Mathison v. Berkebile

Filing 29

MEMORANDUM OPINION AND ORDER re: Vacating Convictions and Resentencing. Signed by U.S. District Judge Lawrence L. Piersol on 4/8/14. (SLW)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION

FILED

APR 0 8 201~

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CIV 12-4156
EUGENE H. MATHISON,
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CR 96-40048
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Petitioner,
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* MEMORANDUM OPINION AND
ORDER RE: V ACATING
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CONVICTIONS AND
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DAVID BERKEBILE, Warden,
RESENTENCING
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Respondent.
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In its Memorandum Opinion and Order in the above case dated December 20,2013, the Court
allowed the Respondent until December 31,2013, to brief the issue ofjudicial estoppel and directed
the parties to later submit simultaneous briefs on which ofMathison's convictions should be vacated,
and what impact the same should have on the calculation of a sentence at a resentencing. Doc. 2l.
The Respondent did not brief the issue ofjudicial estoppel, and the Court released Mathison on bail
on January 3, 2014. Doc. 22. The parties have now submitted simultaneous briefs on which of
Mathison's convictions should be vacated.
Although Respondent still has not challenged the application ofjudicial estoppel, Respondent
in the most recent submission relies on a concurring in part and dissenting in part opinion in United

States v. Prost, 636 F.3d 578,602-03 (1 Oth Cir. 2011) (1. Seymour, concurring in part and dissenting
in part), as support for his position that Mathison was not procedurally obstructed from raising a

Santos claim by Eighth Circuit precedent. The majority opinion in Prost, however, rejected this view
by stating:
After all, the Eighth Circuit appears to agree with Mr. Prost that its RICO precedent
did preclude the reading ofthe money laundering statute later adopted in Santos. See
United States v. Williams, 605 F.3d 556, 567 (8th Cir. 2010). So to reach the result
it advocates, the concurrence has to disagree with the Eighth Circuit's reading of its
own precedent.

Prost v. Anderson, 636 F.3d at 595. This Court, likewise, will not disagree with the Eighth Circuit's

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reading of its own precedent.!
Mathison takes the position that pursuant to the Supreme Court's holding in United States
v. Santos, 553 U.S. 507 (2008), each ofMathison' s money laundering convictions (Counts 32-37 and
53-61 ) sho uld be vacated, as well as his convictions for engaging in monetary transactions in vio lation
of 18 U.S.c. § 1957 (Counts 51-52). Mathison bases his position on Justice Stevens' concurrence
in Santos holding that when a merger problem exists, then "proceeds" may be defined as "profits."
In United States v. Rabashkin, the Eighth Circuit acknowledged that under Justice Stevens'
controlling concurrence "'proceeds' must mean 'profits' whenever a broader definition would
'perverse[ly]' result in a 'merger problem. '" 655 F.3d 849,865 (8th Cir. 2011) (quoting Santos, 553
U.S. at 527,528 n.7). As the Eighth Circuit explained in Rabashkin:
The controlling concurrence, which created a majority, explained that it could be

unfair to "[a]llow[ ] the Government to treat the mere payment of the expense [of

committing an offense] as a separate offense," !d. at 527, 128 S.Ct. 2020. Such

punishment would be "in practical effect tantamount to double jeopardy," id., since

the unlawful activity that produced the proceeds ''would 'merge' with money

laundering." Id. at 516, 128 S.Ct. 2020 (plurality opinion).

655 F.3d at 864-865.

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Respondent takes the position that ifthe Court has the authority to resentence Mathison - and
the Court maintains that it does, Counts 32-37, 53 and 59-61, involving payments to victims of the
Ponzi scheme, and Counts 54, and 56-58 involving payments to co-defendants, constitute a merger
and do not involve profits required to sustain a conviction under Santos. Respondent maintains,
however, that Counts 51 and 52, were transfers to Eldred Evey, who was not a co-defendant in the
Ponzi scheme to defraud investors who believed they were investing in the commodities market, and
cites to United States v. Mathison, 157 F.3d 541, 545 (8th Cir. 1998), for the following
characterization ofthe transfers involved in Counts 51 and 52: "Mr. Mathison laundered some ofthis
money by wiring it to an associate at a bank in Arizona, who then wired the money back to Mr.
Mathison, or into another account, at his direction."

IThe jury in Mathison's case was instructed on the definition of proceeds that was set forth
in the Eighth Circuit Manual of Model Civil Jury Instructions, No.§ 6.18.1956J (1996) and (2000).
This definition was inconsistent with the definition of proceeds set forth in Santos.
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In the Second Superseding Indictment Mathison was charged with and the jury convicted him
of mail fraud, wire fraud, conspiracy and money laundering. Mathison was charged in Count 32
through 39 with money laundering, in violation of 18 U.S.C. §§ 1956(a)(l)(A)(i) and 1956
(a)(1)(B)(i),2 for mailing checks to victims of the Ponzi scheme under the pretense of the money
representing profits from a commodities investment.

Paragraph 6 of the Second Superseding

Indictment alleges "It was part ofthe scheme and artifice to defraud that Eugene H. Mathison would
obtain money from other victims when it became necessary to return some money to earlier victims."
Justice Stevens observed:
The Government suggests no explanation for why Congress would
have wanted a transaction that is a normal part of a crime it had duly
considered and appropriatelypunished elsewhere in the Criminal Code
to radically increase the sentence for that crime. Interpreting
"proceeds" to mean "profits" eliminates the merger problem.

Santos, 553 U.S. at 517. Since the conduct that was charged in Counts 32 through 39 is a normal
part of the mail fraud that was encompassed within Mathison's prosecution, and mail fraud, at that
time, was punishable by imprisonment of not more than five years, Counts 32 through 39 constitute
a merger problem and the Court is vacating the convictions for these Counts. See Garland v. Roy,
615 F.3d 391 (5th Cir. 2010) (Defendant in illegal pyramid scheme entitled to habeas relief under 28
U. S. C. § 2241 when the same transaction may have been used to prove both the underlying unlawful

2In the time frame Mathison was charged, 18 U.S.C. § 1956 provided in pertinent part:
(a)(l) Whoever, knowing that the property involved in a financial
transaction represents the proceeds ofsome form ofunlawful activity,
conducts or attempts to conduct such a financial transaction which in
fact involves the proceeds of specified unlawful activity -­
(A)(i) with the intent to promote the carrying on ofspecified unlawful
activity; or
(B) knowing that the transaction is designed in whole or in part -­
(i) to conceal or disguise the nature, the location, the source, the
ownership, or the control of the proceeds of specified unlawful
activity;
shall be sentenced to ... imprisonment for not more than twenty years ....
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activity and the money-laundering charges).
In Counts 51 and 52 Mathison was charged with and the jury convicted him of money
laundering, in violation ofl8 U.S.C. § 1957. 3 18 U.S.c. § 1957 criminalizes engaging in a monetary
transaction in criminally derived property of a value greater than $10,000 derived from specified
unlawful activity. Counts 51 and 52 involved wire transfers of$20,000 and $12,000 to Eldred Evey.
Evey was employed by a bank in Arizona. Mathison or his co-defendant Dean Chamber wired funds
to Evey, who then made a wire transfer ofthe funds to Euro Capital Markets, a company associated
with Ronald Totaro. TT 1247 - 1262. Totaro was later convicted ofsixty-one counts ofmail fraud,
wire fraud, money laundering, engaging in unlawful money transactions and racketeering, after posing
as an international banker and pocketing ill-gotten advance fees. See United States v. Totaro, 40 Fed.
Appx. 321 (8th Cir. 2002). Evey was not a victim ofMathison ' s Ponzi scheme and the wire transfers
in issue made to Evey were not payment to him as an employee or associate of Mathison. Mathison
has failed to show that there is a merger problem with Counts 51 and 52 and the convictions from
Counts 51 and 52 will not be vacated.
In Counts 53 through 59 Mathison was charged with money laundering in violation of
18 U.S.C. §§ 1956(a)(1)(A)(i) and 1956(a)(1)(B)(i) for conducting a financial transaction knowing
that the monetary instruments, checks, were the proceeds 0 f mail fraud. Count 53 involved a $30,000
check to Dr. Kent Forss. Count 54 involved a $5,000 check to co-defendant Perry Gobel. Count
55 involved a $10,000 check to Charlotte Holmes, co-defendant Robert Holmes' wife. Count 56
involved a $7,000 check to co-defendant Robert Holmes, written on the same day as the check was
written to his wife. The convictions for Count 54 and 56 constitute essential expenses ofoperating
the Ponzi scheme by making payments to Mathison's business associates and co-defendants, and will
be vacated. Counts 57 and 58 involved two checks written to co-defendant Dean Chambers. Count
59 involved a check written to Maclean Webber, one ofthe listed victims ofthe Ponzi scheme in this
case. The conviction for Count 59 involves a merger problem and will be vacated.

3The Santos opinion dealt with money laundering under 18 U.S.c. § 1956, not 18 U .S.c. §
1957. It appears that the Eighth Circuit would apply the Santos holding to a prosecution under 18
U.S.C. § 1957. See United States v. Clay, 618 F.3d 946,954 n.6 (8th Cir. 2010) (reviewed under
plain error standard whether district court should have instructed the jury that the term "proceeds"
meant ''profits'' in a prosecution under 18 U.S.C. § 1957).

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Dr. Kent Forss testified that he invested in Universal Investment Group, believing he was
investing in the commodities market. TT 567. Dr. Forss testified that after he requested to receive
$60,000 ofhis investment, he was issued a check in the amount of$30,000. TT 573. This payment
to Dr. Forss merges with the fraud scheme, so the conviction for Count 53 will be vacated.
According to the trial testimony Charlotte Holmes cashed in a CD and initially invested
$1,000 in Northern States Investment Company in her husband's name. TT 1695-1696. Charlotte
Holmes, who was employed, later invested $10,000 in April of 1995 and $5,000 in November of
1995. TT 1712. There is also testimony that some of the investment statements were in Charlotte
Holmes' name. TT 1723. Charlotte Holmes later requested to take out $10,000 from the Northern
States Investment Group and a check for $10,000 was issued to her with a note saying "complete
liquidation ofpartner share." Gov. Ex. 194. TT 1993. The $10,000 paid to Charlotte Holmes as an
investor or as a business expense ofpaying a partner, constitutes a merger problem under Santos, and
the conviction under Count 55 is vacated.
Counts 57 and 58 for two checks written to co-defendant Dean Chambers do not clearly
constitute an essential expense ofthe fraud scheme in light ofthe evidence regarding those payments.
Chambers testified, and no one has refuted that testimony, that checks in the amount ofapproximately
$60,000 were written to him, but that he cashed them and brought the cash back to Mathison, based
on Mathison's direction. TT 2066. There is no merger problem presented in Counts 57 and 58, and
the convictions on those Counts will not be vacated.
Counts 60 and 61 are § 1956 money laundering charges for wire transfers of$19,000 and
$11,000 to Ben Kienitz.

Ben Kienitz testified that he invested a total of $100,000 in Perob

Investments, believing he was investing in the commodities market. TT 991-992, 1002. After Kienitz
requested money to be used for a down payment on a house for his daughter, he was wired $19,000
on August 12, 1996, and was later wired $1 1,000 on September 5, 1996. TT 1009. Thesepayments
merge with the fraud scheme and the convictions for Counts 60 and 61 will be vacated.
Based on the Santos holding, the money laundering convictions on Counts 32 through 39,
Counts 53 through 56, and Counts 59, 60, and 61 must be vacated. Mathison must be resentenced
in light ofthese convictions being vacated.
Respondent cites to the Santos opinion on p. 528 for the proposition that the money

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laundering convictions not vacated "would be subject to the same mandatory sentencing guidelines
that were in place at the time Mathison was originally sentenced." Doc. 27 at p. 8. Justice Stevens'
concurring and controlling opinion in Santos notes that the respondents' direct appeal was decided
several years before Booker and states: "If Justice ALITO's opinion were to carry the day, both
respondents would return to prison to serve the remainder of their lengthy sentences." 553 U.S. at
528. Justice Alito's opinion, however, is a dissenting opinion, which quite obviously did not carry
the day, and Mathison is not restricted to the sentencing structure in place at the time ofhis original
sentencing. See Pepper v. United States, 131 S.Ct. 1229, 1248-1249 (2011) ("The differences in
procedural opportunity that may result because some defendants are inevitably sentenced in error and
must be resentenced are not the kinds of 'unwarranted' sentencing disparities that Congress sought
to eliminate under § 3553(a)(6).").
Respondent is also incorrect in citing to Never Misses A Shot v. United States, 413 F.3d 781
(8th Cir. 2005), as authority for Santos not applying retroactively on collateral review. In Never
Misses A Shot the petitioner attempted to set aside his conviction based on United States v. Booker,

543 U.S. 220 (2005). The Eighth Circuit in Never Misses A Shot cited to Teague v. Lane, 489 U.S.
288, 310-11 (1989), for the following proposition: "New procedural rules generally do not apply
retroactively unless the rule is of 'watershed' magnitude implicating 'the fundamental fairness and
accuracy of the criminal proceeding,' or unless the rule prevents the lawmaking authority from
criminalizing certain kinds of conduct." Never Misses A Shot, 413 F.3d at 783. The rule in Santos
is not a new procedural rule. The Santos decision provides a new definition of a key phrase in the
money laundering statute and constitutes a substantive change of law which increased the
government's burden of proof, and the decision is therefore retroactive and applies on collateral
review. See Wooten v. Cauley, 677 F.3d 303,308 (6th Cir. 2012); see also Davis v. United States,
417 U.S. 333, 346-347 (1974) (conviction and punishment for an act that the law does not make
criminal justifies collateral relief). Accordingly,

IT IS ORDERED:
1.

That Mathison's money laundering convictions on Counts 32 through 39,

Counts 53 through 56, and Counts 59,60, and 61 are vacated;

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2.

That the United States Probation Office is directed to prepare and submit to
the United States District Court a supplemental presentence investigation
report by May 12, 2014, and the parties may submit objections to the same by
May 19, 2014; and

3.

That resentencing in the above matter will be at the Federal Courthouse in
Sioux Falls in Courtroom 1 on Monday, June 2, 2014 at 1:30 P.M.

Dated this 8th day of April, 2014.

BY THE COURT:

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L rence L. Piersol
United States District Judge
ATTEST:
JOSEPHHJV\S'CLER~
BY:

SLlY\1rt1OJ
(SEAL)

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DEPUTY!

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