United States v. Shotts

Citations: 145 F.3d 1289; 1998 U.S. App. LEXIS 16080; 1998 WL 384047Docket: 96-6634

Court: Court of Appeals for the Eleventh Circuit; July 10, 1998; Federal Appellate Court

Original Court Document: View Document

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Jessee W. Shotts, a criminal defense attorney in Birmingham, Alabama, appeals his convictions and sentences for mail fraud and obstruction of justice. The appeal originates from a case involving Shotts' involvement with JC Bail Bonds, Inc., which was formed after a 1990 Alabama Supreme Court rule prohibited attorneys from owning bail bond businesses. Shotts' wife was the sole shareholder, transferring her shares to Donald Long and subsequently to David Pettus, ensuring Shotts had no ownership stake.

Shotts directed his secretary to submit applications and certifications falsely stating Long as the owner of JC and confirming no lawyer had an interest in the company. The business operated starting in fall 1990, using pre-approved bonds from state district court judge Jack Montgomery, which Shotts obtained under questionable circumstances. An FBI investigation into Montgomery's corruption revealed Shotts sought a bond for a prisoner outside Montgomery's jurisdiction, accompanied by a statement suggesting a bribe.

Shotts later testified before a grand jury investigating Montgomery, denying ownership of JC and invoking his Fifth Amendment rights when asked about his involvement with bail bonds. The indictment against Shotts included conspiracy to commit mail fraud, multiple counts of substantive mail fraud, bribery of Montgomery, and obstruction of justice through false statements and witness tampering. The court affirmed some convictions while reversing others.

On February 23, 1996, Shotts was convicted on multiple counts, including conspiracy to commit mail fraud and obstruction of justice. He appeals these convictions, challenging the legal sufficiency of the mail fraud counts, the constitutionality of the obstruction charges, and the adequacy of evidence for the obstruction counts. Shotts argues that Counts 1-17 should be reversed due to insufficient allegations of mail fraud, which, under 18 U.S.C. § 1341, requires proof that victims were deprived of money or property. The Supreme Court's decisions in McNally v. United States and Carpenter v. United States clarify that while the statute protects property rights, it does not extend to intangible rights. Shotts was indicted for conspiracy related to obtaining business licenses, which the government treated as property. The indictment and trial focused on whether these licenses constituted property under the law. The government contended that the scheme also aimed to obtain money, suggesting that the convictions could stand even if the licenses were not deemed property. However, the general nature of the jury's verdict creates uncertainty about the specific basis for their decision, leading to questions about whether a legal theory supporting the convictions was sufficient. Consequently, a general verdict based on potentially inadequate legal theory necessitates reversal.

Legal sufficiency challenges to indictments are reviewed de novo, as established in United States v. Shenberg. This matter presents an issue of first impression in the circuit, with existing divisions among other circuits regarding whether a business license qualifies as property under Section 1341 for mail fraud convictions. The majority of circuits, including the Second, Eighth, Seventh, Ninth, and Sixth, have concluded that business licenses do not constitute property, viewing them merely as expressions of government regulatory authority. Conversely, some circuits, such as the Fifth, First, and Third, have recognized business licenses as property sufficient to support mail fraud convictions. 

This division persists due to the lack of a definitive definition of "property" in the mail fraud statute, with the Supreme Court emphasizing a broad interpretation without extending it to "intangible rights." In prior cases, the Supreme Court established that confidential business information is property, relying on state law to define property interests. Consequently, lower courts have followed suit, referring to state law when determining the property status of various licenses. Notably, there is a stark contrast in rulings among circuits, exemplified by differing outcomes in cases involving medical licenses, where one circuit found it a federal crime while another dismissed the prosecution for lack of a property interest. The discussion underscores the necessity of state law in defining property for Section 1341 purposes, leading to inconsistent legal interpretations across jurisdictions.

Mail fraud definitions vary significantly across U.S. circuits due to differing interpretations of property interests related to licenses. In the Fifth Circuit, false statements in a mailed gambling license application constitute mail fraud, while the Ninth Circuit does not recognize this as fraud due to the lack of governmental property interest (as seen in United States v. Dadanian). Similarly, fraud in liquor license applications leads to convictions in the First Circuit but not in the Eleventh Circuit, which views liquor licenses as non-property under Alabama law. The discrepancies arise from state-created property interests, with some states recognizing certain licenses as property while others do not. For example, medical licenses are generally considered property in most states, while taxi licenses may not be recognized as such. The interpretations of what constitutes property under Section 1341 vary widely, potentially resulting in fifty different definitions of mail fraud. Notably, circuits relying on federal law consistently conclude that business licenses lack property rights, whereas those looking to state law, like the First, Fifth, and Third Circuits, may recognize property interests in certain licenses. In Alabama, for instance, business licenses, including municipal bail bond licenses, are not considered property, as confirmed by Alabama Supreme Court rulings.

A license does not establish a contractual or property right that protects against a state's or municipality's authority to revoke it. In Alabama, a liquor license is considered merely a privilege without any property right or vested interest, as affirmed in Broughton v. Alabama Alcoholic Beverage Control Board. Federal courts have similarly noted that Alabama law does not recognize a protected property interest in liquor licenses or salvage operator licenses. The legal distinction is significant when considering fraud; while the mail fraud statute involves using the mail to obtain property by fraud, one must consult state law to determine if the item in question qualifies as property. If state law defines it as non-property, a fraudster may evade federal charges. Notably, Alabama does not acknowledge a property interest in any business license against the state's revocation rights. The government contends that once a license is typed, it becomes property under the mail fraud statute, supported by case law suggesting that an unissued license may gain property status upon issuance. However, the distinction between issued and unissued licenses is based on due process rights, and courts emphasize that such licenses are not property of the state at any point. While the government argues that licenses become property upon issuance, the precedent indicates that these licenses do not constitute state property, and may only become the licensee's property upon issuance.

Licenses are considered property of the recipient once issued, but they are not owned by the government at any time, whether before or after issuance. An unissued bingo license does not qualify as property of the State of Tennessee, and once issued, it remains the property of the licensee. The Supreme Court has recognized licenses as a form of property, but the distinction between issued and unissued licenses is relevant to determining property rights. The right to due process before revocation of a license exists solely with the licensee, reinforcing that the license is not state property. The government's argument claiming a property interest in Alabama bail bond licenses lacks support; instead, licenses are perceived as a promise not to interfere rather than a piece of property. Other courts have debated the classification of licenses under traditional property law, but cases cited by the government do not pertain specifically to Alabama law or the status of bail bond licenses. Ultimately, under Alabama law, a municipal license for a bail bonds business is not government property, either prior to issuance or after. Consequently, the actions related to the mailing of a fraudulent application and the receipt of the license do not constitute mail fraud under federal law. As a result, the court reversed the mail fraud convictions based on this legally insufficient theory.

Shotts was convicted of perjury under 18 U.S.C. § 1623 for stating he did not 'own' a bail bonds business, claiming his testimony was 'literally true.' He argued his conviction should be reversed because the question about ownership was ambiguous. Shotts was informed he was a target of the grand jury investigation and invoked his right against self-incrimination when asked about his association with a bail bonds business. Case law, including Bronston v. United States, establishes that a perjury conviction cannot be based on a statement that is literally true, even if misleading. This principle has been upheld in various cases where convictions were reversed due to 'literally true' answers. Shotts asserts his answer aligns with this precedent. Under Alabama law, a corporation is owned by its shareholders, meaning that shareholders are considered the equitable owners of corporate assets, which further supports Shotts' claim regarding the interpretation of 'ownership.'

Shotts did not own shares in JC Bail Bonds, and his assertion about ownership was true under Alabama law. He declined to answer questions about having nominees own the business for him and invoked his Fifth Amendment rights when asked about his association with the company. This suggests he was careful not to commit perjury, as he understood he was not the legal owner of the corporation. The government contended that Shotts was the owner despite not holding stock, arguing that he had previously indicated ownership to others. However, absent a clear ambiguity in the question posed to him, a perjury conviction requires a false statement, which Shotts did not provide. The law protects him from being required to interpret the question against Alabama law. Precise questioning is necessary for a perjury charge, and if a witness provides a literally true but evasive answer, the responsibility lies with the questioner to clarify. Consequently, Shotts' conviction for making a false statement to the grand jury is reversed.

Additionally, Shotts appeals his conviction under 18 U.S.C. § 1512(b)(3), which criminalizes corrupt persuasion to prevent communication of information about federal offenses. The indictment claims he attempted to persuade an employee not to disclose information to law enforcement regarding Jack Montgomery's activities. Shotts argues that the "corruptly persuade" language is unconstitutionally vague and that the government failed to prove the charged crime.

The constitutional claim presented is novel in this circuit, warranting a de novo review. Evidence sufficiency is evaluated favorably towards the government, resolving uncertainties in its favor. Shotts challenges Section 1512(b) by referencing United States v. Poindexter, where the D.C. Circuit overturned Poindexter's conviction under 18 U.S.C. § 1505 due to the term "corruptly" being deemed unconstitutionally vague. Shotts seeks to apply this interpretation to Section 1512(b), but the court declines, having previously rejected a similar argument regarding Section 1503(a) in Brenson, asserting that Sections 1505 and 1503 differ materially. The court maintains that Poindexter's ruling should be narrowly interpreted and not broadly applied across obstruction statutes. It aligns with the Second Circuit's view that "corrupt" in Section 1512(b) is not vague or overbroad, as it targets only constitutionally unprotected speech. The Second Circuit's ruling in United States v. Thompson supports this, stating that Section 1512(b) does not criminalize all persuasion but specifically "corrupt" persuasion, thus not infringing on protected speech. Other circuits have upheld the meaning of "corrupt" within analogous provisions, indicating that it establishes a sufficient standard for clarity regarding prohibited conduct. The D.C. Circuit has also refrained from extending its interpretation of Section 1505 to Section 1512(b), confirming the sufficiency of evidence in cases involving persuasion of legal duty violations. Overall, the court concludes that Shotts' arguments regarding the vagueness of Section 1512(b) lack merit.

Section 1512(b) of the U.S. Code is deemed not unconstitutionally vague, as it specifically prohibits persuasion with an improper purpose. The Second Circuit's interpretation aligns with this view, contrasting with a majority opinion from the Third Circuit in United States v. Farrell, which argued that the term "corruptly" should not simply equate to "for an improper purpose," as Section 1512(b) contains its own explicit intent elements. The dissent in Farrell emphasized that the legislative history supports the Second Circuit's position, asserting that Section 1512 was intended to mirror the protections afforded to witnesses under Section 1503. It highlighted that "corruptly" carries a significant meaning that is not redundant but essential to distinguish actions that hinder justice without crossing into prohibited conduct, such as constitutionally protected speech. The dissent argued against imposing a higher culpability standard on Section 1512(b) without clear Congressional intent. The conclusion affirms that the term "corruptly" is neither overly broad nor vague, thus rejecting Shotts’ constitutional challenge and pivoting to assess whether sufficient evidence was presented regarding his actions towards his secretary, Kandy Kennedy, in relation to law enforcement inquiries.

Government testimony by Kennedy indicated that Shotts advised her not to talk about the FBI following a search of Montgomery's house. Shotts allegedly suggested that if she remained silent, she would not be "bothered," which the government interpreted as a potential threat of prosecution to intimidate her against cooperating with the FBI. The jury was instructed to consider whether Shotts acted with intent to undermine a federal investigation. While the evidence was not overwhelming, the jury could reasonably infer improper motives from Shotts' comments, leading to the affirmation of his conviction on this charge.

In a separate count, Shotts was convicted for instructing employee Larry Eddy to destroy "Jack bonds" in violation of 18 U.S.C. 1512(b)(2), which prohibits corruptly persuading someone to destroy evidence. Kennedy testified that after the search, she removed the bonds and handed them to either Jesse or Larry Eddy, stating that Shotts had instructed Eddy to destroy them. However, there was no direct evidence that the bonds were actually destroyed, and Eddy did not testify. Shotts argued that the indictment was deficient for failing to specify the official proceeding related to the destroyed evidence, and that Kennedy's testimony alone was insufficient to prove destruction. The court reviewed these arguments de novo.

The document analyzes the legal sufficiency of evidence and the constitutionality of charges against Shotts. It addresses whether the statute requires physical destruction of evidence, concluding that Kennedy's testimony supports the inference that Shotts intended for evidence to be destroyed, which justified the jury's conviction. The court finds no merit in claims regarding the legal insufficiency related to the identification of an official proceeding, as the indictment and prior allegations sufficiently informed Shotts of the charges.

Shotts' convictions are categorized into two groups. The first group, including mail fraud and perjury counts, is reversed due to the reversal of those convictions. The second group involves obstruction of justice counts, which are affirmed. Shotts argues that his sentence for these counts was miscalculated under the Sentencing Guidelines. The court agrees to vacate the sentence on obstruction of justice counts and remands for re-sentencing due to the reversal of the mail fraud and perjury convictions.

Counts 1 through 17 are deemed legally insufficient because they allege deprivation of property under Alabama law, which does not recognize a bail bond license as property. Count 26 is reversed due to a literally true statement not constituting perjury. However, Counts 22 and 24 are upheld as legally and constitutionally valid, leading to the reversal and vacation of sentences on Counts 1 through 17 and 26, while affirming convictions on Counts 22 and 24 with their sentences also vacated and remanded for re-sentencing.