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United States v. McQuarrie

United States District Court, E.D. Michigan, Northern Division

July 17, 2018

UNITED STATES OF AMERICA, Plaintiff,
v.
SCOTT MCQUARRIE, DAVID MCQUARRIE, and YVONNE MCQUARRIE, Defendants.

          ORDER DENYING DEFENDANTS' MOTIONS FOR JUDGMENT OF ACQUITTAL AND NEW TRIAL

          THOMAS L. LUDINGTON UNITED STATES DISTRICT JUDGE.

         Scott McQuarrie was indicted on June 13, 2016, with six counts alleging that he made false statements and converted collateral pledged for a loan he received from the Farm Service Agency (FSA). ECF No. 1. On June 8, 2017, a superseding indictment was returned which charged Scott McQuarrie with twelve counts and which named his parents, David Allen McQuarrie and Yvonne Evelyn McQuarrie, as co-Defendants in two counts. On November 1, 2017, a second superseding indictment was issued which charged the three Defendants with an additional two counts, for a total of fourteen counts. ECF No. 42. On January 10, 2018, and February 14, 2018, third and fourth superseding indictments were issued. ECF No. 76, 103. A trial on the fourth superseding indictment was held in late March of 2018.

         Two days before jury selection occurred, Scott McQuarrie filed a motion to dismiss Count Four of the fourth superseding indictment. ECF No. 130. Given the temporal proximity between the filing of the motion to dismiss and the beginning of trial, Count Four was severed. The jury acquitted Scott McQuarrie of Count Nine and convicted him of the remaining counts, leaving Count Four as the only unresolved count. ECF No. 148.[1] David and Yvonne McQuarrie were each convicted of Counts Eleven, Twelve, and Fourteen, but acquitted of Count Thirteen. ECF No. 150, 152.

         On April 11, 2018, Defendants David and Yvonne McQuarrie filed two joint motions. In the first, David and Yvonne McQuarrie move for a judgment of acquittal. ECF No. 166. In the second, they request a new trial. ECF No. 167. On the same day, Defendant Scott McQuarrie filed a motion for acquittal and a new trial. ECF No. 168. For the following reasons, all three motions will be denied.

         I.

         Defendants' motions are governed by Federal Rules of Criminal Procedure 29 and 33. Rule 29(c) permits a criminal defendant to move for a judgment of acquittal within four days after a guilty verdict has been rendered. If the court determines pursuant to its own review of the evidence that “the evidence is insufficient to sustain a conviction, ” the court must enter a judgment of acquittal. Rule 29(a). This review of the sufficiency of the evidence is extremely favorable to the prosecution. “[T]he relevant question is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” Jackson v. Virginia, 443 U.S. 307, 319 (1979) (emphasis in original). In reviewing the jury's verdict, “both circumstantial and direct evidence” must be viewed “in a light most favorable to the prosecution.” United States v. Humphrey, 279 F.3d 372, 378 (6th Cir. 2002). “Circumstantial evidence alone, if ‘substantial and competent,' may support a verdict and need not ‘remove every reasonable hypothesis except that of guilt.'” United States v. Keeton, 101 F.3d 48, 52 (6th Cir. 1996). “The government is entitled to the benefit of all reasonable inferences that can be drawn from the evidence.” United States v. Hofstatter, 8 F.3d 316, 324 (6th Cir. 1993).

         Pursuant to Rule 33(a), “[u]pon the defendant's motion, the court may vacate any judgment and grant a new trial if the interest of justice so requires.” Such a motion may be granted if “the jury's verdict was against the manifest weight of the evidence.” United States v. Hughes, 505 F.3d 578, 592 (6th Cir. 2007). But “such motions are granted only ‘in the extraordinary circumstance where the evidence preponderates heavily against the verdict.'” Id. at 592 (quoting United States v. Turner, 490 F.Supp. 583, 593 (E.D.Mich.1979)). In seeking a new trial based on the district court's refusal to sever defendants and/or counts for trial, the “defendant must show compelling, specific, and actual prejudice from a court's refusal to grant the motion to sever.” United States v. Saadey, 393 F.3d 669, 678 (6th Cir. 2005).

         Defendants can also seek a new trial by arguing that they were convicted pursuant to a duplicitous indictment. See United States v. Kakos, 483 F.3d 441, 444 (6th Cir. 2007). “An indictment is duplicitous if it sets forth separate and distinct crimes in one count.” United States v. Davis, 306 F.3d 398, 415 (6th Cir. 2002). Duplicitous indictments are problematic because they permit a jury to “‘find a defendant guilty on the count without having reached a unanimous verdict on the commission of any particular offense.'” United States v. Shumpert Hood, 210 F.3d 660, 662-63 (6th Cir. 2000) (quoting United States v. Robinson, 651 F.2d 1188, 1194 (6th Cir.1981)). “Duplicitous charges, however, are not necessarily fatal to an indictment.” Id. at 662. If the issue is not raised before trial, then the inquiry focuses on “the harm stemming from the duplicitous indictment.” Kakos, 483 F.3d at 444.

         II.

         Because all three motions raise similar arguments, Defendants' motions will be considered and addressed simultaneously. The initial question is whether the evidence admitted at trial was sufficient for any rational trier of fact to convict. The next issue is whether certain evidentiary rulings made during trial necessitate acquittal or a new trial. The third question is whether David and Yvonne McQuarrie suffered specific and compelling prejudice because their motion for severance was denied. The fourth issue is whether the evidence the Government relied upon at trial for the mail and wire fraud counts constituted a variance from the indictment and bill of particulars and, relatedly, whether mail and wire fraud charges in the fourth superseding indictment were duplicitous. The final question is whether the Government committed misconduct during its closing statements.

         A.

         After considering the evidence in a light most favorable to the prosecution, there is ample factual support for the jury's conclusions.

         1.

         As regards the Counts of the fourth superseding indictment which charge Scott McQuarrie with conversion, Scott McQuarrie argues that he should be acquitted because “it is axiomatic that one cannot convert that which they do not own.” Scott McQuarrie Mot. at 2, ECF No. 168. He identifies no legal support for this assertion. And there was certainly no evidentiary support for the proposition that Scott McQuarrie did not own the collateral, much less that he disclosed that to the FSA. To the contrary, Scott McQuarrie met with Appraiser Jerry Rosenquist on December 28, 2009, to update the value of the property he was pledging for his restructured loan and represented that it was his. Gov. Ex. 2. (“In accordance with your request of December 17 2009, I have completed an appraisal of the livestock and farm equipment in the ownership and possession of Scott McQuarrie, located at 9871 Spruce RD., Ossineke, MI 49766.”). Similarly, Scott McQuarrie expressly represented his ownership of the collateral to FSA in the security agreement executed on July 20, 2011. Gov. Ex. 5 (“3. DEBTOR WARRANTS, COVENANTS, AND AGREES THAT: (a) Debtor is the absolute and exclusive owner of the above-described collateral . . . (e) Debtor will immediately notify Security Party of any material change in the collateral or in the collateral's location. . . .”).

         Moreover, the plain language of 18 U.S.C. § 658 does not require as an element of the crime that the defendant own the pledged collateral. See Id. (“Whoever with intent to defraud, knowingly conceals, removes, disposes of, or converts to his own use or to that of another, any property mortgaged or pledged to, or held by, the Farm Credit Administration . . . .”) (emphasis added). And the definition of conversion provides no support for Scott McQuarrie's argument. According to Black's, conversion involves an individual “depriv[ing] another of his property.” Black's Law Dictionary, Conversion, (10th ed. 2014) (explaining that a person can convert another's property in several ways: “(1) by wrongly taking it, (2) by wrongly detaining it, and (3) by wrongly disposing of it”). The conduct which Congress criminalized in § 658 is depriving the FSA of the security it enjoys through its interest in the pledged collateral. The FSA can be deprived of that interest by any person who converts the pledged collateral, regardless of whether that individual owns the collateral. And, of course, Scott McQuarrie actually did represent that he owned the collateral.

         Scott McQuarrie also argues that the “FSA waived their security agreement to allow Defendant to sell his livestock, crops and trade-up farm equipment, ” and so FSA lost any property interest it may have had. Scott McQuarrie provides no legal support for this contention, and it is inconsistent with the plain language of 18 U.S.C. § 658. Again, Scott McQuarrie identifies no evidentiary support for this proposition. Although Scott McQuarrie advanced the argument to the jury, it was rejected.

         Regardless, this theory is legally insufficient to operate as a defense. Section 658 criminalizes the following behavior: “Whoever with intent to defraud, knowingly conceals, removes, disposes of, or converts to his own use or to that of another, any property mortgaged or pledged to, or held by, the Farm Credit Administration . . . .” Id. There is no textual support for Scott McQuarrie's argument that conversion is noncriminal if the FSA was less than diligent in protecting its rights. Federal courts have repeatedly rejected this theory of defense as legally irrelevant. See United States v. Lott, 751 F.2d 717, 719 (4th Cir. 1985) (finding that there was sufficient evidence of intent to defraud “even if the FHA did lead Lott to believe that it knew of the advance and implicitly acquiesced in his retaining the funds”); United States v. Mitchell, 666 F.2d 1385, 1388 (11th Cir. 1982) (“The $15, 000 advance constituted proceeds from crops and Mitchell's intentional application of that sum to his land rental payment is not excused by the understandable desire to maintain his farm as an ongoing operation.”); United States v. Berman, 21 F.3d 753, 755 (7th Cir. 1994); United States v. Gilbert, 69 F.3d 538 (6th Cir. 1995) (citing Lott approvingly). The evidence admitted at trial was more than sufficient to permit the jury to conclude that Scott McQuarrie sold livestock, crops, and equipment which had been pledged as collateral to the FSA with intent to defraud.

         2.

         Scott McQuarrie does not expressly challenge the sufficiency of the evidence regarding the bankruptcy fraud convictions (Counts Eleven and Twelve). He does challenge several evidentiary rulings made during trial and argues that those rulings prevented him from advancing his preferred defense. Those evidentiary challenges will be addressed below. Yvonne and David McQuarrie, however, argue that there was insufficient evidence for the jury to conclude that “David or Yvonne knew that Scott was withholding any information from the bankruptcy court” and so insufficient evidence to conclude that they acted with intent to defraud. ECF No. 166 at 5.

         David and Yvonne admit that

a rational juror could find that Scott McQuarrie sold assets that were concealed from the bankruptcy court, that David McQuarrie assisted in the sale of some of these assets, and that money was placed in the financial accounts of David and Yvonne McQuarrie. Additionally, it is undisputed that David and Yvonne McQuarrie were aware of the bankruptcy filings of their son.

Def. Mot. Acquittal at 4, ECF No. 166.

         Given these admissions (which could not reasonably be disputed given the evidence admitted at trial, see Gov. Resp. Br. at 4-5, ECF No. 178), Defendants' challenge to their conviction collapses. Defendants' only proffered explanation for why proceeds from the sale of Scott's assets were deposited in his parent's accounts is that he had long been in debt to them, in addition to the FSA. Even if true, that dynamic could not operate as a defense. Defendants have never identified any documents formalizing any loans, much less a security agreement. As such, David and Yvonne would have known (especially given their knowledge of Scott's first bankruptcy filing) that other creditors had superior interests to Scott's assets which were being sold and the proceeds which were being deposited in their accounts. Accordingly, a reasonable jury could have concluded that David and Yvonne cooperated with their son to conceal assets with the intent to defraud the bankruptcy court. Indeed, a reasonable jury could have viewed Defendants' arguments regarding Scott McQuarrie's debts to his parents as providing a motive for David and Yvonne to conceal Scott McQuarrie's assets from the bankruptcy court-that is, to recover their losses at the expense of Scott McQuarrie's other creditors.

         3.

         As to the mail fraud and wire fraud convictions (Counts Thirteen and Fourteen)[2], all three Defendants argue that the Government failed to identify evidence that the jurisdictional element (an interstate use of a wire or mail communication) was met. The elements of mail fraud and wire fraud are as follows: “(1) devising or intending to devise a scheme to defraud (or to perform specified fraudulent acts); (2) involving a use of the mails or wires; and (3) for the purpose of executing the scheme or attempting to do so. United States v. Kennedy, 714 F.3d 951, 958 (6th Cir. 2013) (quoting United States v. Frost, 125 F.3d 346, 354 (6th Cir.1997)). The Sixth ...


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