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United States v. Clark

United States Court of Appeals, Tenth Circuit

June 19, 2013

RICHARD CLARK, a/k/a Rick Clark, Defendant-Appellant.

Appeal from the United States District Court for the Northern District of Oklahoma (D.C. No. 4:09-CR-00013-JHP-2)

Scott A. Graham (Anthony L. Allen, with him on the briefs), of Graham, Allen & Brown, PLLC, Tulsa, Oklahoma, for Defendant-Appellant.

Claire McCusker Murray, Appellate Section, U.S. Department of Justice, Washington, D.C. (Thomas Scott Woodward, United States Attorney, Catherine J. Depew, Assistant United States Attorney, Northern District of Oklahoma; Kevin B. Muhlendorf and Andrew H. Warren, Trial Attorneys, Lanny A. Breuer, Assistant Attorney General, Criminal Division, Greg D. Andres, Acting Deputy Assistant Attorney General, Criminal Division, and Joseph Palmer, Attorney, Criminal Division, Appellate Section, U.S. Department of Justice, Washington, D.C., on the brief), for Plaintiff-Appellee.

Before HARTZ, O'BRIEN, and HOLMES, Circuit Judges.

HOLMES, Circuit Judge.

Defendant-Appellant Richard Clark was charged and convicted of multiple counts relating to his participation in a "pump-and-dump" securities fraud scheme. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm Mr. Clark's conviction.

I. Factual and Procedural Background

This case arises from a classic pump-and-dump scheme that was orchestrated principally by Mr. Clark's co-defendant, George David Gordon. In a separate opinion, we recently affirmed Mr. Gordon's convictions and sentence. See United States v. Gordon, 710 F.3d 1124 (10th Cir. 2013). In doing so, we set forth in considerable detail the relevant factual and procedural background related to the government's prosecution of the pump-and-dump scheme. See id. at 1128–33. Consequently, we will not fully reiterate that discussion here. Instead, we offer at the outset a factual and procedural overview, and then in connection with the resolution of Mr. Clark's specific legal challenges, we explicate necessary additional facts.[1]

In summary, the government alleged that Messrs. Gordon and Clark and other co-conspirators manipulated the shares of several "penny-stock" companies by using false and backdated documents to make those shares publicly tradeable, engaged in coordinated trading among themselves to create the false appearance of an active market for the shares, and promoted the shares through misleading promotional campaigns. See, e.g., id. at 1128 & n.2. The shares were sold to unsuspecting buyers after their prices had surged, and the conspirators laundered the proceeds through an array of bank accounts and nominees. The conspirators subsequently covered up their misconduct in interactions with the Securities and Exchange Commission ("SEC").

A. Investigation and Pretrial Proceedings

The conduct in this case can be traced back to 2004 when Mr. Gordon began dealing with Mark Lindberg and Joshua Lankford, two Dallas stock promoters—both co-conspirators—and collaboratively targeting with them various companies for the fraudulent scheme's purposes. Through a sequence of transactions, the conspirators established and fraudulently promoted the stock of three companies: National Storm Management ("National Storm"), Deep Rock Oil & Gas ("Deep Rock"), and Global Beverage Company ("Global Beverage"). See id. at 1129–32.

In 2004, SEC official Samuel Draddy began looking into an unrelated Pink Sheet[2] company that had "unusual trading surrounding its stock and appeared to be the subject of a promotional campaign." R., Vol. VIII, at 1753 (Test. of Samuel Draddy, dated Apr. 15, 2010). This led to further investigation of other "similarly-situated [stock] issuers" with unusual trading patterns and promotional campaigns. Id.

After taking a deeper look, investigators noticed that the companies under consideration evinced similar patterns where "the people involved owned shells, [that] were publicly-traded issuers that had no legitimate business purpose, . . . [and] [t]hey would . . . get private companies to reverse-merge into these shells so they could get publicly traded." Id. at 1754; see also id., Vol. I, at 55 (noting in the instant indictment that "[t]o obtain the free trading shares, the perpetrators may orchestrate a reverse merger, which occurs when a privately held company with no publicly traded stock merges with a publicly listed shell company that has no assets or revenue but has stock available for public trading, resulting in a public company"). Based on this discovery, the investigators turned their attention to the activities of the companies involved in this case. During that investigation, Mr. Clark testified before the SEC. He made various statements, including an allegedly false denial that he controlled nominee entities involved in the Deep Rock trading scheme.

In July 2007, approximately eighteen months prior to the commencement of criminal proceedings against Mr. Clark, the government placed a caveat on his residence. See generally Black's Law Dictionary 252 (9th ed. 2009) (defining "caveat" as "[a] warning or proviso"). No notice was given to Mr. Clark at that time, and he was not aware of the caveat until July 2008 "when he was attempting to obtain funds to retain counsel." Aplt. Opening Br. at 2. The government temporarily lifted the caveat in June 2009 to allow Mr. Clark to renew an existing loan on his home, and reimposed it in July 2009. The government then completely lifted the caveat in October 2009.

On January 15, 2009, the grand jury returned a twenty-four-count indictment against the members of the conspiracy, including Mr. Clark. Mr. Clark was named in Counts 1–21: specifically, conspiracy (Count 1), in violation of 18 U.S.C. § 371; wire fraud (Counts 2–10), in violation of 18 U.S.C. §§ 1343 and 2(a); securities fraud (Counts 11–15), in violation of 15 U.S.C. §§ 78j(b), 78ff, 17 C.F.R. § 2401.10b-5, and 18 U.S.C. § 2(a); and money laundering (Counts 16–21), in violation of 18 U.S.C. §§ 1957(a) and 2(a).

B. Trial

At trial, [3] the government called witnesses to summarize the details of the conspiracy, including Mr. Lindberg and Richard Singer (another co-conspirator); both men had pleaded guilty to criminal offenses related to the conspiracy. SEC Investigator Draddy testified about the promotional campaigns and Mr. Clark's testimony before the SEC. Other witnesses were called to summarize documentary evidence. Mr. Clark unsuccessfully moved to sever his trial from Mr. Gordon's due to the alleged potential for a prejudicial spillover of evidence that was admitted concerning both Mr. Gordon and the other co-conspirators. Mr. Clark ultimately was convicted of fourteen of the twenty-one counts for which he was indicted. He was sentenced to 151 months' imprisonment.[4]

II. Discussion

Mr. Clark asserts numerous grounds of error. He claims that the pretrial placement of the caveat on his property violated his constitutional rights and that the evidence was insufficient to convict him. He further contests the district court's refusal to appoint an additional or a substitute defense counsel who was well versed in complex securities matters and the court's failure to sever his trial from Mr. Gordon's. He also contends that his rights under the Speedy Trial Act were violated by the roughly fourteen-month delay between the filing of the indictment and commencement of trial. We address each contention but discern no reversible error.

A. Constitutional Challenges Arising from the Government's Caveat

Mr. Clark claims that "[t]he government violated [his] constitutional rights to due process and a fair trial" in its pre-indictment decision to place a caveat on his home, without notice. Aplt. Opening Br. at 6. By the time the government lifted the caveat on Mr. Clark's home, he claims that he had no income because of the government's other post-indictment restrictions on his business activities—viz., restrictions concerning his ability to liquidate various stock holdings. Therefore, Mr. Clark allegedly was unable to pay for chosen counsel and unable to secure a loan against his house for the same purpose.[5]

Mr. Clark claims that the government acted wrongfully in imposing the caveat on his house. He reasons that his house was not forfeitable property.[6] As a consequence, once the caveat was imposed, he contends, the Due Process Clause of the Fifth Amendment, as interpreted in our decision in United States v. Jones, 160 F.3d 641 (10th Cir. 1998), required a post-restraint, pretrial hearing on whether the house was in fact forfeitable property—a hearing that Mr. Clark says he was wrongfully denied.

"We review de novo the extent of constitutional rights . . . ." Jones, 160 F.3d at 645; see United States v. Rivas-Macias, 537 F.3d 1271, 1276 (10th Cir. 2008). However, when a defendant does not properly raise a challenge in the district court, and "there is no suggestion of a knowing, voluntary failure to raise the [claim], " it is forfeited and our "rigorous plain-error standard governs our review." United States v. Cooper, 654 F.3d 1104, 1117 (10th Cir. 2011). Under this rigorous standard, a defendant must demonstrate: "(1) an error, (2) that is plain, which means clear or obvious under current law, and (3) that affects substantial rights. If he satisfies these criteria, this Court may exercise discretion to correct the error if [4] it seriously affects the fairness, integrity, or public reputation of judicial proceedings." Id. (alteration in original) (quoting United States v. Goode, 483 F.3d 676, 681 (10th Cir. 2007)) (internal quotation marks omitted).

Jones was decided in the post-indictment, pretrial context. See 160 F.3d at 645 ("[W]e next address whether due process nevertheless requires a pre-trial hearing at which defendants may challenge the grand jury's findings."). There, we concluded that "[t]he procedural aspect of the Fifth Amendment Due Process Clause, " id., provides a defendant with some ability to "test the [government's] forfeiture allegations, " id. at 646. Pertinently, we reasoned that the "private interests" at stake when access to property is impeded—specifically, the Sixth Amendment right to counsel of choice and the payment of living expenses—together with the "risk of an erroneous deprivation through [pretrial restraint procedures, ]" weighed in favor of a post-restraint, pretrial adversarial hearing "at which the government must establish probable cause to believe that the restrained assets are traceable to the underlying offense." Id. at 646–47.

We noted, however, that "[d]ue process does not automatically require" such a hearing. Id. at 647. A hearing should be held "only upon a properly supported motion by a defendant, " wherein he must (1) "demonstrate to the court's satisfaction that []he has no assets, other than those restrained, with which to retain private counsel and provide for [him]self and [his] family"; and (2) "make a prima facie showing of a bona fide reason to believe the grand jury erred in determining that the restrained assets" are forfeitable property. Id.; see also United States v. Kaley, 579 F.3d 1246, 1254–55 (11th Cir. 2009) (conducting a similar inquiry).

In this case, the government imposed a caveat under Oklahoma law on Mr. Clark's house roughly eighteen months prior to his indictment, but Mr. Clark was never provided notice or a subsequent hearing. We assume without deciding that an Oklahoma caveat constitutes a pretrial restraint of assets sufficient to trigger a defendant's procedural due process rights under Jones.[7] Cf. Jarvis, 499 F.3d at 1198–1200 (implying that a New Mexico lis pendens may constitute a "restraint"). However, even if it does, Mr. Clark faces a formidable—and, ultimately, insurmountable—obstacle in pursuing this claim: Mr. Clark did not properly seek a hearing prior to trial to vindicate his interests related to the imposition of the caveat, much less make an adequate showing for a hearing under Jones's standards.[8]

Consequently, for this reason (and possibly another, see supra note 8), Mr. Clark may have waived his due process challenge. Cf. Sandoval v. City of Boulder, 388 F.3d 1312, 1329 (10th Cir. 2004) ("Sandoval has waived any argument that she was denied due process by failing to request the hearing to which she now claims she was entitled."); cf. also Kaley, 579 F.3d at 1261 n.5 (Tjoflat, J., specially concurring) (discussing a prior Eleventh Circuit decision in which the "defendants had waived their challenge to the constitutionality of . . . ex parte restraints [on property] by not presenting it to the district court"). However, going to great lengths to ensure that Mr. Clark receives his full day in court, we assume that Mr. Clark's failure to properly seek a post-restraint, pretrial hearing under Jones amounted to a forfeiture. Even affording him this best-case scenario, Mr. Clark's circumstances are rather grim: in order to prevail, he must "successfully run the gauntlet created by our rigorous plain-error standard of review." United States v. McGehee, 672 F.3d 860, 876 (10th Cir. 2012). This he cannot do. Mr. Clark cannot even establish the first prong of the plain-error test; in other words, he cannot demonstrate that the district court committed error at all.

Mr. Clark learned about the caveat in July 2008—a year after it had been imposed and six months prior to his indictment. But he never properly asked the district court for a post-restraint hearing regarding the caveat under our decision in Jones. That is, he never filed the motion that Jones requires, never properly alerted the district court to his desire for a Jones hearing, and nowhere sought to demonstrate that he could satisfy the test that Jones sets forth. Accordingly, the district court had no reason to conclude that Mr. Clark's interests were in jeopardy and required protection through a hearing. See Jones, 160 F.3d at 647 ("[A] post-restraint, pretrial hearing [is required] only upon a properly supported motion by a defendant. Due process does not automatically require a hearing . . . .").

The procedures required by our decision in Jones are in place to protect a defendant from an intrusion upon his property interest without due process. See id. at 645–46 ("[A] restraining order issued under section 853(e)(1)(A) deprives one of property even though the assets named in the indictment are only frozen and may eventually be returned."); cf. 21 U.S.C. § 853(e)(1). A defendant cannot successfully establish that a district court's decision deprived him of the affirmative protections inherent in a Jones hearing when the defendant has not properly alerted the court to the need for such a hearing. Cf. Kirkland v. St. Vrain Valley Sch. Dist. No. Re-1J, 464 F.3d 1182, 1195 (10th Cir. 2006) ("Although [the plaintiff] could have immediately filed a grievance challenging his suspension, he chose not to do so. In light of that, he cannot now allege that the individual Defendants deprived him of post-suspension due process."); Luellen v. City of E. Chicago, 350 F.3d 604, 616 (7th Cir. 2003) (noting that because "[the litigant] was provided with the opportunity for additional procedures to vindicate his rights but did not avail himself of those opportunities, . . . the requirements of due process were satisfied"). Accordingly, we conclude that Mr. Clark has not satisfied the first prong of the plain-error test—viz., he has not shown that the district court erred at all.

Mr. Clark suggests that he had no opportunity to lodge a challenge to the caveat because he was not given adequate notice of its placement. However, the record demonstrates that Mr. Clark had notice of the caveat by July 2008, nearly two years before trial. Mr. Clark has not established that the government's failure to give notice of placement of the caveat in 2007 affected his ability to vindicate his interests in a timely fashion so as to facilitate retaining counsel. Consequently, we reject his due process claim—predicated upon the notion that the district court wrongly failed to afford him a post-restraint, pretrial hearing in order to contest the caveat.

Finally, we note that Mr. Clark claims in passing that the placement of the caveat "deprived [him] of his Sixth Amendment right to a fair trial, " and "violated [his] right to counsel." Aplt. Opening Br. at 11–12. We reject these arguments. First, we interpret Mr. Clark's claim that he was denied a fair trial under the Sixth Amendment as a duplicative pulsation of his arguments under Jones. He provides nothing in his brief that would suggest that the argument supports a separate averment of error on appeal.

Second, we also reject Mr. Clark's claim that the government's conduct impermissibly infringed on his Sixth Amendment right to counsel of choice. Mr. Clark failed to raise this claim in a legally cognizable manner before the district court. To be sure, in the amended motion to withdraw of Mr. Clark's trial counsel, counsel did suggest that the government's conduct violated Mr. Clark's Sixth Amendment right to counsel. And, in positing a possible "solution" to the dilemma, Mr. Clark's attorney set forth a number of hypothetical resolutions, including "dismissal of the charges against Mr. Clark at least for all of the reasons set forth in the David Gordon motion." R., Vol. I, at 179.

However, the motion of Mr. Clark containing this comment was geared primarily toward seeking either withdrawal of counsel because of Mr. Clark's failure to pay legal fees, or remedies so that Mr. Clark could obtain the necessary income to compensate current counsel, i.e, severance or a continuance of trial. See id. at 177 (seeking "withdraw[al], " "severance, " or "continuance"). This single, unadorned statement alluding to a separate, potential Sixth Amendment right-to-counsel claim could not reasonably alert the district court to such a claim, at least in the form that the claim is presented here. Indeed, both the magistrate judge (in resolving the motion) and the government (in responding) expressly declined to speculate on the contours of Mr. Clark's allegations. See, e.g., id., at 344 n.1 ("The Court declines to address this one-sentence unsupported suggestion that the charges should be dismissed.").

In sum, the district court was not afforded the "opportunity to consider the question." United States v. Norman T, 129 F.3d 1099, 1106 (10th Cir. 1997). Consequently, we review it only for plain error, as we did Mr. Clark's due process claim. See United States v. Lamirand, 669 F.3d 1091, 1098 n. 7 (10th Cir. 2012).

Under plain-error review, at the very least, Mr. Clark's claim fails under the third prong. In making his skeletal right-to-counsel argument, like (his co-defendant) Mr. Gordon, Mr. Clark relies on the district court and Second Circuit decisions in the Stein criminal case. See United States v. Stein, 541 F.3d 130 (2d Cir. 2008); United States v. Stein, 435 F.Supp.2d 330 (S.D.N.Y. 2006); see also Gordon, 710 F.3d at 1137 (noting that Mr. Gordon "heavily relies" on Stein). Similar to the fate of Mr. Gordon's argument, Mr. Clark's right-to-counsel argument fails under the third prong for two principal reasons. First, Mr. Clark "has not demonstrated that he was denied access to funds to pay for his defense in any substantial sense; certainly, he has not demonstrated a magnitude of financial deprivation anywhere close to that experienced by the Stein defendants." Gordon, 710 F.3d at 1138.

In this regard, it is significant that the district court found $225, 214.81 of equity in Mr. Clark's house—the property subject to the government's caveat—to be forfeitable property because certain "payments for remodeling and the mortgage" were proceeds "traceable . . . to the conspiracy." R., Vol. VI, at 1047 (Order for Criminal Forfeiture, filed Sep. 15, 2010). That finding has support in the record. See id., Vol. II, at 45 (Aff. of William Robert Taylor, (stating that a "significant amount" of the proceeds of stock sales directly at issue in the case "were paid directly out of [Mr. Clark's] brokerage account for residence related expenses"). And it significantly undercuts any suggestion that Mr. Clark's substantial rights were affected by any district court error in addressing the government's caveat on his home.

In particular, nothing in the Constitution "requires Congress to permit a defendant to use assets adjudged to be forfeitable to pay . . . legal fees." United States v. Monsanto, 491 U.S. 600, 614 (1989); see Caplin & Drysdale, 491 U.S. At 632 (rejecting the "claim of a Sixth Amendment right of criminal defendants to use assets that are the Government's—assets adjudged forfeitable . . . —to pay attorneys' fees"). And, in his threadbare argument, Mr. Clark has not attempted to demonstrate that any remaining equity in his home—beyond the amount subject to forfeiture—would have materially assisted him in employing or paying counsel. Accordingly, in light of the district court's forfeiture finding regarding the home, we would be hard-pressed to conclude that Mr. Clark satisfied the third prong of plain-error review.

Second, as in Gordon, Mr. Clark's claim of prejudice is nigh eviscerated (if not completely so) by his ongoing, active representation throughout his trial by the counsel that he initially retained. See 710 F.3d at 1139 ("[U]nlike Stein, it is quite significant that Mr. Gordon's counsel remained fully and actively engaged in the case throughout the entire trial court proceedings."). More specifically, as we recount in further detail infra (Part II.C), even prior to his indictment, Mr. Clark retained a very experienced criminal defense attorney, Allen Smallwood, and Mr. Smallwood represented Mr. Clark throughout the trial proceedings. And, even a cursory examination of the trial transcript would reveal that Mr. Smallwood advocated for Mr. Clark "in a thorough and vigorous fashion." Id. Accordingly, for this reason as well, Mr. Clark cannot demonstrate that any error by the district court affected his substantial rights (i.e., satisfied the third prong of plain error). In sum, for the foregoing reasons, we reject Mr. Clark's constitutional challenges that stem from the government's imposition of a caveat on his home.

B. Sufficiency of the Evidence

Mr. Clark challenges the sufficiency of the evidence on all of his counts of conviction. Mr. Clark was convicted of one count of conspiracy to commit wire fraud, securities fraud, and money laundering; seven counts of wire fraud; five counts of securities fraud; and one count of money laundering. The district court denied Mr. Clark's motion for judgment of ...

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