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United States v. Watts

July 25, 2008


Appeals from the United States District Court for the Eastern District of Wisconsin. No. 03 CR 278-J.P. Stadtmueller, Judge.

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


Before POSNER, RIPPLE, and ROVNER, Circuit Judges.

Jonathan Culbert, Jr., and Johnny Watts were indicted, along with a number of other defendants, for their involvement in a scheme to cash stolen Treasury checks and launder the proceeds. A jury found Watts guilty of one count of conspiracy to commit bank fraud and transport stolen checks in interstate commerce, see 18 U.S.C. §§ 371, 1344, 2314, and a second count of conspiracy to commit money laundering, see id. § 1956(h). The district court sentenced him to a total of eighty-six months' imprisonment and ordered him to pay $105,087 in restitution. Two months later, at a separate trial, a different jury found Culbert guilty of the same two crimes. The district court sentenced him to a total of forty-two months' imprisonment and imposed $16,931 in restitution. Both defendants now appeal their convictions and sentences. We affirm the judgments in all respects.


The two juries found that Watts and Culbert played a part in the same conspiracies, but neither man knew the other. Each defendant instead dealt principally with Gene Vaughn, the central figure in the conspiracy. The defendants' respective roles in Vaughn's scheme are summarized in relevant part below.

A. Jonathan Culbert, Jr.

In early 2001 Culbert's sister, Sheryl, solicited Florida resident Marlon Holt to cash stolen Treasury checks. At the time she did not reveal the source of the stolen checks. Holt, in turn, asked Vaughn, a Wisconsin resident who partnered with Holt in previous forgery schemes, to incorporate a fake check-cashing corporation. In March of that year, Holt and Vaughn, using aliases, incorporated "EZ Check Cashing" and opened a corporate checking account in that name at a Wells Fargo branch in Milwaukee. The two agreed that Holt would get the stolen checks from Sheryl's roommate, Alvyna Sanders, and send them on to Vaughn for deposit into the EZ Check Cashing account. The take was to be split into thirds: one third to be shared by Sheryl and Holt, one-third for Sheryl's source, and one-third for Vaughn.

During a conversation in the summer of 2001, Sheryl hinted to Holt that her brother, Culbert, a Postal Service employee working at the Los Angeles Processing and Distribution Center ("LAPDC"), was the source of the stolen checks. Sheryl later introduced Culbert to Holt and, on three separate occasions, confirmed that Culbert was stealing from the mail the checks she was sending to Holt. Culbert had even engineered a schedule change that summer from the day shift to the night shift, giving him greater access to the machine that sorted Treasury checks.

The stolen Treasury checks consisted mostly of income tax refunds from the IRS and benefit checks from the Social Security Administration, all but one of which were payable to California residents. At first, Vaughn paid Sheryl and Holt by mailing checks drawn on the EZ Check Cashing account to Holt, who would take his cut and send the balance on to Sheryl in California. Soon, however, Vaughn bypassed Holt and began distributing funds directly to Sheryl through Sanders, who had opened a bank account in California where the roommates lived. Culbert continued to supply Vaughn with stolen Treasury checks at least until the end of September 2001, and by that point Vaughn had deposited just over 200 checks totaling over $375,000. But the precise number of checks supplied by Culbert is uncertain because, as we will see, during part of that time Watts also was providing Vaughn with Treasury checks stolen in California.

In November 2002 federal investigators executed a search warrant at Culbert's home. The warrant, predicated on an affidavit authored by IRS Special Agent Thomas Gluntz, noted that persons who commit forgery crimes typically retain in their possession items relating to those crimes. One item found in Culbert's bedroom during the search was a stolen check in the amount of $13,756. That uncashed check, which would have been processed through LAPDC, was issued by Holy Family Hospital in payment for services to Sulzer Orthopedics, Inc.

B. Johnny Watts

Watts, another California resident, first met Vaughn in July 2001 while delivering a Cadillac Escalade to a mutual friend in California. During this meeting Vaughn boasted about some of his illegal activities, including the creation and operation of EZ Check Cashing. Watts then disclosed that he also had access to stolen Treasury checks, and a week later he telephoned Vaughn to inform him that a batch had just been received. Vaughn proposed that Watts give him the checks and let him deposit them into the EZ Check Cashing account. Vaughn suggested that Watts could receive his cut by opening a Wells Fargo account in Los Angeles and giving the account number to Vaughn so that Vaughn could write checks to Watts on the EZ Check Cashing account and deposit them in Milwaukee. Watts agreed to the plan, which called for an even split between the two men.

In August 2001, Watts used a false social security number and a phony drivers license to open an account with Wells Fargo in Los Angeles. Watts gave as his "street address" the address for a "Road Runner" maildrop he had rented (with yet another fake name and address) two weeks earlier. That same day in Milwaukee, Vaughn deposited into Watts's account three checks drawn on the EZ Check Cashing account for $8,700, $8,700, and $3,600. By the end of September, Vaughn had deposited seven more such checks for a grand total of $62,900.

By October 2001, Wells Fargo had shut down the EZ Check Cashing account and Watts's personal account. After that, between November 2001 and April 2002, Watts mailed Vaughn at least four packages containing stolen Treasury checks. Vaughn twice responded by sending Watts checks drawn on a newly opened Wells Fargo account in the name of "Tax Returns by Redd," which Vaughn had opened to replace the defunct EZ Check Cashing account. The address Watts used on his mailings, much like the one he used to open his Wells Fargo account, was in fact the address of "Mail Boxes 4 U," another maildrop where Watts had rented a mailbox under an alias. Watts later had his wife, Cheryl, open a new Wells Fargo account in California so that Vaughn could resume depositing Watts's cut in Milwaukee instead of mailing checks to him in California. The "street address" Cheryl used was once again the address of a commercial maildrop, not the couple's residence. Wells Fargo, however, caught up with Vaughn again and closed ...

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