Opinion
Criminal No. 01-300(1) (DWF/AJB).
March 13, 2002
John R. Marti, Assistant United States Attorney, Minneapolis, MN., counsel for Plaintiff.
Richard F. Koch, Esq., Koch Garvis, Minneapolis, MN., counsel for Defendant.
FINDINGS OF FACT, CONCLUSIONS OF LAW, ORDER AND MEMORANDUM
The above-entitled matter came on before the Honorable Donovan W. Frank, Judge of the above-named court, for a trial before the Court on March 6, 2002.
The matter is before the Court on the charge of Possession with Intent to Distribute Cocaine, pursuant to 21 U.S.C. § 841(a)(1) and (b)(1)(C), as set forth in Count 31 of the Indictment; Firearms — Prohibited Acts, pursuant to 26 U.S.C. § 5861(d), as set forth in Count 32 of the Indictment; and Criminal Forfeiture, pursuant to 18 U.S.C. § 982(a)(7), as set forth in Count 33 of the Indictment.
Based upon the presentations of counsel, the testimony that was received, and the Court being otherwise duly advised in the premises, the Court hereby makes the following:
FINDINGS OF FACT
1. On March 4, 2002, Defendant Stephen Erhart ("Defendant") entered pleas of guilty to one count of conspiracy, in violation of 18 U.S.C. § 371; four counts of false statements relating to health care matters, in violation of 18 U.S.C. § 1035; 10 counts of health care fraud, in violation of 18 U.S.C. § 1347; and 14 counts of money laundering, in violation of 18 U.S.C. § 1956(a)(1).
2. At all relevant times, Defendant, a chiropractor, was co-owner and operator of Advantage Plus Chiropractic Center, at 3260 County Road 10, Brooklyn Center, Minnesota ("the clinic").
3. In the spring of 2000, the FBI commenced a health care fraud investigation of the Defendant and Coral Peterson ("Peterson"), the co-owner and office manager of the clinic. .
4. As part of the health care fraud investigation in the spring of 2000, the FBI utilized a cooperating a witness by the name of Tyrone Robinson ("Robinson"). The FBI sent Robinson, as a cooperating witness, into the clinic to record conversations with the Defendant and other individuals, including Peterson.
5. During Robinson's second visit, on or about August 15, 2000, Robinson entered the clinic and purchased from the Defendant a sawed off shotgun and leather jacket. The Defendant indicated that he had received the gun from another patient of the clinic. The conversation between Robinson and the Defendant regarding the sale of the shotgun and the jacket was recorded (Government's Exhibit 1). The Defendant described the sawed off shotgun to Robinson as a 12-gauge that holds 3-inch shells and stated, "It blew a hole right through the damned door." The Defendant also stated, "Well, I'll tell you what. This is some definite protection." He also commented that "They don't have these damned double barrel side by sides anymore."
6. The sawed off shotgun and leather jacket were introduced as Government's Exhibits 9A.
7. The sawed off shotgun is a 12-gauge model 311 Savage.
8. The Court finds, based upon Government's Exhibits 10 and 11 and the testimony of Sally Gru, that the shotgun in question (the 12-gauge 311 Savage) has a barrel length of less than 18 inches. The barrels are 17 13/16 inches in length.
9. The barrels and the stock of the Savage 12-gauge had been substantially shortened, and this modification was obvious. The characteristics of the shotgun, which rendered it a "quasi-suspect" weapon, were easily observable by any lay person, including the Defendant.
10. The Defendant possessed the sawed off shotgun on or about August 15, 2000.
11. On November 30, 2000, in another recorded conversation between Robinson and the Defendant (Government's Exhibit 4), the Defendant described the firearm as a sawed off shotgun.
12. On March 15, 2001, during another recorded conversation between Robinson and the Defendant (Government's Exhibit 5), the Defendant said, "I got so paranoid after I sold that gun to you."
13. The Court finds that these statements, particularly the statement on March 15, 2001, demonstrate that Defendant was fully aware of the "quasi-suspect" nature of the sawed off shotgun.
14. On July 20, 2001, when FBI agents questioned the Defendant about the shotgun and the sale to Robinson, the Defendant acknowledged selling the sawed off shotgun to Robinson on August 15, 2000.
15. The sawed off shotgun was a firearm in the possession of the Defendant.
16. The firearm was capable of operating as designed.
17. The firearm was not registered to the Defendant in the National Firearms Registration and Transfer Record.
18. The Defendant voluntarily turned over 4.42 grams of cocaine to FBI agents on or about April 11, 2001. The cocaine was stored at his parents' home. The Defendant acknowledged using cocaine in the past, but asserted to the agent that he was no longer using cocaine.
19. The Defendant admitted obtaining the cocaine from a patient about 30 days prior to April 11, 2001. The patient had suggested that the Defendant try to use some of the cocaine, which was described as an "eight-ball."
20. When Defendant turned over the cocaine to the FBI, it was divided into17 so-called "bindles" (small plastic bags containing a small amount of the drug) which were stored in a medicine bottle.
21. Agent Bisswurm testified that the Defendant said he had repackaged the cocaine into smaller bindles for sale. The agent testified that there was no doubt in his mind that the Defendant said he, himself, had repackaged the cocaine into 17 packets, which he intended to distribute in some manner. The Court finds the testimony of Agent Bisswurm credible and concludes that the evidence does establish that it was the Defendant that repackaged the cocaine into 17 bindles and that he repackaged the cocaine with the objective of distributing it in some fashion, either for sale or for free.
22. The Defendant knew he was in possession of cocaine.
23. The Defendant had approximately 150 active patients.
24. The Defendant admitted to the agents that approximately 95 percent of all of his billings were false or fraudulent.
25. The Court finds, by a preponderance of the evidence, that the $3,222.86 in funds derived from the GEICO Indemnity Company check dated June 23, 2000, constitute gross proceeds, traceable to the Defendant's commission of an act in violation of 18 U.S.C. § 1347, as set forth in Count 7 of the Indictment.
26. The Court finds, by a preponderance of the evidence, that the $923.72 in funds derived from the Progressive Northwestern Insurance Company check dated August 2, 2001, constitute gross funds, traceable to the Defendant's commission of an act in violation of 18 U.S.C. § 1347, as set forth in Count 8 of the indictment.
27. The Court finds, by a preponderance of the evidence, that the $502.46 in funds derived from the GEICO General Insurance Company check dated August 4, 2000, constitute gross proceeds, traceable to the Defendant's commission of an act in violation of 18 U.S.C. § 1347, as set forth in Count 9 of the Indictment.
28. The Court finds, by a preponderance of the evidence, that the $1,400.80 in funds derived from the Progressive Northwestern Insurance Company check dated October 20, 2000, constitute gross proceeds, traceable to the Defendant's commission of an act in violation of 18 U.S.C. § 1347, as set forth in Count 10 of the Indictment.
29. The Court finds, by a preponderance of the evidence, that the $1,202.86 in funds derived from the Progressive Northwestern Insurance Company check dated October 20, 2000, constitute gross proceeds, traceable to the Defendant's commission of an act in violation of 18 U.S.C. § 1347, as set forth in Count 11 of the Indictment.
30. The Court finds, by a preponderance of the evidence, that the $1,151.82 in funds derived from the Progressive Northwestern Insurance Company check dated November 9, 2000, constitute gross proceeds, traceable to the Defendant's commission of an act in violation of 18 U.S.C. § 1347, as set forth in Count 12 of the Indictment.
31. The Court finds, by a preponderance of the evidence, that the $1,151.82 in funds derived from the Progressive Northwestern Insurance Company check dated November 19, 2000, constitute gross proceeds, traceable to the Defendant's commission of an act in violation of 18 U.S.C. § 1347, as set forth in Count 13 of the Indictment.
32. The Court finds, by a preponderance of the evidence, that the $799.82 in funds derived from the Progressive Northwestern Insurance Company check dated December 22, 2000, constitute gross proceeds, traceable to the Defendant's commission of an act in violation of 18 U.S.C. § 1347, as set forth in Count 14 of the Indictment.
33. The Court finds, by a preponderance of the evidence, that the $690.20 in funds derived from the Progressive Northwestern Insurance Company check dated December 22, 2000, constitute gross proceeds, traceable to the Defendant's commission of an act in violation of 18 U.S.C. § 1347, as set forth in Count 15 of the Indictment.
34. The Court finds, by a preponderance of the evidence, that the $5,413.20 in funds derived from the American Family Insurance check dated June 15, 2001, constitute gross proceeds, traceable to the Defendant's commission of an act in violation of 18 U.S.C. § 1347, as set forth in Count 16 of the Indictment.
35. That any conclusion of law which can be deemed a finding of fact is incorporated herein as such.
Based upon the above findings of fact, the Court now makes its:
CONCLUSIONS OF LAW
1. Based upon the findings of fact above and the Court's evaluation of the evidence and all of the circumstantial inferences therefrom, the Court finds and concludes that the United States has proven, by proof beyond a reasonable doubt, that on or about April 11, 2001, the above-named Defendant, Stephen Erhart ("Defendant"), did possess cocaine with the intent to distribute it in violation of 21 U.S.C. § 841(a)(1) and (b)(C), as set forth in Count 31 of the Indictment.
2. Based upon the findings of fact and the Court's evaluation of the evidence and all of the circumstantial inferences therefrom, the Court finds and concludes that the United States has proven, by proof beyond a reasonable doubt, that on or about August 15, 2000, the Defendant did possess an unregistered firearm in violation of 26 U.S.C. § 5861(d), as set forth in Count 32 of the Indictment. See United States v. Barr, 32 F.3d 1320 (8th Cir. 1994).
3. Based upon the findings of fact, above, and the Court's evaluation of the evidence and all of the circumstantial inferences therefrom, the Court finds and concludes that the Defendant shall forfeit to the United States, pursuant to 18 U.S.C. § 982(a)(7), all of his right, title, and interest in any property, real or personal, that constitutes or is derived, directly or indirectly, from gross proceeds traceable to the commission of the offenses described in Counts 1-5 and 7-30 of the Indictment, to which Defendant pled guilty.
4. The Court finds and concludes that the funds in Wells Fargo Bank Account #0168229718 constitute or were derived, directly or indirectly, from gross proceeds traceable to the Defendant's commission of a violation of 18 U.S.C. § 1347.
5. The Court finds and concludes that the funds in Merrill Lynch Cash Management Account #673-20U92 constitute or were derived, directly or indirectly, from gross proceeds traceable to the Defendant's commission of a violation of 18 U.S.C. § 1347.
6. The Court finds and concludes that the funds in Merrill Lynch IRA Account #673-78A21 constitute or were derived, directly or indirectly, from gross proceeds traceable to the Defendant's commission of a violation of 18 U.S.C. § 1347.
7. The Court finds and concludes that the funds in Merrill Lynch IRA Account #673-75W73 constitute or were derived, directly or indirectly, from gross proceeds traceable to the Defendant's commission of a violation of 18 U.S.C. § 1347.
8. That any finding of fact which can be deemed a conclusion of law is incorporated herein as such.
Based upon the above findings of fact and conclusions of law, the Court now enters the following:
ORDER
1. Pursuant to the findings of fact and conclusions of law of this Court, the Court finds the Defendant, Stephen Erhart ("Defendant"), guilty of the offense of possession with the intent to distribute cocaine on or about April 11, 2001, in violation of 21 U.S.C. § 841(a)(1) and (b)(1)(C), as set forth in Count 31 of the Indictment.
2. Pursuant to the findings of fact and conclusions of law of this Court, the Court finds the Defendant guilty of the offense of possession of an unregistered firearm, namely, a sawed off shotgun, on or about August 15, 2000, in violation of 26 U.S.C. § 5861(d), as set forth in Count 32 of the Indictment.
3. Based upon the findings of fact and conclusions of law set forth above, the Court finds and concludes that the United States has established the forfeiture allegation as set forth in Count 33 of the Indictment. Therefore, the property set forth in the conclusions of law of this Court is property that was derived from proceeds that the Defendant obtained, directly or indirectly, as a result of his health care fraud offenses and shall be subject to forfeiture, consistent with Count 33 of the Indictment.
4. The Court respectfully directs that the Clerk of Court enter the convictions consistent with the findings and conclusions of the Court.
5. The Court respectfully directs that the Defendant immediately contact the United States Probation Office to begin the presentence investigation report process. Consistent with the Court's remarks off the bench on March 4, 2002, upon completion of the presentence investigation report the Court will set a sentencing date.
MEMORANDUM
Possession of Cocaine With Intent to Distribute
The Court agrees with defense counsel that 4.42 grams of cocaine would, in most instances, be deemed a small amount of cocaine, subject only to personal use. However, the conduct of the Defendant and his statements to Agent Bisswurm distinguish this case both factually and legally from the usual case. The only conceivable reason Defendant would have repackaged the cocaine into 17 bindles would be to distribute them to other individuals, and that rationale is consistent with the statement of the Defendant to Agent Bisswurm on April 11, 2000. The Court does not have to reach the issue of whether the Defendant intended to distribute the bindles to patients, to give the bindles to friends or associates, or to sell the bindles. As the Defendant himself stated, they were not in his possession for personal use.
Moreover, the evidence in the case establishes that the Defendant had general knowledge of cocaine and was familiar with prices of cocaine. This is not a case where the Defendant was in innocent possession of the cocaine or was otherwise the victim of circumstance. The Government established by proof beyond a reasonable doubt that the Defendant possessed cocaine with the intent to distribute it.
Possession of Unregistered Firearm — Sawed Off Shotgun
The National Firearms Act makes it unlawful to receive or possess a "firearm," as that term is statutorily defined, that is not registered in the National Firearms Registration Transfer Record or that is not identified by a serial number. 26 U.S.C. § 5861(d), (i). The statute is silent concerning the mens rea required for a violation.
The Defendant argues that the government must prove, beyond a reasonable doubt, that he knew the barrels of the shotgun were less than 18 inches in length. The Defendant relies on the U.S. Supreme Court's decision in Staples v. United States, 511 U.S. 600 (1994). The defendant in Staples was convicted of possessing a unregistered firearm; the weapon was a semi-automatic rifle-which would not normally need to be registered-that had been modified for fully-automatic fire. The Supreme Court, expressing concern about the possibility of criminalizing seemingly innocent behavior, held that the government must prove that the defendant knows of the features of the weapon that bring it within the scope of 26 U.S.C. § 5861(d), (i).
Staples would seem to support the Defendant's position. Indeed, a majority of circuits have held that, when the weapon at issue is a sawed off shotgun, the government must prove that the defendant knew that the barrel or barrels were less than 18 inches in length. See, e.g., United States v. Starkes, 32 F.3d 100 (4th Cir. 1994); United States v. Mains, 33 F.3d 1222(10th Cir. 1994); United States v. Edwards, 90 F.3d 199 (7th Cir. 1996). However, the Eighth Circuit has taken a contrary view. In United States v. Barr, 32 F.3d 1320 (8th Cir. 1994), the Court concluded that Staples does not require such a stringent showing with respect to sawed off shotguns. The Court reasoned that a "common sense evaluation" of the nature of a sawed off shotgun would put any reasonable gun-owner on notice that the weapon would be subject to regulation. The Court concluded that "[w]here . . . the characteristics of the weapon itself render it `quasi-suspect,' Staples does not require proof that the defendant knew of the specific characteristics which make the weapon subject to [ 26 U.S.C. § 5861(d), (i)]." United States v. Barr, 32 F.3d at 1324.
In the instant case, the Court has found that the weapon at issue was clearly a modified shotgun, "clearly not a traditionally lawful weapon." Id. The evidence indicated unequivocally that the Defendant knew that the weapon was, in fact, a sawed off shotgun. Moreover, Defendant's statement on March 15, 2001, that he became "paranoid" after he sold the gun to Robinson, indicates that the Defendant knew that the gun was subject to regulation and that his conduct was unlawful. "This is not the `apparently innocent conduct' which concerned the Court in Staples." Id.
Thus, the Court finds that the Government proved, by proof beyond a reasonable doubt, that the Defendant possessed the sawed off shotgun in violation of 26 U.S.C. § 5861(d).
Forfeiture Allegations
The Court has concluded that, as a result of the Defendant's guilty pleas, he is subject to forfeiture of the property that constitutes or is derived, directly or indirectly, from gross proceeds traceable to the commission of the offense. 18 U.S.C. § 982(a)(7). The Government has established the requisite nexus between the property in question and the gross proceeds that are traceable to the commission of the offenses to which the Defendant pled guilty. The Court does not now reach the issue of the amount of restitution that the Defendant is liable to pay to the victims in this case; that is a separate issue to be addressed at the time of sentencing.
For the reasons set forth in the findings and conclusion of the Court, the Court has determined that the Defendant is guilty of Counts 31 and 32 and that the Government has established the forfeiture allegations based upon the pleas of guilty the Defendant made to Counts 1-5 and Counts 7-30 on March 4, 2002.