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United States v. Kelerchian

United States Court of Appeals, Seventh Circuit

August 22, 2019

United States of America, Plaintiff-Appellee,
Vahan Kelerchian, Defendant-Appellant.

          Argued April 2, 2019

          Appeal from the United States District Court for the Northern District of Indiana, Hammond Division. No. 2:13-CR-66 - Joseph S. Van Bokkelen, Judge.

          Before Hamilton, Barrett, and Scudder, Circuit Judges.


         Federal law imposes tight restrictions on private possession of machineguns and laser gunsights but allows law enforcement agencies to purchase and use both machineguns and laser sights. This appeal concerns criminal conspiracies among a firearms dealer and law enforcement officers to fool manufacturers into thinking they were selling to local police forces when the machineguns and laser sights were instead going into private hands.

         Defendant-appellant Vahan Kelerchian was a licensed firearms dealer. His co-conspirators were Joseph Kumstar, the Deputy Chief of the Lake County Sheriff's Department in Indiana, and Ronald Slusser, a patrolman who was the armorer for the department's SWAT team. The trio defrauded firearms manufacturer Heckler & Koch and the laser sight producer Insight Technologies into selling them machineguns and laser sights restricted by law for law enforcement and military use. After many fraudulent transactions, the three were indicted on several charges. Kumstar and Slusser pleaded guilty. Kelerchian went to trial and was convicted on four counts of conspiracy and four counts of making false writings. On appeal, Kelerchian raises numerous issues, but we affirm his convictions on all counts. In Parts I and II, we provide the factual and procedural background for Kelerchian's arguments. In Part III, we analyze his numerous challenges to his convictions.

         I. Factual Background

         A. Machineguns and Laser Sights

         Since enactment of the National Firearms Act of 1934, codified in the Internal Revenue Code as 26 U.S.C. § 5801 et seq. ("the 1934 Act"), federal law has forbidden the importation of machineguns, but with several exceptions. Two are relevant here. First, machineguns may be imported for use by state or federal departments or agencies, and second, machineguns may be imported "solely for use as a sample by a registered importer or registered dealer." 26 U.S.C. § 5844; see also 27 C.F.R. § 479.112. The conspirators here submitted fake documents to Heckler & Koch to take advantage of these two exceptions.

         The Gun Control Act of 1968, as amended and codified as part of the criminal code in 18 U.S.C. § 921 et seq. ("the 1968 Act"), imposed additional restrictions on a much broader category of firearms, as well as new recordkeeping laws. The 1968 Act, as amended, prohibits the transfer or possession of machineguns made after 1986, except by a federal, state, or local agency. 18 U.S.C. § 922(o). Both the 1968 and 1934 Acts require importers and dealers of firearms to keep records related to their transactions. 18 U.S.C. § 923(g); 26 U.S.C. § 5843. Both Acts make it a crime to make false statements with respect to these records. 18 U.S.C. § 924(a)(1)(A); 26 U.S.C. § 5861(1). The Bureau of Alcohol, Tobacco, Firearms and Explosives ("ATF") administers the recordkeeping requirements and the exceptions.

         Laser sights, on the other hand, are regulated by the Food and Drug Administration ("FDA") as part of its regulation of radiation-emitting devices. See 21 U.S.C. § 360ii. The powerful lasers on gunsights can cause eye damage, so federal law ordinarily requires them to be equipped with visible or audible warnings before and during use, as well as protective covers and key controls. 21 C.F.R. § 1040.10(f). They also must have labels warning of the risk of eye damage. 21 C.F.R. § 1040.10(g)(2)(iii).

         The FDA may, however, grant exemptions or variances from these requirements, such as for police departments that might need to be able to use silent laser sights. 21 U.S.C. § 360oo(b); 21 C.F.R. § 1010.4(a). The FDA also requires accurate records for laser sales. Laser manufacturers must collect and preserve information that will enable the tracing of lasers sold to distributors or to dealers. 21 C.F.R. § 1002.30(b)(1); see also 21 U.S.C. § 360nn(f). Dealers and distributors must "obtain such information as is necessary to identify and locate first purchasers" of lasers and forward this information "immediately to the appropriate manufacturer." 21 C.F.R. § 1002.40(a), (c).

         B. The Conspiracies

         Vahan Kelerchian was a licensed firearms dealer who ran a business in Pennsylvania called Armament Services International, Inc., known as ASI. He met Lake County Sheriff patrolman Ronald Slusser at a Kentucky machinegun show some time in the early 2000s. A few years later at the same show, Slusser introduced Kelerchian to his supervisor, Joseph Kum-star, the Deputy Chief of the Lake County Sheriff's Department. According to Slusser, he and Kelerchian stayed in touch and did business together for the next several years.

         At some point, Slusser told Kelerchian about an illegal arms deal in 2008 that Kumstar had instructed him to help with. Kumstar had acquired machineguns by claiming that they were for the Sheriff's Department, but then instructed Slusser to remove certain parts of these guns and to sell them over the internet for Kumstar's personal gain. Slusser testified that Kelerchian expressed interest in doing a similar deal with Kumstar and Slusser. The three then plotted the conspiracies that led to their convictions.

         1. Machinegun Purchases

         The first part of the conspirators' plan was to purchase machineguns from international gun importer Heckler & Koch ("H&K") under the pretense that the weapons were for the Lake County Sheriff's Department. Kelerchian, Slusser, and Kumstar orchestrated three fraudulent machinegun purchases from H&K.

         In the first transaction, in December 2008, Kelerchian, Kumstar, Slusser, and Slusser's cousin, Ed Kabella, ordered 50 machineguns for $83, 026. Kumstar prepared paperwork saying falsely that the Sheriff's Department was purchasing all 50 machineguns. Kelerchian sent this paperwork to H&K, including statements on Sheriff's Department letterhead attesting that the weapons were for the exclusive use of Lake County law enforcement. H&K then filed ATF Form 6, asserting that it was importing 50 machineguns for the Lake County Sheriff's Department. ATF approved the transaction, and H&K sent the 50 machineguns to the Sheriff's Department.

         Slusser then took the machineguns apart, separating the guns' lower receivers, which are the regulated portions of the weapons containing traceable serial numbers. The unregulated upper barrels of the guns were distributed among the conspirators according to how much money each had contributed to the purchase. The plan was to refurbish 15 of the regulated lower receivers into new guns using cheaper parts, and then to add these new weapons into the Sheriff's Department's armory. The 35 remaining lower receivers were to be destroyed. No machineguns ever made it to the Sheriff's Department, though. The conspirators sold the unregulated machinegun parts for a substantial profit. Slusser sold his unregulated machinegun barrels to a dealer named Adam Webber, who runs a website selling hard-to-acquire H&K machinegun parts.

         Webber was involved in the next two machinegun purchases. He told Kumstar and Kelerchian that he was interested in buying additional machinegun parts. In February 2009, using the same procedure as before, Kumstar and Kelerchian bought nine H&K machineguns, again telling H&K falsely that the guns were for the Sheriff's Department. Once the machineguns were delivered, Slusser again disassembled them and sent the unregulated parts to Webber. In exchange, and relevant to the money-laundering conspiracy charge, Webber sent Slusser a cashier's check for $18, 900. At Kumstar's direction, Slusser deposited that check into his own account and then sent cashier's checks to both Kumstar and Kelerchian. Nine months later, Kelerchian mailed H&K a check for the machineguns.

         In October 2009, Kelerchian and Kumstar bought twelve more machineguns from H&K, again telling H&K falsely that they were for the Sheriff's Department. Slusser again disassembled the guns and sent the unregulated parts to Webber. Webber mailed Slusser a $31, 200 check, which he cashed. Slusser wrote Kelerchian a check for $28, 200, and Kelerchian wrote H&K a check for the guns' $16, 800 purchase price.

         2. Demonstration Letters

         In the meantime, the conspirators also used the exception for importing machineguns as demonstration samples for a dealer. Kumstar testified that Kelerchian asked him for help in buying machineguns for his personal collection. Between October 2007 and March 2010, Kumstar sent five letters to the ATF stating falsely that the Lake County Sheriff's Department was interested in demonstrations of the weapons Kelerchian wanted for himself. The letters said that Kelerchian had "offered to conduct such demonstration[]" and "intend[ed] to demonstrate the operation, identification and safe handling of the guns" to provide "department personnel a better understanding of the capabilities, limitations and differences of these guns." Kumstar testified that neither he nor the Sheriff's Department was actually interested in demonstrations of the requested machineguns and that he never had discussed a plan for conducting an actual demonstration with Kelerchian. Kumstar also testified that the weapons were not guns the Department would use.

         Through this arrangement, Kelerchian was able to buy nine machineguns. He became the registered owner of these weapons, and federal law allowed him to sell them at his own discretion. No demonstrations ever occurred.

         Kelerchian's testimony disputed Kumstar's account. He said that Kumstar had offered on his own to write the first dealer sales sample letter for Kelerchian and genuinely was interested in a demonstration. Kelerchian also testified that he offered to conduct demonstrations for Kumstar and the Department many times between October 2008 and April 2011. He said that he offered a variety of settings and dates but that Kumstar never took him up on his offers. The most Kumstar did, according to Kelerchian, was to come to Kelerchian's place of business, take photographs with guns, and pick up a gun, saying "We did our demo."

         3. Laser Sight Purchases

         Kelerchian, Kumstar, and Slusser also devised a plan to buy restricted laser sights from a company called Insight Technology. Slusser testified that he and Kelerchian wanted to buy laser sights for their personal collections. The devices Kelerchian and Slusser wanted did not comply with FDA safety rules requiring a visible or audible warning. However, the FDA had granted Insight Technology a variance allowing it to sell its laser sights (technically, Class Mb devices) to federal, state, and local enforcement agencies on the theory that safety features like a visible or audible warning could compromise stealth operations in which officers need to remain unheard and unseen.

         Slusser and Kelerchian used the variance to buy laser sights on the pretext that they were for the Sheriff's Department. Kelerchian and Slusser told Kumstar which sights they wanted, and Kumstar then put together a purchase order with paperwork saying falsely that the Sheriff's Department was buying the lasers. In December 2008, Kelerchian sent Insight Technology this purchase order for 25 sights for $27, 103.52. Using a nearly identical method, in March 2010, the three bought an additional 22 lasers sights for $30, 249.92. According to Slusser, he and Kelerchian placed two more orders for Insight Technology laser sights by using a friend of Slusser's in the Lowell, Indiana Police Department in December 2009 and August 2010. The Lowell orders were for more than 28 Class IIIb laser products costing more than $32, 000.

         Kelerchian testified that he was unaware of the FDA's regulation of lasers and the variance. He told the jury that an Insight Technology employee named Linda Harms told him that the lasers could be sold to individuals if they went through a law enforcement department first. Harms testified at trial that she never would have told a customer that laser sights were available for individual purchase.

         II. Procedural Background

         A federal grand jury returned a nine-count indictment. Count I alleged that, in buying the machineguns, Kelerchian, Kumstar, and Slusser violated 18 U.S.C. § 371 by conspiring to make false statements in records required by the 1968 Act. See 18 U.S.C. § 924(a)(1)(A). Count II alleged that, in buying the laser sights, Kelerchian and the others violated 18 U.S.C. § 371 by conspiring to defraud the FDA by interfering with its lawful government functions of limiting the sale of various restricted laser sights to military and law enforcement agencies and correctly identifying the buyers of restricted laser sights.

         Counts III through VII focused on the demonstration letters. Count III charged Kelerchian under 18 U.S.C. § 371 with conspiring with Kumstar and others to violate 18 U.S.C. § 1001 by making false statements to the ATF in the phony demonstration letters. Counts IV through VII charged Kelerchian with actual violations of § 1001 in four separate letters.

         Count VIII alleged that Kelerchian committed bribery by offering Kumstar a shotgun in exchange for his help with several of the fraudulent transactions. Count IX alleged that Kelerchian, Kumstar, and Slusser conspired to launder money in violation of both 18 U.S.C. § 1956 and § 1957. The § 1956 allegation concerned the second machinegun purchase and the § 1957 allegation concerned the third. The premise of Count IX is that the conspirators engaged in wire fraud in obtaining the machineguns and then laundered the proceeds of that fraud.

         Slusser, Kumstar, and Kabella pleaded guilty and agreed to testify for the prosecution. Kelerchian took his case to trial. After the government rested and again after the close of all the evidence, Kelerchian moved under Federal Rule of Criminal Procedure 29 for a judgment of acquittal on all counts. At both stages, the district court denied the motion on Counts I through VII and took the motion under advisement on Counts VIII and IX.

         The jury found Kelerchian guilty on all counts except the bribery charge in Count VIII. Through a special verdict form, regarding Count II, the jury specifically found Kelerchian guilty of conspiring to interfere with both of the two regulatory functions of the FDA identified in the indictment. Through another special verdict form on Count IX, the jury found Kelerchian guilty of conspiring to launder money in violation of both 18 U.S.C. § 1956 and § 1957. Kelerchian was sentenced to 100 months in prison, plus a fine and term of supervised release.

         III. Legal Analysis

         Kelerchian challenges all of his convictions on a variety of grounds. First, he argues that Counts I and II failed to allege federal crimes. Second, he argues the government failed to prove the demonstration-letter charges in Counts III through VII and the money-laundering conspiracy in Count IX. Third, he contends the district court erred in its jury instructions. Finally, he claims the prosecution engaged in misconduct in its closing argument. We find no errors.

         A. Legal Sufficiency ...

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