                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


8-23-2004

USA v. Pepsny
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-2810




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                                                              NOT PRECEDENTIAL

                 IN THE UNITED STATES COURT OF APPEALS
                          FOR THE THIRD CIRCUIT

                           Case Nos: 03-2810 & 03-2928

                         UNITED STATES OF AMERICA

                                           v.

                                DONNA PEPSNY,
                                 Appellant in No. 03-2810
                                _______________

                         UNITED STATES OF AMERICA

                                           v.

                                  IRENE DIFEO,
                                  Appellant in No. 03-2928
                                 _______________

                   On appeal from the United States District Court
                             for the District of New Jersey
                   (D.C. Nos. 01-CR-00047-03, 01-CR-00047-02)
                   District Judge: The Honorable Alfred M . Wolin
                                   _______________

                               Argued June 16, 2004

                  Before: Alito, Smith & Wallace, Circuit Judges*

                              (Filed: August 23, 2004)


      *
        The Honorable J. Clifford Wallace, Senior United States Circuit Judge for
the Ninth Circuit, sitting by designation.

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                                 _________________

                             OPINION OF THE COURT
                                _________________



WALLACE, Circuit Judge.

      Donna Pepsny appeals from her conviction and sentence on five counts of

wire fraud, 18 U.S.C. § 1343, and one count of conspiracy, id. § 371. Irene DiFeo

appeals from her conviction and sentence on four counts of wire fraud, id. § 1343,

and one count of conspiracy to commit wire fraud, id. § 371. We have jurisdiction

over the consolidated appeals pursuant to 18 U.S.C. § 3742 and 28 U.S.C. § 1291.

We affirm in part, reverse in part, and remand for further proceedings.

                                          I.

      We first examine the District Court’s decision to exclude the proposed

expert testimony of Tomas Norton. We review the exclusion of expert testimony

for abuse of discretion. See United States v. Mathis, 264 F.3d 321, 335-42 (3d

Cir. 2001). To prove the defendants acted with the requisite criminal intent, the

government presented evidence of the defendants’ involvement in seemingly

fraudulent real estate practices; from this evidence, the jury was to infer that the

defendants intended to mislead home buyers. Pepsny and DiFeo contend that

Norton’s testimony was to inform the jury that these highly suspicious facts are

                                           2
not necessarily indicative of fraud and that the defendants, as real estate brokers,

may have been minor participants in the scheme at issue. The defendants argue

that Norton’s testimony would have “assist[ed] the trier of fact to understand the

evidence” and would have assisted the jury in “determin[ing] a fact in issue,”

namely the defendants’ state of mind. F ED. R. EVID. 702; see, e.g., United States

v. Kelly, 888 F.2d 732, 743-44 (11th Cir. 1989) (holding that testimony on

professional standards of conduct “was very relevant to [the defendant’s] intent

and state of mind”).

      However, we need not decide whether the District Court abused its

discretion because we agree with the government that Norton’s exclusion was

harmless. The record is replete with testimonial evidence that directly implicates

the defendants in a scheme that, among other things, falsified documents and made

material misrepresentations to home buyers. This evidence would have

overwhelmed the defendants’ efforts to have the jury draw a competing inference

based on Norton’s generalized testimony. In short, “after an examination of the

record, . . . it is highly probable that the jury would have reached the same

decision absent the identified error,” Mathis, 264 F.3d at 343 (internal quotation

marks and citation omitted), and we therefore do not reverse the defendants’

convictions on this ground.

                                          3
       In any event, disallowing Norton’s testimony did not violate the

defendants’ Sixth Amendment rights. The District Court’s ruling was not

“arbitrary or disproportionate to any legitimate evidentiary or procedural purpose.”

Virgin Islands v. Mills, 956 F.2d 443, 446 (3d Cir. 1992); see also United States v.

Scheffer, 523 U.S. 303, 308 (1998) (“[W]e have found the exclusion of evidence

to be unconstitutionally arbitrary or disproportionate only where it has infringed

upon a weighty interest of the accused.”).

                                          II.

      Our review of the District Court’s response to a question posed by the jury

during deliberations is plenary provided the defendants raised a sufficient

objection at the time to properly preserve the issue. See United States v. Lee, 359

F.3d 194, 203 (3d Cir. 2004). Since neither defendant explicitly objected to the

District Court’s proposed response, the critical question is whether the discussion

as a whole alerted the court to the opposition of the defendants and thus informed

the court of possible errors in its proposed response.

      The question is close, but we conclude that the defendants preserved this

issue for appeal by opposing the District Court’s proposal to answer the inquiry

directly instead of simply referring the jury back to the original instructions.

Although the defendants “did not explicitly state that [they were] objecting to the

                                          4
[supplemented] instruction, the colloquy between the court and counsel . . . , and

the context in which this conversation took place (an on-the-record conference to

discuss . . . the charge),” provided the District Court with “sufficient notice of a

possible error in the . . . jury instruction.” United States v. Russell, 134 F.3d 171,

178 (3d Cir. 1998). Therefore, our “[r]eview of the legal standard enunciated in a

jury instruction is plenary, but review of the wording of the instruction, i.e., the

expression, is for abuse of discretion.” United States v. Yeaman, 194 F.3d 442,

452 (3d Cir. 1999) (internal citation omitted). “This Court reviews jury

instructions to determine whether, ‘taken as a whole, they properly apprized the

jury of the issues and the applicable law.’” Id. (quoting Dressler v. Busch Entm’t

Corp., 143 F.3d 778, 780 (3d Cir. 1998)).

      The jury clearly was inquiring about the “Pinkerton doctrine,” i.e., whether

the defendants could be vicariously liable for substantive crimes committed by co-

conspirators before the defendants entered the conspiracy. See United States v.

Cross, 308 F.3d 308, 311-12 n.4 (3d Cir. 2002), citing United States v. Pinkerton,

328 U.S. 640, 647 (1946). The District Court should have answered the question

in the negative instead of the affirmative: the defendants could not be convicted of

substantive offenses occurring before they became members of the conspiracy.

See United States v. Trotter, 529 F.2d 806, 810 (3d Cir. 1976). The court’s

                                           5
response was not saved by also referring to the instructions already given.

Therefore, the District Court’s instructions to the jury, taken as a whole and as

supplemented by its reply to the jurors’ query, contain the wrong legal standard.

See Lee, 359 F.3d at 203; United States v. Gordon, 290 F.3d 539, 545 (3d Cir.

2002) (reiterating that a charge can be “erroneous where it misstated the law

despite having stated the law correctly just before the misstatement”).

      We next inquire whether this error was harmless. See United States v.

McCulligan, 256 F.3d 97, 101 (3d Cir. 2001) (“[N]on-structural constitutional

errors, including the failure to submit an element of a crime to the jury, are subject

to harmless error review.”). The government has not demonstrated that it is

“highly probable that the error did not contribute to the judgment” on the

substantive counts. Cross, 308 F.3d at 326 (internal quotation marks and citations

omitted). This nonharmless error, in the absence of any indication that the jury

found the defendants joined the conspiracy prior to the commission of a particular

substantive offense, dooms all the defendants’ convictions for wire fraud. We

therefore reverse DiFeo’s convictions on counts two, three, six, and eight, and

Pepsny’s convictions on counts four, five, seven, nine, and ten.




                                          6
      We do not address DiFeo’s other challenges to the District Court’s jury

instructions given that they are limited to the substantive wire fraud convictions

we have vacated.

                                         III.

      As DiFeo failed to object to the prosecutor’s remarks at trial, we review her

allegations of prosecutorial misconduct for plain error. United States v. Irizarry,

341 F.3d 273, 306 (3d Cir. 2003). There was none. DiFeo has not “demonstrate[d

that] prosecutorial misconduct [resulted in] an egregious error or a manifest

miscarriage of justice.” Id. (internal quotation marks and citations omitted)

(second brackets in original). The record shows that the prosecution elicited

testimony concerning the buyer’s vulnerability and recalled it during closing

argument to rebuff DiFeo’s suggestion that the purchasers consummated the

transactions freely and knowingly. Moreover, the prosecutor’s remarks on

DiFeo’s religious convictions were fair comments on the evidence and the defense

summation, not an invitation to convict DiFeo on the basis of the sincerity of her

beliefs.

                                         IV.

      We undertake plenary review of DiFeo’s argument that the District Court

should have excluded losses incurred by lending institutions in setting her offense

                                          7
level under United States Sentencing Guidelines (U.S.S.G.) section 2F1.1 (1995).

See United States v. Maurello, 76 F.3d 1304, 1308 (3d Cir. 1996). As a “specific

offense characteristic[],” see id. § 2F1.1(b)(1), loss is “determined on the basis of,”

inter alia, (1) “all reasonably foreseeable acts and omissions of others in

furtherance of [a] jointly undertaken criminal activity,” id. § 1B1.3(a)(1)(B); see

also id. § 1B1.3, cmt. n.2, and (2) “all harm that resulted from the acts and

omissions specified” in subsection (a)(1), id. § 1B1.3(a)(3). DiFeo cannot assert

that she was unaware of the harm that would eventually befall the financial

institutions who owned the mortgage notes. The calculations accord with section

2F1.1’s commentary on “fraudulent loan application cases,” see id. cmt. n.7(b),

and provide “a reasonable estimate of the loss,” id. cmt. n.8.

      DiFeo’s attempt to offset the amount of loss by benefits purportedly gained

by the buyers is unavailing. These benefits were not the product of DiFeo’s

efforts, and the cases DiFeo cites are distinguishable since they involved

defendants who furnished bona fide, competent services to the individuals they

were otherwise defrauding. See United States v. Hayes, 242 F.3d 114, 119 (3d

Cir. 2001); Maurello, 76 F.3d at 1311-13. The District Court did not err.

      In a notice to us subsequent to oral argument, DiFeo, citing Blakely v.

Washington, 124 S. Ct. 2531 (2004), challenges the nine-level increase to her base

                                          8
offense level for having caused losses in excess of $400,000. On appeal, however,

DiFeo did not contest the computation of the dollar sums included in the amount

of loss calculation (i.e., she did not dispute the propriety of the judge’s fact-

finding). Rather, she simply argued that these losses should not have been

included in the calculation (i.e., she took issue with the application of the

Sentencing Guidelines). Thus, while we have rejected DiFeo’s attack on the

District Court’s Guidelines application, we have not said anything regarding the

underlying factual determinations. Since we remand for resentencing, DiFeo can

attempt to raise the Blakely issue in the District Court.

                                           V.

      In sum, we REVERSE and VACATE the defendants’ convictions on counts

two through ten and remand for a new trial on those counts. We AFFIRM each

defendant’s conviction on count one and remand for re-sentencing.




                                           9
