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Post by Sapphire Capital on Jul 16, 2008 21:37:49 GMT 4
70 F.3d 1020 (8th Cir. 12/05/1995) U.S. CIRCUIT COURT OF APPEALS, EIGHTH CIRCUIT
No. 94-2551
United States of America, Appellee,
v.
Suzanne Wonderly, Appellant.
Submitted: December 13, 1994
Filed: December 5, 1995
Appeal from the United States District Court for the District of Nebraska
Before McMILLIAN, Circuit Judge, JOHN R. GIBSON, Senior Circuit Judge, and SHAW,*fn* District Judge.
McMILLIAN, Circuit Judge.
Suzanne Wonderly appeals from a final judgment entered in the United States District Court*fn1 for the District of Nebraska, upon a jury verdict finding her guilty on one count of conspiracy to commit wire fraud, 18 U.S.C. Section(s) 371, and four counts of wire fraud, 18 U.S.C. Section(s) 1343. The district court sentenced defendant to thirty-three months imprisonment, three years supervised release, a special assessment of $250, and payment of restitution in the amount of $202,683. For reversal, defendant argues that (1) the evidence was insufficient as a matter of law to support the jury's verdict; (2) the district court abused its discretion in admitting Rule 404(b) evidence at trial; (3) the district court committed plain error in making certain statements to the jury concerning scheduling matters; and (4) her sentence under the guidelines was based upon clearly erroneous findings by the district court. For the reasons discussed below, we affirm.
Background
Defendant started a business called Executive Finance & Leasing which purported to provide services to persons seeking commercial financing. According to the government's evidence at trial, during the late 1980s, defendant used false documentation and oral misrepresentations to persuade five individuals to wire her a total of $320,000, which she said she would use to purchase and resell discounted prime bank notes, or to engage in letter of credit transactions, at substantial profits to the investors. Defendant promised these individuals that their funds would not be lost and that, in fact, their investments would generate millions of dollars -- in some instances, doubling in as little as seventy-two hours. In persuading them to invest their money, defendant represented that she had a 100% success rate investing funds for prior clients. Each time she targeted one of the investors, she claimed to have a specific investment opportunity for which time was of the essence. After receiving their money, defendant would provide them with fictitious reports regarding the progress of their investments, holding them at bay for weeks or sometimes months. Oftentimes the investors received communications from individuals other than defendant, including a man named Allen Bestmann, regarding the status of their investments. After a while, however, the investors would find it difficult, if not impossible, to reach defendant. On a few occasions, some of the funds were partially returned. However, the majority of the money was never seen again by the investors.
On June 18, 1992, defendant and Bestmann were indicted in the District of Nebraska on one count of conspiracy to commit wire fraud in violation of 18 U.S.C. Section(s) 371 and five separate counts of wire fraud in violation of 18 U.S.C. Section(s) 1343. Bestmann pleaded guilty to the conspiracy charge and, upon the government's motion, the remaining counts against him were dismissed. Defendant entered pleas of not guilty to all counts. Her case proceeded to trial on January 24, 1994. At trial, defendant testified in her own defense. She denied having made the representations described by the government's witnesses, but did admit to having very little actual experience with the type of investments she had purportedly discussed with the investors. She essentially portrayed her role as that of an intermediary between Bestmann and the investors. She maintained that she had always believed her representations to be truthful and always acted in good faith. At the close of evidence, upon the government's motion, the district court dismissed Count VI of the indictment. The case was submitted to the jury on February 3, 1994. The next day, February 4, 1994, the jury returned a verdict of guilty on the five remaining counts.
In calculating defendant's total offense level under the sentencing guidelines, the district court found, among other things, that the offense involved more than minimal planning or a scheme to defraud more than one victim, U.S.S.G. Section(s) 3F1.1(b)(2); that defendant was an organizer, leader, manager, or supervisor of the criminal conspiracy, id. Section(s) 3B1.1(c); that she had obstructed justice by perjuring herself at trial, id. Section(s) 3C1.1; and that she had not accepted responsibility within the meaning of Section(s) 3E1.1. Defendant was sentenced under the guidelines to thirty-three months imprisonment, three years supervised release, a special assessment of $250.00, and payment of restitution in the amount of $202,683. This appeal followed.
Discussion
Sufficiency of the evidence
Defendant first argues that the evidence was insufficient as a matter of law to support the jury's verdict. She maintains that the jury could not infer from the evidence that she intended to defraud the investors or that she entered into an agreement to commit wire fraud. At best, she argues, the evidence merely established that she acted as an intermediary for Bestmann.
In reviewing the sufficiency of the evidence, this court must view the evidence in the light most favorable to the government, resolving all conflicts in the government's favor. United States v. Clausen, 792 F.2d 102, 105 (8th Cir.), cert. denied, 479 U.S. 858 (1986). "Intent to defraud need not be shown by direct evidence; rather, it may be inferred from all the facts and circumstances surrounding the defendant's actions." Id. Upon review of the evidence, including the testimony of the government's witnesses and defendant herself, we hold that the jury could reasonably have inferred both that defendant had intended to defraud her investors and that an agreement existed among defendant and others, including Bestmann, to carry out a fraudulent scheme. Accordingly, we hold that the evidence was sufficient to support the jury's verdict.
Rule 404(b) evidence
Defendant next argues that the district court abused its discretion in admitting evidence, pursuant to Fed. R. Evid. 404(b), of other wrongful acts committed by defendant. The evidence challenged by defendant includes the testimony of two individuals who invested a total of $130,000 through defendant. These investments were made after the dates charged in the indictment.*fn2 The two witnesses testified that defendant persuaded them to invest substantial sums of money by claiming to have specific opportunities to invest their funds in transactions involving prime bank notes and letters of credit, which would yield tremendous short-term profits. In each instance, they testified, they never saw their money again.
Prior to trial, the district court held an evidentiary hearing on defendant's motion in limine seeking to exclude evidence of other wrongful acts. Upon review of the government's proffer of Rule 404(b) evidence, the district court held that the evidence now being challenged on appeal was admissible to prove absence of mistake or accident because defendant's anticipated defense theory was that she acted in good faith as an intermediary for Bestmann. Defendant now argues, however, that her defense at trial was based upon a denial of the acts charged in the indictment and, thus, the issues of mistake and accident were not relevant to her guilt or innocence. She further argues that, even if the evidence were relevant, the unfair prejudice and confusion of issues created by the evidence substantially outweighed its probative value. Fed. R. Evid. 403. We disagree.
Upon review of the evidence presented at trial, including defendant's own testimony, we note that defendant's theory of defense was not merely a denial of the conduct alleged by the government but was primarily a good faith defense. See, e.g., transcript at 890. For example, she stated that she never intended for the investors to lose their money. Id. at 864-65. She also maintained that the representations she made to investors originated with Bestmann, that she assumed those representations were truthful, and that she believed the operation was legitimate. Id. at 822, 825-29. In other words, she described herself as the innocent messenger for Bestmann. The challenged Rule 404(b) evidence was therefore relevant to show absence of mistake because, even after the five investors lost virtually all of their money, defendant continued to engage in the same practice of seeking out investors and persuading them to turn over tens of thousands of dollars upon the promise of high-yield investment opportunities which she claimed were virtually risk-free. These subsequent acts belie her claim that she merely spoke for Bestmann and that she believed she was being truthful when she claimed a 100% success rate and virtually no risk in the investment opportunities she was presenting. Accordingly, we hold that the district court did not abuse its discretion in admitting the Rule 404(b) evidence.
Comments to the jury
Defendant next argues that her due process rights were violated as a result of certain comments made by the district court to the jury concerning scheduling matters. The comments to which defendant objects began with the district court's inquiry as to whether it would be a problem for members of the jury to begin the proceedings each day at 8:30 a.m. The court stated:
Would it be alright if we started at 8:30 next Monday morning? Would that create a problem for anybody?
We may start at 8:30 every morning we can.
The court then continued:
One of the reasons that I have to [interrupt] our days once in a while, under the present budget cutting procedures in Washington, the United States Marshal's Service budget has been cut about 40%, which is, as you can imagine, very substantial.
That means that if I tried to start something in a criminal matter with a defendant who is in custody, the marshal's service has to pay overtime to get that person here before 9:00 o'clock in the morning.
And in order to avoid putting the burden on the marshal's service, if a person is in custody, I try to schedule it over the noon hour, although many of my noon hours are filled with other commitments, or I have to do it at 9:00 o'clock in the morning. Next week we will try to start at 8:30 and I will keep you advised.
We may shorten our noon hours a couple of days in an effort to try to move along a little more rapidly.
Transcript at 399.
Defendant argues that prejudicial error occurred as a result of these comments because the jury could have inferred that defendant was in custody when, in fact, she had been released on her own recognizance; alternatively, defendant contends, the jury could have inferred that defendant was serving a sentence for another crime. In light of the district court's failure to give any curative instructions, defendant argues, she is entitled to a new trial.
In response, the government notes that defendant failed to object to the district court's comments in a timely manner and thus the standard of review on appeal is plain error. The government argues that the district court's comments constituted neither error nor plain error. The government suggests that the district court's comments quite clearly indicated that, due to budgetary problems affecting the United States Marshal's Service, it would generally not be possible for criminal defendants in custody to arrive at the courthouse before 9:00 a.m.; as a consequence, any matters involving such defendants which the court needed to entertain would be scheduled either over the noon hour or at 9:00 a.m.; if the court were to have such a 9:00 a.m. hearing, then, on that day, defendant's trial would begin afterward. The government thus argues that it would be logically inconsistent for the jury to have inferred that defendant was in custody because the court had just indicated its intention to start the trial proceedings at 8:30 a.m. each day, whereas those defendants who were in custody could not be brought to the courthouse until 9:00 a.m.
We agree with the government that the standard of review on this issue is plain error. Upon review, we hold that the district court's statements did not prejudice defendant in any way. Accordingly, we hold that the district court did not commit error, much less plain error, as a result of its comments to the jury.
Sentencing issues
Defendant also raises several sentencing issues on appeal. She claims that the district court erred in finding that (1) the offense involved more than minimal planning or a scheme to defraud more than one victim, U.S.S.G. Section(s) 3F1.1(b)(2); (2) defendant was an organizer, leader, manager, or supervisor of the criminal conspiracy, id. Section(s) 3B1.1(c); (3) she had obstructed justice by perjuring herself at trial, id. Section(s) 3C1.1, and (4) she had not accepted responsibility for her unlawful conduct and therefore was not entitled to the applicable downward adjustment, id. Section(s) 3E1.1. As to all of these sentencing determinations, defendant maintains that the district court's relevant findings are not supported by the record and are clearly erroneous. As to her perjury claim, defendant additionally argues that the enhancement is invalid under United States v. Ransom, 990 F.2d 1011, 1014 (8th Cir. 1993), because "the court failed to make the necessary findings that she committed perjury, failed to address one of the government's proposed bases for the finding of perjury and placed undue emphasis on the jury's disbelief of [defendant's] testimony." Brief for Appellant at 26-27.*fn3
In response, the government first argues that, as a result of defendant's failure to object to the two-level increase under Section(s) 3F1.1(b)(2), as recommended in the presentence investigation report, the district court's findings that the offense involved more than minimal planning and that it involved a scheme to defraud more than one victim may not be reversed "unless a gross miscarriage of justice would otherwise result." Brief for Appellee at 38-39 (citing United States v. Williams, 994 F.2d 1287, 1294 (8th Cir. 1993)). In any case, the government maintains, the district court's finding that the offense involved more than minimal planning or more than one victim is well supported by the record. As to defendant's arguments addressing her role in the offense and obstruction of justice, the government maintains that the district court's relevant findings are also well supported in the record and not clearly erroneous. On the perjury finding, the government notes that, while the Supreme Court and this court have expressed a preference for specific findings of false statements, the absence of such specific findings does not necessarily render the enhancement invalid, provided the district court sufficiently indicated that it considered the trial testimony in light of the factual predicates for a perjury finding. Brief for Appellee at 44-45 (citing United States v. Dunnigan, 507 U.S. 87, __, 113 S. Ct. 1111, 1117 (1993); United States v. Turk, 21 F.3d 309, 313 (8th Cir. 1994)). As to the finding that defendant was an organizer, supervisor, manager, or leader, the government emphasizes that, from the victims' perspective, defendant was the key person involved in the conspiracy -- she was the one who solicited their business and she made the false representations that convinced them to turn over their funds. Even assuming that she later withdrew from the transactions, this fact does not diminish her leadership role in the conspiracy. Brief for Appellee at 41-42 (citing United States v. Pierce, 907 F.2d 56, 57 (8th Cir. 1990)). Finally, as to the district court's failure to find that defendant had accepted responsibility, the government notes that the standard of review on appeal is one of particularly great deference and this court will not reverse the sentencing court's determination "unless it is without foundation." Brief for Appellee at 48 (citing United States v. Big Crow, 898 F.2d 1326, 1330 (8th Cir. 1990) (quoting U.S.S.G. Section(s) 3E1.1 commentary, application note 5)). In any case, the government argues, a finding that defendant accepted responsibility for her fraudulent behavior would be wholly inconsistent with the evidence at trial, the procedural history of this case, and defendant's continued insistence upon her innocence.
Upon careful review of the record in this case and the arguments on appeal, we hold that the factual findings challenged by defendant are all well supported by the record and not clearly erroneous. Accordingly, we hold that there is no basis for finding reversible error in the sentencing process.
Conclusion
For the foregoing reasons, the judgment of the district court is affirmed. See 8th Cir. R. 47B.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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Post by Sapphire Capital on Jul 16, 2008 21:39:31 GMT 4
286 F.3d 221 (5th Cir. 03/14/2002) U.S. Court of Appeals, Fifth Circuit No. 00-41479 March 14, 2002 UNITED STATES OF AMERICA, PLAINTIFF - APPELLEE, v. WILLIAM MARTIN VALUCK, DEFENDANT - APPELLANT. Before King, Chief Judge, Davis, and MAGILL*fn1, Circuit Judges. The opinion of the court was delivered by: Magill, Circuit Judge Appeal from the United States District Court for the Eastern District of Texas Appellant William Martin Valuck was tried before a jury and convicted of one count of wire fraud, in violation of 18 U.S.C. § 1343, two counts of theft of funds valued $5,000 or more in interstate commerce, in violation of 18 U.S.C. § 2314, and one count of money laundering, in violation of 18 U.S.C. § 1956. On appeal, Valuck claims the evidence supporting his conviction under Count Five, the money laundering conviction, is insufficient, as a matter of law, that the government improperly used an accomplice's guilty plea to prove his guilt, and that his trial counsel was ineffective. For the reasons stated below, we affirm. I. Valuck, a physician, operated a small ambulance company in Huntsville, Texas, with Mike Cleveland acting as the operations manager. Shortly after Valuck's ambulance company went out of business, Cleveland filed a d/b/a for a new business, Life Guard Services, and subsequently opened a checking account for the business at Citizens Bank in Huntsville. Cleveland was the only signatory on the account because Valuck feared that his previous tax troubles would raise questions with the Internal Revenue Service (the "IRS"), possibly resulting in a tax lien on the newly-opened account.*fn2 After establishing the account, Cleveland and Valuck began soliciting various individuals in the health care industry for investment in various prime bank debenture programs. At trial, the government presented the testimony of several of the individuals whom Valuck solicited and they testified that Valuck described the potential investment as a bank trading program with low risk and a guarantee of quick returns. In particular, Valuck told Emile Roques, a pharmacist, that returns were guaranteed within 120 days of investment and that, at the very least, the investment would earn eight percent interest in a bank account. Furthermore, Valuck told Roques that his previous investments in similar schemes had yielded successful results when, in fact, they had not. Significant to this appeal, however, is the investment of Susan Snow, a physician, and Richard Bratt, Snow's common law spouse, who was in charge of Snow's finances at the time. Believing that Valuck, a physician with a high income, would not steer them in the wrong direction, and because Valuck assured Bratt that he had previously invested in such programs and that such investments were successful, Snow and Bratt invested $100,000 in his scheme. Convinced that such an investment was sound, Snow executed a written agreement with Valuck that called for a $100,000 investment to be made by wire transfer. Per the agreement, and in accordance with the wiring instructions furnished by Cleveland, Bratt sent a wire transmission to Muriel Seibert & Company in New York requesting that $100,000 be transferred to the Life Guard Services account at Citizens Bank. The funds ultimately reached the account on February 15, 1996. A summary of the funds going into the account reveals that Snow's investment was spent within two weeks of the wire transfer on personal and business expenses by Valuck, Cleveland, and others. It is this wire transfer that forms the basis of the wire fraud charged in Count Two of the indictment. At trial, Cleveland testified that at the time of the Snow/Bratt wire transfer both he and Valuck were low on cash and they each took a draw out of the $100,000. Because Valuck was not a signatory to the account, he did not have direct access to the funds. In order to gain access to the funds, Valuck told Cleveland to purchase cashier's checks with money withdrawn from the account. As a result, Valuck obtained $26,000 from the Life Guard Services account. Special Agent Paul Geboski testified as to the actual disposition of the Snow/Bratt investment. Prior to the deposit of the $100,000, the Life Guard Services account had a balance of $200. The same day the deposit was made, five cashier's checks, totaling $25,000, were purchased using the newly acquired funds, and an additional $1,000 in cash was withdrawn from the account. In particular, a $10,000, a $5,000, and a $2,500 check were deposited in the Mid-County Teachers Credit Union Account of Sylvia Hargroder, Valuck's friend. A $5,000 check was deposited in a joint account held by Valuck and Hargroder. The final check, in the amount of $2,500, was cashed by Valuck at Citizens Bank. Valuck readily admits that he negotiated the checks and eventually spent the money on personal expenses. The purchase and negotiation of these checks form the basis for the money laundering charge alleged in Count Five of the indictment. On December 16, 1998, Valuck was charged in a five-count indictment. In particular, Valuck was charged with two counts of wire fraud, two counts of causing the transmission of money valued at $5,000 or more in interstate travel, and one count of money laundering. At trial, the government presented the testimony of Cleveland. During the presentation of this testimony, the prosecution made numerous references to Cleveland's guilty plea in its opening statement, on direct examination of Cleveland, and during its closing argument. Notably, Valuck's trial counsel never objected to any of these references. At the close of the government's case, Valuck made a motion for a judgment of acquittal. The motion was granted as to the substantive part of Count One (a wire fraud count) and denied as to the remaining counts. Valuck renewed this objection at the close of all of the evidence, and that motion was denied in all respects. The jury returned guilty verdicts on the four remaining counts charged in the indictment, and Valuck received sixty months' imprisonment for wire fraud, two seventy-month sentences for interstate transportation, and seventy months' imprisonment for money laundering, all to run concurrently, along with concurrent three-year supervised release terms on each count. Additionally, the district court ordered Valuck to pay restitution in the amount of $634,484.91, the total amount lost by various investors, and special assessments in the amount of $200. A timely notice of appeal was filed on December 14, 2000. We have jurisdiction in this case pursuant to 28 U.S.C. § 1291. II. Our review of a jury's verdict is tempered with great deference toward the decision of the jury, and we must evaluate the evidence in the light most favorable to the jury verdict. United States v. McCauley, 253 F.3d 815, 818 (5th Cir. 2001). A district court's denial of a motion for acquittal is reviewed de novo. United States v. De Leon, 170 F.3d 494, 496 (5th Cir. 1999). When evaluating a challenge to the sufficiency of the evidence, we must view the evidence in the light most favorable to the verdict and we will uphold the verdict if a rational juror could have found each element of the charged offense beyond a reasonable doubt. McCauley, 253 F.3d at 818. Our review is de novo, and " f 'the evidence viewed in the light most favorable to the prosecution gives equal or nearly equal circumstantial support to a theory of guilt and a theory of innocence,' a defendant is entitled to a judgment of acquittal." United States v. Brown, 186 F.3d 661, 664 (5th Cir. 1999) (quoting United States v. Schuchmann, 84 F.3d 752, 754 (5th Cir. 1996)).
Valuck challenges the sufficiency of the evidence used to convict him of money laundering under 18 U.S.C. § 1956. That statute provides in pertinent part:
(a)(1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity-
(A)(i) with the intent to promote the carrying on of specified unlawful activity . . . [shall be guilty of money laundering]. 18 U.S.C. § 1956(a)(1) (1994).
To sustain a conviction under this section, the government must prove beyond a reasonable doubt that (1) the financial transaction in question involves the proceeds of unlawful activity, (2) the defendant had knowledge that the property involved in the financial transaction represented proceeds of an unlawful activity, and (3) the financial transaction was conducted with the intent to promote the carrying on of a specified unlawful activity. United States v. Wilson, 249 F.3d 366, 377 (5th Cir. 2001). For our purposes, the Snow/Bratt transaction represents the unlawful activity, and the cashing of the checks represents the financial transaction.
As discussed above, Valuck does not appeal the sufficiency of the government's evidence as to Count Two of the indictment, charging him with wire fraud with respect to the Snow/Bratt transaction. Thus the first element of the offense is established. Also, Valuck does not contest the sufficiency of the government's evidence with respect to his knowledge about the illegality of using the cashier's checks, the funds for which were illegally obtained from the Snow/Bratt transaction. Thus the second element of the offense is established. Valuck does, however, challenge the sufficiency of the evidence regarding the third element of the offense.
Even though Valuck admits negotiating the cashier's checks in question, once when he received them from Cleveland and again when he deposited or cashed the checks, he contends that such negotiations cannot, as a matter of law, promote the antecedent wire fraud. In turn, Valuck argues that if we were to uphold his conviction for money laundering on the evidence before us, we would essentially turn the money laundering statute into a "money spending" statute. See United States v. Olaniyi-Oke, 199 F.3d 767, 770 (5th Cir. 1999) (using proceeds solely for personal expenses will not sustain a money laundering conviction). Although intriguing, we do not find this argument persuasive. Instead, we agree with the government that the manner in which Valuck spent the ill-gotten money is irrelevant because it is the deposit of funds, not the subsequent expenditure of such funds, which is the transaction intended to promote the predecessor wire fraud.*fn3
To start, we categorically reject any suggestion by Valuck that a financial transaction cannot promote a completed illegal activity for purposes of section 1956(a)(1)(A)(i). As we made clear in United States v. Cavalier, the cashing of an illegally obtained check can promote the completion of an underlying unlawful act. 17 F.3d 90, 93 (5th Cir. 1994); see, e.g., United States v. Paramo, 998 F.2d 1212, 1218 (3d Cir. 1993) ("a defendant can engage in financial transactions that promote not only ongoing or future unlawful activity, but also prior unlawful activity"); United States v. Montoya, 945 F.2d 1068, 1076 (9th Cir. 1991) (same); But see, United States v. Jolivet, 224 F.3d 902, 909 (8th Cir. 2000) ("We find no logic in the government's suggestion that [defendant] could promote the carrying on of an already completed crime."). We now take this opportunity to reaffirm our position in Cavalier and we note further that this court subscribes to a broad interpretation of the word "promote" within the context of section 1956. Not only is our view consistent with that of other circuits, it is also in line with how the word is commonly understood within the legal community. See Black's Law Dictionary 1214 (6th ed. 1990) (to "promote" something is to "contribute to [its] growth, enlargement, or prosperity of; . . . to advance"). Here, Valuck's negotiation of the cashier's checks most certainly advanced the underlying wire fraud, in that it allowed Valuck to prosper from his wrongdoing by completing the antecedent wire fraud. Having said this, we now turn to the merits of Valuck's claim.
To satisfy the "promotion" element of a money laundering conviction, we require the government to show that a defendant conducted the financial transaction in question with the specific intent of promoting the specified unlawful activity. Brown, 186 F.3d at 670. In Brown, a case on which Valuck heavily relies, we reversed a defendant's convictions pursuant to section 1956(a)(1)(A)(i) where the defendant used the proceeds from an illegal activity to write checks for legitimate business expenditures. Id. In doing so, we stressed the importance of avoiding turning the "money laundering statute into a 'money spending statute.'" Id. (citing United States v. Leonard, 61 F.3d 1181, 1185 n.2 (5th Cir. 1995)); see also United States v. Sanders, 928 F.2d 940, 946 (10th Cir. 1991). Valuck contends that his case is factually indistinguishable from Brown. We, however, disagree. In Brown, the government indicted the defendant on the basis of his "spending transactions," not on the receipt and subsequent depositing of illegal funds. 186 F.3d at 669 n.12. In this case, however, the government alleges that the "purchase and negotiation"*fn4 of the cashier's checks forms the basis for the money laundering charge. Based on this, by upholding Valuck's conviction for money laundering we are in no way converting section 1956 into a "money spending statute," as Valuck suggests, because we focus solely on the negotiation of the cashier's checks. In fact, other circuits have upheld similar "receipt and deposit" convictions.*fn5 For example, in Paramo, the Third Circuit upheld a defendant's conviction for money laundering where the defendant cashed embezzled checks from the IRS and then spent the ill-gotten gain on personal expenses. 998 F.2d at 1217-18. The court explained that because the defendant
understood that the embezzled checks would have been worthless unless cashed at a bank or otherwise exchanged for negotiable currency . . . the jury rationally could have found that the cashing of each check contributed to the growth and prosperity of each preceding mail fraud by creating value out of an otherwise unremunerative enterprise. Id. at 1218.
As noted above, in Cavalier we endorsed this same approach. 17 F.3d at 93.*fn6 Applying this "receipt and deposit" approach to Valuck's case, we are left with the clear impression that his conviction must be upheld.
In this case, Valuck intentionally chose not to include his own name as a signatory on the Cleveland account so as to avoid the watchful eye of the IRS. Consequently, Valuck did not have direct access to the illegally obtained funds that were deposited into the account. Instead, Valuck's only access to the funds was through his co-conspirator, Cleveland, and the only way Valuck could prosper from this scheme was to receive the cashier's checks and then either deposit or cash the check, ultimately completing the underlying wire fraud. Valuck chose to deposit $25,000. Absent such deposits, the uncashed checks would have been worthless. Thus, a jury could have rationally concluded that the depositing of the checks promoted both the growth and prosperity of the antecedent wire fraud by generating "value out of an otherwise unremunerative enterprise." Paramo, 998 F.2d at 1218. While it is true that had Valuck's name been on the account in question, and he withdrew the money and spent the money for personal expenses, our decision in Brown would cast some serious doubt on the government's money laundering conviction. This is not, however, the manner in which Valuck proceeded. Here, the success of Valuck's wire fraud was predicated on the transfer of money from Cleveland to Valuck. Therefore, it is the absence of Valuck's name on the account that helped promote the prior unlawful activity by allowing Valuck to avoid detection by the IRS. Therefore, we conclude that a rational jury could have found that Valuck's negotiation of the cashier's checks promoted the antecedent wire fraud, and that in negotiating the checks Valuck specifically intended to promote the already completed wire fraud.
III.
Valuck contends that the government improperly introduced Cleveland's guilty plea as substantive evidence of Valuck's guilt. Because Valuck's trial counsel did not object to the introduction of this evidence at trial, our review is for plain error. United States v. Chung, 261 F.3d 536, 539 (5th Cir. 2001) (citing United States v. Calverley, 37 F.3d 160, 162-64 (5th Cir. 1994) (en banc)).
As a general rule, " witness-accomplice guilty plea may be admitted into evidence if it serves a legitimate purpose and a proper limiting instruction is given." United States v. Marroquin, 885 F.2d 1240, 1247 (5th Cir. 1989). Here, the plea agreement was introduced into evidence with an adequate limiting instruction, which properly advised the jury. In particular, the district court instructed the jury that "[t]he fact that an accomplice has entered a plea of guilty to an offense charged is not evidence, in and of itself, of the guilt of any other person." Further, the district court instructed the jury that such testimony should be "received with caution and weighed with great care." We have, in the past, upheld nearly identical instructions to the ones given in this case. See United States v. Abravaya, 616 F.2d 250, 251-52 (5th Cir. 1980). Accordingly, based upon our examination of the district court's instructions, we are convinced that there was absolutely no error contained within the instruction, plain or otherwise. Next we must determine whether the government's introduction of the guilty plea serves a proper purpose.
In support of its introduction of Cleveland's guilty plea, the government argues that the purpose of introducing the plea was to show that there was no unduly favorable deal between the government and Cleveland in exchange for his testimony, and to avoid the impeachment of Cleveland's testimony. In United States v. Black, we noted the propriety of disclosing the nature of a plea agreement on direct examination, so as to ensure that the jury would not be left with the "impression that the government was not being fully candid," should the issue be raised first on cross-examination. 685 F.2d 132, 135 (5th. Cir. 1982); see also Marroquin, 885 F.2d at 1247 (introducing plea agreement to show that no "sweetheart deal" existed between government and witness served a proper purpose). Furthermore, we also have recognized that where the conviction of a co-conspirator may be used to impeach that co-conspirator's testimony, the prosecutor may introduce the plea in order "to 'blunt the sword' of anticipated impeachment by revealing the information first." Marroquin, 885 F.2d at 1246. Here, the introduction of Cleveland's guilty plea served the dual purpose of reducing the potential effects of impeachment, while showing the jury that Cleveland had not been provided any "sweetheart deal" in exchange for his testimony.
At trial, the government referred to Cleveland's plea agreement in its opening statement, on direct examination of Cleveland, and in its closing statement. Surely, the government is permitted to outline its evidence during opening argument, and that, of course, includes evidence about an accomplice's guilty plea. United States v. Magee, 821 F.2d 234, 241 (5th Cir. 1987). With respect to the direct examination of Cleveland, Cleveland testified that he had pleaded guilty to wire fraud, completed almost two years in prison for that crime, was now on supervised release, and that in exchange for his testimony the court could, at most, reduce his term of supervised release by two years. This testimony showed that Cleveland and the government had not brokered any arrangement that might be conceived as conferring a great benefit on Cleveland in exchange for his testimony. Finally, in closing, the government referred to Valuck and Cleveland as "partners in crime" and noted that because Cleveland has "spent two years in prison, [his] testimony carries a great deal of credibility." Although these statements are somewhat overreaching, they are not, however, the "classic example" of an improper use of an accomplice's guilty plea in order to show the guilt of the accused, as Valuck suggests. In light of the adequate jury instructions given by the trial court, and the proper purposes that were served in introducing Cleveland's testimony, we hold that the district court did not commit plain error by admitting evidence of Cleveland's guilty plea. IV.
Valuck argues that he was denied effective assistance of counsel in violation of the Sixth Amendment to the United States Constitution. Specifically, he alleges his trial counsel failed to (1) object to the introduction of his tax problems, (2) object to the introduction of Cleveland's guilty plea, (3) investigate the bases of opinions of Agent Geboski, (4) object to Geboski's testimony, (5) make an opening statement, and (6) object to the non-responsive answers of several government witnesses. As a general rule, Sixth Amendment claims of ineffective assistance of counsel should not be litigated on direct appeal, unless they were previously presented to the trial court. United States v. Delagarza-Villarreal, 141 F.3d 133, 141 (5th Cir. 1998). We do, in rare cases, grant an exception to this rule. Id. (quoting United States v. Navejar, 963 F.2d 732, 735 (5th Cir. 1992)). This, however, is not one of those rare cases. In fact, on the record before us, any determination as to the reasons for trial counsel's actions would be speculative in nature and this court does not decide issues on the basis of speculation alone. Accordingly, we decline to entertain Valuck's appeal on this ground, but we do so without prejudice to Valuck's right to raise this issue collaterally in a habeas corpus proceeding. Delagarza-Villarreal, 141 F.3d at 141; United States v. Higdon, 832 F.2d 312, 314 (5th Cir. 1987).
V.
For the foregoing reasons, we AFFIRM.
Opinion Footnotes
*fn1 Circuit Judge of the United States Court of Appeals for the Eighth Circuit, sitting by designation.
*fn2 In fact, the IRS placed tax liens on another of Valuck's accounts.
*fn3 Count Five of the indictment states: On or about the 15th day of February, 1996, in the Eastern District of Texas and elsewhere, WILLIAM MARTIN VALUCK, Defendant herein, knowing that the money or funds involved in a financial transaction represented the proceeds of some form of unlawful activity, that being the wire fraud described in Count 2 of this indictment which is adopted herein, did knowingly conduct a financial transaction, with the intent to promote the carrying on of such specified unlawful activity, said financial transaction being the purchase and negotiation of $25,000 of cashier's checks from Citizens Bank of Texas, in violation of Title 18, United States Code, Section 1956(a)(1)(A)(1) [sic]. (emphasis added).
*fn4 The government alleges both the "purchase and negotiation" of the cashier's checks; however, it is important to note that Valuck did not actually purchase the cashier's checks. In actuality, Cleveland did so at the request of Valuck. Also, Valuck attempts to draw a distinction between "negotiation" and "deposit," as if the two can be distinguished in the banking context. In that context, however, no such distinction exists because in order to "deposit" a check into a bank account, one must first "negotiate" the check, i.e., transfer the check to the bank.
*fn5 Although we recognize that "receipt and deposit" prosecutions are "disfavored," Brown, 186 F.3d at 669 n.12, this fact does not alter the result we reach today. That is, simply because such prosecutions are disfavored has no bearing on whether we should sustain convictions based upon such prosecutions.
*fn6 We recognize a split among the circuits on this issue. Compare United States v. Haun, 90 F.3d 1096, 1100-01 (6th Cir. 1996) (upholding promotion conviction where evidence presented allowed a reasonable jury to infer that cashing of checks promoted "not only his prior unlawful activity, but also his ongoing and future unlawful activity"), United States v. Manarite, 44 F.3d 1407, 1416 (9th Cir. 1995) (upholding promotion conviction because chip-skimming scheme could not benefit its participants unless chips were cashed, rational jury could conclude chips were cashed with intent to promote the chip-skimming scheme), and United States v. Montoya, 945 F.2d 1068, 1076 (9th Cir. 1991) (upholding promotion conviction and noting that "depositing the check provided an opportunity for [defendant] to carry out the illegal bribery"), with United States v. Jolivet, 224 F.3d 902, 909 (8th Cir. 2000) (reversing promotion conviction because subsequent activity cannot "promote the carrying on of an already completed crime"), and United States v. Heaps, 39 F.3d 479, 486 (4th Cir. 1994) (expressly rejecting broad statutory interpretation employed by Third and Ninth Circuits as inconsistent with congressional intent). Cf. United States v. Calderon, 169 F.3d 718, 722 (11th Cir. 1999) (questioning whether the decisions of the Third, Sixth, and Ninth Circuits "were rightly decided," but not deciding the issue).
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Post by Sapphire Capital on Jul 16, 2008 21:40:34 GMT 4
88 F.3d 1538, 97 Cal. Daily Op. Serv. 5143 (9th Cir. 07/10/1996) U.S. Court of Appeals, Ninth Circuit
No. 95-30198, No. 95-30205, No. 95-30207, No. 95-30208
filed: July 10, 1996.
UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
MORREON B. RUDE, DEFENDANT-APPELLANT. UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE, V. STAFFORD Y.L. MEW, DEFENDANT-APPELLANT. UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE, V. CHARLES E. ANDREWS, DEFENDANT-APPELLANT. UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE, V. RODNEY H.S. KIM, DEFENDANT-APPELLANT.
Appeals from the United States District Court for the Western District of Washington. D.C. No. CR-94-05246-3-FDB. D.C. No. CR-94-05246-01-FDB. D.C. No. CR-94-05246-06-FDB. D.C. No. CR-94-05246-02-FDB. Franklin D. Burgess, District Judge, Presiding. Original Opinion Previously Reported at:,.
Charles A. Johnston, Felker, Lazares & Johnston, Tacoma, Washington, for defendant-appellant Rude; Ronald G.S. Au, Honolulu, Hawaii, for defendant-appellant Mew; Stephen E. Robinson, Fleeson, Gooing, Coulson & Kitch, Wichita, Kansas, for defendant-appellant Andrews; Ronald D. Ness, Port Orchard, Washington, for defendant-appellant Kim.
Robert M. Westinghouse and Carl Blackstone, Assistant United States Attorneys, Seattle, Washington, for the plaintiff-appellee.
Before: Donald P. Lay,*fn* Eugene A. Wright and Edward Leavy, Circuit Judges. Opinion by Judge Lay.
Author: Lay
LAY, Circuit Judge:
These consolidated appeals involve a scheme to defraud investors, including Unity House, Inc., a Hawaii non-profit corporation, of several million dollars. Morreon B. Rude, Rodney H.S. Kim, and Stafford Mew appeal their judgments of conviction for wire fraud, money laundering, and conspiracy. Charles Andrews, who pleaded guilty to one count of testifying falsely before a grand jury in exchange for cooperation in the prosecution of the other defendants, appeals his sentence. We affirm.
THE "PRIME BANK NOTE" SCHEME
At trial the government adduced evidence that the defendants conspired to induce investments in what they termed "prime bank note" transactions.*fn1 The subject transactions were described to potential investors as a form of international bank paper purchased from issuing banks at a discount and sold to wholesale banks for a profit. Defendants held themselves out as persons experienced in such transactions and assured potential investors that the notes would yield monthly returns of roughly two to five percent. They further represented that the investments would not be at risk and in fact would remain in the investors' own accounts. Each of these representations was false.
The scheme began in May 1992, when Morreon Rude and Stafford Mew incorporated North Pacific Investments, Inc. ("NPI"), a Washington corporation, as a means of perpetrating defendants' fraudulent activities.
In December 1992, after several furtive attempts to sell the notes to third parties, representatives of Unity House, a Hawaii non-profit company with assets of more than $50 million, agreed to invest $10 million in the notes. They asked Roderick Rodriguez, the executive director of Unity House, to contact Bank of America to obtain a letter of credit, but Bank of America declined. Mew, NPI's principal, offered to procure a letter of credit from a European bank on behalf of Unity House. Mew represented that an account for Unity House could be opened at Credit Suisse in Geneva, Switzerland, and that the money would remain in the bank earning interest. The representatives of Unity House accepted Mew's proposal. Anthony Rutledge, the president of Unity House, and Mew signed a Limited Power of Attorney and a Private Participation Agreement, each prepared by Kim, authorizing the arrangement, whereunder NPI was given a general power of attorney in order to transfer funds out of the Credit Suisse account. Mew then enlisted the help of Charles Andrews, a commodities broker with a seat on the Chicago Mercantile Exchange, who met him in Geneva, Switzerland to establish the account. On January 19, 1993, Unity House transferred $10 million to the Credit Suisse account.
Between February and April 1993, Mew effected transfers of all $10 million from Credit Suisse to NPI's account at Seafirst Bank. In April, Rutledge received a letter from Mew stating that NPI was holding $625,000 in earnings for Unity House, and in July 1993 Rude transferred $650,000 to Unity House. Unity House was not aware, however, that the money was simply part of its original investment; it understood the payment as a return on its investment, and in fact did not learn of NPI's activities until September 1993, when Rutledge was interviewed by law enforcement agents. In addition, Mew and Rude transferred $2 million to a discretionary account from which Andrews traded until November, when the remaining $350,000 was seized. Andrews received $400,000 in commissions during the course of the trading, and the balance of that $2 million was lost. Another substantial portion of the money was deposited in various accounts and used to trade stocks and commodities, generating losses of approximately $3,667,000. Federal agents seized most of this money. Of the remaining funds, Mew and Rude together received $588,538; Kim received $106,666; and Gonzales received $792,000. The defendants never purchased any prime bank notes or letters of credit, though they maintain that they attempted to do so.
Law enforcement investigations led to a grand jury proceeding in August 1993. Rude then first admitted that Unity House was the source of the $10 million transferred to NPI's Seafirst account. He claimed the money was a loan, and records he produced referred to the transaction as such. In November 1993, federal agents seized the funds in NPI's various accounts. Kim, Rude, Mew, and Jack Gonzales*fn2 were indicted on April 20, 1994.
Andrews appeared before a grand jury in Seattle on December 15, 1993. During his testimony, he failed to disclose the number of times he had met Mew, in an effort to conceal the fact that he and Mew had been in Switzerland to set up the Credit Suisse account. On September 14, 1994, the grand jury returned a superseding indictment charging Andrews, along with Mew, Kim, and Gonzales, with conspiracy, wire fraud, and money laundering. Andrews was also charged with making a false declaration to the grand jury. He later admitted that he had testified falsely and entered a plea to that charge in exchange for his agreement to cooperate in the prosecution of the other defendants.*fn3 The remaining four defendants proceeded to trial, and a jury convicted them on all counts on March 21, 1995. Kim, Rude, and Mew were sentenced on June 9, 1995.*fn4
CHARLES ANDREWS
Andrews argues that the district court erred in the imposition of his sentence by failing to make factual findings requisite to the application of U.S.S.G. § 2J1.3(c)(1) (1994), which provides:
If the offense involved perjury, subornation of perjury, or witness bribery in respect to a criminal offense, apply § 2X3.1 (Accessory After the Fact) in respect to that criminal offense, if the resulting offense level is greater than that determined above.
Andrews acknowledges that cross-referencing U.S.S.G. § 2X3.1 would have been appropriate had the district court found that he committed perjury "in respect to" the criminal offense of money laundering, for which his co-defendants were convicted, but suggests the court applied § 2X3.1 notwithstanding its failure to make such a finding, thus violating both § 2J1.3 and Fed. R. Crim. P. 32(c)(3)(D). Although he objected to the presentence investigative report's characterization of the facts, he suggests the court simply deferred to the probation officer's recommendation to cross-reference § 2X3.1 without addressing his objections.
Contrary to Andrews' claim, we find that the district court was aware that it needed to make such a finding, and that it did so. See Excerpts of Record D at 28 ("That will be my finding, that the offense level will be based on that cross reference."). Rule 32(c)(1) does not require the court to articulate the reasoning for its finding. See United States v. Karterman, 60 F.3d 576, 583 (9th Cir. 1995); United States v. f*gan, 996 F.2d 1009, 1016 (9th Cir. 1993); United States v. Peters, 962 F.2d 1410, 1415 (9th Cir. 1992). Although the court did not articulate the facts upon which it relied in ruling as it did, we are satisfied that the requisite finding was made.
The remaining issue is whether the court's finding that Andrews committed perjury in respect to the money laundering offenses of his codefendants was justified. U.S.S.G. § 2J1.3(c)(1) requires only that the defendant's perjury be "in respect to a criminal offense" for cross-referencing to be justified. The Guideline requires neither that the defendant have committed perjury in respect to his own criminal offense, nor that he have committed perjury in respect to an adjudicated criminal offense. Provided an indictment and conviction are forthcoming, as they were here, and so long as the defendant knew or had reason to know, at the time of his perjury, that his testimony concerned such a criminal offense, the "in respect to" element of § 2J1.3(c)(1) is satisfied.
At the time of his perjured testimony, Andrews knew that Mew was under investigation for money laundering and wire fraud, as verified by a memorandum he prepared and sent to Mew following his interview with federal agents, and the seizure warrant itself, which detailed the factual basis for the forthcoming allegations. Andrews also knew that Mew did not want him to tell the grand jury about the Credit Suisse account - a fact which belies his claim that he thought the charges arose from a legitimate business transaction. These facts demonstrate that Andrews' perjury was "in respect to" the other defendants' money laundering offenses. We find no error in the district court's sentencing of Andrews.
RUDE, KIM, AND MEW
Rude, Kim, and Mew jointly and individually have raised various claims on appeal. They challenge (1) the sufficiency of the evidence to sustain their convictions; (2) the legal sufficiency of the Superseding Indictment and the government's variance therefrom; (3) multiple aspects of the jury instructions; and (4) the conduct of the prosecution during trial.*fn5 Mew raises separate claims that the district court erroneously (1) admitted evidence of other crimes involving fraudulent misconduct under Fed. R. Evid. 404(b); (2) denied his motion for a continuance; and (3) denied his motion to suppress evidence which was allegedly illegally seized from his residence.
THE SUFFICIENCY OF THE EVIDENCE
Defendants claim that the evidence was insufficient to support their wire fraud convictions, under Counts One through Five, for violating 18 U.S.C. § 1343. They observe that they were not charged with wire fraud for the initial wiring of funds from Hawaii to Credit Suisse, but rather for the transfers of funds from Credit Suisse to Seafirst Bank, and for returning funds to Unity House in the sum of $650,000. Defendants maintain that the latter transfers were not in furtherance of the fraud, as the wire fraud was completed at the point when Unity House wired $10 million from Hawaii to Credit Suisse. If the wire fraud counts cannot be sustained, their argument continues, their convictions for money laundering and conspiracy must also be overturned, since the latter counts were dependent upon the underlying wire fraud convictions. In support of these contentions, defendants rely upon United States v. Lane, 474 U.S. 438, 88 L. Ed. 2d 814, 106 S. Ct. 725 (1986), United States v. Maze, 414 U.S. 395, 38 L. Ed. 2d 603, 94 S. Ct. 645 (1974), and Kann v. United States, 323 U.S. 88, 89 L. Ed. 88, 65 S. Ct. 148 (1944).
The defendants' argument is without merit, for it is clear that the $650,000 wire transfer, as well as the transfers from Credit Suisse to Seafirst, the defendants' bank, were at a minimum either "incident to an essential part of the scheme," or "a step in [the] plot." See Schmuck v. United States, 489 U.S. 705, 711, 103 L. Ed. 2d 734, 109 S. Ct. 1443 (1989) (quotations omitted) (alteration in original). The monies returned to Unity House, for example, were intended to create the impression that Unity House was earning an immediate, substantial return on its investment, as promised by the defendants. This transfer therefore was not only relevant to the fraudulent conspiracy, but extended the overall scheme by "'lulling the victims into a false sense of security, postponing their ultimate complaint to the authorities, and therefore making the apprehension of the defendants less likely than if no [transfers] had taken place.'" See Lane, 474 U.S. at 451-52 (quoting Maze, 414 U.S. at 403); see also United States v. Sampson, 371 U.S. 75, 80-81, 9 L. Ed. 2d 136, 83 S. Ct. 173 (1962). The instant case is distinguishable from the fraudulent credit card scheme involved in Maze, where the goods were immediately obtained by the fraud, and where parties other than the defendants completed the underlying mail transfers. See 414 U.S. at 402-05.
Regarding the transfers from the Credit Suisse account to Seafirst, the defendants overlook the fact that their fraud was not complete until the $10 million deposited in Credit Suisse (in Unity House's account) was within their complete control. Unity House was falsely promised that its money would remain in the Credit Suisse account. Although effecting a transfer to Credit Suisse was a step in the scheme, the final steps did not occur until defendants effected transfers to and from the Seafirst account, thus placing the funds outside of Unity House's account, outside of the scope of Unity House's authorization, and within their own control. See United States v. Sindona, 636 F.2d 792, 802 (2d Cir. 1980) ("A scheme to defraud is not complete until the proceeds have been received and use of the mail or wires to obtain the proceeds satisfies the jurisdictional element."), cert. denied, 451 U.S. 912, 68 L. Ed. 2d 302, 101 S. Ct. 1984 (1981). Thus, we find the evidence sufficient to sustain the wire fraud counts.
Specific Intent
Rude suggests the only evidence offered to prove that he possessed the requisite specific intent to defraud concerned his acts in arranging the $650,000 wire transfer to Unity House and in wiring notes of corporate minutes unrelated to the case. We have already rejected Rude's argument that the wire transfers to and from the Seafirst account, including the transfer to Unity House, were not part of the scheme to defraud. As to his claim that his involvement was otherwise limited to wiring corporate minutes, a review of the record does not support this assertion.
The prosecution presented evidence that Rude: acted as the front man who incorporated NPI; opened bank and brokerage accounts; at least once lied concerning the corporation's equity and income; structured transactions through the accounts he established to avoid filing Currency Transaction Reports; concocted board minutes; wired a portion of Unity House's own money back to it as a purported return on their investment, knowing that no return had been earned; transferred several millions to other accounts and to himself; and falsely stated to law enforcement authorities and a federal grand jury that NPI simply had invested its own funds. A review of the record evidence plainly shows that Rude specifically intended to participate in the conspiracy.
Kim contends that there is no support for the prosecution's repeated assertions that he was more than the attorney who drafted the Limited Power of Attorney and Private Participation Agreement in the Unity House transaction. He suggests he lacked knowledge of the five bank wires comprising the bases for the charges and, like Rude, maintains that proof of specific intent may not be based on constructive knowledge of facts known to others.
We disagree. On several occasions, Kim solicited prime bank note transactions; falsely claimed to have learned the trade while seeking funding for a client in Europe in the 1980s; and represented that the prime bank notes would yield absurdly high returns. He assured that the deal with Unity House would close by preparing the Private Participation Agreement and Limited Power of Attorney, which falsely represented that NPI was experienced in prime bank note transactions. He also structured the conversion of a portion of currency checks payable to Mew and, finally, offered Roberta Cabral, a Unity House marketing agent, a bribe to take responsibility for false promises made in one of NPI's subsequent, unsuccessful prime bank note presentations. Viewing this evidence in the light most favorable to the government, Kim clearly intended to further the fraudulent scheme.
THE SUPERSEDING INDICTMENT
The defendants' initial challenge to the legal sufficiency of the superseding indictment is similar to their challenge to the sufficiency of the evidence. As recited above, defendants claim that the fraudulent scheme was complete once Unity House wired the $10 million to the Credit Suisse bank account established in Unity House's name and that, in consequence, the wirings of the $10 million to NPI's Seafirst account were not in furtherance of the scheme and therefore not actionable. Rude and Kim urge that Stafford Mew was the sole signatory with a general Power of Attorney on Unity House's account, and suggest there is no evidence to show that they even knew of those documents or the limited transfer from Unity House to Credit Suisse. The defendants, however, took integral steps in the fraudulent scheme when they effected transfers of money from Credit Suisse to their Seafirst account in the state of Washington. We thus reject this contention.
The defendants also assert that there was a prejudicial variance between the charges against them and the proof offered at trial. The Superseding Indictment charged a scheme to defraud investors, including Unity House, through investments involving the purchase and sale of prime bank debt obligations. It is clear that the Unity House solicitation was part of a single broad scheme of fraud which took place over a roughly two-year period. We find no prejudicial variance between the Superseding Indictment and the evidence adduced by the government.
Along the same line, the defendants claim that the Superseding Indictment was multiplicitous because they were punished twice for the same offense. They assert that the money laundering Counts, Six through Eleven, are merely a relabeling of the five bank wirings charged in the wire fraud Counts, One through Five. We find no merit to this claim. An indictment is multiplicitous if it charges a single offense in several counts. See e.g., United States v. UCO Oil Co., 546 F.2d 833, 835 (9th Cir. 1976), cert. denied, 430 U.S. 966, 52 L. Ed. 2d 357, 97 S. Ct. 1646 (1977). It is well established, however, that money laundering and wire fraud are separate offenses. See United States v. LeBlanc, 24 F.3d 340, 346 (1st Cir.), cert. denied, 115 S. Ct. 250 (1994); United States v. Piervinanzi, 23 F.3d 670, 680 (2d Cir.), cert. denied, 115 S. Ct. 259 & 267 (1994); see also United States v. Edgmon, 952 F.2d 1206, 1214 (10th Cir. 1991), cert. denied, 505 U.S. 1223, 120 L. Ed. 2d 906, 112 S. Ct. 3037 (1992).
JURY INSTRUCTIONS
The defendants raise several challenges to the district court's jury instructions. Specifically, they claim that the court erred in failing to instruct the jury concerning a single scheme to defraud; in instructing the jury that the defendants need not have succeeded in obtaining money or property or in causing others to lose money through their scheme; in instructing the jury on aiding and abetting liability; and in shifting the burden of proof from the prosecution to the defense.*fn6
Single Scheme to Defraud
Defendants argue that the court erred in failing to instruct the jury concerning the requirement that they find a single scheme to defraud, as alleged in the indictment. They rely on United States v. Mastelotto, 717 F.2d 1238, 1247 (9th Cir. 1983), which held:
In a . . . wire fraud case in which a defendant contends that a variance has occurred between the single scheme charged in each count of the indictment and the proof at trial, the jury must be instructed that each of the jurors must find the defendant guilty of participation in the same single scheme to defraud and that the scheme to defraud in which the defendant is found to have participated is the same scheme as the overall fraudulent scheme alleged in the indictment.
If the jurors are not instructed that they must all agree on the existence of the same scheme to defraud, the defendant's right to a unanimous jury verdict as guaranteed by article III, § 2 of and the sixth amendment to the United States Constitution is infringed.
Defendants assert that Instructions 16, 17, 18, and 22, which pertain to the charges of a scheme, failed to meet this standard.
We find that the instructions were proper and did not deprive the defendants of their constitutional rights. Although, as we have concluded, the Superseding Indictment charged and the proof offered supported a finding of a single scheme, Instruction 16 stated in relevant part:
In order for a defendant to be found guilty of [wire fraud], the Government must prove each of the following elements beyond a reasonable doubt:
First, the defendant made up a scheme or plan to defraud individual and organizational investors, including Unity House, Inc., and to obtain money from the investors by means of false promises or statements, with all of you agreeing on at least one particular false promise or statement that was made; . . . .
(Emphasis added.) Instruction 18 stated:
The scheme to defraud charged in the Superseding Indictment is made up of various acts. It is not necessary for the Government to prove all of them, as long as sufficient evidence is shown to establish beyond a reasonable doubt that the scheme, substantially as charged, was set up.
(Emphasis added.) Thus, the instructions required both a unanimous finding concerning the existence of the underlying false statements and a specific finding that the scheme found matched that charged in the Superseding Indictment. We find these instructions proper.
The Successfulness of the Scheme
Defendants also challenge Instruction 22, which stated:
It is not necessary for the Government to prove that the defendants were actually successful in obtaining money or property by means of false or fraudulent pretenses, representations, or promises. It is not necessary for the Government to prove that anyone lost any money or property as a result of the scheme or plan.
An unsuccessful scheme to defraud is as illegal as a scheme or plan that is ultimately successful.
This instruction correctly states the law, in that the mail and wire fraud statutes do not proscribe only successful schemes. See, e.g., United States v. Olson, 925 F.2d 1170, 1175 (9th Cir. 1991).
Aiding and Abetting Liability
Defendants next challenge Instructions 24 and 34, which instructed the jury concerning aiding and abetting liability. They assert that this was plain error, as no defendant was separately charged with aiding and abetting under 18 U.S.C. § 2.
We disagree. Each of the wire fraud and money laundering Counts charged violations of 18 U.S.C. § 2. Moreover, it is well settled that "aiding and abetting are implied in every indictment" for a substantive offense. United States v. Armstrong, 909 F.2d 1238, 1242 (9th Cir.), cert. denied, 498 U.S. 870, 112 L. Ed. 2d 153, 111 S. Ct. 191 (1990).
Burden of Proof
Finally, defendants contend that Instructions 28-31 and 34-37, read together, effectively shifted the burden of proof from the government to them. Defendants' arguments are unsupported by any authority and fail to delineate the manner in which they were prejudiced. We have reviewed them individually and as a whole, and we find no prejudicial error. Those instructions containing the substantive elements of the offenses charged each state, in no uncertain terms, that the government bore the burden of proving its case "beyond a reasonable doubt."
THE PROSECUTORIAL MISCONDUCT CLAIMS
The defendants urge that they were deprived of a fair trial by prosecutorial misconduct.
Inflammatory Language
The defendants first allege that the prosecutor's opening statement was peppered with inflammatory jingles such as "scam," "Ponzi Scheme," "gibberish," "victim," "outlandish," "charlatan," "con," "deceit," "misrepresentation," "falsehoods," "fool's mission," "fictitious business entity," "store front office," and "front person." They acknowledge that each statement itself may have been harmless, but suggest that their cumulative effect crossed the line between permissible oratorical tactics and comments calculated to incite jury prejudice. They maintain that this prejudicial conduct persisted throughout the trial, including the prosecution's statements in closing argument. They suggest the prosecutors referred to the defendants as "crooks" or "evil" at least eleven times; used terms or phrases such as "con man," "charlatans," "trolling around for victims," "lie," "lies," or "lied" over 90 times; and also used words such as "Ponzi Scheme," "practicing their craft," "perfecting their craft," and "victim."
The parties dispute whether defendants objected to the government's use of inflammatory words at trial.*fn7 Resolving this issue in the defendants' favor, we nonetheless conclude that the district court did not abuse its discretion in failing to grant a mistrial (which was not requested by the defendants) or in sustaining any objection. The district court specifically found that "the opening and closing remarks, while containing an element of righteous indignation, were within the boundaries of proper openings and summations." We agree. The terms "victim," "deceit," "misrepresentation," "falsehoods," "fictitious business entity," "outlandish," "gibberish," and even "charlatan" and "scam," for example, are not even properly characterizable as slang.*fn8 Moreover, the law permits the prosecution considerable latitude to strike "hard blows" based on the evidence and all reasonable inferences therefrom. United States v. Baker, 10 F.3d 1374, 1415 (9th Cir. 1993), cert. denied, 130 L. Ed. 2d 289, 115 S. Ct. 330 (1994).
Viewed in their entirety and in the context of the month-long trial below, the government's choice of terms and phrases was not overly repetitious, and in fact reasonably described the practices of defendants. As noted in Guam v. Torre, 68 F.3d 1177, 1180 (9th Cir. 1995), "there is no rule of evidence or ethics that forbids the prosecutor from referring to the crime by its common name when examining a witness. There is no rule requiring the prosecutor to use a euphemism for it or preface it by the word 'alleged.'" See also United States v. Bracy, 67 F.3d 1421, 1431 (9th Cir. 1995) (upholding prosecution's reference to defendant as "'the imminent source of evil in this courtroom - at this moment'"); United States v. Taxe, 540 F.2d 961, 968 (9th Cir. 1976) (upholding in fraud case use of terms "fraud," "scavenger," "parasite," and "professional con-man"), cert. denied, 429 U.S. 1040, 50 L. Ed. 2d 751, 97 S. Ct. 737 (1977). Although there is a point at which prosecutorial comments are no longer reasonably descriptive and therefore serve no purpose other than to incite prejudice in the jury, the prosecution did not cross that point here, and we decline to impose formalistic restrictions on its vocabulary. For this reason, we also find no prejudicial error in the allowance of the prosecution's statements in closing argument.
The Charge of Mischaracterization
The defendants also allege that the government mischaracterized their activities by implying that trading in prime bank notes was a wholly fictitious concept, despite the contrary testimony of its own witness, Agent Steven Studhalter, who defined the term "prime bank."
It is true that the prosecution may neither "assume prejudicial facts not in evidence," nor "insinuate the possession of personal knowledge of facts not offered in evidence." Torre, 68 F.3d at 1179-80. Here, however, the government presented other testimony from which the jury could conclude beyond a reasonable doubt that the very notion of a "prime bank note" was fictitious. Neal Aoki, an attorney employed by the Hawaii Securities Enforcement Unit, testified that the term "prime bank" had no meaning in the financial industry and was commonly associated with fraud schemes. A juror could reasonably infer from this testimony that defendants' business activities were a front. We thus cannot conclude that the government made prejudicial claims not supported by evidence.*fn9
Vouching
Defendants' final allegation of prosecutorial misconduct is a claim of impermissible prosecutorial vouching. The prosecution openly greeted a witness passing in front of the jury box. Rude's counsel objected, but the court simply admonished the prosecution; it did not provide curative instructions to the jury. The defendants suggest this was impermissible vouching and grounds for reversal.*fn10
This argument misconceives the doctrine of vouching, which applies where the prosecutor personally assures the jury concerning a witness's credibility or expresses a personal opinion regarding the defendant's guilt. Cf. United States v. Williams, 989 F.2d 1061, 1071 (9th Cir. 1993); United States v. Necoechea, 986 F.2d 1273, 1276 (9th Cir. 1993). In fact, only one witness extended his hand to the prosecutor, and our research revealed no case suggesting it is improper for a prosecutor, without more, simply to shake hands with a witness upon the close of his testimony in the jury's presence. A prosecutor's open handshake with a witness neither lends governmental imprimatur to his testimony nor personally assures the jury of its credibility.
404(b) EVIDENCE
Mew asserts that the court erred in refusing to grant his motion to exclude evidence of other fraudulent transactions relating to him and dating back to 1986. At trial, two witnesses, Brian Ajifu and Norman Frank, testified concerning Mew's prior fraudulent practices. Ajifu testified that he was enticed to invest $50,000 in a similar scheme by Mew's representation, through a company with which he associated, ADR Industries ("ADR"), that he would earn five times his investment within two to three months. Subsequently, when Ajifu told Mew that he had contacted the FBI, Mew told him not to say anything and to treat the invested funds as a loan. Frank likewise testified that, near the same time, Mew promised him a 25% return on his investment in three months. Frank initially invested $85,000, but when Mew told him his investment had doubled, he invested another $50,000, all of which was lost. Mew acted through IBI Financial ("IBI"), another business entity, during this period. Prior to trial, Mew filed a motion in limine to exclude the testimony under Fed. R. Evid. Rule 404(b), which was denied. We review its denial for an abuse of discretion. United States v. Luna, 21 F.3d 874, 878 (9th Cir. 1994).
Mew suggests the testimony of Ajifu and Frank was irrelevant to the Unity House transaction, remote in time, and insufficient to support a finding that he committed the other acts. He also notes that this court "has specifically incorporated Rule 403's probative value/unfair prejudice balancing requirement into the Rule 404(b) inquiry," United States v. Mayans, 17 F.3d 1174, 1183 (9th Cir. 1994), and suggests the court below failed to conduct a Rule 403 analysis.
The admission of this evidence withstands the four-part analysis of United States v. Spillone, 879 F.2d 514, 518-20 (9th Cir. 1989), cert. denied, 498 U.S. 864 & 878 (1990), which holds that prior bad acts evidence is admissible if it (1) tends to prove a material point; (2) is not too remote in time; (3) is sufficient to support a finding that the defendant committed the other act; and (4) in some cases, concerns an offense similar to that charged. The testimony was relevant to demonstrate defendants' fraudulent intent, as it established that Mew was not simply a highly optimistic, but negligent, investor. See United States v. Sarault, 840 F.2d 1479, 1485 (9th Cir. 1988); United States v. Jenkins, 785 F.2d 1387, 1395 (9th Cir.), cert. denied, 479 U.S. 889, 93 L. Ed. 2d 262, 107 S. Ct. 287 (1986).
We also find the challenged evidence reliable. Both Ajifu and Frank testified that Mew employed similar, fraudulent investment tactics, around the same period in time, to induce them to invest. Their testimony not only was specific concerning the nature of the transactions and the promised returns, but was corroborated by documentary evidence and sufficient to support a finding that Mew committed the alleged frauds. The schemes were strikingly similar to the charged offenses, as each involved "prime bank" notes and related instruments, and each involved promises of high rates of return. Nor were the prior acts too remote in time.
Given the similarity and relevance of the offenses, we are not troubled by the fact that they occurred seven and eight years earlier. This circuit has not adopted a bright line rule concerning remoteness in time, Spillone, 879 F.2d at 519, and, where the prior acts were similar to those charged, previous decisions have upheld admission of evidence of acts up to twelve years old. See United States v. Ross, 886 F.2d 264, 267 (9th Cir. 1989) (acts occurring twelve years ago not too remote), cert. denied, 494 U.S. 1083, 108 L. Ed. 2d 947, 110 S. Ct. 1818 (1990). As to Mew's claim that the court below failed to apply Rule 403, we note that the court specifically found that the probative value of the evidence "outweighed any prejudice which may be present." This argument is therefore meritless as well.
CONTINUANCE
Mew also contends that the district court erred in denying his request for a continuance. He asserts that he lacked time to prepare an adequate defense, given the massive production of exhibits and documents no more than 11 or 12 days prior to trial. This lack of time, and the case's complexity and his pre-trial detention, assertedly deprived him of a fair trial.
We review a trial court's ruling on a request for a continuance under an abuse of discretion standard. It is settled that we will reverse only if the decision is "arbitrary and unreasonable." United States v. Tham, 960 F.2d 1391, 1396 (9th Cir. 1991).
Although there was a concededly large volume of materials produced by the government in this case, the defendants were kept informed of this fact by three separate notices from the government. In addition, it provided an exhibit list two weeks prior to trial. Jencks materials were provided ten days before the first witness testified. See Jencks v. United States, 353 U.S. 657, 1 L. Ed. 2d 1103, 77 S. Ct. 1007 (1957).
Furthermore, as the court recognized, a continuance would greatly have inconvenienced the government, the court, and out-of-state witnesses under subpoena. Nor has Mew shown the particular manner in which he was prejudiced by the denial of a continuance: he has not suggested he would have done additional investigation based on the new discovery, or that he was unable to use the discovery in cross-examining witnesses or in presenting his defense. In the absence of any particular proof of prejudice, we cannot say the court below abused its discretion in denying the continuance, particularly since it perceived a threat of flight. Moreover, the trial court found that defendant's counsel "came into the case with the understanding that if you couldn't come in and pick up the baton and keep the race going, that this was not the case to come into. I believe your assurance to the Court was that that would be no problem." Thus, we find no abuse of discretion.
THE FOURTH AMENDMENT CLAIMS
Although each of the defendants' residences as well as the offices of NPI were searched, only Mew has standing to challenge the search of his residence.*fn11 The search warrant issued in the present case authorized the seizure of the following documents dating from May 1992 to the present and pertaining to the defendants and NPI:
Business records . . . Bank account records . . . Brokerage account records . . . Credit card record statements and payment records . . . Records of domestic and foreign travel . . . Records pertaining to potential victims and associates, to include, but not be limited to, telephone toll records, letters, memos, correspondence, address books, diaries, photographs, video and audio recordings . . . Currency and other valuable items, such as gold and jewelry, traceable to fraud and money laundering.
Mew asserts that the search warrant was overly broad in scope and failed to state with particularity any guidelines for the agents to determine objectively whether a document to be seized related to wire fraud or money laundering. He also argues that many of the documents seized by the government pre-dated May 1992, and that none of these documents pertained to NPI or to the Unity House fraud.
The Validity of the Warrant
While a search warrant must describe items to be seized with particularity sufficient to prevent "a general, exploratory rummaging in a person's belongings," Coolidge v. New Hampshire, 403 U.S. 443, 467, 29 L. Ed. 2d 564, 91 S. Ct. 2022 (1971) (plurality), it need only be "reasonably specific, rather than elaborately detailed," United States v. Brock, 667 F.2d 1311, 1322 (9th Cir. 1982), cert. denied, 460 U.S. 1022, 75 L. Ed. 2d 493, 103 S. Ct. 1271 (1983), and the specificity required "varies depending on the circumstances of the case and the type of items involved," United States v. Spilotro, 800 F.2d 959, 963 (9th Cir. 1986).
The warrant here was sufficiently specific. As the district court noted, the warrant was limited to post-May 1992 documents, and to records pertaining to five individuals and one corporation. Any search for relevant documents is likely to retrieve some information that ultimately is beyond the core of evidentiary material produced at trial. An objective basis for distinguishing relevant documents from others is therefore necessary to ensure that the search is limited. Here, the specification of dates, individuals, and the NPI corporation, along with a reasonably precise delineation of the type of records sought, satisfied the specificity requirement. In In re Grand Jury Subpoenas Dated Dec. 10, 1987, 926 F.2d 847, 857 (9th Cir. 1991), this court upheld a warrant authorizing the search of an attorney's office for documents because the list of documents sought "was qualified by the requirement that the document seized be 'in the name of or have reference to' [the defendant] or [the persons] or entities that had been linked to [the defendant] through the investigation." Such is the case here. Moreover, the agents did not conduct a wholesale seizure of Mew's records, but left "a large volume" behind. RT 12/16/94 at 137-38.
The district court's finding that Mew's business was "permeated with fraud," thereby justifying an extraordinarily broad seizure of documents, bolsters our Conclusion. CR 107 at 6. See United States v. Offices Known as 50 State Distributing Co., 708 F.2d 1371, 1374-75 (9th Cir. 1983) (broad search for business records is permissible if probable cause exists to believe fraud permeates the entire business operation), cert. denied, 465 U.S. 1021, 79 L. Ed. 2d 677, 104 S. Ct. 1272 (1984). The affidavit supporting the search warrant validates the lower court's finding, as it is clear therefrom that NPI's central purpose was to serve as a front for defrauding prime bank note investors. Accordingly, we find that the warrant itself was neither overly broad nor insufficiently specific.
The Plain View Doctrine
As to the seizure of material outside the scope of the warrant, the government concedes that its agents seized several documents pre-dating May 1992, but urges that these documents were properly seized under the "plain view" doctrine. Mew argues that, under the plain view doctrine, the incriminating character of the documents must be "'immediately apparent.'" See Horton v. California, 496 U.S. 128, 136, 110 L. Ed. 2d 112, 110 S. Ct. 2301 (1990) (quoting Coolidge, 403 U.S. at 466 (plurality opinion)). The record reveals that the agents had to peruse each document to determine whether it related to other fraudulent activity.
The government maintains that the pre-May 1992 documents pertained to Mew's prior fraudulent activities with IBI and ADR, concerning which they had probable cause. Agent Dana MacDonald, who oversaw the search of Mew's residence, testified that the agents were informed prior to the search concerning previous criminal investigations of IBI and ADR. The government thus suggests that the incriminating nature of these documents was "immediately apparent" to the executing agents, in conformance with Horton 's requirements. It appears eighteen such documents were seized and offered into evidence.
We think this is a close question. See Arizona v. Hicks, 480 U.S. 321, 326, 94 L. Ed. 2d 347, 107 S. Ct. 1149 (1987). Just as the officer in Hicks could not, absent probable cause, upon glancing at a stereo, move it and look for a serial number, id. at 324-29, it may be argued that neither may an officer, upon glancing at a document noticeably beyond a search warrant, peruse it and look for incriminating evidence. As the D.C. Circuit observed in United States v. Heldt, a pre- Hicks case:
The incriminating character limitation necessarily permits a brief perusal of documents in plain view in order to determine whether probable cause exists for their seizure under the warrant. If in the course of that perusal, their otherwise incriminating character becomes obvious, they may be seized. Otherwise, the perusal must cease at the point at which the warrant's inapplicability to each document is clear.
668 F.2d 1238, 1267 (D.C. Cir. 1981) (per curiam) (internal citations and parenthetical quotations omitted) (emphasis added), cert. denied, 456 U.S. 926 (1982).
This is not a case in which the officers merely perused the documents to determine whether they fell within the scope of the search as specified by the search warrant; their immediate observation of the contested documents revealed that the documents fell outside the warrant. The government concedes the agents had to use their own discretion in perusing these papers to determine whether they were incriminating. As the Supreme Court observed in Andresen v. Maryland, 427 U.S. 463, 482 n.11, 49 L. Ed. 2d 627, 96 S. Ct. 2737 (1976):
There are grave dangers inherent in executing a warrant authorizing a search and seizure of a person's papers that are not necessarily present in executing a warrant to search for physical objects whose relevance is more easily ascertainable. In searches for papers, it is certain that some innocuous documents will be examined, at least cursorily, in order to determine whether they are, in fact, among those papers authorized to be seized. . . . Responsible officials, including judicial officials, must take care to assure that they are conducted in a manner that minimizes unwarranted intrusions upon privacy.
This court, in United States v. Issacs, 708 F.2d 1365 (9th Cir.), cert. denied, 464 U.S. 852 (1983), upheld an officer's perusal of a ledger "in no more thorough a manner than necessary to determine whether it contained the items which were the object of the search warrant," id. at 1369, stating in summary:
These cases make clear that when conditions justify an agent in examining a ledger, notebook, journal, or similar item, he or she may briefly peruse writing contained therein. The justification may arise from a reasonable suspicion to believe that the discovered item is evidence . . . ; or it may arise from the authority conferred by a warrant to search for certain items which might reasonably be expected to be found within such a book, as here. In either case, the plain view doctrine would permit brief perusal of the book's contents and, consequently, its seizure if such perusal gives the examining agent probable cause to believe that the book constitutes evidence.
We do not mean to suggest that agents entitled to examine a book or similar item may minutely scrutinize its contents, especially when personal, nonbusiness papers are involved. But this case does not require us to explore the limits to brief perusal. The trial court's factual findings establish that no more than a glance was necessary to ascertain the incriminating nature of the notations.
Id. at 1370 (internal citations and quotations omitted).
In the present case, we are troubled by the fact that, although the warrant limited the search to records post-dating May 1992 and pertaining to the Unity House fraud, the agents nonetheless seized documents beyond the scope of the warrant. It would have been readily apparent to the government agents that the documents seized pre-dated May 1992. In examining these documents, therefore, the agents were immediately alerted to the fact that the documents were beyond the warrant's scope. More difficult is the question of whether these documents were on their face incriminatory. Compare United States v. Menon, 24 F.3d 550, 559-61 (3d Cir. 1994) (upholding plain view seizure of documents beyond warrant where seizing agents' collective knowledge gave them probable cause to believe trigger words such as "Jabeco," the name of a company with which defendant allegedly engaged in criminal activity, and "reprocessing" indicated that the documents evidenced illegal activity), with United States v. Soussi, 29 F.3d 565, 572 (10th Cir. 1994) (permitting cursory review of documents pre-dating warrant by ten months, but remanding for factual finding to determine whether the incriminating character of the documents was "immediately apparent during the cursory review"); and United States v. Hinckley, 217 U.S. App. D.C. 262, 672 F.2d 115, 132 (D.C. Cir. 1982) (per curiam) (rejecting argument that officer's observation, during lawful search for contraband, of piece of paper containing trigger words "prison," "life sentence," and "cooperation with the Justice Department," justified reading the entire document), overruled in part on other grounds, Hudson v. Palmer, 468 U.S. 517, 82 L. Ed. 2d 393, 104 S. Ct. 3194 (1984).
We assume arguendo that the searches for and seizures of these eighteen documents were not justified by the plain view doctrine, and therefore that they were illegally seized. This evidence was only material, however, to the testimony of Norman Frank and Brian Ajifu, as it pertained to Mew's prior fraudulent schemes. As we have held that this evidence was properly received under Fed. R. Evid. 404(b), we also note that the trial involving all of the defendants lasted for over one month. The other documentary and testimonial evidence pertaining to the Unity House fraud, including that implicating Mew, was overwhelming. The evidence pertaining to Mew's prior involvement with IBI, ADR, Norman Frank, and Brian Ajifu was de minimis in comparison to the evidence directly relevant to the particular offenses for which the defendants were tried.
We therefore find, even assuming that Mew's Fourth Amendment rights were violated, that the evidence admitted as a result of the illegal search was harmless beyond a reasonable doubt. See Chapman v. California, 386 U.S. 18, 24, 17 L. Ed. 2d 705, 87 S. Ct. 824 (1967).*fn12
Conclusion
The judgment of conviction of each of the defendants and the sentencing of the district court are AFFIRMED.
Order, DENIAL OF PETITION FOR REHEARING, REJECTION OF SUGGESTION FOR REHEARING EN BANC, AND AMENDED OPINION
The opinion filed July 10, 1996, is amended as follows:
Slip opinion at page 8332, delete paragraph [20]: "We therefore find, even assuming . . . ."; and substitute the following:
We therefore find, even assuming that Mew's Fourth Amendment rights were violated, that the evidence admitted as a result of the illegal search was harmless beyond a reasonable doubt. See Chapman v. California, 386 U.S. 18, 24, 17 L. Ed. 2d 705, 87 S. Ct. 824 (1967).*fn13
With this amendment, the panel has voted to deny the petition for rehearing. Judge Leavy has voted to reject the suggestion for rehearing en banc, and Judges Lay and Wright have so recommended.
The full court has been advised of the en banc suggestion and no Judge of the court has requested a vote on it.
The petition for rehearing is DENIED and the suggestion for rehearing en banc is REJECTED.
Disposition
Judgment of conviction of each of the defendants and the sentencing of the district court are AFFIRMED. The petition for rehearing is DENIED and the suggestion for rehearing en banc is REJECTED.
Judges Footnotes
*fn* Honorable Donald P. Lay, Senior Circuit Judge for the Eighth Circuit, sitting by designation.
Opinion Footnotes
*fn1 The government maintains that the very notion of a "prime bank note" transaction is fictitious.
*fn2 Gonzales too was convicted, but he is not a party to this appeal.
*fn3 Andrews was sentenced to a 30-month term of imprisonment, to be followed by a three-year term of supervised release. As a condition of his supervised release, the court ordered him to make restitution to Unity House in the amount of $10 million. Pursuant to the plea agreement, the court dismissed the remaining charges against Andrews.
*fn4 Mew received a sentence of 236-months imprisonment, Kim received a sentence of 189-months imprisonment, and Rude received a sentence of 135-months imprisonment, each to be followed by a three-year term of supervised release. Like Andrews, the other defendants were ordered to pay restitution of $10 million to Unity House.
*fn5 Each of the parties relies on Fed. R. App. P. 28(i) and adopts by reference the claims in one another's briefs. To avoid confusion, we discuss the claims as if they are applicable to all three defendants, except where otherwise noted.
*fn6 The government asserts that the defendants failed to object to the instructions at the time of the trial, as required by Fed. R. Crim. P. 30. Rude concedes that he did not object, and we can find no objection by Mew. Kim, however, asserts that a number of objections were timely made and that all defendants joined in the objections. Notwithstanding the dispute over whether the defendants properly objected (and our reading of the transcript verifies that the defendants failed properly to object to most of the instructions contested on appeal), we nonetheless have reviewed these instructions and find no prejudicial error.
*fn7 The government maintains that the defendants made no objection, but the defendants note that they objected twice during opening statement, once during trial, and once during closing argument. They also note that objections or motions raised by one defendant were automatically joined by the others.
*fn8 The dictionary defines "scam" as "a fraudulent or deceptive act or operation." Webster's Ninth New Collegiate Dictionary 1047 (1984). It defines "charlatan" as "one making usu. showy pretenses to knowledge or ability: FRAUD, FAKER." Id. at 228. These are just the kinds of fraudulent acts the government indicted and proved.
*fn9 The defendants also argue that the government repeatedly referred to gambling, in violation of the court's pre-trial orders. The court ruled such statements admissible, however, provided the government could tie the fraud proceeds to gambling. Viewed in the light most favorable to the government, the evidence supports the allegation that the proceeds were tied to gambling.
*fn10 Defendants also claim that the United States engaged in improper vouching by presenting two pie charts to the jury which demonstrated the Disposition of the fraud proceeds. This court has recognized, however, that the government may, in a fraud case, prove that the defendants did not use the funds obtained for their intended purpose. See United States v. Brutzman, 731 F.2d 1449, 1452 (9th Cir. 1984) ("The misuse of the funds directly established the fraudulent nature of the scheme."). A different result is not required simply because the government used pie charts to this end.
*fn11 As earlier explained, the parties have attempted to incorporate by reference the arguments in each other's briefs. Neither Rude nor Kim, however, has standing to challenge the search of Mew's residence. Conversely, Mew lacks standing to challenge the search of any other defendant's residence.
*fn12 In Brecht v. Abrahamson, 507 U.S. 619, 637, 123 L. Ed. 2d 353, 113 S. Ct. 1710 (1993), the Supreme Court for the first time rejected the harmless error rule of Chapman v. California, 386 U.S. 18, 24, 17 L. Ed. 2d 705, 87 S. Ct. 824 (1967), in collateral attack cases involving constitutional trial error. The Brecht Court held that, where there is constitutional trial error, the petitioner must show actual prejudice under the "'substantial and injurious effect'" rule in order to obtain a reversal. 507 U.S. at 637 (quoting Kotteakos v. United States, 328 U.S. 750, 760, 776, 90 L. Ed. 1557, 66 S. Ct. 1239 (1946)). In other words, the petitioner may no longer succeed by showing a mere reasonable possibility of prejudice. Id. Until Brecht was decided, however, the Court had regularly applied the Chapman rule to constitutional trial error in collateral attack cases. See, e.g., Rose v. Clark, 478 U.S. 570, 576-77, 92 L. Ed. 2d 460, 106 S. Ct. 3101 (1986); Chambers v. Maroney, 399 U.S. 42, 52-53, 26 L. Ed. 2d 419, 90 S. Ct. 1975 (1970). The standard applied in the latter cases now appears to be overruled by the Brecht decision. Until the Brecht decision, the Kotteakos standard, grounded in the federal harmless error rule under 28 U.S.C. § 2111, had been limited to trial error of non-constitutional questions. Although there is language in the Brecht case, see 507 U.S. at 631 n.7, which indicates that § 2111 is more amenable to the harmless error review of constitutional violations, we know of no case which substitutes the Brecht rule of actual prejudice for the less stringent rule of Chapman on direct appeal.
*fn13 In Brecht v. Abrahamson, 507 U.S. 619, 637, 123 L. Ed. 2d 353, 113 S. Ct. 1710 (1993), the Supreme Court for the first time rejected the harmless error rule of Chapman v. California, 386 U.S. 18, 24, 17 L. Ed. 2d 705, 87 S. Ct. 824 (1967), in collateral attack cases involving constitutional trial error. The Brecht Court held that, where there is constitutional trial error, the petitioner must show actual prejudice under the "'substantial and injurious effect'" rule in order to obtain a reversal. 507 U.S. at 637 (quoting Kotteakos v. United States, 328 U.S. 750, 760, 776, 90 L. Ed. 1557, 66 S. Ct. 1239 (1946)). In other words, the petitioner may no longer succeed by showing a mere reasonable possibility of prejudice. Id. Until Brecht was decided, however, the Court had regularly applied the Chapman rule to constitutional trial error in collateral attack cases. See, e.g., Rose v. Clark, 478 U.S. 570, 576-77, 92 L. Ed. 2d 460, 106 S. Ct. 3101 (1986); Chambers v. Maroney, 399 U.S. 42, 52-53, 26 L. Ed. 2d 419, 90 S. Ct. 1975 (1970). The standard applied in the latter cases now appears to be overruled by the Brecht decision. Until the Brecht decision, the Kotteakos standard, grounded in the federal harmless error rule under 28 U.S.C. § 2111, had been limited to trial error of non-constitutional questions. Although there is language in the Brecht case, see 507 U.S. at 631 n.7, which indicates that § 2111 is more amenable to the harmless error review of constitutional violations, we know of no case which substitutes the Brecht rule of actual prejudice for the less stringent rule of Chapman on direct appeal.
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1995.C10.1495 (10th Cir. 12/15/1995) UNITED STATES COURT OF APPEALS TENTH CIRCUIT Filed 12/15/95 UNITED STATES OF AMERICA,Plaintiff-Appellant, v. DELTON OWEN OLSON,Defendant-Appellee Nos. 95-8006, 95-8019 (D.C. No. 94CR-31) (D. Wyoming) ORDER AND JUDGMENT *fn1 Bef Baldockore BALDOCK, CMcWILLIAMS, REAVLEY*fn2, Circuit Judges. Delton Owen Olson was convicted by a jury of conspiracy to launder money. He was acquitted of wire fraud. Because of Olson's minimal participation in the investment scheme, the district court granted his motion for downward departure and sentenced him to 51 months imprisonment. We affirm. Olson was charged in a multi-count indictment with Grady Hand*fn3 and the Cross brothers -- Stewart and Stephen. The investment scheme undertaken by the conspirators involved NorthStar Investment Trust, its successor company SLM, and Cross & Associates. Olson and Stephen Cross were the manager and trustee, respectively, for NorthStar. In March of 1993, Olson and Stephen began marketing a "roll program" through NorthStar to investors. This program was said to provide small investors with the opportunity to invest or "piggyback" into the larger "roll program" being conducted by Cross & Associates, a company comprised of Hand and Stewart. The investors were informed that Hand and Stewart were purchasing prime bank notes in the amount of 100 to 300 million dollars or more. Cross & Associates, through its trader, was supposed to purchase the notes at a discount from only the world's largest 100 banks. Cross & Associates would then contract with an institution in the secondary market to purchase these notes. This secondary market was described as pension funds, insurance companies, and large corporations. The actual "roll" or "tranche" was supposed to occur when Cross & Associates purchased the note from the bank with cash and then sold the note to the secondary market. The difference between the purchase and sale of these instruments was to result in a substantial profit to Cross & Associates and their investors. The investors were informed that because of bank and federal regulations the two parties were not able to deal directly with the other, thus creating the need for Cross & Associates. There was, in fact, no roll program. Olson brought in the first investors, a divorced couple who still invested together, in March of 1993. The couple invested $500,000 each. Investors were paid the two to 4 per cent per month return from their investment principal. The four conspirators looted much of the remaining money. In October of 1993 the investment scheme was ended by federal officials. In the end, Olson had personally taken a total of $326,000 of the investors' 3.3 million dollars. I. Sufficiency of the Evidence Olson challenges the sufficiency of the evidence to support his conviction. He argues that the evidence does not establish that there was an agreement between the alleged co-conspirators to launder money or that money laundering occurred. We review the evidence in the light most favorable to the government to determine whether any rational trier of fact could find Olson guilty beyond a reasonable doubt. United States v. Hanson, 41 F.3d 580, 582 (10th Cir. 1994). Olson was charged with conspiracy to violate 18 U.S.C. 1956(a)(1)(A)(i) and 1956(a)(1)(B)(i). Those sections provide: (a)(1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity-- (A)(i) with the intent to promote the carrying on of specified unlawful activity; or * * * (B) knowing that the transaction is designed in whole or in part-- (i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity . . . shall be sentenced to a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both. The "specified unlawful activity" alleged in the indictment was mail or wire fraud in violation of 18 U.S.C. Section(s) 1341 and 1343. A. The Conspiracy The government proceeded under the basic theory that Olson and others conspired to violate Section(s) 1956(a)(1)(A)(i) or (B)(i). 18 U.S.C. 1956(h). To prove a conspiracy, the government must prove: (1) the existence of an agreement; (2) to break the law; (3) an overt act; (4) in furtherance of the conspiracy's object; and (5) that a defendant willfully entered the conspiracy. Hanson, 41 F.3d at 582; 18 U.S.C. 371. "While all five of these elements must be present, the essence of any conspiracy is `the agreement or confederation to commit a crime.'" Id. (quoting United States v. Bayer, 331 U.S. 532, 542, 67 S.Ct. 1394, 1399, 91 L.Ed. 1654 (1947)). "The agreement need not be shown to have been explicit. It can instead be inferred from the facts and circumstances of the case." Iannelli v. United States, 420 U.S. 770, 777, n. 10, 95 S.Ct. 1284, 1289-90, n. 10, 43 L.Ed.2d 616 (1975) Olson's defense and his contention on appeal is that he was unaware of the fraud being perpetrated by Cross & Associates. He insists that there is no evidence of any agreement between him and any of the other co-conspirators. The government relied on circumstantial evidence to establish the agreement between the conspirators. In support of his argument, Olson notes that Stewart Cross never informed him that the "roll program" did not exist, that he received false reports concerning investor profits in the "roll program," that he did not have access to or control over investor funds at any time, and that he did everything in his power to assure investor monies were secure. Our inquiry is not whether the Cross brothers knew Olson was aware of the object of the conspiracy, but whether Olson knew of the object of the conspiracy and voluntarily chose to participate in it. See United States v. Evans, 970 F.2d 663, 669 (10th Cir. 1992), cert. denied, 113 S.Ct. 1288 (1993) ("A defendant may be convicted of conspiracy only if the government proves that the defendant had knowledge of the conspiracy and voluntarily participated therein."); United States v. Metropolitan Enters., 728 F.2d 444, 451 (10th Cir. 1984) ("A co-conspirator need not know of the existence or identity of the other members of the conspiracy or the full extent of the conspiracy.") Olson's actions and statements to others indicate that Olson knew the roll program did not exist and chose to participate in the overall objective of the conspiracy. Olson began marketing the fictitious "roll program" in March of 1993. In that month he received the program's first investment of 1 million dollars, $500,000 each from the divorced couple. In April of 1993 the couple received their first interest check of 3-1/2 per cent or $17,500 each. Also in April the Securities and Exchange Commission inquired of Olson about NorthStar's securities activities. In an effort to avoid detection, Olson and Stephen Cross created a new entity called SLM. To further eliminate NorthStar's existence, Olson replicated NorthStar's investor management agreements with SLM as the new investment company. Olson created and sent a new agreement to each investor. The new agreements were signed by Olson using a rubber stamp of Stephen Cross's signature. The investors were then asked to sign the "new" agreements and return the old NorthStar agreements. One could easily surmise this last request was to eliminate any trace of NorthStar. Olson met with an attorney in April to discuss the S.E.C. letter. As a result of this meeting, Olson responded to the S.E.C. in June of 1993. In that letter Olson specifically stated that "[t]here is not now nor has there been any agreement between the trust and any entity for the promotion and sale of any investment program, including a roll program." The letter also noted that all NorthStar activity had ceased. It noted, "[t]here will be no further activity in this area by the trust and the trust has had no other contact with any other potential participant for the purchase and sale of prime bank obligations." Further, Olson related to the S.E.C. that " t no time has there ever been any person or persons that have invested in [NorthStar]." Contrary to his letter to the S.E.C., Olson was still marketing a "roll program" through SLM. In a letter to an investor in September of 1993, Olson wrote, "I am pleased to inform you that we have further strengthened our piggybacking program with Cross & Associates. To simplify the mechanics and to insure our longevity with Cross & Associates, we're now piggybacking on Cross' large trading account at Paine-Webber." Olson also made numerous false representations to investors concerning the program. Olson represented that he had seen several accounts during his time at Anovest, the brokerage company that controlled investor funds through Paine-Webber, in excess of three million dollars. He assured investors that he had personally seen trading confirmations. When one investor questioned Olson about possible S.E.C. implications, Olson replied that "[w]e have a ruling, you know, from an attorney or an opinion from an attorney stating that this does not fall within the realm of the S.E.C.; therefore, it does not need to be regulated through the S.E.C." During the month of April, Olson was aware that investors were receiving interest checks for their investment through NorthStar. Olson's attorney testified that Olson informed him in April there was no roll program in existence. Contrary to this knowledge that the program did not exist, Olson continued to promote, profit, and participate in the scheme during and after the month of April. A rational jury could conclude from this evidence that Olson had joined the conspiracy and had agreed to continue to market the nonexistent "roll program."
B. Money Laundering
Olson also contends that the money he gained from the illegal activity was spent personally, and therefore, does not constitute money laundering. While he did use some of the money for himself, that is not the whole story. Much of the money Olson received from NorthStar was spent to further promote NorthStar or SLM. In fact, Olson himself testified that some of the money he received was spent to pay the business expenses of NorthStar whose only apparent business was to promote the "roll program." Additionally, Olson used investor funds to pay other brokers who brought investors into the program. A total of $54,920 was paid to these intermediate brokers.*fn4 The evidence is sufficient to support a jury's conclusion that Olson used investor money obtained illegally through wire fraud to continue to "promote" the ongoing scheme. See 18 U.S.C. Section(s) 1956(a)(1)(A)(i).
C. Acquittal on Wire Fraud
Olson also argues that because the jury found him not guilty of wire fraud, the evidence is insufficient to support the conspiracy charge. Even assuming that the verdicts are inconsistent, Olson may not challenge the propriety of his conspiracy conviction with the jury's action in the wire fraud count. See United States v. Powell, 469 U.S. 57, 66, 105 S.Ct. 471, 477, 83 L.Ed.2d 461 (1984) ("The fact that the inconsistency may be the result of lenity, coupled with the Government's inability to invoke review, suggests that inconsistent verdicts should not be reviewable."); United States v. Abbott Washroom Systems, Inc., 49 F.3d 619, 622 (10th Cir. 1995) (a corporate defendant cannot use acquittal of employee co-defendant to challenge the corporate defendant's conviction.)*fn5
II. The Decrease in Olson's Sentence
The government contends in a cross-appeal that the district court improperly granted Olson a four-level decrease for "minimal participation" in his adjusted offense level under the Sentencing Guidelines. See U.S.S.G. Section(s) 3B1.2(a). "A trial court' findings concerning a defendant's role in a particular offense are treated by an appellate court as factual findings, which are subject to deferential review under the clearly erroneous standard." United States v. Santistevan, 39 F.3d 250, 253 (10th Cir. 1994). The finding will not be disturbed unless it is without factual support in the record, or if after reviewing the evidence we are left with a definite and firm conviction that a mistake has been made. Santistevan, 39 F.3d at 253-254. Application note one to section 3B1.2 states that the mitigating circumstance for minimal participation is intended to cover defendants who are plainly among the least culpable of those involved in the conduct of the group. Under this provision, the defendant's lack of knowledge or understanding of the scope and structure of the enterprise and of the activities of others is indicative of a role as a minimal participant.
In determining Olson was only a minimal participant in the overall conspiracy, the district court noted, I find that there was a great deal that [Olson] was not aware of in this matter. And had he been aware, I would be speculating on what might have happened. We don't know is the point. And it seems unfair to me to, in effect, charge him with things -- with activities that clearly were kept from him and were not disclosed and were significant in terms of this operation from the very beginning because it was within a day or two of the [couple's investment of one million dollars] -- around March 31, 1993 of [their] investment that those funds were slipping away through loan transactions with [Hand] that [Olson was] not aware of and through loans, dunning (sic) loans to Stephen and to Cross & Associates.
The district court's ruling that Olson was plainly among the least culpable of the conspirators is not clearly erroneous. The court's ruling is supported by the actions of his co-conspirators in their acquisition of investor funds without Olson's knowledge and their apparent attempt to keep much of the details of the scam from Olson.
In March of 1993, Hand and the Cross brothers decided to "borrow" $300,000 of the divorced couple's investment funds from their brokerage account. The three conspirators agreed to classify this transaction as a loan. As the months passed more money would be "borrowed" from investor funds. Investor funds were controlled by Cross & Associates in Atlanta, and investor statements were prepared and mailed from Cross & Associates in Atlanta. The conspirators in Atlanta perhaps attempted, although unsuccessfully, to keep Olson from discovering that the "roll program" was a ruse. Hand and the Cross brothers all misinformed Olson to further the investment scheme. While Olson was aware the program was non-existent and participated in its overall objectives, thus making him a member of the conspiracy, the district court did not clearly err in determining Olson was a minimal participant because of the actions of his co-conspirators.
AFFIRMED.
Entered for the Court
Thomas M. Reavley, Circuit Judge
***** BEGIN FOOTNOTE(S) HERE *****
*fn1 This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. The court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of the court's General Order filed November 29, 1993. 151 F.R.D. 470.
*fn2 The Honorable Thomas M. Reavley, United States Court of Appeals, Fifth Circuit, sitting by designation.
*fn3 Grady Lewis Hand has filed a related opinion, No. 95-8007.
*fn4 The evidence indicates that much more money was supposed to be paid to the other brokers, but, unbeknownst to the other co-conspirators Olson kept the difference.
*fn5 This does not call into question the limited rule of consistency that is applied to where all co-conspirators are acquitted but one. See Abbott Washroom Systems, Inc., 49 F.3d at 622-623.
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Post by Sapphire Capital on Jul 16, 2008 21:43:18 GMT 4
38 F.3d 1419 (6th Cir. 11/01/1994) UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
No. 93-2230
decided: November 1, 1994.
UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE
v.
JAMES F. MOORED, DEFENDANT-APPELLANT
ON APPEAL from the United States District Court for the Western District of Michigan. District No. 92-00046. Robert Holmes Bell, District Judge.
For UNITED STATES OF AMERICA, Plaintiff - Appellee: Julie Ann Woods, Asst. U.S. Attorney, Argued, Briefed, Office of the U.S. Attorney, Grand Rapids, MI.
For JAMES F. MOORED, Defendant - Appellant: David A. Dodge, Argued & Briefed, Grand Rapids, MI.
Before: Jones and Batchelder, Circuit Judges; and Gilmore, District Judge.*fn*
Author: Gilmore
GILMORE, District Judge. This is the second time this case has been before this court. Appellant James Moored was charged in a one count information with wire fraud, and entered into a plea agreement with the government wherein the parties agreed to a specific account of the events and a nonbinding calculation of the dollar amount that should attach to the offense. He was sentenced to 27 months imprisonment, three years supervised release, and a $50.00 mandatory special assessment. Moored appealed this sentence.
On appeal, this court reversed Moored's 27 month sentence, and remanded the case for resentencing. United States v. Moored, 997 F.2d 139 (6th Cir. 1993). At resentencing, Moored again received a sentence of 27 months incarceration, and this appeal followed.
The facts of the case were adequately set forth in the first appeal as follows.
In early 1990, Defendant applied for loans in the total amount of $1,750,332 from various private lenders. Defendant indicated to the lenders that $400,000 of the loan proceeds would be used to pay a debt owed to Jordan College, a small institution in Grand Rapids, Michigan. Defendant had an active history with the college, including a term on its board of trustees. He had engaged in various financial transactions with the college, including loans, donations, and real property transactions, based in part on promises that he failed to keep and representations that proved untrue.
The debt to Jordan College was comprised of a $100,000 loan that the college made to Defendant, a $50,000 undisclosed lien on property that Defendant sold to the college, and a $175,000 downpayment on that same property that Appellant had promised to return to the college.
In order to entice the lenders, Defendant falsified an offer to purchase stock that Defendant had pledged as security for the loan. Defendant transmitted the falsified offer from outside the state of Michigan by facsimile to the lenders' counsel in Michigan. Defendant also falsified a letter of credit from Northwest Bank.
Immediately after the two checks comprising the loan were transferred to Defendant, the lenders learned of the fraud and stopped payment. The lenders suffered no actual loss.
Defendant pled guilty to a one-count information pursuant to a plea agreement. The government agreed that the potential loss to the lenders was less than $350,000, which would result in an offense level enhancement of eight levels, according to 2F1.1(b)(1)(I) of the United States Sentencing Guidelines ("U.S.S.G."). The basis for that calculation was the actual value of the stock pledged as security compared to the value fraudulently attributed to the stock by Defendant when applying for the loans.
The probation officer agreed that the base offense level was six, pursuant to U.S.S.G. § 2F1.1. In addition, the officer recommended an enhancement of twelve levels, pursuant to U.S.S.G. § 2F1.1(b)(1)(M), finding the potential or intended loss to be $1,500,000 to $2,000,000. That calculation was purportedly based on the amount of the loans added to the amount owed to Jordan College.
At sentencing, the district court found the amount of the loss to be $325,000, which represented only Defendant's debt to Jordan College. . . . On that basis, the court enhanced the offense level by eight.
Moored, 997 F.2d at 140-41. (footnote omitted).
The Court vacated Moored's 27 month sentence and remanded the case for resentencing. First, the court found that the district court committed "clear error" by including the potential loss to Jordan College in the computation of the total loss. Additionally, the court held that the district court incorrectly added two levels for abuse of a position of trust. Finally, the court concluded that the district court must reconsider the acceptance of responsibility issue, excluding from consideration Defendant's conduct in connection with Jordan College.
At Moored's original sentencing, the district court deter-mined that both the actual and intended loss for sentencing purposes was zero. This determination was not appealed by either Moored or the government. However, upon resentencing, the district court reviewed its earlier determination and recalculated the loss to equal the gross amount of the loans. The issue on appeal is whether the district court had the authority to do so.
At the resentencing, the district court stated that it had earlier made a mistake regarding the calculation of the loss, and the intended loss was properly determined at $1,700,000, rather than zero. Based on this loss calculation, the court reimposed the same sentence of 27 months imprisonment. The court determined that this was a proper sentence under the United States Sentencing Guidelines based upon a finding of a potential loss or an intended loss of 1.7 million dollars.
I.
The first question we must resolve is whether the district court was authorized to reconsider the loss attributable to Defendant on remand.
Defendant contends the district court was precluded from reconsidering the loss issue for two reasons: (1) this court's mandate did not direct the district court to reconsider the loss issue, and (2) neither party challenged the district court's findings and Conclusions on that issue in the first appeal and, therefore, the district court's determination of zero loss became the law of the case. Accordingly, Defendant argues that the district court's decision to reconsider and reverse its earlier ruling concerning the loss issue violated the "law of the case" doctrine and the "mandate rule."
Under the doctrine of law of the case, findings made at one point in the litigation become the law of the case for subsequent stages of that same litigation. United States v. Bell, 988 F.2d 247, 250 (1st Cir. 1993). A complementary theory, the mandate rule, requires lower courts to adhere to the commands of a superior court. Id. at 251. Accordingly,
upon remand of a case for further proceedings after a decision by the appellate court, the trial court must 'proceed in accordance with the mandate and the law of the case as established on appeal.' The trial court must 'implement both the letter and the spirit of the mandate, taking into account the appellate court's opinion and the circumstances it embraces.'
United States v. Kikumura, 947 F.2d 72, 76 (3d Cir. 1991). (Citations omitted).
In determining whether the district court violated the law of the case doctrine or the mandate rule, we must consider: a) whether the loss issue was expressly or impliedly decided by this court in Defendant's first appeal, and b) whether this court's mandate to the district court was so narrow in scope as to preclude the district court from considering the loss issue.
The law of the case doctrine and the mandate rule generally preclude a lower court from reconsidering an issue expressly or impliedly decided by a superior court. However, these principles are not without exception. "Even where, as here, an appellate court's mandate does not contemplate resurrecting an issue on remand, the trial court may still possess some limited discretion to reopen the issue in very special situations." Bell, 988 F.2d at 250-51. In Petition of United States Steel Corp., 479 F.2d 489, 494 (6th Cir.), cert. denied, 414 U.S. 859, 38 L. Ed. 2d 110, 94 S. Ct. 71 (1973), this circuit explained that the law of the case doctrine dictates that issues, once decided, should be reopened only in limited circumstances, e.g., where there is "substantially different evidence raised on subsequent trial; a subsequent contrary view of the law by the controlling authority; or a clearly erroneous decision which would work a manifest inJustice." (citing White v. Murtha, 377 F.2d 428, 431-432 (5th Cir. 1967)). Accord United States v. Rivera-Martinez, 931 F.2d 148 (1st Cir.), cert. denied, 112 S. Ct. 184 (1991).
In addition to those exceptions outlined by the Sixth Circuit in Petition of United States Steel Corp., several circuits have given broad discretion to the district court to reconsider sentencing factors on a sentencing remand. For example, in United States v. Smith, 930 F.2d 1450, 1456 (10th Cir.), cert. denied, 112 S. Ct. 225 (1991), the court stated that absent explicit limitations in the appellate court's mandate, an order vacating a sentence and remanding the case for resentencing "directs the sentencing court to begin anew, so that 'fully de novo resentencing' is entirely appropriate. . . . The law of the case doctrine and the cases cited by Mr. Smith are inapposite, given this court's vacation of his initial sentence." See also United States v. Cornelius, 968 F.2d 703, 705 (8th Cir. 1992) ("Once a sentence has been vacated or a finding related to sentencing has been reversed and the case has been remanded for resentencing, the district court can hear any relevant evidence on that issue that it could have heard at the first hearing."); United States v. Sanchez Solis, 882 F.2d 693, 699 (2d Cir. 1989) ("In the interests of truth and fair sentencing a court should be able on a sentence remand to take new matters into account on behalf of either the Government or the defendant."); United States v. Romano, 749 F. Supp. 53, 55 (D. Conn. 1990) (on remand, a sentencing court may proceed as it might have proceeded in the first instance), aff'd sub nom., United States v. Lanese, 937 F.2d 54 (2d Cir. 1991).
The only portion of the first Moored decision, 997 F.2d 139, that specifically discussed the district court's loss calculation related to the appropriateness of including the debt to the college because it could not be viewed as relevant conduct. In addressing that narrow issue, we stated:
Defendant argues that his transactions with Jordan College are not relevant conduct. The importance of the district court's inclusion of those activities in the calculation of the loss in this case lies in the fact that the district court found that no actual loss resulted from the offense of conviction. The court based the
eight level enhancement for the amount of the loss solely on Defendant's transactions with Jordan College. That enhancement had the effect of raising Defendant's final sentencing range from six to twelve months to 27 to 33 months.
Moored, 997 F.2d at 143. (emphasis added).
With respect to the above-mentioned section of the Moored opinion, we concluded that "the district court committed clear error by including the amount of the 'loss' to Jordan College in the computation of Defendant's total offense level." Id. at 144. This court did not, however, make a determination of whether any loss, i.e., actual or intended, resulted from the offense of conviction. We find that the mere repetition of the factual findings of the district court cannot be deemed a decision of the appellate court. In other words, the first Moored panel did not consider or resolve the issue of whether the district court's Conclusion concerning the amount of loss was in accordance with the law. In our view, therefore, this court did not expressly or impliedly decide the "loss" issue or even affirm the district court's finding that no loss resulted from the offense of conviction. As such, we conclude that the district court did not violate the law of the case doctrine in deciding to reconsider and reverse its earlier ruling concerning the loss issue.
Moreover, we conclude that the district court did not violate the mandate rule. The mandate to the district court stated: "For the foregoing reasons, the judgment of the district court is vacated, and this case is remanded for resentencing according to law and consistent with this opinion." Moored, 997 F.2d at 144. Because, as we have explained, this court did not address the "loss" issue, the district court's decision to revisit that issue is not inconsistent with our earlier ruling. Thus, the mandate rule did not prohibit the district court from reconsidering the loss issue and reversing its earlier decision regarding same. Based on the foregoing, we hold that the district court did not err in deciding to revisit the loss issue on remand.
In the instant case, the district Judge believed that he had made a mistake regarding his earlier calculation of loss for the offense of conviction. Where, as here, the district court felt constrained to reconsider the loss issue to resentence Defendant in accordance with the law, we feel that this court's interest in truth, Justice and fair sentencing, requires that the district court's decision to reopen the loss issue be upheld. Accordingly, we hold that the district court did not violate either the law of the case doctrine or the mandate rule and, therefore, the district Judge did not exceed the scope of his authority on remand by reconsidering the loss issue.
II.
Having determined that the district court did not err in revisiting the loss issue on remand, the next question before the court is whether the district court erred in calculating Moored's offense level based on "loss" of $1.7 million. Moored argues that the base offense level should have been six (6) because there was no actual or intended loss to the lenders. This court reviews the application of the United States Sentencing Guidelines de novo. United States v. Hicks, 4 F.3d 1358, 1361 (6th Cir. 1993); United States v. Sanchez, 928 F.2d 1450, 1458 (6th Cir. 1991). We must uphold a sentencing court's factual findings unless they are clearly erroneous. United States v. Watkins, 994 F.2d 1192, 1195 (6th Cir. 1993).
After this case was remanded to the district court, the probation officer submitted a revised presentence report. At paragraph 35, the Report recommended that Defendant receive a twelve (12) level increase in his base offense level for the loss involved, stating:
Specific Offense Characteristics: Section 2F1.1(b)(1)(M) provides a 12 level increase because the fraud involved more than $1,500,000.00. The instant offense involved a potential loss of over $1,750,000.00.
J.A. at 22.
At the resentencing proceeding, the district Judge reconsidered and reversed his earlier decision that Defendant's sentence would not be enhanced for actual or intended loss for the offense of conviction. Over Defendant's objections, the district court found that "that 12-level increase is not unreasonable in light of the fact that the fraud picture was more than $1,700,000." J.A. at 200. The district court began by stating, "this court erroneously sought to benefit Mr. Moored with the benefit of looking at what an actual loss was, and this Court perhaps incorrectly did so." J.A. at 198. The district court explained that it "had gone back to review 2F1.1" and it understood the "question is the intended loss or probable loss that was anticipated to be undertaken as a result of the immediate transactions and relevant conduct of Mr. Moored, and clearly I think here amounts to more than $1,700,000." J.A. at 198-199. The district court then concluded that Defendant's intended loss was more than $1,700,000. J.A. at 199.
The applicable guideline provision for offenses involving fraud and deceit is Guideline § 2F1.1, and the accompanying commentary. Section 2F1.1 assigns a base offense level of six, then "the Guidelines award bonus punishment points for different levels of proven loss beginning with $2,000." United States v. Schneider, 930 F.2d 555, 559 (7th Cir. 1991). See U.S.S.G. § 2F1.1(b)(1)(A)-(S) (providing for an increase of one level for a dollar loss of more than $2,000 and up to an increase of eighteen levels for a loss of more than $80,000,000).
Application Note 7 to § 2F1.1 instructs how the loss is to be measured, stating as follows:
7. Valuation of loss is discussed in the Commentary to § 2B1.1 (Larceny, Embezzlement, and Other Forms of Theft). As in theft cases, loss is the value of the money, property, or services unlawfully taken; it does not, for example, include interest the victim could have earned on such funds had the offense not occurred. Consistent with the provisions of § 2X1.1
(Attempt, Solicitation or Conspiracy), if an intended loss that the defendant was attempting to inflict can be determined, this figure will be used if it is greater than the actual loss. Frequently, loss in a fraud case will be the same as in a theft case. For example, if the fraud consisted of selling or attempting to sell $40,000 in worthless securities, or representing that a forged check for $40,000 was genuine, the loss would be $40,000.
U.S.S.G. § 2F1.1, comment. (n.7). This general rule is subject to modification in certain exceptional circumstances "where additional factors are to be considered in determining the loss or intended loss." Id.
Fraudulent loan application cases, as is involved in the instant case, is an example of such an exceptional circumstance. Subsection (b) of Application Note 7 deals with fraudulent loan applications stating:
In fraudulent loan application cases and contract procurement cases, the loss is the actual loss to the victim (or if the loss has not yet come about, the expected loss). For example, if a defendant fraudulently obtains a loan by misrepresenting the value of his assets, the loss is the amount of the loan not repaid at the time the offense is discovered, reduced by the amount the lending institution has recovered (or can expect to recover) from any assets pledged to secure the loan. However, where the intended loss is greater than the actual loss, the intended loss is to be used.
In some cases, the loss determined above may significantly understate or overstate the seriousness of the defendant's conduct. For example, where the defendant substantially understated his debts to obtain a loan, which he nevertheless repaid, the loss determined above (zero loss) will tend not to reflect adequately the risk of loss created by the defendant's conduct. Conversely, a defendant may understate his debts to a limited degree to obtain a loan (e.g., to expand a grain export business), which he genuinely expected to repay and for which he would have qualified at a higher interest rate had he made truthful disclosure, but he is unable to repay the loan because of some unforeseen event (e.g., an embargo imposed on grain exports) which would have caused a default in any event.
In such a case, the loss determined above may overstate the seriousness of the defendant's conduct.
U.S.S.G. § 2F1.1, comment. (n.7(b)). Thus, under Comment Note 7(b), in fraudulent loan application cases the loss is either "the actual loss to the victim," or "where the intended loss is greater than the actual loss, the intended loss is to be used." Additionally, Application Note 8 instructs that the loss calculated under § 2F1.1(b)(1) need not be determined with precision; rather, the court need only make a reasonable estimate of the loss, given the available information. U.S.S.G. § 2F1.1, comment. (n.8). Finally, Application Note 10 allows an upward or downward departure from the sentencing range where the loss calculation either understates or overstates the seriousness of the offense. U.S.S.G. § 2F1.1, comment. (n.10).
The circuits appear to be split on how to define fraud loss. One of the earliest cases which addressed the meaning of "loss" under the Guidelines was United States v. Schneider, supra. In Schneider, defendants were convicted of conspiring to defraud and defrauding federal agencies in connection with misrepresentations made during a contract bidding process. The Schneiders, husband and wife, submitted bids for contract work for two federal agencies. In one bid, Mr. Schneider certified falsely that he had not been charged with a criminal offense within the past three years, when in fact a charge of forgery was then pending against him in an Illinois state court. Mr. Schneider also submitted a fraudulent payment and performance bond. Being the low bidder, he won the contract. However, before the performance began or any payment was made under the contract, the federal agency cancelled it on the ground of misrepresentation and awarded the contract to a higher bidder. In a second bid, Mrs. Schneider submitted the same type of fraudulent payment and performance bond. Mrs. Schneider did not, however, receive the bid as the agency was dissatisfied with the bond (though it did not realize at that time that the bond was fraudulent). The government claimed that the "loss" for sentencing purposes was the face value of the contracts, or $142,400.
The Schneider court stated that "'loss' within the meaning of the Guidelines includes intended, probable, or otherwise expected loss, a qualification of vital importance in a case such as this where the fraud is discovered or otherwise interrupted before the victim has been fleeced." Schneider, 930 F.2d at 558. Finding that Mr. Schneider had previously performed some fifty contracts for federal agencies, and that there was "no reason to believe that he and his wife would not have performed these two contracts to the equal satisfaction of the contracting agencies," the court felt it necessary to distinguish between two types of fraud for sentencing purposes. Id. at 558. The court explained:
But it is necessary to distinguish between two types of fraud. One is where the offender-a true con artist (as in Davis)-does not intend to perform his undertaking, the contract or whatever; he means to pocket the entire contract price without rendering any service in return. In such a case the contract price is a reasonable estimate of what we are calling the expected loss, and we repeat that no more than a reasonable estimate is required. The other type of fraud is committed in order to obtain a contract that the defendant might otherwise not obtain, but he means to perform the contract (and is able to do so) and to pocket, as the profit from the fraud, only the difference between the contract price and his costs. This is such a case.
Schneider, 930 F.2d at 558. (citations omitted).
The Schneider court rejected as "irrational" a holding that would apply as severe a sentence to a performing contractor who submitted false documents with his application as to a true con artist who does not intend to perform his undertaking. Id. at 559. Finally, the court concluded that the government did not prove any loss, actual or intended, to the victims. Thus, the appellate court held that "the government did not earn a bonus in this case," and remanded the case with explicit instructions that the district court resentence defendants "without an additional punishment based on a proven monetary loss-for none was proved." Id.
The Tenth Circuit employed a similar analysis in United States v. Smith, 951 F.2d 1164 (10th Cir. 1991), where the defendant was convicted of aiding and abetting false statements to a federally insured lending institution. On the basis of certain misrepresentations, the defendant was advanced loans in the cumulative amount of $440,896. Nonetheless, at the time of sentencing it was observed that not a single loan was in default. In determining the proper sentence, the district court accepted the probation officer's offense level calculation and added a nine level enhancement for a loss value of $440,896, the total face value of the loans. Apparently, the district Judge concluded that there was no actual loss, but that defendant intended to inflict a loss of $440,896.
The Smith court began by acknowledging that the district court had authority under the guidelines to increase defendant's base offense level for either actual or intended loss, whichever is greater. Smith, 951 F.2d at 1166. "Where there is no [actual] loss, or where actual loss is less than the loss the defendant intended to inflict, intended or probable loss may be considered." Id. The court cautioned, however, that in order to increase a defendant's offense level for intended loss, "the record must support by a preponderance of the evidence the Conclusion that Mr. Smith realistically intended a $440,896 loss, or that a loss in that amount was probable." Id. at 1168. The court ultimately concluded that the government failed to offer any support for its assertion that defendant intended to cause loss in the amount of $440,896, stating:
On appeal, the government never argues that Smith intended to cause loss in the full amount of the loans, only that 'the potential that these six loans may eventually go into default is ever present.' Brief of Plaintiff-Appellee at 5. However, as Mr. Smith points out, each of the six loans was secured by the house on which the loan was made, and the home buyers have been paying down their loans. Thus, even under a worst case scenario, the total potential loss could not be the full amount of the loans. We do not believe the possibility that some loss might occur on one or more of the six loans in the future amounts to the 'probable' loss contemplated by section 2F1.1. The government has simply failed to offer any support for its calculation.
Smith, 951 F.2d at 1169. (emphasis in original). Finding no actual loss, and no support in the record for the district court's determination that defendant intended to inflict a loss in the full amount of the loans, the Tenth Circuit held that "the court may only properly sentence on the basis of the base offense level of six provided by section 2F1.1(a)." Id. at 1169. See also United States v. Hughes, 775 F. Supp. 348, 350-351 (E.D. Cal. 1991) (although the defendant conspired to present false loan applications to buy three homes, the court rejected the government's argument that the total amount of the loans should be considered as "loss" upon its finding that "defendant did not intend for the banks to suffer any economic loss as a result of the loans"). But see United States v. Johnson, 908 F.2d 396, 398 (8th Cir. 1990) (court declined to reduce the loss calculation by the amount recovered by the defrauded bank where defendant was a true con artist who falsified identification to obtain loans for herself).
In United States v. Shaw, 3 F.3d 311 (9th Cir. 1993), the Ninth Circuit had occasion to consider the question of how to define "loss" when the defendant intends to pay back a fraudulently obtained loan. The Shaw court held that "'intended loss' is the amount the defendant subjectively intended not to repay. Under the 1989 Guidelines, it is this figure, rather than the total at risk from the bank's perspective, which is to be compared with the amount actually lost by the victim, for purposes of sentencing." Id. at 312. Recognizing a difference of opinion among the circuits on how to define "intended loss," the Shaw court agreed with other courts which have defined intended loss as "the loss the defendant intended to inflict on the victim." Id. at 313. (citing United States v. Kopp, 951 F.2d 521, 531 (3d Cir. 1991)). Thereby, the Shaw court rejected the rationale of the Second Circuit in United States v. Brach, 942 F.2d 141 (2d Cir. 1991), which held that "'loss' was the amount taken, or put another way, that 'intended' and 'probable' loss equate with the gross amount of a fraudulently obtained loan." Id. See also Hughes, 775 F. Supp. at 350 ("'Intended' must be interpreted as relating to the state of mind of the defendant at the time of the offense.")
In Kopp, supra, the defendant, a real estate developer, pled guilty to procuring a bank loan by fraudulent misrepresentations, in violation of 18 U.S.C. § 1344. The district court agreed with the government that the amount of loss, for the purposes of § 2F1.1, was the full $13.75 million face value of the loan. Thereby, the court declined to accept the probation officer's calculation that the bank's actual loss was only $3.4 million in light of the fact that the bank was able to sale the security for the loan for more than the loan balance.
In Kopp, the Third Circuit found the logic in Schneider and Hughes compelling and held that "fraud 'loss' is, in the first instance, the amount of money the victim has actually lost (estimated at the time of sentencing), not the potential loss as measured at the time of the crime. However, the 'loss' should be revised upward to the loss that the defendant intended to inflict, if that amount is higher than actual loss." Kopp, 951 F.2d at 535-536. Accordingly, the court concluded that the district court erred in determining that a loss under § 2F1.1 is always the amount fraudulently obtained, regardless of actual or intended loss. Id. at 536.
The Sixth Circuit recently dealt with a similar issue in United States v. Chichy, 1 F.3d 1501 (6th Cir.), cert. denied, 126 L. Ed. 2d 584, 114 S. Ct. 620 (1993). In Chichy, the defendants were convicted of conspiracy and making false, fictitious, or fraudulent statements to federal agents in connection with applications for Federal Housing Administration loans. At the sentencing hearing, the government argued that the intended loss was the total face value of the mortgage loans charged in the conspiracy count, which amounted to $1,563,000. The district court estimated that the actual loss would not be more than $120,000. Nonetheless, the district court accepted the government's calculation of loss and enhanced defendants' sentence by 12 levels based on the face value of all the loans.
Relying on Application Note 7(b) to § 2F1.1, the Chichy court explained that "the loss calculation of U.S.S.G. § 2F1.1(b) in cases of fraudulently induced bank loans should be based on the 'actual' or 'expected' loss rather than on the face value of the total amount of the loan proceeds." Chichy, 1 F.3d at 1508. The court then cited several cases in further support of this interpretation. See, e.g., United States v. Mount, 966 F.2d 262, 265 (7th Cir. 1992) (The Sentencing Commission's notes defining "loss" in § 2F1.1 calls for the court to determine the net detriment to the victim rather than the gross amount of money that changes hands).
The Chichy court held that the offense levels "should not have been increased based on the total mortgage proceeds of all the loans charged in the conspiracy count ($1,563,000)," but rather, "the district court should have increased each defendant's offense level by six levels based on the 'actual' or 'estimated' loss to HUD-FHA of $70,000-$120,000." Id. at 1508-1509. Ultimately, the Chichy court found that the district court committed only harmless error where the district court initially increased the offense level by twelve based on the total of the mortgage loan proceeds, then subtracted six levels based on actual or expected loss. Because the district Judge corrected his initial error and reached the correct result, the district court was affirmed on this issue. Id. at 1509.
This circuit likewise held that the face value of a loan fraudulently obtained was not the proper measure of the loss under § 2F1.1 in United States v. Buckner, 9 F.3d 452 (6th Cir. 1993). There, the court remanded the case for resentencing where the district court enhanced the offense level by eight levels based on the total value of the loans advanced to the defendant, a cumulative amount of $200,000. Over her objections, the district court refused to consider defendant's assertion that she had repaid approximately $127,000 on the loans and, therefore, such amount should be subtracted from the losses of the financial institutions. Citing Chichy, the Buckner court remanded the case for resentencing upon its finding that the district court erred in refusing to consider the amount of any repayment made by defendant prior to the discovery of the fraud. Buckner, 9 F.3d at 454.
Chichy and Buckner are both distinguishable from the instant case in that the defendants caused actual loss to the victims. Applying Application Note 7 to the facts therein, the Chichy and Buckner courts held that the calculation of "loss" for the purposes of U.S.S.G. § 2F1.1, in cases of fraudulently induced bank loans, should be based on the "actual" or "expected" loss to the victims and not the face value of the fraudulently obtained loans.
We hereby part company with those circuits that have held that "intended loss" for the purposes of U.S.S.G. § 2F1.1 should be equated with the gross amount of a fraudulently obtained loan. Rather, we find most persuasive and, therefore, join the ranks of those circuits which have defined intended loss as the loss the defendant subjectively intended to inflict on the victim, e.g., the amount the defendant intended not to repay. Under this view, "loss" under § 2F1.1 is not the potential loss, but is the actual loss to the victim, or the intended loss to the victim, whichever is greater.
In this case, Defendant provided false information to a group of private lenders in an effort to obtain a $1,750,332 loan. The false information related to the collateral which would he pledged to secure the loan. Two checks in the amount of $868,239 were issued to Defendant to partially fund the loan. Apparently, the lenders discovered the false statements after the checks were issued, but they were able to stop payment on the checks before they were cashed by Defendant. Thus, the lenders were able to recover all of their money.
We must begin with the fact there is no evidence of any actual loss in the record. Nonetheless, the district court found "a potential loss or an intended loss of $1.7 million." J.A. at 199. As the Third Circuit stated in Kopp, "the fraud guideline [] has never endorsed sentencing based on the worst-case scenario potential loss (here, the face value of the loan)." Kopp, 951 F.2d at 529. (emphasis in original). Therefore, under the reasoning of Kopp, and Smith, supra, the record must support, by a preponderance of the evidence, a Conclusion that Defendant realistically intended a loss of more than $1,700,000.
In finding an intended loss of $1.7 million, the district Judge stated:
Now, this question of intention of repayment, the world is paved with good intentions. I don't think I've ever had anyone before me on a wire fraud or embezzlement charge who didn't indicate they intended to repay. I take that back; I may have had one or two. But everybody wants to repay. The question is: Is there a reasonable probability in some cases, were efforts made, et cetera, et cetera.
I find due to the magnitude of the potential intended loss here and due to Mr. Moored's precarious financial circumstances, and due to the nature of the fraudulent nature of the pledge he made here, I find that his
ability certainly, if that was his intention, was certainly far removed from that intention. And therefore, I find that a potential loss or an intended loss of $1.7 million does not do an inJustice to the particular picture that is before this Court as it pertains to at least Windquest and Prime Bank here that are the two subject matters that brought us here. The question of what was the actual loss I don't think is a true measurement, then, of the magnitude of what application note 7 directs this Court to consider.
J.A. at 199.
Relying primarily on Shaw, Schneider, and Kopp, Defendant argues that the district court erred in determining the enhancement for the amount of loss under U.S.S.G. § 2F1.1. Defendant asserts that the district court properly determined at the original sentencing proceeding that the amount of actual loss for the offense of conviction was zero and that Defendant did not intend to cause any financial loss. Therefore, according to Defendant, the base offense level for his offense of conviction is six, and it should not have been increased based on actual or intended loss.
The government responds that neither Chichy nor Buckner deals with the circumstances of the instant case and are therefore not controlling of this issue. We agree with the government's contention that Chichy and Buckner do not directly deal with the circumstances of this case. While neither of those cases dealt with the calculation of loss when there is no actual loss involved, we believe the Seventh Circuit and the Tenth Circuit provided compelling logic on how to resolve this issue in Schneider and Smith. Notably, the government did not address either of these cases in its brief to this court.
The government further asserts that at the first sentencing hearing it provided the district court with an affidavit indicating that the collateral in question was already pledged by Defendant to another creditor and did not have the value claimed by Defendant, nor could it have been readily used by the victims to offset their loss. Accordingly, the government maintains that the total loan package of $1,750,332, was properly found to be the amount of loss for the offense of conviction.
There is nothing in either the amended presentence report or the transcript of the resentencing proceeding which indicates that the district court had any factual basis for finding that Defendant intended a loss of $1.7 million. As stated above, there was a question raised about whether the collateral pledged was sufficient and/or available to secure the loan, but there is no evidence in the record even to suggest that the victims would have been forced to rely on the collateral because Defendant intended from the outset to default on his obligation to repay the loan.
Additionally, there is no evidence in the record to support a finding that Defendant had no financial ability to repay the loan. The only person, other than the district Judge, who ever said anything positive or negative about Defendant's intentions respecting the loan was Defendant himself. At the original sentencing proceeding, Defendant was allowed to make a statement on his own behalf and he asserted that he had every intention to repay his debt. Specifically, Defendant stated:
There was never an intent to defraud. There was a purpose there, and granted, it was survival. . . . It's a lot of money, you know, the total package, but there was in the plan ways to pay it off.
I reached a point in my mind mentally where I wanted [the loan] to come about so badly and I still felt there was an opportunity to not hurt anybody and not have there be any losses or any pain that was being suffered by the people that were involved at that time that I really believed I could do it. I thought I could pull it off. It wasn't something I was going to grab a bunch of money and take off. That was the farthest thing from my mind. I never have walked away from any responsibilities or obligations in my life, and I crossed over that line somewhere in April, in March and April, and I'm sorry.
J.A. at 182-83.
The government did not introduce any evidence, either at the original or resentencing hearing, to refute Defendant's assertions that he intended to perform his obligations. Moreover, the government declined to argue that Defendant intended to cause a loss in the full amount of the loan. Even in its brief to this court, the government does not argue that Defendant intended a loss in the amount of $1.7 million. Rather, the government simply repeats with approval the district Judge's comment that all defendants charged with fraud or embezzlement indicate that they intended to pay the money back, and this Defendant was no exception. Government's Brief at 11.
The district Judge commented upon Moored's "precarious financial circumstances" and indicated that Moored had no financial ability to repay the loan, but failed to state in the record how he came to this Conclusion. Due to the lack of support in the record for the district court's findings, we conclude that the district Judge enhanced Defendant's offense level by twelve levels for intended loss of $1.7 million based solely on his speculation that Defendant did not intend to repay the loan. Clearly, it would have been proper for the district court to enhance Defendant's offense level if there was sufficient evidence in the record that Defendant did not intend to repay the loan, or even if there was proof in the record that Defendant had no realistic means to repay the loan. However, such a Conclusion cannot be supported by the record of this case.
For the reasons stated, we conclude that the district court was clearly erroneous in finding that Defendant intended a loss to his victims in the amount of $1.7 million. As mentioned earlier, U.S.S.G. § 2F1.1 provides a base offense level of six for all fraud and deceit cases, even where minimal loss is involved. Because there is no evidence in the record to support any actual or intended loss to Defendant's victims, we find that the district court erred in enhancing the base offense level by twelve levels.
III.
For the reasons given, the Defendant's sentence is VACATED and this case is REMANDED to the district court for resentencing consistent with this opinion. The district court erred in enhancing the base level offense by 12 levels. Defendant's offense of conviction carries a base offense level of 6, a loss calculation of 0, and a criminal history category of I, with a resulting sentencing range of 0 to 6 months. The case is remanded, with instructions that Defendant be sentenced to time served because he has already served slightly more than six months under the proper guideline range for a base level of six. VACATED AND REMANDED.
Judges Footnotes
*fn* The Honorable Horace W. Gilmore, United States District Judge for the Eastern District of Michigan, sitting by designation
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Post by Sapphire Capital on Jul 16, 2008 21:44:09 GMT 4
786 F.2d 1278 (5th Cir. 04/15/1986) UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT No. 85-4838 April 15, 1986 UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE v. HERBERT J. LEWIS AND VERNON ABRAHAMS, DEFENDANTS-APPELLANTS Appeals from the United States District Court for the Western District of Louisiana, Earl E. Veron, District Judge, Presiding Attorney for Appellant, Robert R. Race, 300 Park Ave., South, 10th Fl., NY, NY 10010, Vernon Abrahams, (Pro Se), 2525 21st Str., Lake Charles, LA 70601, Attorney for Appellee, Joseph S. Cage, Jr., USA, 3B12 Joe D. Waggoner Fed., Dosite H. Perkins, Jr., AUSA Bldg., 500 Fanning St., Shreveport, LA 71101 Author: Hill Before: Thomas Gibbs Gee, Thomas M. Reavley, and Robert M. Hill, Circuit Judges. ROBERT M. HILL, Circuit Judge: Herbert J. Lewis and Vernon Abrahams appeal convictions related to their involvement in a fraudulent investment scheme. We hold that they were not deprived of their rights under the Sixth Amendment, notwithstanding their claims that their counsel was inadequate and was subject to a conflict of interest, nor was there error in the government's use of redacted portions of Lewis' grand jury testimony against him during the trial. Thus, we affirm in all respects. I. FACTS Lewis and Abrahams were each indicted and later convicted on four counts relating to their participation in a fraudulent investment scheme.*fn1 According to the indictment and evidence adduced at trial, Lewis and Abrahams held themselves out to the public as partners in a financial consulting enterprise named Security Financial Consultant, Inc. ("Security Financial"). During 1983 and early 1984 they met with several individuals, some of whom were seeking loans for various business or financial projects. Lewis and Abrahams obtained funds from these individuals, but they did not invest these funds as contemplated, instead diverting them to their personal use. Although never providing any actual return, the investment scheme offered by Lewis and Abrahams was a shadowy but supposedly very lucrative opportunity for the investor. They would convince a prospective investor that they knew of a source of "prime bank promissory notes," which could, for a fee, be used as collateral for loans. They would then propose a partnership with he investor, who contributed a sum of money ranging from $10,000 to $25,000 to be deposited to a sinking fund at a Georgia bank. After Lewis and Abrahams were to add their own funds, the prime bank promissory notes were to be purchased a collateral. Lewis and Abrahams were then to use this collateral to negotiate low interest loans to the partnership in sums of $100,000,000 for overseas or Canadian lenders. The partnership would then somehow repay the loans with the prime bank promissory note, producing a "fallout" or profit to the partnership of millions of dollars. Instead of placing the investors' money in the sinking fund as promised, Lewis and Abrahams would divide it and use it for their own purposes. One such investor was Earl Martin. According to his testimony at trial, Martin was a former employer of Lewis' who was seeking financing for an apartment construction project. Lewis and Abrahams persuaded Martin to invest $25,000 which was to yield an eventual return of $2,500,000 to $3,500,000. They promised Martin that they would match his investment with $25,000 of their own and buy collateral for a $100,000,00 loan. They told Martin that they "had turned a lot of deals" successfully, and Lewis promised to return Martin's investment if the plan failed. Abrahams told Martin that he had a Swiss bank account with over $100,000 in it to reimburse Martin. At their request, Martin brought $25,000 in cash from his home near Houston, Texas, to Lake Charles, Louisiana. They informed Martin that the $100,000,000 loan would come from a source in Quebec, Canada. They persuaded him to create and use stationery for a fictional company, "Martin Enterprise," to draft loan request and other documents. A Georgia attorney wrote to "Martin Enterprise" and confirmed that $100,000,000 in collateral was assigned by a Georgia trust fund for his use. The attorney received $5000 from Lewis and Abrahams. When Martin later was unable to receive an accounting or repayment of his money, he went to federal law enforcement authorities. A grand jury issued a subpoena to Lewis requesting his appearance and the production of various documents. Lewis retained an attorney, Eddie L. Stephens, to represent him. Lewis testified before the grand jury, admitting his and Abrahams' roles in the schemes but insisting that no fraud occurred. According to Lewis, Martin and the other investors knew that he venture entailed a high risk of failure. During his testimony Lewis was advised of his right not to incriminate himself, and he was allowed to consult with Stephens outside the presence of the grand jury. Lewis continued his testimony, admitting that he and Abrahams received $25,000 from Martin. The grand jury later issues an indictment naming Lewis and Abrahams. After a brief period when he was also represented by Stephens, Abrahams, retained his own counsel, Steven Hale. Five and one-half weeks before trial commenced, another group of retained lawyers filed a notice of appearance for the joint representation of both defendants. The district court conducted a hearing to determine whether Lewis and Abrahams both agreed to joint representation, not withstanding any potential conflicts of interest. Satisfied that they understood the potential conflict of interest and agreed to joint representation, the court permitted the substitution of counsel. The new group of lawyers, composed of three other attorneys, conducted their joint defense at trial. Lewis and Abrahams now have a different attorney representing them on appeal. At trial, the government produced a number of witnesses to link Lewis and Abrahams to the fraudulent schemes. Among these were the Georgia attorney involved and officials for the Georgia Bank. Also testifying were Martin and Jerry Stephens of Barter Systems, who had lost $10,000 to Abrahams and Lewis in a similar scheme. The government put on other witnesses who had lost money to Lewis and Abrahams, including a real estate investor and a railroad switchman. The government successfully introduced redacted portions of Lewis' grand jury testimony and extensive documentary evidence. The defendant called three witnesses, placed supplementary documents in evidence, but neither Lewis or Abrahams testified. The jury found both of them guilty on all counts. Lewis and Abrahams challenge their conviction on two major grounds. First, they claim that they were denied the effective assistance of counsel, both because their representation was poor and because their defense team was trained by a conflict of interest. Second, they contend that Lewis' grand jury testimony was improperly admitted at trial, both because the government did not furnish the defense with a copy during discovery and because the redacted version impermissibly implicated Abrahams. II. EFFECTIVE ASSISTANCE OF COUNSEL A. Inadequacy "A convicted defendant's claim that counsel's assistance was so defective as to require reversal of a conviction...has two components." Strickland v. Washington, 466 U.S. 668, 687, 104 S. Ct. 2052, 2064, 80 L. Ed. 2d 674, 693 (1984). First, "The defendant must show that counsel's representation fell below an objective standard of reasonableness." Id. at 688, 104 S. Ct. at 2065, 80 L. Ed. 2d at 693. Second, "The defendant must show that there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different. A reasonable probability is a probability sufficient to undermine confidence in the outcome." Id. at 694, 104 S. Ct. at 2068, 80 L. Ed. 2d at 698. Thus, both a deficiency and resulting prejudice must be shown. Alexander v. McCotter, 775 F.2d 595, 602 (5th Cir. 1985). Since we believe that Lewis and Abrahams have not demonstrated prejudice, we need not determine the magnitude of the alleged deficiency. Lewis claims that his pretrial representation by Stephens was deficient in several respects.*fn2 First, Lewis claims that at the time he retained him, Stephens was not admitted to practice in federal court, had only one year of experience practicing law, and was unfamiliar with local court rules and the Federal Rules of Evidence. Second, Lewis claims that Stephens misadvised him about his grand jury testimony, telling Lewis that the had to answer all question or risk arrest for contempt. Third, he argues that Stephens conducted inadequate pretrial investigation, and failed to gain court permission for Lewis to travel out of state to prepare his defense. Fourth, he claims that Stephens mishandled a hearing on alleged governmental misconduct. Lewis' initial complaint, that Stephens was inexperienced, has little merit. An attorney can render effective assistance of counsel even if he has had no prior experience in criminal advocacy. See United States v. Kelley, 559 F.2d 399, 401 (5th Cir.), cert. denied, 434 U.S. 1000, 98 S. Ct. 644, 54 L. Ed. 2d 497 (1977). "Whether the defendant has been afforded his right to counsel depends on whether the attorney is reasonably likely to render and does render reasonably effective assistance, not on whether counsel has an extensive background in criminal defense work." Id. (citing Herring v. Estelle, 491 F.2d 125, 126 (5th Cir. 1974)). When the district judge discovered that Stephens had not been admitted in federal court, he allowed Stephens to enroll. Lewis has not pointed to any specific errors that resulted from Stephens' alleged lack of familiarity with local court rules or evidentiary rules. Lewis has also been unable to demonstrate any prejudice resulting form Stephens' alleged advice that he answer all question put to him at the grand jury proceedings. The federal prosecutor who conducted the proceedings advised Lewis of his rights to remain silent and not incriminate himself. The prosecutor advised Lewis of these rights both prior to his testimony and at a point during his testimony, and received Lewis assurances that he understood.*fn3 the prosecutor's warnings cured any misadvice Lewis may have received from Stephens. Cf. Bonvillain v. Blackburn, 780 F.2d 1248, 1253 (5th Cir. 1986) (sentencing judge's instruction to defendant on potential prison term could cure defense counsel's misrepresentation) (citing Martin v. Blackburn, 606 F.2d 92, 94 (5th Cir. 1979), cert. denied, 446 U.S. 911, 100 S. Ct. 1841, 64 L. Ed. 2d 265 (1980)). Moreover, Lewis has given us no reason to believe that he would have refused to testify had Stephens' advice been accurate. Lewis' claim that Stephens conducted inadequate pretrial investigation is without merit. Lewis has not suggested what exculpatory evidence could have been uncovered by further investigation, nor has he shown how his travel outside the state would have produced favorable evidence. Since Lewis has not pointed out any evidence which would have been produced by more thorough investigation, much less evidence that would be sufficient to undermine confidence in the outcome of the trial, no prejudice has been shown. See Berry v. King, 765 F.2d 451, 454 (5th Cir. 1985). Lewis' final*fn4 claim, that Stephens mishandled a hearing on governmental misconduct, is similarly flawed. Lewis makes conclusory claims that Stephens was unprepared and performed inadequately at the hearing, which was to resolve Lewis' allegations that improper threats had been made by federal investigatory agents. AT the hearing Stephens explained to the district court that further investigation by him and Hale had shown these "rumors" were unfounded. Lewis has not indicated that his allegations had any basis in fact, and points to nothing that Lewis could have done or failed to do in order to substantiate these claims. In sum, Lewis has demonstrated no prejudice as a result of his pretrial representation by Stephens. The challenges Lewis and Abrahams make to the effectiveness of their later representation by the defense team that represented them at trial also fail to demonstrate the requisite prejudice. They claim that the defense team failed to seek a continuance for further investigation, although there is still no indication of what further evidence would have been obtained or what effect it would have had on the trial. They claim the defense team failed to obtain from Stephens a transcript of Lewis' grand jury testimony, but the defense team did obtain a transcript form Hale and had sufficient opportunity to examine this testimony and redact the portions inculpating Abrahams. They claim the defense team failed in unspecified ways to "anticipate or prepare defense," to "adequately prepare legal arguments or apprise themselves and the court of the relevant law," to "make a proper record on appeal," and to press "viable motions." Lewis and Abrahams have not described these latter supposed faults in sufficient specificity for us to even known what the alleged errors were, and we have no inkling as to what prejudice may have resulted. B. Conflict of Interest Lewis and Abrahams contend that their joint representation at trial constituted a conflict of interest and a violation of their rights to the effective assistance of counsel. They have not, however, indicated any instance where their joint counsel sacrificed the interests of either Lewis or Abrahams in order to benefit the other.*fn5 Lewis and Abrahams suggest that their interests were inherently in conflict.*fn6 They claim that the hearing to determine potential conflicts of interest conducted pursuant to Fed. R. Crim. P. 44(c) was inadequate. We note that a conflict of interest claim is judged under different standards form other types of ineffectiveness allegations. Such a clam warrants a limited presumption of prejudice. Strickland, 466 U.S. at 692, 104 S. Ct. at 2067, 80 L. Ed. 2d at 696. "Prejudice is presumed when counsel is burden by an actual conflict of interest." Id. (citing Cuyler v. Sullivan, 446 U.S. 335, 345-50, 100 S. Ct. 1708, 1716-19, 64 L. Ed. 2d 333, 334-47 (1980)). However, this presumption is a limited one, for "the possibility of conflict is insufficient to impugn a criminal conviction. In order to demonstrate a violation of his Sixth Amendment rights, a defendant must establish that an actual conflict of interest adversely affected his lawyer's performance. Cuyler, 446 U.S. at 350, 100 S. Ct. at 179, 64 L. Ed. 2d at 348. Lewis and Abrahams have not asserted any adverse affect on their representation resulting from a conflict of interest. Moreover, we find that the district court adequately protected each defendant's right to counsel as contemplated by Rule 44(c).*fn7 The district court carefully questioned Abrahams and Lewis, posing potential conflict of interest situations to them. Alerted to the conflict possibilities, each insisted that he desired joint representation. Each defendant understood his right to separate counsel, but declined to exercise this right. Our review of the transcript of this hearing convinces us that Lewis and Abrahams each made a knowing, intelligent, and voluntary waiver of the right to separate representation. " defendant may waiver his right to the assistance of an attorney unhindered by a conflict of interest." Holloway v. Arkansas, 435 U.S. 475, 482 n. 5, 98 S. Ct. 1173, 1178 n. 5, 55 L. Ed. 2d 426, 433 n. 5 (1978) (citing Glasser v. United States, 315 U.S. 60, 62 S. Ct. 457, 86 L. Ed. 680 (1942)). Without the possibility of such a waiver, joint representation would be impossible, even in cases where " common defense...gives strength against a common attack." Glasser, 315 U.S. at 92, 62 S. Ct. at 475, 86 L. Ed. 2d at 710-711 (Frankfurter, J., dissenting).
III. GRAND JURY TESTIMONY
A. Discovery
Abrahams and Lewis contend that the grand jury testimony of Lewis was inadmissible because the government did not produce it in response to their discovery requests. The record demonstrates that the factual predicate of this claim is incorrect. Lewis, while represented by Stephens, moved for discovery and inspection of the government's evidence, including "any oral inculpatory statement or confession." Abrahams, while represented by Hale, moved for discovery and inspection of any evidence the government intended to use in its case in chief and of any statements by Abrahams, as well as of any statements made by a co-conspirator. The government's response to these motions stated that "The Government will, with leave of the Court, make available to counsel for the defendant the Grand Jury transcript of co-defendant Herbert J. Lewis..." Stephen obtained a copy of Lewis' testimony, although Lewis' later defense team seems to have had some difficulty in acquiring it from Stephens. A copy was also made available to Hale on behalf of Abrahams, and he based a motion to sever on the impending use at trial of Lewis' admissions before the grand jury. The joint defense team later acquired this copy from Hale, shortly before they made a formal appearance in the case. Thus, all defense counsel involved had prompt access to Lewis' testimony.*fn8
B. Redaction
Abrahams*fn9 finally contends that Lewis grand jury testimony was inadmissible because it implicated him in the scheme. Abrahams suggests that, as an incriminating extrajudicial statement of a nontestifying codefendant, Lewis' grand jury testimony violated his rights under the confrontation clause. see Bruton v. United States, 391 U.S. 123, 88 S. Ct. 1620, 20 L. Ed. 2d 476 (1968). Alternately, Abrahams claims that the redaction of Lewis' grand jury testimony was faulty, permitting references to Abrahams to remain. Abrahams concludes that severance rather than redaction was the only proper course for the district court to follow. He also claims error in the district court's failure to give limiting instructions to the jury regarding the purpose of the grand jury testimony.
"Application of the Bruton rule, however, requires a more discriminating approach than exclusion of all out of court confessions by co-defendants. Courts must exclude these confessions only when they directly inculpate the complaining co-defendants, as well as the declarant." United States v. Hicks, 524 F.2d 1001, 1003 (5th Cir. 1975) (citations omitted), cert. denied, 425 U.S. 953, 96 S. Ct. 1729, 48 L. Ed. 2d 197 (1976). "A codefendant's confession is admissible in a joint trial if references to the other codefendants are deleted." United States v. Gray, 462 F.2d 164, 165 (5th Cir.) (citations omitted), cert. denied, 409 U.S. 1009, 93 S. Ct. 452, 34 L. Ed. 2d 303 (1972). Here, the defense team and the prosecutor carefully examined the transcript of Lewis' grand jury testimony to eliminate all inculpatory references to Abrahams. Whenever the parties were unable to agree on a redaction, the district court intervened to decide the particular issue. The court without exception ruled for the defense on every disagreement, stating that it preferred to err, if at all, on the side of caution.
Abrahams now argues that the redacted version of the transcript still contained some references to him. Our review of the trial transcript reveals instances where Abrahams was referred to by name during the reading of Lewis' testimony. Lewis stated that Abrahams was an officer of an enterprise known as Herbess Minerals, Ltd., of which Lewis was the president. Lewis clarified that this enterprise, a mining operation, was separate from the consulting business he did at Security Financial, and that Abrahams was not an officer of Security Financial. Thus, these two references, if they have any impact at all on the case against Abrahams, are probably exculpatory.
A third reference in the transcript was in he prosecutor's reading of a document assigning to a Georgia law firm the proceeds of a loan from Martin Enterprise. The assignors were named as Lewis and Abrahams. However, this document was independently placed in evidence by the prosecution. The district court, upon an objection by the defense team, ordered the transcript read again, this time without this reference to Abrahams. We are unable to discern any prejudice to Abrahams in this mention of his name in a document already before the jury. A fourth and final reference to Abrahams occurred when Lewis stated that "a friend of Mr. Abrahams" had been interested in entering into an investment deal with Barter Systems. This reference did not indicate or imply that Abrahams was otherwise involved with Lewis' dealings.*fn10
Moreover, the counsel for the defense, with the exception of the assignment document, never brought these references to Abrahams to the attention of the district court.*fn11 Nor did they request limiting instructions as to the use of the redacted transcript.*fn12 As a general rule, issues must be presented to the trial court to receive appellate consideration unless to ignore them would result in a "fundamental miscarriage of justice," see Mitchell v. M.D. Anderson Hospital, 679 F.2d 88, 91-92 (5th Cir. 1982), or a "grave injustice," see Masat v. United States, 745 F.2d 985, 988 (5th Cir. 1984). "This court is solely a court of appeals, and it powers are limited to reviewing issues raised in, and decided by, the trial court." Id. The failure to object to the admission of evidence waives any ground of complaint against its admission, absent "plain error." See, e.g., Fed. R. Evid. 103; United States v. Vesich, 724 F.2d 451, 462 (5th Cir. 1984). We conclude that no such error was committed by the district court.
Accordingly, the judgments of the district court are AFFIRMED.
Opinion Footnotes
*fn1 Lewis and Abrahams were both named in each of four counts of the indictment. Count One charged them with inducing Earl Martin to travel interstate in the of a scheme and artifice to defraud. See 18 U.S.C. § 2314. Count Two charged them with conspiracy to (1) induce Martin to travel interstate in the of a scheme and artifice to defraud and (2) transport in interstate commerce $5000 obtained by fraud from Martin. See 18 U.S.C. § 371, 2314. Count Three charged Lewis, as aided and abetted by Abrahams, with transporting in interstate commerce $5000 fraudulently obtained form an organization known as Barter Systems International ("Barter Systems"). See 18 U.S.C. § 2314. Count Four charged Lewis, as aided and abetted by Abrahams, with transporting in interstate commerce $5000 fraudulently obtained from Martin. See 18 U.S.C. § 2314.
*fn2 Abrahams concedes that his pretrial representation by Hale "was indeed what could reasonably be expected of a defense counsel," and he does not challenge Hale's actions on his behalf.
*fn3 The prosecutor advised Lewis of his rights at the start of the grand jury proceedings:
*fn4 Lewis has also claimed that Stephens is to be faulted for fling an inadequate number of pretrial motions. Stephens filed motions for discovery and inspection, discovery of prosecution witnesses, and for release of Lewis' passport. Lewis has not indicated how other motions would have led to a different result in his case. "Counsel is not required to engage in the filing of futile motions. The filing of pretrial motions falls squarely within the ambit of trial strategy." Murray v. Maggio, 736 F.2d 279, 283 (5th Cir. 1984) (citing williams v. Beto, 354 F.2d 698, 703 (5th Cir. 1965)).
*fn5 We do not agree with their bland assertion that "prejudice is readily apparent from examination of the record." The only specific example of prejudice cited in their brief was when the district court allegedly "refused to consider certain objections because the [sic] related to only one of the defendant or were in opposition to the other defendants[sic] position and often treated the two defendant as one although they were in distinct position." The citation to the record which followed this claim indicates that the alleged prejudice was the defense counsel's withdrawal of its request to have Lewis read the answers to his grand jury testimony in court. The defense counsel suggested that a mistake by Lewis in reading a portion of the redacted testimony might implicate Abrahams, and the district court instead had a member of the court staff read the answers. We are not able to discern the prejudice to either Lewis or Abrahams in having the redacted testimony read accurately.
*fn6 Appellate counsel for Lewis and Abrahams on appeal does not indicate how their interests could diverge so sharply during trial as to require reversal while not being so distinct now as to require separate appellate counsel.
*fn7 The district court held a hearing to determine the adequacy of the joint representation pursuant to the following:
*fn8 Lewis and Abrahams also make the frivolous argument that, although they knew of the existence and substance of Lewis' grand jury testimony, they did not know that the government intended to use it in its case in chief. The district court dismissed this argument, for Lewis never asked for a listing of what evidence the government intended to use, and Abrahams was not entitled under Fed. R. Crim. P. 16(a)(1)(A) to discovery of Lewis' statements. The parties agree that Lewis' grand jury testimony was not admissible against Abrahams under Fed. R. Evid. 801(d)(2)(E) as statements of a co-conspirator, since the conspiracy had ended by the time Lewis appeared before the grand jury and made the statements. In any event, the district court eliminated any possibility of prejudice by permitting the defense team ample time during trial to reexamine the transcript of Lewis' testimony and request redactions.
*fn9 Lewis, except for the alleged discovery violations, does not challenge the admission of his grand jury testimony.
*fn10 Abrahams also objects to the presence of "we" and "us" at various places in the transcript, contending that Lewis' use of the plural form indicates an association with Abrahams. We do not agree that these references in any way pertain to Abrahams. Moreover, even if they did, references to the number of persons involved in criminal activity presents little prejudice. The key concern was not that a crime took place, or that it involved more than one participant, but that Abrahams was involved. See Hicks, 524 F.2d at 1003. See also United States v. Stewart, 579 F.2d 356, 359 (5th Cir. ), cert. denied, 439 U.S. 936, 99 S. Ct. 332, 58 L. Ed. 2d 332 (1978).
*fn11 Although Lewis and Abrahams do not cite this as an example of prejudice on their ineffective assistance claim, we feel compelled to treat it as such. Thus, even had the defense team's performance been completely flawless, there would still be no reversible error on appeal. Overwhelming testimony from several other witnesses, including Martin, linked Abrahams to the investment schemes. In the face of this incriminating evidence, we are unable to say that there was a reasonable probability of Abrahams' acquittal absent these stray, unobjected-to references to Abrahams.
*fn12 We note that a district court's cautionary instruction that the declarant's statement could not be considered as evidence against another defendant has been used as partial support for affirmance of the admission of a redacted statement. See Stewert, 579 F.2d at 359. We hold only that, in view of the innocuous nature of the references to Abrahams and the overwhelming evidence from other sources linking him to the scheme, the district court's failure to give such an instruction did not constitute a grave injustice.
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Post by Sapphire Capital on Jul 16, 2008 21:45:01 GMT 4
263 F.3d 1056 (9th Cir. 09/04/2001) U.S. Court of Appeals, Ninth Circuit No. 00-30243 1 Cal. Daily Op. Serv. 7741, 2001 Daily Journal D.A.R. 9593 September 04, 2001 UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE v. EDWARD KEITH HOWICK, DEFENDANT-APPELLANT D.C. No. CR-99-00011-DWM Appeal from the United States District Court for the District of Montana Donald W. Molloy, District Judge, Presiding Counsel John P. Rhodes, Assistant Federal Defender, Federal Defenders of Montana, Missoula, Montana, for the defendant-appellant. Kris A. McLean, Assistant United States Attorney, United States Attorney's Office, Missoula, Montanta, for the plaintiff-appellee. Before: Donald P. Lay,*fn1 Stephen S. Trott and Marsha S. Berzon, Circuit Judges. The opinion of the court was delivered by: Berzon, Circuit Judge FOR PUBLICATION Argued and Submitted May 8, 2001--Seattle, Washington OPINION Edward Howick appeals his jury convictions of possession of counterfeit currency, possession of fictitious documents, and bringing counterfeit currency into the United States. We affirm.*fn2 I. A. Discovery and Delivery of the Unlawful Instruments In 1999, a Customs Inspector in Anchorage, Alaska intercepted a suspicious package entrusted to Federal Express for delivery. Addressed to defendant Howick at his Bozeman, Montana residence, the package had been sent from the Phillippines by one Fred Pfahl. According to the attached manifest, the contents of the package were "legal documents." As we develop later, "illegal documents" would have been more like it. Inside were counterfeit gold and silver certificates,*fn3 fictitious Series 1935 Federal Reserve notes,*fn4 a packet of fictitious "Tiger Zebra" bonds, and other contrived obligations. At the behest of the Secret Service, a Federal Express employee phoned Howick to confirm that the package would be arriving soon. Using a vehicle and uniform provided by Federal Express, Secret Service agent Kal Bedford then delivered the package to Howick, who volunteered that he had been expecting it. Bedford returned to Howick's residence shortly thereafter, having exchanged his Federal Express regalia for a federal search warrant. While Bedford and other agents performed a security sweep of the premises, Special Agent Timothy Christine remained with Howick. After affirmatively waiving his Miranda rights, Howick discussed matters relating to the phony currency with Christine and later with Bedford. B. Howick's Statement In those discussions, Howick admitted that a number of financial documents were present in his home, but offered an explanation for them. He claimed that the materials purporting to be United States obligations came from two sources: Fred Pfahl, in the Philippines, and Clyde Beverly, a resident of Oklahoma for whom Howick, a licensed attorney, had previously done legal work. Howick's tale of how those individuals, and later Howick himself, came to be in possession of what turned out to be in excess of eighteen-billion dollars of bogus financial instruments was set forth in a typed statement prepared by Howick while his house was being searched. Howick asserted in the statement that he had been recruited for "this project" by Beverly, who claimed to have information on a large amount of currency discovered aboard United States military aircraft that had crash-landed in the Phillippines decades earlier. Also found on the aircraft, reportedly, were the skeletal remains of eight men, their dog tags, and approximately 50 containers marked "U-235 007, " possibly referring to the U-235 isotope, of which fissionable uranium is comprised. Howick's role in the project, he explained, was to attempt to authenticate the putative obligations, with the eventual aim of repatriating them--for a fee, of course. Toward that end, Howick contacted the offices of two elected federal officials from Utah to enlist their aid in the authentication process. After discussing the matter with the Secret Service, the office of Senator Robert Bennett informed Howick that the documents were apparently phony, a conclusion Howick chose to accept. Howick also contacted certain private parties regarding the putative financial instruments, including his "associate," Joe Wersal. "Although it was suggested that Joe tried to arrange some method of using them," Howick wrote in his statement, "it was always the intent that each material be thoroughly authenticated before anything was done with it." As for his own views on the documents' authenticity, Howick conceded in his written statement that one piece of currency, supposedly decades old, "raised questions " because it showed an oversized portrait of Benjamin Franklin, a 1996 design innovation in United States currency. According to Agent Christine, Howick also conceded that certain silver certificates in his possession were "obviously false." At the same time, Howick maintained in his statement that he was"aware of no illegal activity on the part of anyone involved in this matter." C. Fruits of the Initial Search The search of Howick's apartment turned up numerous contrived obligations and related documents, including some that had not arrived in the controlled delivery performed by Agent Bedford. Some of the bogus currency contains defects easily discoverable by a skeptical observer, such as the over-sized, off-center presidential portraits, noted by Howick, on currency ostensibly lost at least forty years ago. Both the silver and gold certificates were, according to Agent Christine, printed by the ink-jet technology commonly associated with personal computers rather than the intaglio method favored by the United States Treasury. Particularly unusual among the ostensible currency in Howick's possession were federal reserve notes in the improbable denominations of $100,000,000 and $500,000,000. Printed by silk screen, the notes are completely blank on one side and approximately twice as large as ordinary bills. The first note shows the phrase "ONE HUNDRED MILLION DOLLARS" beneath a portrait of George Washington--the same one seen on one-dollar bills--while the numeral "100" is printed to the right of the portrait over the Treasury Department's seal, and in each of the four corners. The second note looks substantially similar to the face of the now-withdrawn five-hundred dollar bill, with the numeral "500" over the Treasury Department's seal and in each corner, framing a portrait of William McKinley. The only indication of the bill's "true" value is the ornamental phrase beneath the portrait, which reads: "FIVE HUNDRED MILLION DOLLARS." The notes' eye-poppingly large denominations are thousands of times higher than the highest-denomination currency ever actually printed--$100,000 gold certificates--which were in any event never publicly circulated.*fn5 Certain defects in the contrived certificates and notes were not obvious to an untrained eye. Some had serial numbers printed in yellow, rather than green, ink. The Treasury seals on certain documents were of poor quality. Some bills marked "Series 1935" listed Francine Neff as Treasurer of the United States, although Ms. Neff did not occupy that position until 1974. The paper on which the bills were printed was sometimes tinted a brownish color, possibly intended to simulate aging. In addition to the bogus obligations, agents discovered various materials apparently related to the currency-manufacturing enterprise. These included handwritten notes concerning the serial numbers of the putative financial instruments; a letter on "Bank of Richmond" letterhead falsely stating that a $500,000,000 Federal Reserve note had been issued; photographs of dog tags; simulated microfilm relating to the "Tiger Zebra" bonds; a catalogue of U.S. currency; and annotated lists of Secretaries of the Treasury. D. The November Search On November 9, 2000, approximately one month after the controlled delivery and initial search, a second search warrant was executed on two computers in Howick's residence. The search, which Howick challenges, see infra, yielded few useful materials. The government did, however, seize computer files containing four versions of Howick's resume, each slightly different from the others. E. Procedural History In a three-count superseding indictment, Howick was charged with (1) possession with intent to defraud of fictitious documents "appearing, representing, or contriving " to be an actual financial instrument (specifically, a one-hundred million dollar Federal Reserve note and a five-hundred million dollar Federal Reserve note) with intent to pass, utter, or present the same, in violation of 18 U.S.C. § 514(a)(2); (2) possession of counterfeit obligations (specifically, gold and silver certificates), in violation of 18 U.S.C. § 472; and (3) bringing counterfeit obligations (specifically, gold and silver certificates) into the United States, in violation of 18 U.S.C. § 472. The jury convicted Howick on all three counts. Although the guideline range for Howick's offense level is 97 to 121 months imprisonment, Howick was sentenced to a term of only 24 months, reflecting the district judge's determination that the "[o]ffense level overstates the seriousness of the offense." This appeal followed. II. A. Suppression of Evidence Before trial, Howick moved to suppress the four copies of his resume seized in the November 9 search of his personal computers. The district court denied the motion. Howick now challenges that ruling, arguing (1) that the affidavit in support of the warrant did not set forth particularized facts sufficient to make out probable cause; and (2) that if the affidavit did contain particularized facts, those facts were stale by November 9, 1999, the date the warrant was executed. We find it unnecessary to resolve either question because we conclude that the government has successfully shown beyond a reasonable doubt that the error, if any occurred, was harmless. See Arizona v. Fulminante, 499 U.S. 279, 307-08 (1991) (the erroneous admission of evidence does not require reversal when harmless beyond a reasonable doubt). True, the government relied on the disputed resumes to cross-examine Howick about his professed "considerable experience in international finance," and later, during closing argument, to shore up its assertion that Howick"was a very educated con man." But Howick himself attested to his experience in such matters, stating during direct examination that he had been recruited for the project because "there are some [financial] instruments . . . that I have dealt with over the years that people have called me and asked if I would assist them in doing things with them." He also testified about the proper methods of authenticating and placing financial instruments, suggesting that he had expertise in these areas. Howick's purposes in offering this testimony are not difficult to discern. After all, the fact that Howick was knowledgeable about financial instruments cuts in both directions: It favors the government insofar as it suggests that Howick ought to have realized that the currency was bogus. But it favors the defense insofar as it suggests that Howick, in light of his known experience, might have been contacted by others involved in a fraudulent scheme in the hope that he would, ly and in good faith, agree to become involved in the project and, by doing so, lend it an aura of credibility. Having provided information to the jury himself to advance the latter purpose, Howick rendered harmless any error that may have resulted in substantially the same information being provided by the government to advance the former purpose. See United States v. Haili, 443 F.2d 1295, 1300 (9th Cir. 1971) ("In any event, the error alleged is harmless since [the defendant] admitted [the same information]."). B. Constructive Amendment of the Indictment Count I of the superseding indictment charged that "Howick did, with the intent to defraud, possess false or fictitious documents . . . with the intent to pass, utter, present, the same." The language of the operative statute is broader: It reaches anyone who with intent to defraud "passes, utters, presents, . . . or attempts or causes the same , or with like intent possesses" fictitious documents. 18 U.S.C.§ 514(a)(2) (emphasis added). As we interpret this provision,"attempts . . . the same" means attempts to pass, utter, or present. Similarly, "with like intent possesses" means possesses with intent to pass, utter, or present. Attempting to pass documents and possessing documents with intent to pass them are, of course, discrete acts and either one can serve as the predicate of a section 514 offense. Thus, while the grand jury could have charged Howick with attempting to pass fictitious documents fraudulently, it actually charged him only with possessing fictitious documents with the intent to pass them fraudulently. The district court nonetheless instructed the jury that the first element it must find to convict Howick of Count I is that he "possessed, with the intent to pass, utter or present or to attempt or cause the same," fictitious obligations. Howick argues that the variation between the superseding indictment and the jury instruction amounts to a constructive amendment of the indictment, in violation his Fifth Amendment right to due process and his Sixth Amendment right to notice. Howick's challenge focuses only on the presence of the"attempt" phrase in the jury instruction; he does not object to the addition of the term "cause." Our review is de novo. United States v. Pisello, 877 F.2d 762, 764 (9th Cir. 1989). In general, "after an indictment has been returned its charges may not be broadened through amendment except by the grand jury itself." Stirone v. United States, 361 U.S. 212, 215-16 (1960); see also United States v. Stewart Clinical Laboratory, Inc., 652 F.2d 804, 806 (9th Cir. 1991). " constructive amendment occurs when `the crime charged [is] substantially changed at trial, so that it [is ] impossible to know whether the grand jury would have indicted for the crime actually proved.' " Pisello, 877 F.2d at 765 (quoting United States v. Von Stoll, 726 F.2d 584, 586 (9th Cir. 1984)).
There is no doubt that the language in the jury instructions concerning attempt was not present in the superseding indictment. The question is whether the addition unconstitutionally broadened the charges against Howick. We conclude that it did not.
The supplemental language in the jury charge--"possessed, with the intent to pass . . . or to attempt . . . the same,"--did not accurately track the attempt language of section 514--"passes . . . or attempts . . . the same, or with like intent possesses." The difference is significant. As it happened, the court did not instruct the jury that it could find Howick guilty for attempting to pass fictitious obligations, an instruction that would have permitted conviction on a theory available under the statute but not included in the indictment. Rather, the message to the jury was that a conviction must be predicated upon a finding that Howick intended to pass the documents, as charged in the superseding indictment, or upon a finding that he intended to attempt to pass them.
The second possibility does not constitute a separate basis for liability, such that adding it to the jury instruction would work an unconstitutional amendment of the superseding indictment. An "intent to pass" something necessarily includes an "intent to attempt to pass" it. Conversely an "intent to attempt to pass" will amount to an "intent to pass" so long as the attempter does not hope to fail, an unlikely scenario not at issue here. So the jury instructions, while adding unnecessary verbiage, did not make available any theory of liability not charged in Count I of the superseding indictment. Accordingly, we reject Howick's contention that his conviction on Count I must be vacated because the superseding indictment was unconstitutionally amended.
C. Sufficiency of the Evidence
1. Bringing Counterfeit Currency into the United States.
Count III of the superseding indictment charges Howick with bringing counterfeit currency into the United States, in violation of 18 U.S.C. § 472. In relevant part, the statute provides for a criminal sanction against any person who "brings into the United States or keeps in possession or conceals " counterfeit currency. 18 U.S.C. § 472.
At the close of evidence, Howick moved for a judgment of acquittal with regard to Count III pursuant to Federal Rule of Criminal Procedure 29(a). He argued that a conviction on this Count would require a showing by the government that Howick had personally transported counterfeit currency across the border, a fact the government concededly had not demonstrated. The government opposed the motion, arguing that a conviction could be predicated on the evidence that Howick had caused the relevant documents to be brought into the country by requesting them from Pfahl. The district court elected pursuant to Federal Rule of Criminal Procedure 29(b) to withhold its ruling until after the jury returned its verdict.
During deliberations, the jury inquired into this very issue, asking the court whether a conviction on Count III required a "physical" bringing in of counterfeit currency, or whether causing documents to be brought into the country would suffice. According to the district court, Howick requested that no further instructions be given regarding the offense and the court agreed, telling the members of the jury only that they should "apply their common sense." United States v. Howick, 96 F. Supp. 2d 1099, 1100 (D. Mont. 2000). The jury returned a verdict of guilty.
Afterward, the district court issued an order rejecting Howick's Rule 29 motion, concluding that section 472 does not "require a `physical' bringing in of the counterfeit . . . items." Id. Howick now appeals that order. Our review is de novo. United States v. Pacheo-Medina, 212 F.3d 1162, 1163 (9th Cir. 2000).
We agree that the government need not show physical transportation of counterfeit currency into the United States to establish criminal liability. We look first to 18 U.S.C. § 2(b), which provides: "Whoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal."
Admittedly, the superseding indictment did not charge Howick expressly with causing documents to be brought into the country, but, as we have previously explained, this omission does not foreclose a subsequent conviction on a causation theory. "In keeping with the provisions of§ 2, it has long been held that an indictment need not specifically charge . . . `causing' the commission of an offense against the United States, in order to support a jury verdict based upon [such] a finding . . . . All indictments must be read in effect, then, as if the alternatives provided by 18 U.S.C. § 2 were embodied in each count thereof." United States v. Armstrong, 909 F.2d 1238, 1241 (9th Cir. 1990) (quoting United States v. Lester, 363 F.2d 68, 72 (6th Cir. 1966)).
Accordingly, we conclude that the district court correctly determined that a section 472 offense may be established by evidence that a defendant caused counterfeit documents to be brought into the country. Since the superseding indictment may be read to have so charged, the prosecution so argued, and the jury so found, we reject Howick's challenge to the sufficiency of the evidence on this ground.
2. The Counterfeit Documents.
Howick also moved for judgment of acquittal on Counts II and III of the indictment--charging him with possessing counterfeit currency and with bringing it into the country, respectively--on the ground that the subject documents were not sufficiently similar to actual currency to support a conviction. Reviewing de novo, Pacheo-Medina, 212 F.3d at 1163, we will reject a challenge to the sufficiency of the evidence if, viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could find the essential elements of the crime beyond a reasonable doubt. United States v. Iriarte-Ortega, 113 F.3d 1022, 1024 n.2 (9th Cir. 1997).
Both Counts II and III of the indictment, based on the counterfeit gold and silver certificates, alleged violations of 18 U.S.C. § 472, which provides:
Whoever, with intent to defraud, passes, utters, publishes, or sells, or attempts to pass, utter, publish, or sell, or with like intent brings into the United States or keeps in possession or conceals any falsely made, forged, counterfeited, or altered obligation or other security of the United States, shall be fined under this title or imprisoned not more than fifteen years, or both.
We have previously held that a conviction under section 472 must be predicated on documents that "bear such a likeness or resemblance to genuine currency as is calculated to deceive an honest, sensible and unsuspecting person of ordinary observation and care when dealing with a person supposed to be upright and honest." United States v. Johnson, 434 F.2d 827, 829 (9th Cir. 1970) (internal quotation marks omitted); see also United States v. Taftsiou, 144 F.3d 287, 290 (3d Cir. 1998).
According to Howick, the gold and silver certificates did not satisfy this standard because they possessed flaws rendering them "obviously fake," namely: the one-hundred dollar certificates, purporting to be Series 1935, had oversized portraits of Benjamin Franklin, a design that appears only on genuine currency marked Series 1996 or later; the certificates were printed on paper that lacked the "very small nylon fibers embedded throughout" that are found in actual currency; the certificates were not printed by the intaglio method used by the Bureau of Engraving and Printing on behalf of the United States Treasury; and the serial numbers were printed on the certificates, whereas the serial numbers on actual currency are, in effect, stamped into the paper.
Howick's challenge falls well short of establishing insufficiency of the evidence with regard to Counts II and III. The certificates' defects may have been apparent to a skeptical examiner trained in the detection of counterfeit currency, but they could easily have been overlooked by an ordinary person who had no grounds for suspicion. It is not common practice to verify that the money in one's pocket bears a design in accordance with its Series date, or to run one's fingers across the bills' corners to find the hallmarks of the intaglio printing method. Bogus currency that can be detected by such means may therefore still be "calculated to deceive an honest, sensible and unsuspecting person of ordinary observation and care when dealing with a person supposed to be upright and honest." Johnson, 434 F.2d at 829.
Accordingly, we conclude that a rational trier of fact could have found the essential elements of the offenses charged in Counts II and III of the indictment, and therefore affirm Howick's convictions on those Counts.
3. The Fictitious Documents.
More difficult to resolve is Howick's challenge to the sufficiency of the evidence supporting Count I of the superseding indictment. The substance of the challenge is the same--that the relevant documents are clearly fake and therefore cannot support a conviction--but both the factual and legal circumstances are different in the following respects: Howick's factual claim that the documents are obviously false is considerably stronger, but the legal question whether, and if so to what degree, the relevant documents must appear genuine to be unlawful is as yet unsettled.
Count I of the superseding indictment, based on the $100,000,000 and $500,000,000 federal reserve notes, charged Howick with possession of fictitious obligations, in violation of 18 U.S.C. § 514, as opposed to counterfeit obligations covered by section 472, as were at issue in Counts II and III. The fictitious obligation statute provides:
Whoever, with the intent to defraud . . . passes, utters, presents, offers, brokers, issues, sells, or attempts or causes the same, or with like intent possesses, within the United States; . . . any false or fictitious instrument, document, or other item appearing, representing, purporting, or contriving through scheme or artifice, to be an actual security or other financial instrument issued under the authority of the United States, a foreign government, a State or other political subdivision of the United States, or an organization, shall be guilty of a class B felony. 18 U.S.C. § 514(a)(2).
Section 514 is a rather new statute; under it, prosecution appears to be infrequent. It differs from the pre-existing counterfeit statute, section 472, which reaches"falsely made, forged, [and] counterfeit" obligations, in that section 514, reaches "false or fictitious" obligations, so long as they appear to be "actual." Plainly, section 514 was intended to criminalize a range of behavior not reached by section 472.
We find the legislative history of section 514 helpful in illuminating more precisely the differences between that provision and section 472. The need to criminalize possession of fictitious, as opposed to counterfeit, documents was explained in 1995 by then-Senator Alfonse D'Amato, who introduced the legislation:
Mr. President, I am today introducing the Financial Instruments Anti-Fraud Act of 1995.
This legislation combats the use of factitious *fn6 financial instruments to defraud individual investors, banks, pension funds, and charities. These fictitious instruments have been called many names, including prime bank notes, prime bank derivatives, prime bank guarantees, Japanese yen bonds, Indonesian promissory notes, U.S. Treasury warrants, and U.S. dollar notes. . . .
Because these fictitious instruments are not counterfeits of any existing negotiable instrument, Federal prosecutors have determined that the manufacture, possession, or utterance of these instruments does not violate the counterfeit or bank fraud provisions contained in chapters 25 and 65 of title 18 of the United States Code. The perpetrators of these frauds can be prosecuted under existing Federal law only if they used the mails or wires, or violated the bank fraud statute.
Mr. President, we have worked closely with the Treasury Department and various U.S. Attorneys' Offices to prepare the Financial Instruments AntiFraud Act of 1995. This bill makes it a violation of Federal law to possess, pass, utter, publish, or sell, with intent to defraud, any items purporting to be negotiable instruments of the U.S. Government, a foreign government, a State entity, or a private entity. It closes a loophole in Federal counterfeiting law. 141 Cong. Rec. S9533-34 (emphasis added).
The distinction that emerges is this: A "counterfeit" obligation is a bogus document contrived to appear similar to an existing financial instrument; a "fictitious" obligation is a bogus document contrived to appear to be a financial instrument, where there is in fact no such genuine instrument, and where the fact of the genuine instrument's nonexistence is presumably unknown by, and not revealed to, the intended recipient of the document.
In keeping with this distinction, we interpret the phrase "false or fictitious instrument" in section 514 to refer to non-existent instruments, whereas the phrase "falsely made, forged, counterfeited, or altered obligation" in section 472 refers to doctored up versions of obligations that truly exist. So, for example, a phony hundred-dollar bill might be unlawful pursuant to section 472, the counterfeit statute, while a document purporting to be a negotiable "Federal Treasury Warrant," of which there are no genuine versions, might fall under the fictitious obligation statute, section 514.
The question we face--one of first impression--is whether section 514 contains a threshold requirement with respect to the credibility of the contrived documents and, if so, whether the $100,000,000 and $500,000,000 bills were sufficiently credible to support a conviction.
Howick urges us to read a "similitude" requirement into section 514, akin to the requirement in section 472 that the offending documents must "bear such a likeness or resemblance to genuine currency as is calculated to deceive an honest, sensible and unsuspecting person of ordinary observation . . . ." Johnson, 434 F.2d at 829; see supra. We find the notion of similitude ill-suited to the fictitious obligation statute. As stated, section 514 applies to documents that are not forgeries of any existing financial instrument. What, then, would a fictitious obligation have to be similar to?
More appropriate under these circumstances is the idea of verisimilitude--the quality of appearing to be true or real. Section 514 reaches documents "appearing, representing, purporting, or contriving . . . to be an actual security or other financial instrument." 18 U.S.C. § 514(a)(2) (emphasis added). The significance of the term "actual" in this context requires some explanation, since the very purpose of the statute is to supplement the pre-existing counterfeit laws by criminalizing bogus obligations that are not copies of any actual obligation. What is perhaps the most natural interpretation of "actual . . . financial instrument"--an instrument that really exists--is therefore unavailable. Put differently, because, for example, "actual Federal Treasury Warrants" is a null set, it cannot be that to violate section 514 a purportedly negotiable "Federal Treasury Warrant" must appear to be an actual one.
To give meaning to the phrase"actual security or other financial instrument," then, we must read the statutory langauge more generally. An unlawful fictitious obligation, we conclude, is one that appears to be "actual" in the sense that it bears a family resemblance to genuine financial instruments. The offending document must, in other words, include enough of the various hallmarks and indicia of financial obligations so as to appear to be within that class. The test, then, is not whether the document is similar to any financial obligation in particular, but whether taken as a whole it is apparently a member of the family of "actual . . . financial instrument" in general.*fn7
This is by necessity an ad hoc analysis, for the range of possible financial obligations is limitless and so too, for that reason, is the range of fictitious ones. No particular mark or characteristic is independently determinative such that its presence or absence alone could resolve the question whether a document purports to be a negotiable instrument. The question is whether the document's features are among the various and sundry ones commonly found in genuine obligations, and, relatedly, whether it is free of disqualifying marks. We do not attempt to set forth an exhaustive list of the relevant attributes, but they include such things as official seals; serial numbers; portraits of government buildings, officials, or statespersons; symbols or mottos of the issuing nation or entity; official signatures; dates of issue; and statements to the effect that the document shall serve as legal tender or shall be redeemable for something of value.
The standard we announce today is not a stringent one. We are mindful of the fact that section 514 was enacted to reach documents not striving to duplicate any existing obligation. Individuals who accept such documents as negotiable instruments will have ignored or deemed unimportant a significant ground for suspicion: that the putative obligation is largely or entirely unfamiliar. Having blundered ahead that far, they will be without clear guidelines to discern authentic obligations from false ones because they will have no precise of what the bona fide articles look like.
Thus, those who regard fictitious obligations as genuine will likely include persons of a rather credulous nature, and moreover persons who lack a key protection available to the intended recipients of counterfeit currency: the ability to detect bogus obligations by noticing variations between the phony document and the real McCoy. Accordingly, by enacting section 514, Congress provided protection from fraud to a particularly vulnerable class of victims. In keeping with that objective, we conclude that the statute criminalizes even bogus obligations that a prudent person might upon consideration be unlikely to accept as genuine, so long as those documents bear a family resemblance to actual financial obligations. To trigger liability, in other words, the document need only credibly hold itself out as a negotiable instrument.
Thus, for example, a putative financial obligation bearing a large portrait of a dog smoking a cigarette would probably not appear to be an actual financial instrument, and therefore would probably not support a section 514 conviction. But an ostensible "United States Bank Certificate" with a portrait of President Monroe might, even if a prudent person would look at the document and say, in effect: "It appears to be some sort of money, but I've never seen anything like it, I don't believe that it's United States currency, and I won't take it in lieu of ordinary money."
In so departing from the reasonable victim standard applicable to section 472, see Johnson, 434 F.2d at 829, we reject the suggestion that a parade of horribles will follow in which defendants are convicted of violating section 514 for possession of "Monopoly money" and other mock currency. Two factors support this conclusion: First, section 514 convictions must be based on documents that appear objectively to be "actual" obligations, and mock currency will fail that test. Second, section 514 contains the subjective element of"intent to defraud," and as a practical matter, documents that are obviously not negotiable instruments will rarely be employed in a fraudulent scheme to persuade others that they are negotiable. Thus, the implausibility of mock currency may count as circumstantial evidence that the requisite intent to defraud was not present.
Applying this standard to the facts at hand, we conclude that a rational trier of fact could have found the essential elements of a section 514 violation, and therefore affirm Howick's conviction on Count I of the superseding indictment. The offending documents contained many of the indicia of genuine financial instruments, including presidential portraits used on genuine currency; official seals; ornamental phrases; official signatures; series dates; and statements that the notes are "legal tender for all debts public and private," and in the case of the $500,000,000 bill, that it is"redeemable in lawful money at the United States Treasury or at any Federal Reserve Bank." The bills were also free of disqualifying marks, such as, for example, a statement that the document is not negotiable. Indeed, during trial Howick's defenses included the claim that he himself believed that the notes may have been authentic, a position in obvious conflict with his present claim that the notes are so implausible that they do not appear to be actual obligations.
The evidence also showed that Howick made reference to the $100,000,000 and $500,000,000 notes in one fax and one email to private parties not directly involved in the project, apparently sent to advance the goal of eventually placing the bogus documents. The jury was properly instructed that to convict Howick of possessing the notes, it had to find that he intended to defraud others with them. Apparently, it did so find.
In these circumstances, and in light of our construction of the statute set forth above, we cannot say that no rational trier of fact could have found the essential elements of the offense beyond a reasonable doubt.
AFFIRMED.
Opinion Footnotes
*fn1 The Honorable Donald P. Lay, United States Circuit Judge for the Eighth Circuit, sitting by designation.
*fn2 Howick also appeals the district court's method of calculating the loss that Howick intended to cause by his crimes, a figure that may affect base offense levels pursuant to U.S.S.G. § 2F1.1(b)(1). Howick argues that the intended loss should have been calculated according to the "economic reality" theory, a claim that he concedes is foreclosed by our decision in United States v. Koenig, 952 F.2d 267 (9th Cir. 1991). We reject Howick's argument, but note that he has raised it in order to preserve the issue for further review.
*fn3 Gold certificates were issued by the U.S. Treasury Department from 1865 until 1933 in exchange for gold coin and bullion. Silver certificates were issued in exchange for silver dollars from 1878 until 1963, when the first one-dollar Federal Reserve notes were introduced.
*fn4 Federal Reserve notes, the only paper currency still issued, are the familiar $1, $2, $5, $10, $20, $50, and $100 bills. Notes in denominations of $500, $1,000, $5,000, and $10,000 have not been printed since 1946, and have not been distributed since 1969. The "Series date" of paper currency is not the calendar year in which the currency was printed but rather the last year in which the design of the currency was changed.
*fn5 Printed in 1934-35, before wire transfers were available, these certificates, bearing a portrait of Woodrow Wilson, were used only to transfer wealth within the Federal Reserve system.
*fn6 The term "factitious" means produced by artifice. We are not aware whether "fictitious" or "factitious" was intended here, but we leave the printed version of Senator D'Amato's remarks unaltered.
*fn7 Having thus interpreted the statute, we reject Howick's contention that if section 514 does not contain a similitude requirement, it is void for vagueness. The statutory language is not so vague, nor is our construction of it so unexpected, as to deprive defendants of fair warning of the conduct made criminal. Rogers v. Tennessee, 121 S. Ct. 1693, 1698 (2001).
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Post by Sapphire Capital on Jul 16, 2008 21:46:00 GMT 4
76 F.3d 393 (10th Cir. 12/15/1995) UNITED STATES COURT OF APPEALS TENTH CIRCUIT
Filed 12/15/95
UNITED STATES OF AMERICA, Plaintiff-Appellee
v.
GRADY LEWIS HAND, aka James Grady Lewis Hands, III, aka James G. Hands, III, aka Major General James Grady Lewis Hands, III, Defendant-Appellant.
No. 95-8007
(D.C. No. 94CR-31) (D. of Wyoming)
ORDER AND JUDGMENT*fn1
Before BALDOCK, McWILLIAMS and REAVLEY,*fn2 Circuit Judges.
Grady Lewis Hand appeals his conviction by a jury of conspiracy to launder money and the trial court's order that he pay $699,760 in restitution. We affirm the judgment of conviction, vacate the order of restitution and remand the cause to the district court.
Hand was charged along with Delton Olson*fn3 and the Cross brothers -- Stewart and Stephen, in a multi-count indictment alleging wire fraud, mail fraud, and conspiracy to launder money all stemming from fraud related to a financial investment scheme. The conspirators operated through two entities -- Cross & Associates and NorthStar Investment Trust. Hand was chairman of the board of Cross & Associates, a company solely owned by its president Stewart Cross. Stewart and Hand were initially involved in "self-liquidating" loans. While the exact nature of these loans is unclear, Cross & Associates was supposedly to obtain funds from these financial instruments in excess of 300 million dollars. These funds would later play an integral part in the conspirators' investment scheme.
In March of 1993, Olson and Stephen Cross began marketing a "roll program" through NorthStar.*fn4 This program was designed to provide small investors with the opportunity to invest or "piggyback" into the larger "roll program" being conducted by Cross & Associates.*fn5 The investors were informed that Hand and Stewart were purchasing prime bank notes in the amount of 100 to 300 million dollars or more. Cross & Associates, through their trader, would contract to purchase the notes at a discount from only the world's largest 100 banks. Cross & Associates would also contract with an institution in the secondary market to purchase these notes. This secondary market consisted of pension funds, insurance companies, and large corporations. The actual "roll" or "tranche" occurred when Cross & Associates purchased the note from the bank with cash and then sold the note to the secondary market. The difference between the purchase and sale of these instruments were to result in a substantial profit to Cross & Associates and their investors. The investors were informed that because of bank and federal regulations the two parties were not able to deal directly with the other, thus creating the need for Cross & Associates.
To further insure that investors' monies were safe, Hand and Stewart Cross executed an assignment agreement on behalf of Cross & Associates to the investors, assigning the investors the rights to the 300 million dollars in "self-liquidating loans." Olson assured the investors that their money was "guaranteed." The money was to remain in a brokerage account unless it was out on a "roll." When the money was out on a "roll" it was guaranteed through the assignment.
The roll program was non-existent. Investors were paid the two to four per cent per month return for their investment funds. The four conspirators looted much of the remaing money. In October the investment scheme was ended by federal officials. During the length of the conspiracy, Hand alone received approximately $449,000 of a total of 3.3 million dollars invested in NorthStar/SLM. A jury found Hand guilty, and the district court sentenced him to 97 months imprisonment and three years supervised release.
I. Sufficiency of the Evidence
Hand challenges the sufficiency of the evidence to support his conviction. He argues the evidence does not establish that there was an agreement between the alleged co-conspirators to launder money or that money laundering occurred. We review the evidence in the light most favorable to the government to determine whether any rational trier of fact could find Hand guilty beyond a reasonable doubt. United States v. Hanson, 41 F.3d 580, 582 (10th Cir. 1994).
Hand was charged with conspiracy to violate 18 U.S.C. 1956(a)(1)(A)(i) and 1956(a)(1)(B)(i). Those sections provide:
(a)(1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity--
(A)(i) with the intent to promote the carrying on of specified unlawful activity; or
* * *
(B) knowing that the transaction is designed in whole or in part--
(i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity . . .
shall be sentenced to a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both.
The "specified unlawful activity" alleged in the indictment was mail or wire fraud in violation of 18 U.S.C. Section(s) 1341 and 1343.
A. The Conspiracy
The government proceeded under the basic theory that Hand and others conspired to violate Section(s) 1956(a)(1)(A)(i) or (B)(i). 18 U.S.C. 1956(h). To prove a conspiracy, the government must prove: (1) the existence of an agreement; (2) to break the law; (3) an overt act; (4) in furtherance of the conspiracy's object; and (5) that a defendant willfully entered the conspiracy. Hanson, 41 F.3d at 582; 18 U.S.C. 371. "While all five of these elements must be present, the essence of any conspiracy is `the agreement or confederation to commit a crime.'" Id. (quoting United States v. Bayer, 331 U.S. 532, 542, 67 S.Ct. 1394, 1399, 91 L.Ed. 1654 (1947)). In the present case there is no direct evidence of an agreement among all the parties; however, the surrounding circumstances are sufficient for a rational jury to conclude that Hand was a member of the conspiracy. Hand's representations to the investors, his role in duping them and appropriating large amounts of their money, and documents recovered from Hand during the government's investigation of the conspirators' illegal actions all support the jury's conclusions.
Several of the investors believed that Hand's participation in the program was vital to its existence. This was due, in part, to Hand's representations to co-conspirators and others about his "high-placed" government contacts. Hand represented that he was a major general in United States Military Intelligence,*fn6 and that he was handling large sums of monies for the Central Intelligence Agency for covert operations. As a result of these contacts and his position, Hand was supposed to be knowledgeable about international finance and be able to consummate large financial transactions.
On April 19, 1993, Olson, the Cross brothers, and several investors of NorthStar met in Atlanta. The investors were informed that Hand was unable to attend in person but would participate via the telephone. During the phone conversation, Hand relayed that Cross & Associates was conducting significant "rolls" at that time. He also answered investor questions concerning the ongoing roll programs and the documentation of those programs. Hand responded that documentation would be provided; however, because of the secret nature of the transactions the documents could not be released until after the transactions were complete. Hand informed the investors that " he believe d we can structure the roll program as nearly risk-free as anything can be structured." Hand even discussed the decrease of credibility in some "roll programs" because of the apparently fraudulent actions of other individuals.
In June of 1993, Hand instructed Stewart Cross to summarize Hand's resume and provide it to Olson for the investors. Hand also assisted Stewart in producing materials for an investor meeting in Bellevue, Washington. These materials included Hand's "government" documents and his military "commission." The investors at that meeting were provided with a letter signed by Hand apologizing for his absence. (The letter was prepared at Hand's request by Stewart.) The letter also informed the investors that in the next two weeks 10 billion dollars would be transferred to Cross & Associates for Stewart's management. When Stewart returned to Atlanta, Hand requested that the letter be destroyed.
Hand also participated in critical aspects of the operation of Cross & Associates. Hand signed the initial letters of authorization for the transfer of the first $300,000 from the investors' account into various other accounts.*fn7 This $300,000 was termed a "loan" from the investors' account by Hand and the Cross brothers. However, the management agreements only permitted investor funds to be used for "rolls" or the money was to remain in the brokerage account. Hand also signed the assignment agreement between Cross & Associates and NorthStar. This assignment agreement was a crucial part of the guarantee offered to investors. This and Hand's other representations to investors were a critical part of NorthStar/SLM's success in raising the 3.3 million dollars.
Finally, the evidence also indicates that Hand was aware that the money he was receiving from Cross & Associates was investor money. In December of 1993, investigators from the states of Georgia and Wyoming, the Internal Revenue Service, and the United States Post Office interviewed Hand at his motel room in Atlanta. One of the documents presented to the investigators at that time by Hand was an investor list of the SLM program and how much each investor was owed. A copy of the assignment agreement was also recovered, as was a file entitled "Stephen T. Cross/Del Olson problem." This file contained various documents relating to SLM, Cross & Associates, NorthStar, and the grand jury investigations in Wyoming of NorthStar/SLM. This evidence supports the jury's conclusion that Hand was an active member of the conspiracy, and that there was an agreement beween Hand and the others to obtain investor funds through the false representations of the conspirators.
B. Money Laundering
Hand also asserts that there is no evidence that money laundering occurred, that is, that he did not commit any transaction with the proceeds from the mail or wire fraud to either promote the carrying on of the mail or wire fraud or to conceal or disguise "the nature, the location, the source, the ownership, or the control of the proceeds" of the mail or wire fraud. See 18 U.S.C. Section(s) 1956(a)(1)(A)(I) (use of money for promotion of scheme) and 1956(a)(1)(B)(I) (commission of transactions to conceal proceeds of scheme). The evidence was sufficient under either theory.
Investor proceeds were used by Cross & Associates to create the "aura of legitimacy" and bolster the credibility of the principals with the investors. United States v. Johnson, 971 F.2d 562, 566 (10th Cir. 1992). The Cross & Associates offices were in the Atlanta Financial Center. Both Hand and Stewart Cross negotiated a new company's lease after investor funds began to arrive. Hand also assisted in selecting new furniture for the company. Several investors testified that they were impressed with the Cross & Associates offices during the April meeting. The company also spent other funds for Hand's business expenses, like his mobile phone, to further facilitate his pretended financial dealings in the international community. The evidence supports a jury conclusion that Hand was aware of and authorized the expenditure of investor funds through Cross & Associates to continue to promote the non-existent "roll program." Even more compelling is the alternative ground of concealment which was presented to the jury. Several transactions evidenced Hand's motive to conceal his appropriation of funds from the financial scheme. The most glaring example concerns the Cross & Associates' financial statement. Stewart instructed the accountant (per Hand's instructions) to show Hand's receipt of investor funds as a short term investment. The Cross & Associates balance statement listed $494,071.71 which had been paid to Hand as a short term investment in "PFA INTL." The importance of creating a legitimate purpose for these funds was demonstrated by Hand's own representations to the investors in April. At that meeting, Hand specifically outlined how the investors' money was secure because the money was either being used for a "roll" (at which time the assignment covered the monies) or it was in the brokerage account. Listing the money as a short term investment in "PFRA INTL" gave the appearance that this money was out on a "roll." However, the $494,071.71 was not an investment of any kind, but rather business and personal expenses of Hand.
To further legitimize the use of investor funds, Hand also executed several loan agreements between himself (personally or through his corporation) and Cross & Associates. These loans were structured to appear to give Cross & Associates a tremendous payout in a relatively short time period. This evidence could support a juror's conclusion that Hand and the conspirators' actions were designed to conceal the nature of their illicit gains through the mail and wire fraud.
II. Testimony of "General" Ferrara
Hand argues the trial court erred in failing to compel Ferrara to testify or in failing to require Ferrara to invoke the Fifth Amendment before the jury. Ferrara was allegedly one of Hand's high placed government contacts who was a liaison between the Mexican and American governments. Hand delivered a total of $215,000 in cash to Ferrara in three separate installments at the Orlando airport during the summer of 1993. During Hand's trial, Ferrara was awaiting trial for alleged wire fraud and securities violations not related to the instant offense. After examining Ferrara and his attorney, the district court declared Ferrara unavailable for purposes of Fed. R. Evid. 804.
Ferrara was clearly entitled to invoke the Fifth Amendment privilege of self-incrimination. Any admission concerning the receipt of funds by Ferrara from Hand because of Ferrara's fraudulent representations could have constituted a federal or state crime. The privilege is to be liberally construed in favor of a witness. Hoffman v. United States, 341 U.S. 479, 486, 71 S.Ct. 814, 818, 95 L.Ed. 1118 (1951); United States v. Hart, 729 F.2d 662, 670 (10th Cir. 1984), cert. denied, 469 U.S. 1161, 105 S.Ct. 914, 83 L.Ed.2d 927 (1985). Additionally, a defendant has no right to force a witness to invoke the privilege in front of a jury. Hart, 729 F.2d at 670. Therefore, the district court did not err in refusing to compel Ferrara to testify or to force Ferrara to invoke his privilege in the presence of the jury.
III. Restitution
Finally, Hand asserts the trial court erred in ordering Him to pay $699,760 in restitution. The government agrees. The parties note that Hand presently is in debt for 5.77 million dollars, has little if any assets, and has a negative monthly cash flow of $3,854. The evidence is equally unclear whether Hand has the earning potential to pay restitution in the future. See United States v. Kunzman, 54 F.3d 1522, 1532 (10th Cir. 1995) (lack of financial resources is not a bar to a restitution order if the evidence indicates the defendant has some assets or the earning potential to pay the amount ordered). Therefore, on this record the district court abused its discretion in determining the amount of the restitution ordered.
The judgment of conviction is AFFIRMED, the order of resitution is VACATED, and the cause is REMANDED to the district court.
Entered for the Court
Thomas M. Reavley, Circuit Judge
***** BEGIN FOOTNOTE(S) HERE *****
*fn1 This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. The court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of the court's General Order filed November 29, 1993. 151 F.R.D. 470.
*fn2 The Honorable Thomas M. Reavley, United States Court of Appeals, Fifth Circuit, sitting by designation.
*fn3 Delton Olson has filed a related appeal, Docket No. 95-8006.
*fn4 After a Securities and Exchange Commission inquiry into NorthStar's activities, Olson and Stephen Cross stopped soliciting investors in NorthStar's name. The two created a company called SLM which continued the investment scheme. Stephen and Olson substituted SLM agreements with the NorthStar management agreements that had been previously executed with the investors. The SLM agreements were backdated to coincide with the creation of the NorthStar "roll program." The investors were asked, but most refused, to return the old NorthStar agreements. The S.E.C. was then informed that no "roll programs" were in existence.
*fn5 All that we say about the planned operation of this investment program is based on what is gleaned from defendants' claims and not from supporting evidence for those claims.
*fn6 In support of this, Hand produced his military "commission." Numerous individuals testified that the document was not real, and that generals were not covertly commissioned in this manner. Retired General Colin Powell, former Chairman of the Joint Chief of Staffs testified, through a videotaped deposition, that he did not know Hand and that generals were not commissioned in such a manner. In fact the stamp on the so-called "commission" was from the War Department, the predecessor to the Department of Defense.
*fn7 Hand also argues in his brief that there is insufficient evidence to demonstrate that wire or mail fraud occurred. But as can be seen from these facts, Hand signed several letters of authorization in his capacity as chairman of the board of Cross & Associates which authorized the wire transfer of monies from the investor brokerage accounts to other accounts. These transactions were termed "loans" by the co-conspirators, but a reasonable juror could have rejected this explanation.
One investor who knew Hand testified that he invested in NorthStar/SLM because Hand was running the larger "roll program." That investor had turned down other opportunities to invest in similar programs because he was not comfortable with the traders. The investor further testified that all four conspirators, including Hand, represented to him that these trades were actually occurring.
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