United States v. Powell, No. 11-4724

Decided: May 16, 2012

The Fourth Circuit Court of Appeals affirmed Richard Powell’s conviction and sentencing for making, or aiding and abetting of, a false entry in a bankruptcy-related document, in violation of 18 U.S.C. §§ 2, 1519.  This case arose from a fraudulent scheme devised by Pavlock, Powell’s co-defendant.  Pavlock established companies and maintained control of them by installing his associates as their nominal heads.  He convinced individuals to make loans to the businesses which were promised to be repaid with interest, but misappropriated the funds for personal use.  Powell was the nominated head of one of Pavlock’s companies, Fayette Investment Acquisitions, LLC (FIA).  Golden Investment Acquisitions, LLC (GIA), was nominally managed by Craig Golden but also controlled by Pavlock.  In March, 2006, GIA signed a contract of sale to purchase the assets of a limousine service from Charles and Trudy Gratz (the “Gratz’s”).  In December, 2006, Powell met with the Gratz’s accountant and represented he had authority to receive the limousines on behalf of FIA.  FIA did not pay for the limousines and GIA did not transfer them to FIA.

In June, 2007, GIA was over-leveraged and filed for bankruptcy under Pavlock’s direction.  GIA’s bankruptcy schedules did not reflect its acquisition or ownership of the limousines.  Pavlock instructed Powell to contact the bankruptcy trustee to purchase the assets of GIA.  After the sale was agreed to, Powell sent several checks that bounced.  The bankruptcy trustee discovered the limousine purchase after being contacted by the Gratz’s attorney.  Thereafter, Powell wrote the bankruptcy trustee a letter containing two false statements.  First, Powell claimed that FIA loaned $500,000 to GIA in order to fund acquisitions including the Gratz limousine service.  Second, he stated, with the exception of two limousines, GIA had transferred all of the limousine service assets to FIA.  Those statements are the basis of Powell’s conviction.

Powell contends that the district court erred in not providing three jury instructions.  First, Powell cites the jury instructions lacked an element of materiality of the falsification which he alleges is a necessary element to prove the offense.  However, the Fourth Circuit joined other circuits who have omitted a “materiality” element when interpreting the relevant statute.  Second, Powell contends that the district court erred in not providing a jury instruction regarding an “advice-of-counsel” defense.  The advice-of-counsel defense requires that the defendant disclosed all pertinent facts to an attorney and relied in good faith on the attorney’s advice.  However, Powell did not establish an evidentiary foundation for such a defense because the record did not show that Powell had disclosed facts to the attorney.  Therefore, the Fourth Circuit held that the district court did not err in providing an instruction related to this defense.  Finally, Powell contends that the district court erred in not instructing the jury that Powell’s statement that FIA acquired ownership of the limousines was true as a matter of law.  This was not error because a reasonable jury could determine that Powell obtained title to the limousines on behalf of FIA by fraud or deception, so the titles did not establish ownership.

Next, Powell claims the prosecutor committed reversible misconduct by referring to him as a “liar” in opening statements.  This issue was not preserved for appeal because Powell failed to object; in order to reverse due to the prosecutor’s remarks, it must be plain error that affects a substantial right.  Without deciding whether it is improper to refer to someone as a liar, the Fourth Circuit held this did not meet the plain error standard.

Next, Powell claims that he was entitled to a mitigating role adjustment in sentencing because his role made him less culpable.  The key inquiry is whether the defendant’s conduct is material or essential to committing the offense; the Court found Powell’s false entry in a bankruptcy related document was essential and material.

Additionally, Powell claims that his trial counsel was constitutionally ineffective.  This claim is normally raised before the district court and is cognizable on direct appeal only when it appears from the record that defense counsel did not provide effective representation.  The claim was premature to raise on appeal, and Powell can reassert it before the district court.

Full Opinion

-Jennifer Routh

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