Court: District Court, N.D. Ohio; September 6, 2018; Federal District Court
Defendant Arvel Ray Henderson filed a motion for judgment of acquittal and a renewed motion for acquittal or a new trial following his jury conviction on one count of conspiracy to commit money laundering and four counts of engaging in monetary transactions involving property from unlawful activity. The initial motion was submitted after the government's case-in-chief on February 21, 2018, and the renewed motion was filed on March 9, 2018, after the jury's guilty verdict on February 23, 2018. The government responded to both motions, and the court has now denied Henderson's requests.
In evaluating the motion for acquittal, the court highlighted that according to Federal Rule of Criminal Procedure 29(a), a motion may be granted if the evidence is insufficient to sustain a conviction. The court can reserve judgment on the motion until after the jury verdict, basing its decision on the evidence presented at that time. The burden of proof lies heavily on the defendant to demonstrate that the prosecution's failure is clear, and the relevant standard is whether a rational trier of fact could find the essential elements of the crime beyond a reasonable doubt when viewing the evidence favorably for the prosecution. Circumstantial evidence alone can be sufficient for a conviction, and juries are permitted to make reasonable inferences from both direct and circumstantial evidence. The court's role is to determine if the judgment is supported by substantial and competent evidence in the record.
Circumstantial evidence can support a conviction, but it must be more than mere speculation (Newman v. Metrish). In this case, Henderson was convicted on five counts, including conspiracy to commit money laundering and engaging in a monetary transaction in property from unlawful activity. To prove the monetary transaction, the government needed to demonstrate that Henderson knowingly engaged in a transaction involving criminally derived property exceeding $10,000, specifically relating to wire fraud (18 U.S.C. § 1957(a)).
Henderson contested the sufficiency of evidence regarding the $500,000 wire transfer, arguing it was not proven to be proceeds of wire fraud, nor did he know the money was criminally derived. He acknowledged the use of wire communications for the transfer but claimed the funds were from a legitimate transaction involving Freddie Mac bonds, not wire fraud. Henderson asserted that the consultancy fee paid to Mark Wittenmyer was part of a legitimate agreement and argued that Wittenmyer was not in collusion with the victim, Pierre Leneveu.
Conversely, the government argued that sufficient evidence demonstrated the wire transfer was tied to wire fraud, asserting that the bond deal was based on non-existent bonds. They pointed to evidence suggesting Wittenmyer's knowledge of the bond's non-existence when he demanded the fee, including his setup of the deal, use of nominees, false documents, threats regarding liens on non-existent bonds, and lavish spending. The government contended that these facts allowed the jury to reasonably infer fraudulent activity.
The government contends that federal fraud statutes do not impose a convergence requirement. It asserts that there was adequate evidence for the jury to determine that Henderson was either aware of or willfully ignorant regarding the fraudulent nature of a $500,000 wire transfer linked to criminal activity. During the trial, Special Agent Eric Robinson from the FBI provided testimony about the investigation into Wittenmyer, who was suspected of fraudulent trading, embezzlement, and wire fraud since 2010. The investigation revealed that Wittenmyer, who had been unemployed for several years, attempted to buy a home valued over $1,000,000 with stolen funds.
Henderson, acting as the realtor for Wittenmyer, was contacted by SA Robinson for a meeting, which included RE/MAX representatives and attorneys. Testimony from Kathy Kuyoth, a co-owner of RE/MAX, highlighted unusual elements in Wittenmyer’s real estate transaction, including a promised $50,000 bonus to the buyer's agent and fluctuating sources for the earnest money, raising red flags for the title company. During their meeting on April 17, 2012, Henderson informed the group about the transaction, revealing that Wittenmyer claimed the funds would originate from R M Capital, deemed by SA Robinson a shell company associated with approximately $85,000 in stolen funds. Robinson detailed R M Capital's principals' criminal backgrounds and confirmed that the company lacked the necessary funds for the home purchase.
Consequently, RE/MAX decided to sever ties with Wittenmyer, cautioning Henderson against further engagement with him unless done independently. Despite this, Henderson continued to work with Wittenmyer, prompting RE/MAX to return his license to the Ohio division of real estate when they became aware of his actions.
On December 22, 2012, SA Robinson and a sheriff's deputy arrested Wittenmyer for credit card fraud at Henderson's home, where Henderson later posted a $2,000 cash bond for Wittenmyer. The credit card fraud charge became part of Wittenmyer's federal indictment, which he ultimately pled guilty to, while the state charge was no-billed. In 2013, Wittenmyer initiated a Freddie Mac bond deal, involving Jeffrey Lasman, who agreed to serve as the closing attorney. The deal was designed such that Mohammad Tariq Azmat would purchase three Freddie Mac bonds through his company, Creative Global Consulting, which would then transfer them to a limited liability company (LLC) created by Lasman. The LLC was intended to subsequently sell the bonds to Panchine Group Limited.
Lasman coordinated the legal documents and created CL Trust Management, LLC as the housing entity for the bonds, which Azmat owned by September 5, 2013. Initially, Lasman believed Azmat already owned the bonds, based on information from Wittenmyer and Azmat, who provided a purported financial statement from Morgan Stanley as verification. Azmat later expressed concern about the legitimacy of the transaction, noting he contacted a legal advisor who indicated the bond transfer was improperly structured. He claimed many documents presented at trial bearing his signature were forged and asserted that no bonds existed.
Wittenmyer was to receive a $1,000,000 consulting fee, representing one percent of the bond deal's face value, to be paid to Henderson's FTL Properties account. Wittenmyer stated he needed FTL Properties for fee collection to avoid receiving commissions from both sides of the transaction, and he communicated this to Brody. Due to financial constraints of the involved parties, Wittenmyer struggled to collect the fee, prompting Brody to write letters on his behalf in September 2013, with Lasman also advocating for the payment. Wittenmyer suggested placing liens on the bonds to secure the consulting fee, but these liens were never executed despite assurances to other parties involved in the transaction.
Brody testified that Wittenmyer and Henderson consented to accept half of a $1,000,000 fee to be paid to FTL Properties via Brody's office. Lasman noted that to facilitate the bond deal, $500,000 was required in the FTL Properties account. Despite concerns raised by SA Robinson regarding Wittenmyer's potential illegitimacy, Brody continued collaborating with him, motivated partly by prior loans he had made to Wittenmyer. Brody agreed to inform Henderson that he would report the receipt of the $500,000 fee to SA Robinson. Pierre Leneveu subsequently wired $500,000 to FTL Properties based on his understanding of a bond investment scheme proposed by Wheeler, who indicated he would return Leneveu's money along with profit shortly after. Leneveu was unaware of specific details regarding the bond deal or FTL Properties.
Later, Brody discovered that Henderson received the $500,000 directly, which was almost entirely spent. Lasman indicated that the bond deal faced complications after this payment, as Wittenmyer was supposed to coordinate a closing in Florida that never took place. Lasman attempted to verify the existence of the bonds with Morgan Stanley, but found no confirmation of their existence. He learned that Wittenmyer had become uncontactable, leading him to suspect wrongdoing. Lasman ultimately did not receive any payment from the bond deal as it did not close with the intended buyer, Panchine Group. Additionally, he realized he did not know Wittenmyer's real name. Dalyne Shinneman, who worked at Ridgeway and Conger, testified that Azmat expressed interest in purchasing mortgage-backed securities but never opened or funded an account with them, nor did he buy any bonds.
Shinneman denied writing a memo indicating her readiness to execute transactions on three bonds, although she recognized one bond's CUSIP, which she sold to Morgan Stanley after her last contact with Azmat. The bond sale arose from an arbitration involving Ridgeway, Conger, and Morgan Stanley, and Shinneman was unaware of any subsequent sale involving Azmat. She also disputed the existence of a Ridgeway and Conger account for CL Trust Management, despite Gary Shumate, a Morgan Stanley financial advisor, testifying that an account for CL Trust Management was in the process of being opened but never completed or funded.
Shumate received a letter claiming there was $27,000,000 available for bond transactions, which he understood was to be wired to Morgan Stanley; however, the funds were never received, and attempts to contact the letter's purported author, Lasman, were unsuccessful. Lasman denied writing the letter. Shumate explained that bond transactions must be initiated by the buyer through their broker, but Morgan Stanley did not submit a bond order, nor did Shumate inform Azmat or anyone from CL Trust Management about any Freddie Mac bonds in an account for Azmat.
Additionally, Shumate identified a document that appeared to be an account statement as not being an authentic Morgan Stanley statement but rather a bond proposal. Brody corroborated that there were no bonds ever held. Separately, SA Robinson learned in 2013 that Mr. Henderson had wired money related to Wittenmyer and, suspecting theft, contacted Henderson about the transactions. Henderson claimed ignorance but mentioned loaning Wittenmyer money. The FBI later subpoenaed Henderson's bank records, revealing a PNC account for his company FTL Properties Limited, which did not include Wittenmyer as an authorized user or in the company's organization documents.
The FBI acquired records for Henderson's FTL Properties account covering six to eight months, revealing typical income and expenses for September 2013. Henderson's account balance fell from over $9,200 to just under $6,000 during that month, with a largest deposit of $2,117.75 and a major expense of $955.70 for an airplane ticket. Testimony from bookkeeper Betty Padgett indicated that Henderson's spending patterns in April and May 2013 were consistent, with account balances fluctuating between $36.42 and $5,858.31, and no single check card purchase exceeding $1,000.
In October 2013, there was a notable increase in Henderson's income, including a $30,000 wire transfer on October 30 and another of $9,980 on October 31. Subsequent purchases included significant withdrawals and wire transfers totaling $20,000 on the same day. November records continued to show increased income and purchases, highlighted by a $499,980 wire from Leneveu and high-value purchases at luxury retailers and hotels, alongside large transfers to his personal PNC account.
By December, Henderson's FTL Properties account balance dropped from over $131,000 to just above $3,000. Testimony from Ali Moubarak, who shared a personal bank account with Henderson, indicated that normal monthly deposits were around $3,000 to $4,000 until November 2013, when deposits surged to $128,567.60 and expenditures reached $123,467.07. Additionally, Henderson failed to report the near $500,000 deposit on his 2013 tax return.
Sufficient evidence exists to support the conclusion that the $500,000 wire transfer was the result of wire fraud. Henderson argues that the transfer was a legitimate fee based on a membership unit purchase agreement between Creative Global Consulting and Panchine Group. However, this agreement pertains to the sale of CL Trust Management and bonds, where the obligation to pay Wittenmyer's consulting fee to Henderson arose from a different transaction involving the sale of bonds to CL Trust Management. Wittenmyer orchestrated a scheme to create the appearance of purchasing three Freddie Mac bonds, which were then to be sold in succession, allowing each seller to profit; however, no bonds existed, as confirmed by multiple testimonies. Wittenmyer misled participants by claiming the bonds were owned by Creative Global Consulting and presented a fraudulent account statement. Furthermore, he pressured Brody to demand payment from Henderson, using false claims of liens on the non-existent bonds to coerce payment. Leneveu eventually paid the consulting fee directly to Henderson, bypassing Brody, who was cut out of the transaction after threatening to report any funds to the FBI. The evidence indicates Wittenmyer devised the fraudulent scheme with the intent to defraud, while Henderson appeared to either know or willfully ignore the illicit nature of the wire transfer. The Sixth Circuit does not require a convergence of identity for a wire fraud conviction, reinforcing the basis for these findings.
In April 2012, SA Robinson informed Henderson and RE/MAX representatives about Wittenmyer's illegal activities, prompting RE/MAX to sever ties with him, although Henderson continued his association. Henderson allowed Wittenmyer to stay at his home, where Wittenmyer was arrested in December 2012 on credit card fraud charges, after which Henderson posted his bond. Despite being warned about Wittenmyer and the illegal nature of his activities, Henderson engaged in financial transactions with him, receiving a consulting fee for a nonexistent bond deal and facilitating substantial wire transfers into his account. He subsequently transferred large sums from his business to his personal account and concealed these transactions, including a $500,000 wire transfer, from tax reporting and from SA Robinson when questioned. This behavior suggested that Henderson was either aware of the criminal origins of the funds or willfully ignorant, leading to the denial of his motion for judgment of acquittal.
Henderson also filed a motion for a new trial, asserting that the verdict was against the weight of the evidence, claiming Brady violations, and arguing that the government improperly commented on his failure to report to law enforcement. Under Rule 33, a new trial can be granted if the interests of justice require it, but such motions are rarely favored. The defendant bears the burden of proof for a new trial. The court found that Henderson's arguments mirrored those made for acquittal and determined that the evidence supported the jury's verdict, indicating that the $500,000 transfer was from wire fraud and that Henderson was either aware of this or deliberately ignorant. Therefore, the evidence did not heavily preponderate against the verdict, and the motion for a new trial was denied.
The jury's verdict is upheld as not being against the weight of the evidence. A new trial may be warranted if substantial legal error is found, as per United States v. Munoz. Henderson alleges prosecutorial misconduct, claiming violations of his due process rights due to the government's withholding of Brady evidence and comments infringing on his right against self-incrimination. Specifically, he contends that the government failed to disclose that Brody was an informant and withheld impeachment material related to Brody. Under Brady v. Maryland, suppression of evidence favorable to the accused violates due process if it affects guilt or punishment, regardless of the prosecution's intent. A Brady violation necessitates that the evidence is favorable, suppressed by the state, and prejudicial to the accused.
Henderson's assertion that Brody was an undisclosed government agent is deemed meritless, as he relies on Brody's trial testimony and an FD-302 form to support his claim. The government counters that Brody was neither a government agent nor compensated for his information and that any relevant documentation had been disclosed prior to trial. Furthermore, the government argues that even if Brody were a government agent, Henderson fails to prove he had valid defenses of entrapment or entrapment by estoppel. Henderson points to inconsistencies between Brody's statements about his FBI contacts and the documented contacts, highlighting a discrepancy in the number of meetings, but the government maintains that Brody's interactions were adequately documented and disclosed.
Defense counsel inquired about the frequency of Brody's contacts with the FBI, to which Brody indicated it was more than ten, but less than twenty. The analysis of FBI reports (302s) reveals that Brody had ten documented contacts with the FBI between September 7, 2012, and June 25, 2014. These included multiple phone conversations and the provision of text and Skype communications. Brody’s recollection closely aligns with the documented contacts, with a possible discrepancy of only one instance, likely attributable to the time elapsed before Henderson's trial. Henderson argues that a December 6, 2012, 302 suggests Brody was acting as an agent for the FBI, interpreting SA Robinson's statement about allowing Brody to disclose his contact with the FBI as evidence of direction. However, the distinction between "allowing" and "directing" is clarified, indicating Brody was merely a witness providing information rather than an informant. Furthermore, Henderson's claim that the government suppressed impeachment evidence related to Brody's involvement in civil litigation over a fraudulent scheme is deemed without merit, as this claim was introduced too late for the government to respond. Ultimately, no evidence of suppression or Brady violation was found.
Henderson's claim of a Brady violation fails because the relevant information was not fully under the prosecution's control, as established in Coe v. Bell. A Brady violation does not occur if the defendant was aware or should have been aware of the essential facts or if the information was accessible from another source, as per Carter v. Bell. Henderson's reference to a civil case filed on November 10, 2014, and its amended complaint from March 28, 2017, indicates that the evidence of pending litigation was publicly available before his trial, which commenced on February 16, 2018. Consequently, there was no Brady violation since Henderson could have obtained the information from other sources.
Henderson also argues that the government improperly commented on his pre-arrest silence during closing arguments, suggesting it inferred his guilt in violation of the Fifth Amendment. The government contends that it did not comment on this silence but maintained that had it done so, such comments would be permissible. Moreover, even if improper comments were made, the government argues they were not egregious enough to warrant a new trial. The Sixth Circuit's two-step test for prosecutorial misconduct requires determining whether comments were improper and if they were sufficiently flagrant to necessitate a new trial. It concludes that the government's remarks did not directly reference Henderson's silence as evidence of guilt and were not deemed improper.
The comment made by the government did not explicitly state that Henderson failed to contact the FBI, nor did it directly imply his guilt based on that omission. The court referenced *Wells*, which established that a prosecutor must explicitly mention a defendant's silence for it to be considered a direct comment. In the broader context of the government's closing argument, the remarks focused on demonstrating Henderson's knowledge and intent through various comparisons, including his actions relative to his sister Christina Perry and RE/MAX's management after the FBI's investigation began. The government highlighted that while RE/MAX distanced itself from Wittenmyer, Henderson allowed him to stay at his home, further demonstrating a lack of action in response to warnings. Additionally, the government contrasted Henderson's inaction with Brody's proactive approach after being informed about Wittenmyer’s potential criminal activity. The court analyzed whether the government's comments were intended to reference Henderson's silence, concluding that they were not manifestly intended as such and that alternative explanations for the remarks were plausible. The court emphasized that evaluating the context of comments and the effectiveness of curative instructions is crucial in determining their interpretation by the jury. Henderson's argument regarding improper indirect comments on his silence was found to be insufficient based on these criteria.
In *United States v. Robinson*, 651 F.2d 1188, 1197 (6th Cir. 1981), the court addressed claims of prosecutorial misconduct regarding a statement made by the government. The court found that the statement, although poorly phrased, did not appear intended to comment on Henderson's choice not to contact the FBI, nor would a jury naturally interpret it as such. The government's argument involved comparing Henderson's actions to those of a reasonable person learning about potential criminal activity nearby, which aligned with the jury instructions on inferring a defendant's state of mind from circumstantial evidence, including the defendant's behavior and statements.
The court clarified that even if the government had commented on Henderson's silence, it would not constitute misconduct, as pre-arrest silence may be used as substantive evidence of guilt unless the defendant explicitly invoked the right to remain silent (citing *Abby v. Howe* and *Salinas v. Texas*). Consequently, Henderson’s motions for a new trial and for judgment of acquittal were denied. Additionally, Henderson initially argued that the $500,000 was not from wire fraud but later shifted his position, contesting the fraudulence of the bond transaction itself. He also alleged that Brody perjured himself regarding his legal status, a claim he later conceded after the government clarified that attorneys in New York must register regardless of their active or retired status. Finally, testimony revealed that Ms. Perry, Wittenmyer's fiancée, was unaware of the illicit source of funds used for her lavish gifts and expenses, indicating she did not question or attempt to return a substantial deposit to her account, which she assumed was from Wittenmyer.
