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United States v. Smith

United States District Court, E.D. Kentucky, Southern Division, London

July 21, 2015

TERRY SMITH, Defendant.


KAREN K. CALDWELL, Chief District Judge.

After a week-long trial, the jury found Defendants Terry Smith and Gerry Smith guilty of conspiring to distribute oxycodone. The jury also found Terry guilty of distributing oxycodone resulting in the death of another and being a felon in possession of a firearm. All of these charges stem from "sponsoring" individuals to obtain prescriptions for oxycodone from pain clinics, confiscating a share or all of the "sponsored" prescription medication, and then distributing the prescription medication.

At the close of the government's evidence and again after the close of all evidence, the defense sought a judgment of acquittal on all counts of the indictment. The Court denied the motions on all counts. This matter is now before the court on Defendant Terry Smith's post-verdict motion for judgment of acquittal (DE 211), Terry's pro se motion for new trial (DE 213), and Terry's unsigned pro se motion to "dismiss and/or suppress" (DE 214). For the following reasons, the Court will deny Terry's motions.


In 2011 various federal, state, and local agencies (the "Task Force") began investigating the burgeoning abuse of prescription drugs in Eastern Kentucky. The Task Force identified one method used to bring excess prescription drugs to Eastern Kentucky- "diversion." Law enforcement officials use the term diversion in reference to plans or schemes to divert legal narcotic pain medication from its legal distribution and use for the purpose of illegal procurement, distribution, or use. Here, the government presented evidence that individuals traveled to corrupt, out-of-state pain clinics and fraudulently procured prescriptions[1] for oxycodone that they later filled at profiteering pharmacies.

Corrupt pain clinics accepted only cash payments, and "patients" received minimal or no physical examination from a doctor before receiving a prescription for narcotic pain medication. Most individuals who traveled to these out-of-state pain clinics lacked medically-justifiable reasons to receive prescriptions for narcotic pain medication and could not afford travel or medical costs-"sponsors" organized and financed the scheme.

These individuals, who were neither injured nor sick, traveled from Kentucky to pain clinics in Florida and Georgia for the express purpose of obtaining fraudulent prescriptions for narcotic pain medication. At the time, Florida and Georgia lacked centralized reporting requirements regarding prescription narcotic pain medications. Without state-wide reporting requirements providing information to a national database, these individuals could visit multiple pain clinics and receive numerous prescriptions for narcotic pain medication significantly in excess of a therapeutic dosage.

Once these individuals received a prescription from a corrupt, out-of-state pain clinic, they filled the prescriptions at a profiteering pharmacy. Profiteering pharmacies were licensed pharmacies that could fill any prescription but also filled all prescriptions for powerful controlled substances, such as oxycodone, in exchange for cash payments in excess of the retail price for the medication. These individuals then illegally distributed their prescription narcotic medication to others for recreational use.

At trial, the Task Force officers testified that they learned about Terry Smith while investigating several large-scale organizations engaged in diverting narcotic pain medication. They learned that Terry Smith-a trailer park landlord in Manchester, Kentucky with a second residence in Berea, Kentucky-entrusted drivers with money to transport and pay the expenses for two to four people ("sponsorees") to travel to an out-of-state pain clinic, obtain prescriptions for oxycodone, and fill the prescriptions at a profiteering pharmacy. Upon returning to Eastern Kentucky, the driver would bring the sponsorees and the filled prescriptions to Terry's house to "settle up."

Terry's sponsorees were typically drug addicts or tenants of Terry's trailer park who had fallen behind on their rent. Terry calculated the amount of money he had advanced to finance each sponsoree's trip and withheld an amount of pills that he deemed financially equivalent to his advance. Then, he would split the remainder of pills with the sponsoree who either used or resold them. Sometimes, Terry offered the non-addict tenants cash or reduced rent in exchange for the entire prescription.

Some of Terry's sponsorees also procured pills on behalf of other local sponsors. For example, Bill Stanley testified that both Terry Smith and Sue Fox paid him and his girlfriend, Patty Smallwood, to visit out-of-state pain clinics for the sole purpose of getting prescriptions for oxycodone. Bill also testified that Terry had driven Bill and Patty to a pain clinic in September 2011. Terry paid all the expenses, including the doctor's visit and the pharmacy bill. Terry then provided Bill and Patty with a portion of the pills as payment for their services. Bill testified that after one trip, he and Patty returned home and began using the pills they got from Terry. At some point, Patty told Bill she had a headache and went to bed. Bill continued his drug use until he fell asleep in the couch. The next morning Bill woke up and found Patty dead in her bed. Shocked, Bill called 911. The Clay County Deputy Coroner arrived, pronounced Patty dead, noted that there was no evidence of trauma, and took a blood sample for a postmortem toxicology screen. The postmortem toxicology report found that Patty had more than four times the maximum therapeutic level of oxycodone in her system-a lethal dosage.

In addition to financing others, Terry and his wife, Gerry Smith, traveled to out-of-state pain clinics to obtain their own prescriptions for oxycodone for no medical purpose. In July 2011, Gerry began visiting Georgia Health Associates ("GHA")-a pain clinic in Tucker, Georgia run by Dr. Michael Johnston. Gerry visited GHA once a month until November 2011. Gerry visited GHA once a month only because pain clinics operated on a 28-day cycle to try to evade detection by federal and state authorities. GHA did not succeed. In November 2011, the Drug Enforcement Administration ("DEA") raided GHA and shut down the pain clinic.

In December 2011, Gerry went to North Georgia Total Health ("NGTH"), which tested Gerry's urine for the presence of oxycodone. Her urinalysis was negative for oxycodone despite her having received continuous prescriptions for oxycodone from GHA. Nonetheless, Gerry received another prescription for oxycodone. After a second negative urinalysis in January 2012, NGTH counseled Gerry that she would not receive oxycodone prescriptions because a negative urinalysis result for oxycodone indicated that she was not taking the medication.

Angela Smith, Gerry's sister in law, described how sponsorees that did not take the prescribed medication could "pass" a urinalysis. Sponsors gave non-user sponsorees a "sugar pack" that contained portions of crushed up medication, and-prior to submitting a urine sample-the non-user sponsoree would pour the contents of the sugar pack into the sample. Gerry urinalysis never returned negative for the presence of oxycodone after January 2012.

In April 2012, Terry started visiting NGTH. Terry and Gerry continued receiving prescriptions for oxycodone from NGTH through 2012. In all, Terry and Gerry received prescriptions for more than 5, 000 oxycodone pills.

Throughout 2012 and into 2013, the Task Force acted on the fruits of their investigations. The Task Force executed numerous search warrants but noted that they recovered less evidence from each subsequent search as individuals destroyed and removed evidence. The Task Force also began arresting participants, including Larry Smith-Terry's brother-and Charles Tenhet-the owner and operator of Community Drug, a local profiteering pharmacy.

In August 2013, the Task Force executed searches on Terry and Gerry's residences in Manchester and Berea. The Task Force found Terry's and Gerry's medical records from their visits to the Georgia pain clinics, but-conspicuously-the Task Force did not find one oxycodone prescription bottle or pill. In the Berea residence, the Task Force found six handguns, three rifles, one shotgun, and a substantial amount of ammunition.

A grand jury returned a three-count indictment against Terry and a one-count indictment against Gerry. Count 1 charged Terry and Gerry with conspiring to knowingly and intentionally distribute oxycodone in violation of 21 U.S.C. § 846. Count 2 charged Terry with distributing oxycodone resulting in the death of Patty Smallwood in violation of 21 U.S.C. § 841(a)(1). Count 3 charged Terry with being a felon in possession of firearms in violation of 18 U.S.C. § 922(g)(1). (DE 163.)

A jury trial occurred in London, Kentucky in January 2015. At the close of the government's proof, both Terry and Gerry moved for a judgment of acquittal pursuant to Rule 29(a) of the Federal Rules of Criminal Procedure. The Court denied the motion. Terry and Gerry renewed the motion at the close of their case, but the motion was again denied. On January 26, 2015, a jury found Terry and Gerry guilty on all counts and answered a special interrogatory finding that Patty's death would not have occurred but for her use of oxycodone distributed by Terry. (DE 208.)


A motion for a judgment of acquittal and a motion for new trial are governed by very different standards. Federal Rule of Criminal Procedure 29(c) addresses motions for a judgment of acquittal after a jury verdict has been returned and such motions may be granted only if the evidence is insufficient to sustain the conviction. "[T]he relevant question is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Jackson v. Virginia, 443 U.S. 307, 319 (1979) (emphasis in original). The evidence presented at trial does not need to remove every other reasonable hypothesis other than guilt, and circumstantial evidence alone can sustain a jury's verdict. United States v. Hughes, 505 F.3d 578, 592 (6th Cir. 2007). Overall, a criminal defendant bears a very heavy burden. United States v. Graham, 622 F.3d 445, 448 (6th Cir. 2010).

Conversely, a motion for a new trial applies a broader standard. Rule 33 of the Federal Rules of Criminal Procedure provides that "[u]pon the defendant's motion, the court may vacate any judgment and grant a new trial if the interest of justice so requires." The Rule does not provide more specific grounds, but several recurring themes emerge from the body of Rule 33 case law. United States v. Munoz, 605 F.3d 359, 373 (6th Cir. 2010).

It has long been recognized that Rule 33 authorizes a new trial if the jury verdict is against the weight of the evidence. Tibbs v. Florida, 457 U.S. 31, 38 n.12 (1982); Munoz, 605 F.3d at 373. The court, however, should grant a motion for a new trial based upon this ground "only in the extraordinary circumstance where the evidence preponderates heavily against the verdict." Hughes, 505 F.3d at 592-93 (internal quotations omitted). "When considering a motion for new trial based upon the weight of the evidence, district judges can act in the role of a thirteenth juror' and consider the credibility of the witnesses and the weight of the evidence to insure that there is not a miscarriage of justice." United States v. Lutz, 154 F.3d 581, 589 (6th Cir. 1998).

Additionally, the "interest of justice" standard allows the grant of a new trial where substantial legal error occurred. Munoz, 605 F.3d at 373. It is clear that violations of a defendant's Constitutional Rights and errors of sufficient magnitude to require reversal on appeal are grounds to grant a new trial, but it is less clear whether other alleged errors satisfy the "interest of justice" standard. Id. at 373-74.

Terry's motion for a judgment of acquittal pointedly argues that the government did not present sufficient evidence to sustain a guilty verdict against Terry for Counts 1, 2, and 3 of the third superseding indictment. (DE 211 at 2-6.) Terry's pro se motion for a new trial includes six arguments. (DE 213-1 at 7-15.) Terry's third argument in support of the motion for a new trial, while not directly moving this Court to order a new trial on manifest-weight-of-the-evidence grounds, asserts that the jury's resolution of conflicting testimony was in error. To avoid any possible prejudice to Terry and aware that Terry's Rule 33 motion was filed pro se, the Court will interpret Terry's third argument as an assertion that the jury verdict was against the manifest weight of the evidence. See Tibbs, 457 U.S. at 42. Terry's first, second, fourth, and fifth arguments assert Constitutional errors and errors of a sufficient magnitude to require reversal on appeal. Finally, Terry's sixth argument asserts generalized error.

To address all of Terry's arguments and to avoid all possible prejudice, the Court will first evaluate the evidence presented at trial under the broader Rule 33 standard, then the Court will evaluate the evidence presented at trial under the more deferential Rule 29 standard with respect to each count charged against Terry, and finally the Court will evaluate Terry's asserted legal errors.

A. Evaluating the Weight of the Evidence Under the Broader Rule 33 Standard

Terry asserts that there is insufficient evidence to support his conviction under Rule 29(c) and that his conviction is against the weight of the evidence under Rule 33. Because the Rule 33 standard is more favorable to Terry, the Court first addresses Terry's arguments pursuant to that rule.

Terry's argument that the jury verdict is against the manifest weight of the evidence relies upon three alleged errors by the jury. First, Terry asserts that the jury improperly resolved conflicting lay witness testimony concerning the existence of the conspiracy and Terry's distribution of oxycodone to Patty Smallwood. Second, Terry claims that the jury improperly weighed medical expert testimony to find that use of oxycodone distributed by Terry was a but-for cause of Patty Smallwood's death. And third, Terry contends that the jury verdict is against the manifest weight of the evidence because the government only introduced circumstantial evidence. (DE 213-1 at 9, 11.)

1. Lay witness testimony establishes that Terry conspired to distribute oxycodone and that Terry distributed the oxycodone that Patty Smallwood consumed immediately preceding her death.

The United States called a number of lay witnesses that described Terry's conspiracy to distribute oxycodone and to establish that Terry had distributed the oxycodone that Patty Smallwood consumed immediately preceding her death.

a) Lay witnesses testifying for the United States

Bill Stanley testified that both Terry and Sue Fox sponsored trips for him to visit out-of-state pain clinics to obtain prescriptions for oxycodone. He explained that the driver would pay all of the expenses for the trip and that, on one occasion, Terry had acted as the driver. Terry paid for the doctors' visits and filled the prescriptions. Terry then took "his cut." Initially, Bill denied selling oxycodone pills for Terry, but Bill later recanted and admitted that he had sold pills for Terry and explained that he had denied selling oxycodone pills for Terry because he was "scared of retaliation" from Terry.

Bill Stanley also described a particular trip to GHA in Tucker, Georgia. Bill testified that in September 2011, a few days before Patty's death, Terry sponsored Bill's and Patty's visits to GHA. When Bill and Patty returned from Georgia, they brought their filled prescription bottles of oxycodone to Terry to "settle up." After receiving their share from Terry, Bill and Patty returned home and immediately began using the oxycodone that she and Bill received from Terry. Patty then told Bill that she had a headache and left to take a shower and lie down in her bedroom. Shortly thereafter, Bill fell asleep on the living-room couch watching television. Bill woke up the next morning and found Patty dead.

Jimmy Harris testified that he drove Terry's sponsorees to pain clinics in Florida and Georgia at least fifteen times. Jimmy stated that Terry would give him the money to pay for a trip if Terry didn't trust the sponsoree. Jimmy explained that after trips to doctors in Florida, he filled the prescriptions at pharmacies in Florida and after trips to doctors in Georgia, he filled the prescriptions with Charles Tenhet at Community Drug. Jimmy also stated that he only drove one to three sponsorees at a time to avoid suspicion. Jimmy testified that Terry paid him $100 for each trip and that he only took oxycodone pills "every now and then."

Gary Nantz, Rose Centers, and Betty Tipton were tenants in Terry's trailer park which was across the street from his house. All three witnesses admitted to using oxycodone, and all three described Terry's sponsorship of their visits to out-of-state pain clinics along with the compensation they received from Terry. All three described receiving a discount on their rent, a quantity of oxycodone pills, or a combination of discounted rent and quantity of pills in exchange for traveling to the out-of-state pain clinics.

Chris Gregory was Terry's trailer park tenant but did not use oxycodone. Chris testified that, when he was unemployed and looking for work, Terry approached him and asked him to drive sponsorees to out-of-state pain clinics and, later, to visit pain clinics himself to receive prescriptions for oxycodone. Chris stated that he got "food money and $100" for each trip. Additionally, Chris testified that-on one occasion-he sold oxycodone pills for Terry. Chris described the process as follows: He received about ten pills from Gerry, sold each pill for $50, gave the proceeds to Gerry, and then received ten more pills. Chris claimed that the margin he received for each pill sold was "not worth" the risk. Accordingly, he stopped selling pills for Terry.

Brandon Stanley worked for and rented from Terry for approximately five years. Brandon claimed that Terry trusted him because he and Terry had a long-term working relationship. Brandon stated that-because Terry trusted him-he spent a significant amount of time in Terry's house and witnessed sponsorees bringing prescription medication into Terry's house after returning from pain clinics.

In particular, Brandon testified that he was present when Patty Smallwood returned from GHA in September 2011 and witnessed Terry "split the medicine up" and give Patty her "cut" on the date of her death. Brandon also stated that he saw Terry distribute oxycodone pills to trusted confidants-such as Joe Zorn, Tommy Johnson, and Patty Smallwood-who sold the pills on Terry's behalf. And Brandon admitted that he was another trusted confidant. He said that he sold Terry's supply of oxycodone pills for eight months and that he charged $50 for each thirty milligram oxycodone pill and $25 for each fifteen milligram oxycodone pill. He estimated that, over the eight-month period, he sold 5, 000 pills for Terry.

Terry also recruited Brandon to travel to out-of-state pain clinics. Brandon stated that he made two trips for Terry and that Terry offered to split the pills or to take $400 off Brandon's rent to compensate him for his time and effort. Additionally, Brandon testified that he occasionally saw Terry with a handgun, and he thought it was a nine millimeter Browning.

Jennifer Mathis worked at Community Drug from 2003 until 2012. She described how, beginning in 2010, Community Drug filled any and all out-of-state prescriptions for controlled substances in exchange for cash payments in excess of the retail price for the medication. Jennifer then explained Community Drug's recording system. She also testified that sponsors, such as Sue Fox, would occasionally accompany individuals to the pharmacy, but that, generally, the pharmacy was operating "wide open."

On cross examination, Terry's counsel verified that Jennifer had seen Sue Fox accompany Bill Stanley to Community Drug. Terry's counsel attempted to intimate, and Terry now asserts, that Jennifer testified that Sue accompanied Bill in September 2011 immediately prior to Patty Smallwood's death; however, Jennifer merely described general trends. Jennifer stated that Sue had accompanied Bill but that Bill also filled prescriptions at Community Drug without Sue.

b) Lay witnesses testifying for Terry

Terry called two lay witnesses, Billy Wombles and Beulah Kemp. Terry hired Billy as a watchman for his rental properties, and Billy declared that he never observed any drug use or drug dealing at Terry's rental properties. Billy was also Patty Smallwood's nephew and he claimed to be very close to her. On cross examination, however, Billy testified that he was not aware that Patty-one of Terry's tenants and his "close" relative-frequently traveled to out-of-state pain clinics to receive oxycodone. And Billy, despite working as a "watchman, " was only able to name a few of Terry's tenants.

Beulah Kemp cleaned Terry and Gerry's Manchester residence. Beulah testified that she came to their house twice a week and cleaned for eight hours. Beulah stated that she never observed any illegal activity occurring in or around Terry and Gerry's residence.

c) Comparing lay witness testimony

Evaluating all the evidence presented at trial and assessing the credibility of the government's witnesses-some of whom the Court acknowledges had a history of drug use-in the role of the "thirteenth juror, " the Court does not find that the evidence preponderates heavily against the jury's verdict on any count. See Hughes, 505 F.3d at 592-93.

There are discrepancies among the witnesses' testimonies, but the Court finds the discrepancies immaterial. Billy Wombles asserted not to have seen any drug activity around Terry's rental properties, but Billy's testimony was not credible. His testimony was vague, inconsistent, and implausible. Beulah Kemp also testified that she did not observe any criminal activity in and around Terry's residence; however, Beulah was only occasionally present and maintained a regular schedule. It would not have been difficult for Terry to hide evidence from Beulah. ...

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