UNITED STATES COURT OF APPEALS
FIFTH CIRCUIT
No. 94-10052
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
CHARLES R. CROWELL,
Defendant-Appellant.
Appeal from the United States District Court for the Northern District of Texas
(July 25, 1995)
Before REYNALDO G. GARZA, HIGGINBOTHAM, and PARKER, Circuit Judges.
ROBERT M. PARKER, Circuit Judge:
The defendant, Charles R. Crowell, was tried before a jury and
convicted on all 23 counts of a superseding indictment related to
a fraudulent investment scheme that spanned more than 5 years and
affected more than 160 victims. Crowell appeals the district
court's rejection of two negotiated plea agreements and the
sentence the district court imposed. Since we find that the
district court participated in plea discussions in violation of
Federal Rule of Criminal Procedure 11 (e)(1), but find that the
defendant received a fair trial, we affirm Crowell's conviction,
vacate his sentence, and remand for resentencing. I. FACTS
Crowell was the president and chief operating officer of
Abacus and Associates, Inc. Abacus was in the business of
preparing income tax returns and providing related bookkeeping
services. In addition, Abacus held itself out as a manager of
investments. Beginning sometime in 1979, Crowell, through Abacus,
established the Abacus Retirement Management Trust, with Crowell as
Trustee. Crowell directed Abacus employees to identify potential
investment clients through their income tax returns. When
potential investors were identified, Crowell would convince them to
put their money into IRA accounts, pension plans, and other
investments that he purported to manage through Abacus Retirement
Management Trust.
Crowell represented to potential investors and clients that
their money would be invested in first lien mortgage notes,
municipal leases, church bonds, municipal bonds, and "safe" stocks.
What Crowell failed to tell investors and clients is that instead
of investing their money as he represented, he diverted, through
various bank accounts, much of the money for his own business and
personal use, including payroll, the purchase of personal property,
concrete for a swimming pool, utilities, cattle, credit card
charges, and legal fees not related to trust business. Crowell
periodically mailed fraudulent Statements of Account to his
investors, which indicated that their investments were doing well
and that the funds were readily available. In addition, at times
Crowell used new investor deposits to cover other investor's
2 withdrawals, preventing exposure of his fraudulent practices. As
a result of his fraudulent investment scheme, Crowell deprived more
than 160 victims of savings and retirement funds in the amount of
$1,818,668.77.
On August 11, 1992, Crowell was charged in a three-count
indictment with interstate transportation of money obtained by
fraud in violation of 18 U.S.C. § 2314, fraudulent sale of a
security as part of a pension plan in violation of 15 U.S.C. § 77q,
and conducting a financial transaction in proceeds of the
interstate transportation of money obtained by fraud in violation
of 18 U.S.C. § 1956(a)(1). All three charges related to
transactions that took place in August of 1987.
On November 6, 1992, pursuant to a plea agreement with the
government, Crowell pled guilty to Count 2 of the indictment. The
agreement provided that the other charges would be dropped and that
Crowell would make restitution to the victims through the sale of
property he owned, including land in Keller, Texas. The district
court accepted Crowell's guilty plea subject to a later
determination on whether to accept the plea agreement.
After reviewing the plea agreement and presentence
investigation report, the district court expressed concern
regarding the sentence allowable under the agreement. The charge
to which Crowell pled guilty would allow a maximum term of
imprisonment of five years, which was too light a sentence, in the
district court's opinion, considering the defendant's conduct. The
district court indicated, however, that if significant restitution
3 could be made under the agreement through the sale of the
defendant's property, then the overall effect of the agreement
would be acceptable. Defense counsel agreed that the plea
agreement contemplated significant restitution to the victims, not
just a "pie in the sky" promise.
Further investigation revealed that Crowell's property was
encumbered by multiple liens, including private security interests
and tax liens, and that it was the subject of adversary proceedings
in bankruptcy. The district court held multiple conferences with
counsel in an effort to determine the value of defendant's property
that would be available for restitution. In addition, the district
court monitored proceedings in the bankruptcy court for any sign
that the property would be available. Finally, in May of 1993, the
court determined that significant restitution would not be
available despite the efforts of the court and counsel. The
district court also decided that absent the actual ability to
provide the restitution contemplated by the agreement, the sentence
allowable under the plea agreement would not adequately reflect the
aggravated nature of Crowell's conduct or the harm to Crowell's
victims. Thus, the district court rejected the plea agreement, and
Crowell withdrew his guilty plea. The court entered a Memorandum
Opinion and Order reflecting this decision on May 25, 1993. Trial
was scheduled for June 1, 1993.
Following the rejection of this plea agreement, the government
moved for a continuance to allow additional charges to be presented
to the grand jury. This motion was granted, and on June 17, 1993,
4 Crowell was charged in a superseding indictment with interstate
transportation of money obtained by fraud in violation of 18 U.S.C.
§ 2314, 20 counts of mail fraud in violation of 18 U.S.C. § 1341,
and two counts of engaging in monetary transactions in property
derived from mail fraud in violation of 18 U.S.C. § 1957.
On July 19, 1993, the parties reached a tentative agreement
for defendant's plea of guilty to two counts of mail fraud under
the superseding indictment. Before the agreement was in final
form, and before the factual resume had been prepared, the parties
decided to contact the district court to inquire in advance whether
the court anticipated any problems with the plea agreement.1 The
court first, correctly, stated that it would have to see the plea
agreement and factual resume prior to making that determination.
The court continued, however, saying
My concern before, as I indicated, was I didn't think that the sentence that could be imposed under the prior plea agreement adequately addressed the defendant's criminal conduct as contemplated -- and that I didn't have any choice but to reject it under the policy statement of the guidelines that governs what we'll do when we are presented with a plea agreement. I felt that a sentence significantly in excess of what he likely would serve under the prior plea of guilty and plea agreement would be required for the sentence to adequately address his criminal conduct.2
Later that day, the parties submitted the completed plea agreement
1. We note that clearly this is an inappropriate procedure. Counsel should not have asked the court to give any opinion on the proposed plea agreement until it had had an opportunity to review the agreement in its entirety. To the extent we find that the district court improperly participated in the plea discussions, we also find that this error was invited by counsel's improper inquiry.
2. Supp. Rec. on Appeal, Vol. 8, p.5 (July 19, 1993).
5 and factual resume for the district court's review.
On July 20, 1993, pursuant to the second plea agreement,
Crowell pled guilty to two counts of mail fraud. The district
court again accepted the defendant's guilty plea and deferred its
decision on whether to accept the plea agreement. Because the mail
fraud counts to which Crowell pled guilty were based on conduct
after November 1, 1987, the court reviewed the plea agreement under
Section 6B1.2 of the Federal Sentencing Guidelines. The district
court determined that the likely guideline sentencing range, 37-46
months, would not adequately reflect the seriousness of Crowell's
actual offense behavior and that the agreement would undermine the
statutory purposes of sentencing. Thus, the district court
rejected the second plea agreement as well. Crowell again withdrew
his guilty pleas.
On July 26 and 27, 1993, Crowell was tried before a jury and
found guilty on all 23 counts of the superseding indictment. On
January 5, 1994, the district court held a sentencing hearing and
Sentenced Crowell to imprisonment for 60 months on each count 2
through 10, concurrently; 60 months on each count 11 through 21,
concurrently, but consecutive to the sentences imposed on counts 2
through 10; 120 months on counts 22 and 23, concurrently, and
concurrent to the sentences imposed on counts 2 through 21; and 10
years on count 1 (a pre-guidelines offense) to run consecutive to
the sentences imposed on counts 2 through 23. In addition, the
district court ordered $1,818,668.77 in restitution, as well as a
special assessment and a three-year term of supervised release
6 following imprisonment. This appeal followed.
II. DISCUSSION
On appeal, Crowell argues (1) that the district court
improperly participated in plea negotiations in violation of
Federal Rule of Criminal Procedure 11(e)(1), (2) that the district
court abused its discretion in rejecting the proposed plea
agreements, (3) that Crowell was denied a fair trial by being
required to make certain admissions at a plea hearing before the
district court decided to reject the negotiated plea agreement, (4)
that the district court erroneously calculated Crowell's total
offense level under the sentencing guidelines, and (5) that the
district court's upward departure from the guidelines was
unwarranted and unreasonable when imposed in addition to a
consecutive sentence on the pre-guidelines offense.
Crowell's first contention is that the district court
participated in the plea discussions in violation of Federal Rule
of Criminal Procedure 11(e)(1). Rule 11(e)(1) provides that the
attorney for the government and the attorney for the defendant, or
the defendant himself when acting pro se, may engage in discussions
with a view toward reaching a plea agreement. Relevant to this
appeal, the rule also provides that "[t]he court shall not
participate in any such discussions." We have previously
recognized that this rule "prohibits absolutely a district court
from `all forms of judicial participation in or interference with
7 the plea negotiation process.'"3 We have also noted, however, that
a district court must actively participate in the discussions that
occur after a plea agreement is disclosed.
In fact, Rule 11 mandates it, to include: "addressing the defendant personally in open court" to ensure "that the plea is voluntary and not the result of force or threats or promises apart from a plea agreement", Rule 11(d); inquiring "as to whether the defendant's willingness to plead guilty or nolo contendere results from prior discussions between the attorney for the government and the defendant or the defendant's attorney", id.; "making such inquiry as shall satisfy it that there is a factual basis for the plea", Rule 11(f); and either accepting or rejecting the plea agreement and stating the reasons for doing so, see Rule 11(e)(3).4
In United States v. Miles, we held that although the district
court may state its reasons for rejecting a plea agreement, it may
not also suggest the plea agreements that would be acceptable.
When a court goes beyond providing reasons for rejecting the
agreement presented and comments on the hypothetical agreements it
would or would not accept, it crosses over the line established by
Rule 11 and becomes involved in the negotiations.5 In Miles, we
held that the district court crossed that line. Crowell asks us to
find a similar violation here.
The defendant points to comments made by the district judge
after the first plea agreement was presented and before the court
determined that it had to be rejected. In evaluating the first
3. United States v. Miles, 10 F.3d 1135, 1139 (5th Cir. 1993) (quoting United States v. Adams, 634 F.2d 830, 835 (5th Cir. Unit A Jan. 1981)).
4. Miles, 10 F.3d at 1140.
5. Id. at 1139-40.
8 agreement, the district court compared the possible sentence under
the agreement to the potential sentence if the defendant were
convicted on all counts of the indictment. On February 11, 1993,
in performing that comparison, the court noted that if Crowell were
convicted on all counts he "probably would end up with [a sentence]
of 15 or 20 years."6 Crowell argues that it was the court's
comments in this regard that the parties were attempting to address
in reaching the subsequent plea agreement, and that this indirect
influence constitutes the type of judicial participation in plea
discussions that is prohibited by Rule 11(e)(1). This argument
must fail.
The commentary to Rule 11 and our previous decisions make it
clear that the district court is expected to take an active role in
evaluating a plea agreement, once it is disclosed.7 We have no
doubt that this evaluation may include a consideration of the
punishment allowable under the agreement, as compared to the
punishment appropriate for the defendant's conduct as a whole.
Therefore, any such comments made during a discussion of the
effects of a plea agreement properly presented to the court do not
constitute improper participation in violation of Rule 11.
The comments made by the court on February 11, 1993, were made
in the context of an evaluation of the first plea agreement
properly presented by the parties. We note that at that time the
district court was three months away from a final determination
6. Supp. Rec. on Appeal, Vol. 4, p. 3 (Feb. 11, 1993).
7. See Miles, 10 F.3d at 1140.
9 that the first plea agreement was unacceptable. We also note that
clearly the comments were not intended to suggest a sentencing
range that would be acceptable in a subsequent plea agreement.
That the parties called on the court's earlier comments in
fashioning the second plea agreement cannot be determinative. The
proper inquiry is whether the district court was actively
evaluating a plea agreement, as the court is required to do, or
whether the court is suggesting an appropriate accommodation for a
subsequent plea agreement, something this Court found prohibited in
Miles. The district court's comment's on February 11 must fall
into the former category.
However, on July 19, 1993, after the rejection of the first
plea agreement, and before the second plea agreement was in its
final form, the district court had another discussion with counsel
regarding the range of punishment that would be required. The
court's comments, quoted above, indicate the court's feeling that
a penalty significantly more severe than that allowed under the
first plea agreement would be necessary for an agreement to be
acceptable. The fact that this comment was injected into the
discussions while the parties were still preparing the second
agreement is critical. It is precisely this type of participation
that is prohibited by Rule 11. Although not as blatant as the
suggestion of particular terms of imprisonment in Miles, we find
that the court's comments on July 19 constituted a violation of
Rule 11.
Finding a violation of this rule does not end our inquiry,
10 however. Recently, this Court held that a violation of Rule 11
would never require automatic reversal or vacatur. Rather, "when
an appellant claims that a district court has failed to comply with
Rule 11, we shall conduct a straightforward, two-question `harmless
error' analysis: (1) Did the sentencing court in fact vary from the
procedures required by Rule 11, and (2) if so, did such variance
affect substantial rights of the defendant?"8 Having answered the
first question, we must proceed to the second.9
In a case where the defendant was convicted by guilty plea
pursuant to an agreement, we would "examine the facts and
circumstances of the . . . case to see if the district court's
flawed compliance with . . . Rule 11 . . . may reasonably be viewed
as having been a material factor affecting [defendant]'s decision
to plead guilty."10 The focus of our inquiry must necessarily be
different where a plea agreement was rejected, the defendant pled
not guilty, and was convicted after a full trial. To determine
8. United States v. Johnson, 1 F.3d 296, 298 (5th Cir. 1993). Fed. R. Crim. P. 11(h) provides "[a]ny variance from the procedures required by this rule which does not affect substantial rights shall be disregarded."
9. Although the government did not argue that any error was harmless, we proceed with our analysis because "harmless error" is the appropriate standard of review. "If neither party suggests the appropriate standard, the reviewing court must determine the proper standard on its own." United States v. Vonsteen, 950 F.2d 1086, 1091 (5th Cir.) (en banc), cert. denied, 112 S. Ct. 3039 (1992). See also Lufkins v. Leapley, 965 F.2d 1477, 1481-82 (8th Cir.) (appellate court may raise harmless error analysis sua sponte in certain circumstances), cert. denied, 113 S. Ct. 271 (1992).
10. Johnson, 1 F.3d at 302 (quoting United States v. Bachynsky, 934 F.2d 1349, 1360 (5th Cir.) (en banc), cert. denied, 502 U.S. 951 (1991)).
11 whether substantial rights were affected in this case, we must
examine whether the district court's participation might reasonably
be said to have affected the court's impartiality in the conduct of
the trial or sentencing.11
After he withdrew his guilty plea, Crowell was tried before a
jury. He does not challenge on appeal the sufficiency of the
evidence, trial procedure, evidence rulings, jury instructions, or
anything else relating to the conduct of the trial. In addition,
the court's improper comments related solely to the level of
punishment necessary for an acceptable plea agreement; they did not
reflect the court's view on the strength or weakness of the
evidence in the case or the government's ability to prove the
necessary elements of any particular charge. Thus, the court's
participation in the plea discussions, limited as it was, cannot
reasonably be said to have affected the court's ability to
impartially conduct the trial of this case. Since Crowell
ultimately entered a plea of not guilty, and since there is no
indication in the record that Crowell did not receive a fair trial,
we have no problem finding that the court's violation of Rule 11
was harmless with regard to Crowell's conviction.
However, we cannot say that the district court's participation
11. See United States v. Adams, 634 F.2d 830, 841-42 (5th Cir. Unit A Jan. 1981) ("Rule 11(e)(1)'s ban on judicial participation in plea discussions does serve important prophylactic purposes even in cases in which the defendant pleads not guilty: it helps to insure that the trial judge is impartial throughout the defendant's trial and sentencing, and avoids the dangers implicit in the court's misrepresentation of its role in plea negotiations.").
12 in the plea discussions was harmless with regard to Crowell's
sentencing. With regard to the sentencing, there is no intervening
jury deliberation to satisfy us that the error was harmless.
Instead, the sentencing determination was made by the same judge
who had become involved in the plea discussions. One of the main
purposes of the rule against judicial involvement in plea
discussions is that "such involvement `is likely to impair the
trial court's impartiality.'"12
In this case, the district court's comments suggested, at the
very least, that it felt a sentence significantly more severe than
a five year pre-guidelines sentence would be required to make a
plea agreement acceptable. Although the second plea agreement was
rejected, the district court had to address the appropriate level
of punishment again at sentencing. The court's earlier comments,
however, create the appearance of a premature commitment to a
sentence of at least a certain level of severity.
Given the potential effect the district court's improper
comments had on its duties at sentencing, in the absence of any
suggestion of harmless error by the government, we must find that
substantial rights of the defendant were affected. Therefore, we
cannot find the court's violation of Rule 11 harmless with regard
to Crowell's sentencing. We cannot conclude our discussion,
however, without addressing Crowell's other argument's relevant to
his conviction.
Crowell contends that the district court abused its discretion
12. Miles, 10 F.3d at 1139 (quoting Adams, 634 F.2d at 840).
13 in rejecting the second plea agreement. A district court's
rejection of a plea agreement is reviewed only for abuse of
discretion.13 A court may properly reject a plea agreement based
on undue leniency.14 In addition, section 6B1.2 of the sentencing
guidelines provides that a court may accept such an agreement "if
the court determines . . . that the remaining charges adequately
reflect the seriousness of the actual offense behavior and that
accepting the agreement will not undermine the statutory purposes
of sentencing or the sentencing guidelines."15 The district court
made the determination, on the record, that a plea of guilty to two
counts of mail fraud with a likely sentencing guideline range of
37-46 months would not meet that standard. Given the large number
of victims and the protracted course of fraudulent activity, we
cannot find that the district court abused its discretion in this
determination.
Crowell also contends that the district court prejudiced his
right to a fair trial by conducting a plea hearing prior to
rejecting the second proposed plea agreement. In conducting the
plea hearing, the district court explored the factual basis for the
plea by addressing the defendant personally, as required by Rule 11
13. United States v. Foy, 28 F.3d 464, 472 (5th Cir.), cert. denied, 115 S. Ct. 610 (1994).
14. Id. (citing United States v. Bean, 564 F.2d 700, 704 (5th Cir. 1977)).
15. U.S.S.G. § 6B1.2(a) (1994). The same language is found in the 1992 edition which was used in this case.
14 of the Federal Rules of Criminal Procedure.16 Prior to questioning
the defendant, the district court asked Mr. Crowell "Do you
understand that you are now under oath and that if you answer any
of my questions falsely your answers may later be used against you
in a prosecution for perjury or giving a false statement?" Crowell
responded "Yes, sir."
Crowell argues that his confirmations under oath at the plea
hearing unjustly prevented him from testifying in his own defense.
Crowell does not explain how his previous admissions would have
prejudiced him if he had testified except to say that it would have
been like walking through a minefield. Rule 11(e)(6) of the
Federal Rules of Criminal Procedure precluded the use of any such
statements against Crowell in his criminal prosecution and would
have prevented the use of the same statements for impeachment
purposes had he testified.17 The rule does allow the use of such
16. See Fed. R. Crim. P. 11(c), (f).
17. Fed. R. Crim. P. 11 (e)(6) provides
Except as otherwise provided in this paragraph, evidence of the following is not, in any civil or criminal proceeding, admissible against the defendant who made the plea or was a participant in the plea discussions: (A) a plea of guilty which was later withdrawn; (B) a plea of nolo contendere; (C) any statement made in the course of any proceedings under this rule regarding either of the foregoing pleas; or (D) any statement made in the course of plea discussions with an attorney for the government which do not result in a plea of guilty or which result in a plea of guilty later withdrawn. However, such a statement is admissible (i) in any proceeding wherein another statement made in the course of the same plea or plea discussions has been introduced and the statement ought in fairness be considered
15 statements under certain circumstances in criminal proceedings for
perjury or false statement. However, to the extent this use was a
possibility, Crowell received a full warning prior to being asked
any questions. Moreover, the provision for use of a defendant's
statements in subsequent prosecutions for perjury or false
statement is an important check on the defendant's veracity under
oath, which is necessary to protect the integrity of the judicial
process. There was nothing improper in the procedure followed by
the district court at Crowell's plea hearing, and thus the
procedure cannot be said to have deprived him of a fair trial.
III. CONCLUSION
Since the district court's participation in the plea
discussions did not have any prejudicial effect on Crowell's
conviction, and because Crowell's other arguments relevant to his
conviction are without merit, the conviction must be AFFIRMED.
However, because the court's participation in the plea discussions
cannot be said to have been harmless with regard to Crowell's
sentence, the sentence must be VACATED.18 For the foregoing
reasons, this case is REMANDED for assignment to a different
district judge for resentencing.
contemporaneously with it, or (ii) in a criminal proceeding for perjury or false statement if the statement was made by the defendant under oath, on the record, and in the presence of counsel.
18. Because of our disposition, we need not address the appellant's arguments regarding sentencing.