Case 4:13-cv-00569-ALM-CAN Document 24 Filed 09/19/16 Page 1 of 8 PageID #: 1297
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`IN THE UNITED STATES DISTRICT COURT
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`FOR THE EASTERN DISTRICT OF TEXAS
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`SHERMAN DIVISION
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`EDWARD S. DIGGES, JR. §
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`VS. § CIVIL ACTION NO. 4:13cv569
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`DIRECTOR, TDCJ-CID
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`§
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`MEMORANDUM OPINION AND ORDER
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`Petitioner Edward S. Digges, Jr., an inmate confined within the Texas Department of
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`Criminal Justice, Correctional Institutions Division, proceeding pro se, filed this petition for writ of
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`habeas corpus pursuant to 28 U.S.C. § 2254.
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`Prior Proceedings
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`Following a jury trial in the 219th District Court of Collin County, Texas, petitioner was
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`convicted of securities fraud and sentenced to 99 years of imprisonment. The conviction was
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`affirmed by the Texas Court of Appeals for the Fifth District. Digges v. State, 2012 WL 2444543
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`(Tex.App.–Dallas 2012). The Texas Court of Criminal Appeals refused a petition for discretionary
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`review filed by petitioner. Digges v. State, PDR No. 1020-12. The United States Supreme Court
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`denied a petition for writ of certiorari. Digges v. Texas, 133 S. Ct. 2801. Petitioner did not file a
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`state application for writ of habeas corpus.
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`Grounds for Review
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`Petitioner asserts the following grounds for review: (1) his prosecution violated the
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`Commerce Clause of the Constitution; (2) the state court lacked territorial jurisdiction over his
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`offense because it was not established that he was a seller of a security within Texas and (3) he is
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`actually innocent.
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`Factual Background
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`In its opinion, the intermediate appellate court described the factual background of this matter
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`as follows:
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`Appellant was an attorney who surrendered his law license in 1989 when he was sen-
`tenced to thirty months’s imprisonment for mail fraud. According to appellant, he was
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`an adjunct faculty member at the University of Maryland School of Law teaching federal
`jurisdiction, an adjunct faculty member at the University of Baltimore School of Law
`teaching civil procedure, and an adjunct faculty member at the John Hopkins School of
`Business teaching business law. Following his incarceration in federal prison, appellant
`was unable to secure a real estate license and developed his idea of starting a company
`in the telecommunications area.
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`In November, 2008, appellant was indicted on charges of securities fraud in an aggregate
`amount of $100,000 or more. The indictment included sixteen paragraphs alleging,
`among other things, that appellant committed fraud in connection with the sales and
`offers of securities by intentionally failing to disclose the following material facts:
`(1) appellant, an attorney, had been indicted in 1989 on mail fraud charges stemming
`from his (a) billing a client for the legal services of attorneys that never worked on the
`client’s behalf and (b) billing for legal services that no attorney at appellant’s law firm
`ever [performed], for which appellant had been convicted of mail fraud and aiding and
`abetting in 1990 and sentenced to thirty months’ imprisonment; (2) in 1989, appellant
`had judgment entered against him in federal district court in the amount of $3,124,414.93
`plus $510,386.99 in prejudgment interest, and the judgment remained due and owing;
`(3) appellant was involved in and controlled the Millennium Terminal Investment Pro-
`gram and misrepresented material information and falsely portrayed that individuals
`who had only nominal roles in the operation of the program were managing the pro-
`gram; (4) the funds invested by investors in the Millennium Terminal Investment Pro-
`gram would be used to pay appellant’s and his family’s personal expenses; (5) in 2003,
`the Pennsylvania Securities Commission had issued a cease and desist order against pre-
`decessor corporations offering the Millennium Terminal Investment Program for vio-
`ations of the Pennsylvania Securities Act; (6) in 2003, the Securities Division of the
`office of the Maryland Attorney General issued an order to the predecessor corporations
`to cease and desist from offering and selling unregistered securities, acting as an un-
`registered broker-dealer or agent, and engaging in material misrepresentations in con-
`nection with the offer or sales of securities in Maryland; (7) in 2004, the Ohio Depart-
`ment of Commerce ordered the predecessor corporations to cease and desist from com-
`mitting further violations of the Ohio Securities Act; (8) the “reserve fund” was not
`maintained by the Millennium Terminal Investment Program; (9) the fund for repur-
`chasing the terminals was not maintained by the Millennium Terminal Investment Pro-
`gram; (10) the terminals placed with merchants were not generating sufficient funds to
`meet the monthly payments to investors; (11) the majority of the lease payments to in-
`vestors were not paid from revenue earned from the placement of terminals with mer-
`chants, but with funds received from other investors; (12) a business model for the
`Millennium Terminal Investment Program projected that it would not generate a pro-
`fit for the first eighteen months of operation; (13) prior investors in the Millennium
`Terminal Investment Program had not received monthly payments in accordance with
`their contracts; and (14) in June 2005, a search and seizure warrant was issued in Bexar
`County, Texas, and served on a Millennium salesman, and records were seized relating
`to violations of the Texas Securities Act.
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`At trial, James Bowling, one of appellant’s salesmen, testified appellant hired sales-
`people around the county to sell his “Millennium Terminal” program. Several of
`appellant’s salespeople worked in Texas, and some made sales in Collin County.
`Under the Millennium Terminal program, an investor purchased a credit card terminal
`for $5000 and leased the terminal back to appellant’s company for $50 a month for
`five years. Appellant’s company was to place the terminals with businesses, and the
`transaction fees from the terminals were to be used to pay the investors. Appellant’s
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`company was also supposed to set aside a reserve fund so that investors could be paid
`if terminals underperformed or had technical problems and another fund so that the
`company could buy back the terminals for $5000 at the end of the contract period. In
`order to operate the program, appellant used a network of twenty-five companies under
`an umbrella corporation, Televest Communications.
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`James Silver, the attorney appointed by the SEC as receiver in the case involving ap-
`pellant, testified his duties included taking on the responsibilities the company’s of-
`ficers would have otherwise handled, investigating what had occurred, operating the
`companies if feasible, and liquidating the companies’ assets. In general, Silver’s goal
`was to try to maximize the return to the people defrauded or harmed by violations of
`securities law. Silver determined that approximately $11 million was raised by ap-
`pellant’s companies in Texas, and a disproportionate number of the investors were el-
`derly. Silver testified a number of the elderly investors died during the receivership.
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`In 2005, the SEC began an investigation into the Millennium Terminal program, and
`in February 2006, the SEC appointed James Silver as receiver. Silver discovered that,
`of the more than 4000 terminals sold to investors, only 900 were placed in businesses.
`Further, the terminals that were working were not making enough to cover the monthly
`payments to investors. The terminals averaged income of approximately $23-25 per
`month, but this amount was [less than] what the terminals were supposed to be making
`at their locations. Silver testified the only source of money to make the payments to in-
`vestors was new investor funds, making the program a Ponzi scheme. Silver testified the
`operation involved “money being recycled.”
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`Soneet Kapila, a forensic accountant hired by Silver, testified the Millennium Terminal
`program had 25,000 “transaction lines” in which money flowed back and forth from the
`twenty-five Televest companies and the 130 bank accounts associated with them. Kapila
`testified there was “no real substantive business explanation” for the transactions. In-
`stead, the transactions were a money-laundering technique to obscure the source of the
`funds. Over three years, Televest took in nearly $23 million, but the source of more than
`$22 million, or 97% of those funds, were investors. Only approximately $203,000 came
`from the terminals. Nevertheless, appellant took approximately $6 million for himself
`and family members. Silver testified that, at the conclusion of the receivership, he liqui-
`dated the assets of appellant’s companies and was only able to pay investors ten cents on
`the dollar; a “little over” $1.6 million to all investors.
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`Digges, 2012 WL 2444543, at *1-2.
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`Standard of Review
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`Title 28 U.S.C. § 2254 authorizes the District Court to entertain a petition for writ of habeas
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`corpus on behalf of a person in custody pursuant to a state court judgment if the prisoner
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`demonstrates he is in custody in violation of the Constitution or laws or treaties of the United States.
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`28 U.S.C. § 2254(a). The Court may not grant relief on any claim that was adjudicated in state court
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`proceedings unless the adjudication: (1) resulted in a decision that was contrary to, or involved an
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`unreasonable application of, clearly established federal law, or (2) resulted in a decision based on
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`an unreasonable determination of the facts in light of the evidence presented in the state court. 28
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`U.S.C. § 2254(d). A decision is contrary to clearly established federal law if the state court reaches
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`a conclusion opposite to a decision reached by the Supreme Court on a question of law or if the state
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`court decides a case differently than the Supreme Court has on a materially indistinguishable set of
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`facts. See Williams v. Taylor, 529 U.S. 362, 412-13 (2000). An application of clearly established
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`federal law is unreasonable if the state court identifies the correct governing legal principle, but
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`unreasonably applies that principle to the facts. Id. An unreasonable application of law differs from
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`an incorrect application; thus, a federal habeas court may correct what it finds to be an incorrect
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`application of law only if this application is also objectively unreasonable. Id. at 409-11. “A state
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`court’s determination that a claim lacks merit precludes federal habeas relief so long as ‘fairminded
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`jurists could disagree’ on the correctness of the state court’s decision.” Harrington v. Richter, 131
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`S.Ct. 770, 786 (2011) (citation omitted). “[E]ven a strong case for relief does not mean the state
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`court’s contrary conclusion was unreasonable.” Id. The Supreme Court has noted that this standard
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`is difficult to meet “because it was meant to be.” Id.
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`This Court must accept as correct any factual determinations made by the state courts unless
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`the petitioner rebuts the presumption of correctness by clear and convincing evidence. 28 U.S.C.
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`§ 2254(e). The presumption of correctness applies to both implicit and explicit factual findings. See
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`Young v. Dretke, 356 F.3d 616, 629 (5th Cir. 2004); Valdez v. Cockrell, 274 F.3d 941, 948 n. 11 (5th
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`Cir. 2001) (“The presumption of correctness not only applies to explicit findings of fact, but it also
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`applies to those unarticulated findings which are necessary to the state court’s conclusions of mixed
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`law and fact.”).
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`Violation of Commerce Clause
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`Analysis
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`Petitioner contends his prosecution for a securities offense by the State of Texas violated the
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`Commerce Clause of the United States Constitution. He states his prosecution impermissibly
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`discriminated against interstate commerce because it sought to control conduct beyond the
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`boundaries of the state. He states the Commerce Clause prevents a state from applying its statutes
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`to activities that take place wholly outside its borders, even if the activities have effects within its
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`borders.
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`Petitioner asserted this ground for review on direct appeal. In finding the ground for review
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`to be without merit, the intermediate appellate court stated as follows:
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`In his fourth issue, appellant argues his prosecution for a securities regulatory offense in
`Texas was in contravention of the U.S. Constitution’s commerce clause. Specifically,
`appellant argues prosecution under the Texas Securities Act (TSA) “discriminates against
`interstate commerce” because it seeks to control conduct beyond the boundaries of the
`State of Texas. Appellant’s argument ignores the fact the indictment alleged appellant
`committed fraud, directly and through agents, in connection with the sale or offer to sell
`securities in Texas. The TSA applies if any act in the selling process of securities
`covered by the Act occurs in Texas.
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`Digges, 2012 WL 2444543, at * 4 (citations omitted).
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`The indictment alleged that petitioner, directly and through agents, committed fraud in
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`connection with the sales and offers of sale of securities. The indictment further alleged that this
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`occurred in Collin County, Texas. In addition, as set forth in the intermediate appellate court’s
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`opinion, James Browning, a salesperson employed by petitioner, testified that several of petitioner’s
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`salespeople worked in Texas and some made sales in Collin County. As petitioner’s conviction was
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`based on actions taken by his agents within the State of Texas, it cannot be concluded his
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`prosecution violated the Commerce Clause. In prosecuting petitioner, the State of Texas did not
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`attempt to apply its statute to activities that took place wholly outside its borders, but instead sought
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`to punish conduct that occurred within the state. Accordingly, the rejection of this ground for review
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`by the state court was not contrary to, and did not involved an unreasonable application of, clearly
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`established state law.
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`Prosecution Exceeded Court’s Territorial Jurisdiction
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`Petitioner was convicted of violating Article 581-29(C) of the Texas Revised Civil Statutes
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`Annotated. This article makes it illegal for a person to, in connection with the sale or offering for
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`sale of any security: (1) engage in any fraud or fraudulent practice; (2) employ any device, scheme
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`or artifice to defraud; (3) knowingly make any untrue statement of material fact or (4) engage in any
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`act, practice or course of business that operates as a fraud or deceit upon any person. Petitioner
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`describes this statute as being conduct oriented, rather than results oriented. He contends the state
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`court lacked territorial jurisdiction over his offense. He states that before he surrendered himself
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`to authorities in Collin County on December 8, 2008, he had not been in Texas for more than 20
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`years. Petitioner contends that his alleged failure to disclose certain information to prospective
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`buyers was an omission that occurred, if at all, in Maryland. He states that he, as a resident of
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`Maryland did not solicit any Texas resident to buy a security. As a result, he was never the seller of
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`a security in Texas and never engaged in any illegal conduct within the state.
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`In rejecting this ground for review, the intermediate appellate court stated as follows:
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`The term “jurisdiction” refers to the power of a court to hear a controversy and make
`decisions that are legally binding on the parties involved. Section 1.04(a)(1) of the
`penal code provides for territorial jurisdiction “if either the conduct or result that is
`an element of the offense occurs inside this state.”
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`Regarding territorial jurisdiction, the indictment alleged appellant “directly and through
`agents,” committed fraud in connection with the sale or offering for sale of securities.
`An individual may be charged as a party to an offense and may be held criminally re-
`sponsible for the conduct of another when that individual acts in concert with another
`person in committing an offense. The indictment contains nearly five pages listing
`individuals in Collin County, Texas, who appellant, directly and through agents, at-
`tempted to sell and to whom he offered for sale the Millennium Terminal Investment
`Program. The indictment alleged this involved the sale or offer to sell a security, and
`appellant committed fraud in the sale or offer to sell a security as enumerated in six-
`teen paragraphs. Accordingly, the trial court had territorial jurisdiction over this mat-
`ter.
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`Digges, 2012 WL 2444543, at *3-4 (citations omitted).
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`As the intermediate appellate court observed, petitioner was prosecuted under a “law of the
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`parties” theory. Section 7.01 of the Texas Penal Code provides that a person is criminally
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`responsible as a party to an offense if the offense is committed by his own conduct, by the conduct
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`of another person for whom he is criminally responsible, or both. Petitioner’s conviction was not
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`based on the allegation that he fraudulently sold or offered to sell securities in Texas. Instead, the
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`conviction was based on the allegation that persons for whom petitioner was criminally responsible
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`fraudulently sold or offered to sell securities in Texas. As the actions of these persons occurred in
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`Texas, the state court had territorial jurisdiction over the offense under Section 1.04(a)(1) of the
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`Texas Penal Code. Accordingly, the conclusion by the state courts that they had territorial
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`jurisdiction over petitioner’s offense was not contrary to, and did not involve an unreasonable
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`application of, clearly established federal law.1
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`Actual Innocence
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`Finally, petitioner asserts he is actually innocent of committing securities fraud. However,
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`a claim of actual innocence does not constitute a basis for federal habeas relief absent an independent
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`constitutional violation occurring in the underlying criminal proceeding. Herrera v. Collins, 506
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`U.S. 390, 400 (1993). “This rule is grounded in the principle that federal habeas courts sit to ensure
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`that individuals are not imprisoned in violation of the Constitution, not to correct errors of fact.” Id.
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`As petitioner has not demonstrated there were any constitutional deficiencies in his state proceeding,
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`his assertion of actual innocence does not provide him with a basis for relief.
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`Conclusion
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`Petitioner’s assertion of actual innocence does not provide him with a basis for relief in this
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`proceeding. Further, he has failed to demonstrate that the rejection by the state courts of his
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`remaining grounds for review was contrary to, or involved an unreasonable application of, clearly
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`established federal law. He is therefore not entitled to relief. It is accordingly
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`ORDERED that the petition for writ of habeas corpus is DENIED and petitioner’s case is
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`DISMISSED with prejudice. An appropriate final judgment shall be entered.
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`In addition, the Court is of the opinion petitioner is not entitled to a certificate of
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`appealability. An appeal form a judgment denying federal habeas corpus relief may not proceed
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`unless a judge issues a certificate of appealability. See 28 U.S.C. § 2253. The standard for granting
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`a certificate of appealability requires a pettioner to make a substantial showing of the denial of a
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` 1 In addition, this ground for review does not entitle petitioner to relief in this proceeding because it is
`based solely on an assertion that the conviction violated state law. Petitioner asserts that the state court never had
`territorial jurisdiction over his offense as required by Section 1.04 of the Texas Penal Code. “[I]t is not the province
`of a federal habeas court to reexamine state-court determinations on state-law questions. In conducting habeas
`review, a federal court is limited to deciding whether a conviction violated the Constitution, law, or treaties of the
`United States.” Estelle v. McGuire, 502 U.S. 62, 67-68 (1991). The state courts have already considered and
`rejected this ground for review, and it is not the function of a federal habeas court “to review a state’s interpretation
`of its own law.” Weeks v. Scott, 55 F.3d 1059, 1063 (5th Cir. 1995).
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`federal constitutional right. See Slack v. McDaniel, 529 U.S. 473, 483-84 (2000); Elizalde v. Dretke,
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`363 F.3d 323, 328 (5th Cir. 2004). To make a substantial showing, a petitioner need not establish
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`that he should prevail on the merits. Instead, he must demonstrate that the issues are subject to
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`debate among jurists of reason, that a court could resolve the issues in a different manner, or that the
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`questions presented are worthy of encouragement to proceed further. Slack, 529 U.S. at 483-84.
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`Any doubt regarding whether to grant a certificate of appealability should be resolved in favor of the
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`petitioner and the severity of the penalty may be considered in making this determination. See Miller
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`v. Johnson, 200 F.3d 274, 280-81 (5th Cir. 2000).
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`In this case, petitioner has not shown that any of the issues raised are subject to debate among
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`jurists of reason. The factual and legal questions presented are not novel and have been consistently
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`resolved adversely to his position. Further, the questions presented are not worthy of encouragement
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`to proceed further. As a result, a certificate of appealability shall not be issued in this matter.
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