Herbert Phipps was a meth addict and retail dealer. After being nabbed by law enforcement agents, he was charged along with several others in a large conspiracy case. Curiously, prosecutors chose to charge Phipps only with a conspiracy count, and not with a substantive drug trafficking offense. The government’s theory was that Phipps conspired with his wholesale supplier. Although the jury accepted this theory and convicted Phipps, the sufficiency of the evidence of a conspiracy became the most difficult issue facing the Seventh Circuit in his appeal.
Phipps could not be convicted of conspiracy unless there was another party to the conspiracy. His guilt thus required that his wholesale dealer be a coconspirator, and whether this was so depended on the wholesaler’s intent. As the Seventh Circuit observed,
Conspiracy is agreement, and it takes two to agree. “A person who sells a gun knowing that the buyer intends to murder someone may or may not be an aider or abettor of the murder, but he is not a conspirator, because he and his buyer do not have an agreement to murder anyone.” United States v. Lechuga, supra, 994 F.2d at 349. If Phipps’s supplier was indifferent to Phipps’s intended use for the drugs, even if he knew that it was to resell them, he is merely an aider and abettor of Phipps’s retail sale of illegal drugs and there was no conspiracy between them. (10)
In addressing the application of conspiracy law to wholesaler-retailer relationships, the Seventh Circuit was hardly writing on a blank slate.
Much of the caselaw relies on an amorphous multifactor test. Judge Posner, writing for the panel in the Phipps case, plainly disfavors such tests. As an alternative, he embraced a test based on credit and quantity. In this approach, a jury may
infer conspiracy from a sale on credit of illegal drugs in a quantity too great to be for personal consumption. For then the wholesaler relies on his expectation that the retailer will repay the loan by committing the crime of selling the illegal drugs that he’s acquired . . . . (11-12)
But how great a quantity will be sufficient to support this inference? The court laid down no bright-line rule, but its analysis of Phipps’ quantities is instructive:
The quantity of meth sold to Phipps over a four-month period—five to twelve ounces—doesn’t by itself establish that his supplier knew that Phipps would be reselling the meth rather than consuming it himself and relied on that knowledge in deciding to sell to him on credit. Each ounce of meth would have supplied at least 75 doses. United States v. Cruz, 680 F.3d 1261, 1262 (10th Cir. 2012); United States v. Pruett, 501 F.3d 976, 985 (8th Cir. 2007), vacated on other grounds, 552 U.S. 1241 (2008); United States v. Ruiz, 412 F.3d 871, 878 (8th Cir. 2005). But that means that five ounces of meth might yield only 375 doses, which is three a day over a four-month period (or even fewer if some is stored for later use). There was testimony that a meth addict consumes up to 1.5 grams a day, which would mean that one ounce would supply the addict’s needs for only 18 days, and five ounces for 90 days—three months rather than four. Phipps was a dealer but also a serious meth addict, so it’s possible that he could have consumed all the drugs he bought. He sometimes fell behind on paying for the meth that he obtained on credit, and his supplier, in contemplating further drug loans, worried that Phipps might instead consume the meth and that the payments from his construction business (his day job) would fail to materialize or be diverted by him to the purchase of additional drugs for consumption. It’s possible therefore that Phipps was just an unreliable purchaser from the conspiracy rather than a member of it. The government was skating on thin ice by failing to charge him with a substantive drug offense, for which the evidence was much stronger, rather than just with conspiracy. (14-15)
Although quantity and credit alone might not have been enough to convict Phipps, the court nonetheless concluded that additional evidence ws available to save the government from its risky strategy:
The jury heard evidence that he indeed sold as well as consumed meth that he bought from the drug ring in quantity on credit. He was recorded asking his supplier for multiple ounces of meth on credit and seeking to assuage the supplier’s fears about his creditworthiness by assuring him that he could resell it quickly to his customers, and he mentioned having done so in the past. At trial he testified that this was a ruse to obtain a large quantity of meth for his personal use, but the jury didn’t have to believe him. (15)
The opinion, which affirms the convictions and sentences of Phipps and his codefendants, is United States v. Moreland (No. 11-2546). The opinion more briefly considers and rejects numerous other issues by the appellants.