction with the factors set forth in 18 U.S.C. § 3553(a). (2007).
3

Gall v. United States, 128 S. Ct. 586, 596

In reviewing the district court's application of the

We have also carefully reviewed and reject as without merit Hodge's remaining two challenges to her convictions: (1) that the district court committed reversible error by denying her motion for a mistrial based upon the government's brief reference to Timothy McVeigh during its rebuttal closing argument; and (2) that the testimony of securities law expert Michael Ferraro should have been excluded as irrelevant and unfairly prejudicial. Neither argument warrants further discussion.

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Guidelines,

we

review

findings

of

fact

for

clear

error

and

questions of law de novo. 456 (4th Cir. 2006).

United States v. Green, 436 F.3d 449,

Hodge's double-counting argument is without merit. § 2F1.1(b)(4)(C) provides for a two-level increase if

USSG the

offense involved "a violation of any prior, specific judicial or administrative order, injunction, decree, or process not

addressed elsewhere in the guidelines . . . ." added).

Id. (emphasis

See also USSG § 2F1.1(b)(4)(C) (2000), comment. (n.6)

("This enhancement does not apply if the same conduct resulted in an enhancement pursuant to a provision found elsewhere in the guidelines."). USSG § 2F1.1(b)(6)(A) (2000) provides for a two-

level increase if "the defendant relocated, or participated in relocating, a fraudulent scheme to another jurisdiction to evade law enforcement or regulatory officials . . . ." Id.

Here, the district court increased Hodge's offense level by two levels, pursuant to USSG § 2F1.1(b)(4)(C) (2000), based upon Hodge's violation of the Cease and Desist Order by continuing to make sales presentations and to accept new members in FWC (with membership applications directed to a mailing address for FWC in Maryland) after she received the Cease and Desist Order. district court then increased Hodge's offense level by The two

levels, pursuant to USSG § 2F1.1(b)(6)(A) (2000), based upon her

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and Dukes' relocation of FWC to Washington, D.C., to evade the jurisdiction of the Maryland Securities Commission. Contrary these two to Hodge's position, on the district court based in two

enhancements Dukes, the

different court

conduct. applied

Notably, these same

sentencing

district

enhancements, and we rejected Dukes' identical double-counting argument on the same basis. See Dukes, 242 Fed. Appx. at 51.

In sum, we reject Hodge's double-counting argument as without merit.

IV. Hodge further contends the district court erred when it increased § 3B1.1(c) offense. her offense for level her by two levels, pursuant role to in USSG the

(2000),

alleged

aggravating

The government concedes that Hodge's sentence should

be vacated and the case remanded for Hodge's resentencing absent the two-level increase in her offense level imposed pursuant to USSG § 3B1.1(c)(2000). We agree.

USSG § 3B1.1(c) (2000) provides for a two-level increase "[i]f the defendant was an organizer, leader, Id. manager, or

supervisor in any criminal activity . . . ."

Application

Note 2 to this guideline makes clear that "[t]o qualify for an adjustment under this section, the defendant must have been the organizer, leader, manager, or supervisor of one or more other - 14 -

participants."

USSG

§

3B1.1(c)

(2000),

comment.

(n.2).

Application Note 1 defines "participant" as "a person who is criminally responsible for the commission of the offense, but need not have been convicted." Here, § 3B1.1(c) the district on court Id. comment. (n.1). based its application and of USSG of

(2000)

Hodge's

recruitment

supervision

church leaders, in particular Pastor Samuel Hairston and Bishop Ralph Dennis. However, as the government concedes, at Dukes'

resentencing on October 12, 2007, the district court found that Pastor Samuel Hairston and Bishop Ralph Dennis were not "other participants" in Dukes and Hodge's scheme to defraud, within the meaning of USSG § 3B1.1(c) (2000), comment. (n.2). basis upon which the district court applied USSG Thus, the § 3B1.1(c)

(2000) in sentencing Hodge is infirm. Hodge's sentence on this basis and

Accordingly, we vacate remand for resentencing

absent application of the two-level increase pursuant to USSG § 3B1.1(c) (2000). 4

We have carefully reviewed and find without merit Hodge's two remaining challenges to her sentence: (1) that the district court erred in increasing her offense level by two levels, pursuant to USSG § 3C1.1 (2000), for obstruction of justice; and (2) that the district court erred by using the preponderance of the evidence standard instead of the more rigorous beyond a reasonable doubt standard in making its factual findings for purposes of calculating her advisory sentencing range under the Guidelines. Neither argument warrants further discussion.

4

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V. In conclusion, we: (1) affirm Hodge's convictions in toto;

and (2) vacate her sentence and remand for resentencing absent application of a two-level increase in her offense level

pursuant to USSG § 3B1.1(c) (2000). AFFIRMED IN PART; VACATED AND REMANDED IN PART

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