U.S. v. McConnell

• Court: Court of Appeals for the Fifth Circuit
• Decided: April 5, 1993
• Docket: 92-4028
• Status: Published

Opinion

UNITED STATES COURT OF APPEALS for the Fifth Circuit

No. 92-4028

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

VERSUS

GUSSIE L. McCONNELL and WILLIE R. McCONNELL,

Defendants-Appellants.

Appeal from the United States District Court for the Western District of Louisiana

(April 5, 1993)

Before WISDOM and DUHÉ, Circuit Judges, and DOHERTY1, District Judge.

PER CURIAM:

Gussie L. McConnell and Willie R. McConnell appeal their

conviction for conspiracy to commit mail fraud and mail fraud in

furtherance of that conspiracy in violation of 18 U.S.C. §§ 371,

1341. The McConnells argue the trial court erroneously admitted a

1 District Judge of the Western District of Louisiana, sitting by designation. hearsay statement and evidence of coconspirators' illegal

activities, as well as arguing there was insufficient evidence to

support their conviction. Finding that the court below erred in

admitting the challenged testimony, we REVERSE the convictions.

Appellants were indicted in May, l988, along with twenty-two

(22) other individuals, for mail fraud and conspiracy to commit

mail fraud. The indictment alleged the twenty-four (24) Defendants

conspired to use the United States mail for the purpose of

defrauding various insurance companies "by means of false and

fraudulent pretenses, representations and promises." Indictment of

May 12, l988, at 2. The indictment alleged that the essential

feature of the scheme to defraud the insurance companies was that

the conspirators caused their own admission into hospitals for

injuries which they knew did not require hospitalization, were

incurred as a result of accidents which were staged, or never

occurred at all. Id. After alleging the facts regarding the

conspiracy itself, the indictment went on to list the

hospitalizations of all twenty-four (24) Defendants, identifying

them as the "overt acts" undertaken by Defendants in furtherance of

the conspiracy. Finally, the indictment proceeded to list the

documents received by the Defendants through the United States

mail.

All of the Defendants named in the indictment either pled

guilty or were convicted after trial. Appellants were tried

2 separately from the other Defendants who chose not to plead guilty.

Trial of Appellants was had in October, l991 and they were

convicted on all counts with which they had been charged.2

The Evidence

The government presented four (4) witnesses at Appellants'

trial. The first two witnesses, Evelyn Hassen and Michael

McFarland, were alleged coconspirators of Appellants; the second

two were F.B.I. agents who had participated in the investigation

which led to the indictment.

Ms. Evelyn Hassen had pled guilty to participating in the

conspiracy and testified primarily concerning her and her husband's

acts in furtherance of the conspiracy. Of vital importance to this

appeal, Ms. Hassen also testified that her husband, Grady Hassen -

who is related to both Appellants - had once mentioned to her that

Gussie McConnell "was just in the insurance and he had helped her

out with a couple of policies." (Tr. at 8.) This was the only

direct evidence produced by the government at trial of a link

between Appellants and the conspiracy alleged in the indictment.

Counsel for both Appellants objected to admission of the statement

as hearsay. The trial court overruled the objection conditioned

upon a proper predicate being laid, but the record does not reflect

2 At trial, the government acknowledged it lacked evidence in connection with Count 352 of the indictment and therefore moved for and was granted dismissal of that count.

3 the Court's revisiting the issue thereafter for a determination of

whether the predicate had been met. The only subsequent reference

to the hearsay statement made by the Court was in connection with

deliberations on whether the government had proven sufficient

connection between Appellants and the conspiracy to make the

coconspirators' illegal activities relevant at this trial.3

The second witness, Michael McFarland, testified exclusively

about the conspiracy: how it was run and by whom, as well as his

knowledge regarding Grady Hassen's connection to the conspiracy.

Mr. McFarland had been convicted of participating in the conspiracy

of which Appellants were alleged to be a part. He testified that

he did not know the Appellants or whether they were connected to

the conspiracy. Mr. McFarland testified that he had seen Grady

Hassen conversing with the leader of the conspiracy, Sammy Duncan.

He testified that they had been discussing the insurance business.

This provided the connection between Grady Hassen and the

conspiracy which, in combination with Evelyn Hassen's testimony

that Grady Hassen had once mentioned Gussie McConnell, provided the

link between the Duncan conspiracy and Appellants.

Mr. McFarland then went on to explain the way that the

conspiracy worked. He testified that he took instructions from

Sammy Duncan, who would direct him regarding the type of accidents

3 The Court: "Ms. Hassen, if her testimony is believed by the jury, firmly ties in the defendants with Mr. Hassen." (Tr. at 238.)

4 to claim and to which hospitals and doctors to present himself for

admission. Duncan also did the paperwork necessary to obtain

insurance coverage for McFarland and, at times, completed the

necessary papers to make claims to the insurance companies.

Further, Mr. McFarland would endorse the insurance checks over to

Duncan, who would cash them and return some part of the money to

Mr. McFarland.

The third witness who testified for the government was F.B.I.

agent Kenneth R. Klocke, who participated in the investigation of

the Duncan conspiracy. Agent Klocke testified to the mileage

distances between Appellants' home and the various hospitals to

which they presented themselves for admission during the course of

their alleged association with the Duncan conspiracy. The closest

hospital was Jackson Parish Hospital, 8.2 miles from Appellants'

home; the farthest hospital was LaSalle General Hospital in Jena,

Louisiana, 73.8 miles from Appellants' home.

The fourth and final witness who testified at Appellants'

trial on the government's behalf was F.B.I. agent Jerry L.

Richardson, who investigated the conspiracy in connection with the

indictment. Agent Richardson's testimony was by far the longest at

trial. Agent Richardson was the only witness who testified

regarding acts of Appellants themselves and his testimony consisted

of information about the insurance applications and claim forms

which the government contended were filed by Appellants with false

5 and/or incomplete information.

Mr. Richardson testified that Willie McConnell had been in the

hospital twice; once after a claimed motor vehicle accident and

once 18 months later when he claimed to have fallen in the attic of

his home. Both hospitalizations were for contusions and sprains,

both at the Jackson Parish Hospital eight (8) miles from his home.

Six insurance companies paid on the hospital indemnity policies for

the first accident and eleven (ll) insurance companies paid on

policies for the second accident. Payments on the claims had been

mailed to Willie McConnell after both claims. Agent Richardson

testified that many of the claim forms were incomplete because they

did not acknowledge that Mr. McConnell had ever suffered any

similar condition before and because they did not acknowledge the

existence of other insurance policies. Mr. Richardson gave no

testimony that Willie McConnell knew or coordinated his activities

with Duncan or anyone involved in the conspiracy.

Mr. Richardson testified that Gussie McConnell had been in the

hospital seven times between April, l980 and May, l984. Agent

Richardson testified that Gussie McConnell was hospitalized for

lumbar injury and gastritis, for contusions to her left shoulder

and rib cage, for lumbar and sacroiliac strain, for trauma to her

right hip, for trauma to her right shoulder, for acute lumbar

strain, and, finally, for injury to her low back, right leg, and

hip. Claims under multiple indemnity insurance policies were made

6 in connection with each of these hospitalizations: three policies

for the first hospitalization and an increasing number for

subsequent hospitalizations culminating with 18 policies for the

seventh hospitalization. Mr. Richardson testified that claims made

in connection with each hospitalization were incomplete for failure

to reference the existence of other insurance policies in nearly

every instance and, in many instances, for failure to reference

previous similar injuries and/or physical conditions.

Finally, Agent Richardson testified regarding applications for

many of these insurance policies which Appellants owned during the

relevant time period. Again, many applications did not acknowledge

that Appellants owned other insurance policies, indemnity or

otherwise, and some applications did not acknowledge prior

treatment for certain specified injuries or illnesses or prior

hospitalizations within a particular time frame.

The government's theory of this case is as follows. The

Duncan conspiracy, the workings of which Mr. McFarland and Ms.

Hassen described, was proven to have existed. Mr. McFarland

testified to the connection of Grady Hassen to the conspiracy. Ms.

Hassen testified to the connection between Grady Hassen and Gussie

McConnell. Gussie McConnell was married to Willie McConnell and

Gussie and Willie McConnell were both related to Grady Hassen. The

similarity in the pattern of types of accidents, types of injuries,

and travel to distant hospitals, between the McConnells' behavior

7 and that of the admitted or convicted conspirators, the government

contends, along with the proven connection between the conspiracy

and the McConnells, proves the Appellants' guilt of participation

in the conspiracy.

Hearsay

Appellants' first challenge is to the trial court's ruling

allowing into evidence Evelyn Hassen's testimony regarding her

husband's out-of-court statement.4 Appellants argue the statement

is inadmissible hearsay. The government contends the statement is

by a coconspirator and, therefore, an exception to the hearsay

definition under FRE 801(d)(2)(E).

Admission and exclusion of evidence by a trial court is

reviewed for abuse of discretion. United States v. Moody, 903 F.2d

321, 326 (5th Cir. l990). "'Hearsay' is a statement, other than

one made by the declarant while testifying at the trial or hearing,

offered in evidence to prove the truth of the matter asserted."

FRE 80l(c). Rule 80l goes on, however, to list certain types of

statements which are not hearsay. One type of statement which is

not hearsay is that made "by a coconspirator of a party during the

course and in furtherance of the conspiracy." FRE 801(d)(2)(E).

As argued by Appellants - and not challenged by the prosecution -

4 Ms. Hassen testified that Mr. Hassen had told her Gussie was in the insurance and that he had helped Gussie out with a couple of policies.

8 the statement at issue herein, that Gussie was in the insurance,

clearly falls within the definition of hearsay, i.e., an out of

court statement offered to prove the truth of the matter asserted,

unless the conditions of the coconspirator exception are met.

In order to fit the coconspirator exception, a statement must

have been made (l) by a coconspirator of a party, (2) during the

course of the conspiracy, and (3) in furtherance of the conspiracy.

Appellants challenge whether the government proved the first and

third elements of the test. Because we find that the government

did not prove the statement had been made in furtherance of the

conspiracy, this Court will not address whether the coconspirator

element was proven.

"A statement is made in furtherance of the conspiracy if it

advances the ultimate objectives of the conspiracy." United States

v. Snyder, 930 F.2d 1090, 1095 (5th Cir.), cert. denied, 112 S.Ct.

380 (l991). Mere conversation between conspirators is not

admissible under the exception. United States v. James, 510 F.2d

546, 549 (5th Cir. l975) (en banc). The determination of whether

a statement was made in furtherance of a conspiracy can, in the

appropriate circumstances, be made by reference to the statement

alone. In this case, however, Grady Hassen's purpose in making

this statement is not obvious from the statement itself. The

government's appeal brief suggests two possible reasons for Grady

Hassen's statement; several other possibilities were suggested by

9 Appellants in their brief and at oral argument. None of these

suppositions can be proven by reference to the statement itself

without an understanding of the context in which the statement was

made. As the prosecution failed to present any evidence whatsoever

concerning the context in which this statement was made, it is not

possible for this Court to determine the basis for the trial

court's implicit finding that the statement was made in furtherance

of the conspiracy.

Ms. Hassen testified to the statement at the beginning of the

trial. (Tr. at 8.) Defense counsel objected that no predicate had

been laid at that point. (Tr. at 7.) The government attorney

asserted that he would lay the proper foundation. Id. The trial

court allowed the testimony to go forward conditioned on the

predicate being laid. (Tr. at 7-8.) However, the question of

whether the proper foundation had been laid was not revisited by

the Court. No testimony was elicited regarding the context in

which the statement was made by Grady Hassen to Evelyn Hassen.

There is no evidence in the record which suggests the purpose for

which the statement was made. As the context in which the

statement was made is not obvious from the statement itself, and no

testimony regarding the context was elicited by the government,

there was no basis for the trial court to find that the statement

had been made in furtherance of the conspiracy. Indeed, the record

does not reflect the trial court made any finding other than that

conditioned upon the government's laying the proper foundation; the

10 government did not do so. Without a finding that the proper

predicate had been laid, the trial court did not have discretion to

allow the statement into evidence. We find that the trial court

abused its discretion in admitting Grady Hassen's statement without

the government having laid the proper foundation that the statement

had been made in furtherance of the conspiracy.

Conspirators' Activities

Appellants next challenged the trial court's ruling on their

objection to the testimony regarding the activities of convicted

and/or admitted members of the Duncan conspiracy. Appellants argue

insufficient evidence of a connection between them and the

conspiracy was presented by the government at trial. The

prosecution contends, on the other hand, the trial court's ruling

was correct.

Again, review of evidentiary determinations is for abuse of

discretion. United States v. Moody, 903 F.2d at 326. In order for

the evidence of the conspirators' illegal acts to have been

relevant, the government must have provided evidence of a

connection between Appellants and the conspiracy of which they were

accused of being a part. See Lutwak v. United States, 344 U.S.

604, 608 (l953). The introduction of inadmissible evidence of

criminal acts of Defendants' associates runs the risk of a finding

of guilt by association. This Court has repeatedly noted the

11 highly prejudicial effect of the introduction of evidence which

suggests guilt by association. See e.g., United States v. Romo,

669 F.2d 285, 288 (5th Cir. l982), cert. denied, 459 U.S. 1021

(l982); United States v. Singleterry, 646 F.2d 1014, 1018 (5th Cir.

l981); United States v. Labarbera, 581 F.2d 107, 109 (5th Cir.

l978).

Considerable testimony concerning the Duncan conspiracy, its

innerworkings, and the acts committed by Mr. McFarland and Mr. and

Ms. Hassen in connection with the conspiracy, was admitted into

evidence. Counsel for Appellants objected to the testimony,

arguing that the government had not laid a proper foundation upon

which to find the activities of the conspirators relevant to the

case against Mr. and Mrs. McConnell. The Court heard arguments at

several points in the trial on the admissibility of the

conspirators' activities. (Tr. at 5, ll, 26-27, 166-74, 233-40.)

It was not until the government had rested, however, that the court

directly addressed the question of the admissibility of the

evidence, in the context of a motion for mistrial by Appellants.

The trial court denied the motion for mistrial, reasoning that

sufficient connection between Appellants and the conspiracy had

been presented to support a finding that the testimony of Mr.

McFarland and Ms. Hassen was relevant at the trial. (Tr. at 238-

40.) The court reasoned as follows: Mr. McFarland testified about

his own connection to Duncan and the conspiracy; Mr. McFarland's

testimony established that Duncan and Grady Hassen knew one another

12 and discussed insurance business; Ms. Hassen's testimony

established a connection between Grady Hassen and Gussie McConnell.

With sufficient testimony in evidence to establish the chain of

connection between the conspiracy and Appellants' the Court found

that the similarity in patterns of conduct between the McConnells

and the conspirators, in combination with the government's

entitlement to all reasonable inferences in the context of a motion

for mistrial5, provided sufficient evidence of Appellants'

connection to the conspiracy to make McFarland's and Hassen's

testimony relevant.

One crucial link in the chain between Appellants and the

conspiracy upon which the trial court relied was established with

inadmissible hearsay testimony. As this Court has already found,

the statement by Grady Hassen, to which Evelyn Hassen testified,

should not have been admitted into evidence and, therefore, should

not have been considered by the Court in its determination of

whether the testimony regarding the conspirators' criminal

activities was relevant at this trial. Without evidence of a link

between Grady Hassen and Gussie McConnell, the Court's reasoning on

the relevance of the testimony regarding the criminal acts of the

conspirators fails.6 The only remaining evidence which the trial

5 The court relied upon Glasser v. United States, 315 U.S. 60 (l942). 6 Even with consideration of the statement, there is no link between the conspiracy and Willie McConnell, inasmuch as the Grady Hassen statement refers only to Gussie.

13 court had before it7 to use in determining the relevance of the

conspirators' activities was the similarity in patterns of conduct

between Appellants and the convicted conspirators.

We find that, as regards Willie McConnell, there was not

sufficient similarity to find the criminal activities of the

conspirators relevant at this trial. The government in oral

argument urged the multiple policies and claims as well as the non-

serious nature of his injuries, as similarities sufficient to

sustain admission of the evidence; however, the list of

dissimilarities is much longer. Both of Willie McConnell's

hospitalizations occurred at the same hospital, with the same

doctor, only eight (8) miles from home. He was hospitalized only

twice during the relevant time period. Unlike other members of the

conspiracy, there is no evidence that the McConnells received

instructions from Duncan, that Duncan obtained policies on the

McConnells' behalf, nor that Duncan shared any proceeds with them.

There is no evidence in the record the McConnells even knew or ever

spoke with Duncan, the leader of the conspiracy in which they were

allegedly involved.

7 The government makes much of the fact that Grady Hassen is related to both appellants, thereby providing an additional link between the conspiracy and the McConnells. However, this Court has made very clear its opinion of prosecutors' attempts to prove guilt by association. United States v. Romo, 669 F.2d at 288 ("That one is married to, associated with, or in the company of a criminal does not support the inference that the person is a criminal or shares in the criminal's guilty knowledge.")

14 The simple fact that Willie McConnell had two soft tissue

injuries and multiple indemnity insurance policies does not provide

sufficient connection between him and the conspiracy to make the

testimony regarding the conspirators' criminal activities relevant.

As the government conceded8, obtaining multiple indemnity policies

is not in and of itself illegal and one must not lose sight of the

fact the McConnells were indicted and tried for conspiracy to

commit mail fraud and mail fraud in furtherance of that conspiracy.

In order to use the illegal actions of conspirators as evidence

against the McConnells, the government must first establish a

connection between the McConnells and the conspiracy. The trial

court's analysis of the connection is based, in part, on

inadmissible evidence and, therefore, fails; without evidence of a

connection between Hassen and Gussie McConnell, we find the

testimony of Evelyn Hassen and Michael McFarland was inadmissible

as to Willie McConnell. As the trial court noted, and the

government conceded9, this evidence was so prejudicial that its

erroneous admission entitled Appellants to a mistrial. We find the

trial court was correct in its estimation of the prejudicial effect

of this testimony on the trial. The admission of this evidence

without the proper foundation is reversible error.

We find that, as regards Gussie McConnell, the similarities in

conduct between she and the members of the conspiracy were

8 (Tr. at 134-35.) 9 (Tr. at 237.)

15 sufficient to prove that they were engaged in similar conduct, but

not sufficient to prove they were engaged in the same conspiracy.

Gussie was proven to have had multiple indemnity insurance

policies, to have had multiple soft tissue injuries in a four-year

period of time, and to have traveled far distances to the same

hospitals and doctors used by at least some members of the

conspiracy. However, as is the case with Willie McConnell, there

are significant dissimilarities. Mr. McFarland admittedly, and

Grady Hassen apparently, took instructions from Duncan regarding

the type of accidents to have and to which hospitals and doctors to

present themselves for treatment, and shared proceeds with Duncan.

There is no evidence that Duncan and the McConnells even knew each

other, much less that Duncan was providing instructions on

insurance fraud. There is no evidence Duncan helped the McConnells

obtain policies or complete claim forms, as Duncan did with other

members of the conspiracy. Again, and perhaps most importantly,

the conspirators shared the proceeds of their fraud with Duncan;

there is no evidence in this record of any such sharing between the

McConnells and Duncan.

The demonstrated similarities between Gussie McConnell's

pattern of conduct and that of admitted or convicted conspirators,

although more extensive than in Willie's case, still is not

sufficient to establish a link between Gussie and the conspiracy

such as to make relevant the testimony of Mr. McFarland and Ms.

Hassen. We find the testimony of Evelyn Hassen and Michael

16 McFarland was inadmissible as to Willie McConnell. Further, we

find the trial court was correct in its estimation of the

prejudicial effect of the inadmissible testimony at trial. The

trial court abused its discretion by admitting this testimony into

evidence.

In view of our finding of reversible error, we need not

address Appellants' challenge to the sufficiency of the evidence to

convict them.

Conclusion

Gussie and Willie McConnell were indicted for participating,

along with twenty-two (22) others, in a conspiracy to defraud

insurance companies and for the mail fraud used to accomplish the

conspiracy's aim. At Appellants' trial, the government introduced

a hearsay statement without proving the statement's admissibility

and introduced conspirators' illegal activities without

establishing that their acts were relevant. Because the trial

court's rulings allowing the inadmissible evidence to be introduced

were clearly erroneous and severely prejudiced Appellants, we

REVERSE Appellants' convictions.

REVERSED.