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United States v. Lazaro Modesto Delgado

filed: September 8, 1993.


Appeal from the United States District Court for the District of Nevada. D.C. No. CR-88-00185-PMP. Philip M. Pro, District Judge, Presiding.

Before: Arthur L. Alarcon, Cynthia Holcomb Hall and Andrew J. Kleinfeld, Circuit Judges. Opinion by Judge Kleinfeld; Concurrence by Judge Hall.

Author: Kleinfeld

KLEINFELD, Circuit Judge:

Modesto Delgado was convicted of engaging in a continuing criminal enterprise in violation of 21 U.S.C. § 848(c)(2), conspiracy to distribute cocaine, unlawful use of a communication facility, and distribution of cocaine. We reverse Delgado's conviction of engaging in a continuing criminal enterprise, but affirm the convictions on the other counts. The evidence was insufficient to establish that Delgado organized, supervised, or otherwise managed five or more people. The remaining convictions are unaffected. The critical issue on the reversed count is whether Delgado's customers, and their customers, count as persons whom Delgado managed.

I. Facts.

The government arrested two cocaine dealers in Las Vegas, Raul Fernandez and Mario Fajardo, who eventually led Drug Enforcement Administration agents to appellant Delgado. Fernandez and Fajardo testified for the government, and the continuing criminal enterprise case was based on their testimony and recordings of their telephone conversations with Delgado. Delgado had sold cocaine several times in quantities of several kilograms to each of them.

Fernandez had entered the cocaine business in 1985, when he learned from Delgado at a social gathering that an old mutual friend of theirs was a cocaine dealer, and the potential profits of the trade were considerable. A few months later, Delgado made his first sale to Fernandez, by undercutting their old friend's price. Delgado sold Fernandez two kilograms on credit. Sales of cocaine on credit, to be paid for after the buyer resells it, are called "fronting." Once Fernandez began buying from Delgado, he dropped his previous supplier and used Delgado exclusively, although Fernandez was free to buy from other suppliers.

About two weeks later, Fernandez paid Delgado for the first two kilograms, and bought four more. This time, Fernandez came with an associate whom he knew Delgado would not approve of because of his violent reputation, so Fernandez left his associate outside. Fernandez then had about six regular customers who bought on credit by the ounce. Delgado did not know who Fernandez's customers were or control the terms of Fernandez's sales to them. A couple of weeks later, Fernandez bought two kilograms from Delgado, who introduced Renieri Martinez as his employee. Fernandez made payment for his previous purchase to an unnamed individual who was staying in a cabin at a hotel and working for Delgado. Fernandez's final purchase was four kilograms. Delgado's price had gone down each time, and Fernandez had saved his profits. On cross-examination, Fernandez was asked about the extent to which Delgado controlled Fernandez's business:

Q Now, with respect to your organization, did Mr. Delgado make any decisions with respect to who purchased cocaine from you?

A No, he only distributed to us.

Q All right. And so he did not select your customers?

A No, the customers, we selected them.

Q And did he decide whether and to what extent you would front cocaine to your customers?

A No, we distributed; he would only give us the front.

Q All right. Did he prevent you from buying cocaine anywhere, at whatever price you chose to do so?

A No, he would quote us a price, and if it was convenient, we would buy there; if not, we would buy elsewhere.

In December 1985, Fernandez decided to separate from the business. He brought Fajardo to a meeting with Delgado, paid the last of his debt to Delgado, and suggested that from then on, Delgado do business with Fajardo. Delgado told Fernandez that although he and Fajardo were friends, Fajardo was "not sufficiently responsible . . . in the sense that he would spend more than what the business would produce and not make timely payments." Delgado was also worried about Fajardo's financial responsibility because Fajardo associated with "Koko," a violent addict who stole from Fajardo. For this reason, Delgado agreed to sell to Fajardo only if Fernandez agreed to guarantee Fajardo's debts to Delgado for cocaine Delgado would front. Fernandez did agree, and also shared Fajardo's profits.

On one occasion Delgado used Kiki Matamoros to deliver some cocaine to Fajardo. Delgado said in a surreptitiously taped conversation with Fajardo that he on occasion had his wife take care of certain customers. In another surreptitiously taped conversation, Fajardo told Delgado he was buying cocaine from someone else for $14,000 or $14,500 per kilogram, and Delgado responded that he was paying $15,000 and $15,250 himself.

Fajardo said he expanded Fernandez's customer list, but he did not consider his customers part of his business organization. "The customers are customers, they don't receive any instruction. They buy, that's all. I have only two people working for me, but I instruct them. . . . The rest are customers, they buy or no buy, that's all." Delgado did not give Fajardo orders about how to run his business - he just supplied inventory. When asked about whether Delgado would make decisions about who Farjardo could sell to, Fajardo explained that Delgado "couldn't be able to order me anything, because he has a business, I had mine. . . . His activity was to supply me, that's all." Delgado told Fajardo he thought it was unwise to use Koko, but did not try to impose his will. Fajardo made his own decisions about extending credit to his customers. When asked whether he was free to buy from other suppliers, Fajardo responded "Oh, absolutely. You can buy, I started with Raul Herrera, and later I change with him. And later I change with other people. That's normal." During his dealings with Delgado, Fajardo met two people who worked for Delgado, Renieri Martinez and a person who delivered the four kilograms, and knew of one more, Kiki Matamoros.

II. Management of Five People.

The statute defining the crime of "continuing criminal enterprise" requires, as one of its elements, that the defendant act "in concert with five or more other persons with respect to whom such person occupies a position of organizer, a supervisory position, or any other position of management." 21 U.S.C. ยง 848(c)(2)(A). Acting in concert is not enough for this statute - the "with respect to . . ." modifier means that the defendant must occupy the requisite position of management ...

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