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United States v. Smith

October 16, 2002

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
DANNY SMITH AND HARRY D. LOWE, DEFENDANTS-APPELLANTS.



Appeals from the United States District Court for the Northern District of Illinois, Western Division. No. 99 CR 50022--Philip G. Reinhard, Judge.

Before Harlington Wood, Jr., Cudahy, and Kanne, Circuit Judges.

The opinion of the court was delivered by: Cudahy, Circuit Judge.

ARGUED OCTOBER 23, 2001

Harry Lowe and Danny Smith were convicted by a jury of several counts of conspiracy and possession of marijuana with intent to distribute, in violation of 21 U.S.C. §§ 841, 846. During the tax years in question, Lowe had substantial income, presumably from drug trafficking, which he failed to report as income, in violation of 36 U.S.C. § 7203. The defendants appeal on several grounds related to whether they were given a fair trial and whether the district court erred in determining their criminal sentences. We affirm.

I.

This appeal involves two criminal defendants and numerous alleged errors by the district court. Therefore, we must discuss the facts of the case in some detail. This narrative follows a simple chronology: the drug transactions leading to Harry Lowe's arrest, the events leading authorities to Danny Smith, the seizure of a large amount of cash from Lowe's residence (which forms the subject of his tax crimes) and the subsequent trial and sentencing proceedings.

A.

The conspiracy charges against defendants Lowe and Smith arise from several drug transactions that took place from the early to the late 1990s. They can be separated into four episodes: (1) the purchase of marijuana from Jose Rubalcava; (2) the purchase of marijuana from Gerardo Rivera via co-conspirator Edwin Rivas; (3) the purchase of marijuana in a deal Rivas brokered with suppliers in Texas and Mexico and (4) the purchase of marijuana from a supplier in Arizona.

1. Marijuana from Rubalcava.

In the early 1990s, a home remodeler named Stuart Swick, a co-conspirator and eventual prosecution witness, was working at the home of his friend Harry Lowe, a.k.a. Wayne Lowe, the owner of a used car lot. Swick and Lowe discussed one of Swick's other clients, Jose Rubalcava. Swick had observed Rubalcava moving garbage bags from the trunk of his car into his home, and Swick inferred that Rubalcava was trafficking in marijuana. This piqued Lowe's interest, and he asked Swick to find out if Rubalcava would be willing to sell him several pounds of marijuana, and if so, at what price. According to testimony at trial, a deal was struck for five pounds of marijuana (approximately 2.3 kilograms) for $5,000. Several weeks later, Lowe gave Swick $10,000 to arrange another deal with Rubalcava, this time for ten pounds of marijuana (about 4.6 kilograms).

During 1992, Lowe and Swick continued to make purchases from Rubalcava. Swick observed that some of the cash supplied by Lowe came from a safe buried in the dirt floor of Lowe's basement. In the summer of 1992, Lowe enlisted his cousin, Tom Lones, in a plan to make a $50,000 "down payment" on 300 pounds (140 kilograms) of marijuana from Rubalcava, never intending to pay the balance. The plan failed when Rubalcava delivered the first 90 pounds but refused to deliver any more until he was paid. Apparently, the buyers ceased dealing with Rubalcava from that time forward.

2. Marijuana purchased from Rivera.

Lowe had another opportunity to traffic in large quantities of marijuana in 1994. According to testimony at trial, the business manager for Lowe's car lot, Greg Fitzgerald, met a customer named Edwin Rivas. Fitzgerald found out that Rivas had acquaintances in the drug importation business and set up a meeting between Lowe and Rivas. At the meeting, Lowe asked Rivas if he knew of any sources for marijuana or cocaine, and Rivas contacted Gerardo Rivera on Lowe's behalf. Thereafter, Rivas acted as a courier for Lowe, exchanging large amounts of cash for marijuana. The first transaction was for 50 pounds (or 23 kilograms) at $35,000, and Rivas was usually given $300 to $400 for his efforts.

3. Marijuana from Texas and Mexico.

In the summer of 1994, Lowe asked Rivas to go to Laredo, Texas, and negotiate a deal with a Spanish-speaking marijuana source. Rivas agreed. Once in Laredo, Rivas met with two individuals and negotiated a deal to acquire 50 kilograms of marijuana for $475 per kilogram. Rivas contacted Lowe, who accepted the deal. Rivas then returned to Rockford, picked up $23,000 from Lowe, and brought it to Texas. The first shipment of marijuana arrived in Rockford a short time later.

Following this transaction, Rivas traveled to Laredo again, this time accompanied by Lowe. They were taken to Mexico and introduced to a person called "Rogilo" with whom they negotiated new terms. The deal made at that meeting set up a regular shipment of 300 pounds (about 140 kilograms) of marijuana to Rockford at $275 per pound ($605 per kilogram, or about $82,000 per shipment). According to testimony at trial, this arrangement resulted in approximately ten 300-pound shipments of marijuana to Rockford between 1994 and 1996.

The marijuana was transported by sealing it in the gasoline tanks of pick-up trucks. The trucks were driven to Rockford, where the drivers would stay at a local hotel. Lowe would drive the trucks from the hotel to his dealership or to an auto body shop owned by his friend (and co-defendant) Danny Smith. They would remove the gas tanks and cut them open to access the marijuana. Containers filled with payments of $100,000 or more were then welded inside new tanks, which in turn were installed on the trucks and returned to the drivers. Danny Smith's business partner at the body shop, James Petrow, who subsequently testified at trial, witnessed this activity several times, and once assisted Smith in dividing marijuana into smaller units and packaging it in bags. The bags were kept in a freezer at the rear of the body shop, and buyers would periodically stop by to pick up marijuana and drop off money.

4. Marijuana from Arizona.

In November of 1995, Rivas bought a van from Lowe's lot. A few months later, Lowe asked Rivas to drive the van to Arizona to pick up some marijuana. Rivas again agreed. He drove the van to a hotel in Tucson, where Lowe's contact picked up the van to load it with drugs. The van was returned the next day and Rivas was shown how marijuana had been hidden behind the van's interior rear panels. On the return trip, the Nebraska State Police stopped Rivas. Rivas consented to a search, and a trooper found 115 pounds of marijuana (about 50 kilograms). Rivas was then placed under arrest.

Rivas agreed to cooperate with DEA officials. The DEA sent Rivas on a controlled delivery to Lowe's car lot, using recording and surveillance equipment. Rivas pulled into the garage of Lowe's facility, showed Lowe how the marijuana could be accessed, and asked to receive one pound of marijuana in partial payment of his $5,000 courier fee. Rivas then borrowed a car from Lowe and drove a short distance, where he turned over the marijuana and a recording device to DEA agents. Shortly thereafter, Lowe left the car lot. However, because he was driving very fast, DEA agents were unable to follow. Lowe's vehicle was subsequently found outside Danny Smith's auto body shop, but when Lowe left the lot, he once again drove too fast for authorities to maintain surveillance. That evening, Lowe was finally arrested as he left a tavern owned and operated by his father. A search warrant was obtained to search Lowe's car lot facilities. The search recovered 63 packages suspected of containing drugs, 52 of which were chemically tested and determined to contain marijuana weighing 35 kilograms (about 75 pounds). A loaded shotgun was on the premises and accessible at the time of the search.

B.

Lowe was released on bond shortly thereafter. Smith and Lowe still possessed large amounts of marijuana, which Smith placed in the trunk of a Saab at the body shop. The auto body shop had purchased the Saab from Lowe's car lot. One week after Lowe's arrest and release, Lowe asked Swick to do him a favor and to get instructions from Smith. Smith directed Swick to pick up the Saab at the auto body shop and to lock it in Swick's garage. Eventually, Smith also directed Swick to remove a marijuana-filled duffle bag from the trunk of the Saab and to lock it in a freezer that was also located inside the garage. Periodically over the next year, Lowe would direct Swick to transport quantities of this marijuana to Smith's body shop. On one occasion in March of 1997, Swick delivered nine pounds to Smith.

In April 1997, the police department of Loves Park, Illinois, received a tip that Swick was storing a large quantity of marijuana in a freezer at his residence. The police then visited Swick's home, and Swick voluntarily agreed to a search. Both Swick and Tom Lones, who was Lowe's cousin and the owner of Swick's rented home, disclaimed ownership of the locked freezer in the garage. The authorities impounded the freezer and transported it to State Police headquarters. It was then opened and found to contain almost 18 pounds of marijuana. A fingerprint examiner inspected the packages of marijuana, finding Lowe's fingerprints on one and Smith's on another.

C.

On December 3, 1997, a search warrant was executed at Lowe's residence, simultaneously with the execution of a seizure warrant based on a civil forfeiture complaint. Several documents were seized, including some items that were improperly catalogued. *fn1 In addition to numerous firearms, Police seized a safe buried in the basement floor, of which Lowe denied knowledge. The safe contained more than $100,000 in cash. Although Lowe had earned income during 1995 and 1996, he did not file tax returns for those years until December 12, 1997, shortly after the search and seizure.

According to testimony at trial, Lowe approached Vincent Lloyd, an accountant, in March of 1998 for his assistance in reviewing and correcting his tax returns as far back as 1993. The Government asserts that because this review and correction took place so soon after the search and seizure, they raise a legitimate suspicion that Lowe was trying to protect some of his assets from forfeiture.

D.

Smith and Lowe were indicted by a federal grand jury in June 1999. Count 1 charged both Smith and Lowe with conspiring to distribute in excess of one hundred kilograms of marijuana, a Schedule I Controlled Substance, in violation of 21 U.S.C. § 841(a)(1). Counts 2 and 3 charged Lowe with conspiracy to distribute "approximately fifty-two kilograms" and "approximately 1038 grams" of marijuana, respectively. Counts 4, 5 and 6 charged Lowe with making false statements on his tax returns for 1994, 1995 and 1996, in violation of 26 U.S.C. § 7606(1). *fn2 Counts 7 and 8 charged Lowe with willful failure to file timely tax returns for 1995 and 1996, in violation of 26 U.S.C. § 7206(1). A jury trial followed.

Before the government commenced its case, Lowe objected to joinder of the tax and drug charges. Lowe argued that these charges were unrelated and should be severed to avoid unfair prejudice. The district court denied the motion for severance and the trial went forward. *fn3 After the government presented its case-in-chief against Lowe but before Lowe began his defense case, the district court informed counsel for Smith that any cross examination by him of Lowe's defense witnesses would be limited to matters that pertained to his client, Danny Smith. The district court judge said that he wanted to avoid jury confusion by limiting the possibility that counsel for Smith would attempt to develop his own case during the cross examination of Lowe's defense witnesses. Instead, counsel for ...


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