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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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No. 90-6572 (6th Cir. 12/27/1991)
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

No. 90-6572

filed: December 27, 1991

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE

v.

RICHARD C. GRAVATT, DEFENDANT-APPELLANT

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF TENNESSEE. 89-00198. Wisemau, Jr., C.J.

Before: Keith and Norris, Circuit Judges: Lively, Senior Circuit Judge.

Author: Norris

ALAN E. NORRIS, Circuit Judge. Defendant, Richard Carl Gravatt, was convicted after a jury trial on seven counts of mail and wire fraud for operating a scam in which individuals were fraudulently induced to pay money to him in exchange for promises of extraordinary returns on their investments. Defendant appeals, contending that the district court erred by: (1) improperly commenting on the evidence; (2) applying a four-level increase to his sentencing offense level for being the organizer of extensive criminal activity; and (3) ordering restitution in an amount representing the losses of all individuals defrauded by his scheme when only some of the victims were listed in the indictment.

I.

Defendant, claiming that he owned the largest "guarantor trust" in the world and that he had personal assets worth billions of dollars, convinced numerous people that he was involved in arranging loans for third-world countries from the World Bank through his organization, Imperial Trust. As explained to investors, he would arrange for a foreign country to borrow a minimum of $10 billion from the World Bank and the country would then turn over all but five percent of the loan proceeds to Imperial Trust. The country would enjoy the use of this "free money," since the trust would assume the entire loan obligation and pay it off through a process yielding vast profits and involving the purchase and sale of what defendant called "documentary letters of credit" and "prime bank notes."

The money defendant sought from the investors was said to be for paying the expense of putting together these complex international financial transactions. Investors were promised a return on their money at rates varying from 5-to-1 to as high as 20-to-1, payable out of profits generated by the proceeds of the loan from the World Bank. Investors were given promissory notes, signed by defendant, which included a false representation that he possessed sufficient personal assets to pay the notes in full.

A representative of the World Bank testified that her organization had not dealt with defendant and it would be impossible for the World Bank to be involved in the transactions that he had described to investors. A professor of accounting and business law testified that the transactions described by defendant to investors were not possible. Not surprisingly, no third-world country transaction was ever consummated. The amount committed to the 166 investors by defendant in the promissory notes totaled several million dollars, but only one or two investors received any of their money back; none received the amount promised.

Defendant enlisted the services of David Sanders and two others in carrying out the scheme. These individuals were charged in the indictment along with defendant, but, under an agreement with the government, were placed on pretrial diversion and probation in return for their testimony.

II.

A. Trial Judge's Comment on the Evidence

Defendant argues that the district judge improperly commented on the evidence during the cross-examination of government witness Sanders. When he was asked about his understanding of how the scheme was to work, the following colloquy ensued:

Defense Counsel: So it was not Imperial Trust actually signing for the loan?

Witness: Not to my knowledge.

The Court: Were they going to make 20 to 1 off the sale of these letters of credit, purchase of these letters of credit in order to be able to pay 20 to 1 on the money they were borrowing from these folks?

Witness: They would -- according to how it was explained to me, they would make 15 percent of the $10 billion which they would call a fallout or difference between buying and selling. That 15 percent would be used to pay notes and other obligations.

Defense Counsel: Explain that to the jury.

The Court: You have asked for the impossible. We'll take a recess.

Defense Counsel: I Object.

According to defendant, the judge and members of the jury began to laugh after defense counsel was told he had "asked for the impossible." Defendant argues that the district judge's comment and laughter prejudiced his cause, as the jury was left with the impression that the court found his plan inexplicable and, therefore, undercut his argument that he acted in good faith and without fraudulent intent. Following the comment, while considering a motion for mistrial outside the presence of the jury, the district judge said that the comment was in response to counsel's request that the witness explain "the most inexplicable scam I have ever seen . . . how anybody could be stupid enough to pretend that this was a legitimate enterprise. . . ." He then observed that defendant was "guilty as sin . . . and so is this witness." Defendant argues that this belief was essentially communicated to the jury by the judge's comment during Sanders' testimony, thereby denying him his constitutional right to an impartial jury.

In Quercia v. United States, 289 U.S. 466 (1933), the Supreme Court held that the trial judge has a duty to use "great care" that the expression of his opinion on the evidence not mislead the jury, but stated that he "may express his opinion upon the facts, provided he makes it clear to the jury that all matters of fact are submitted to their determination." Id. at 469; see also United States v. Mentz, 840 F.2d 315, 321-22 (6th Cir. 1988) ("A trial judge may comment on the evidence . . . if his remarks do not convey the impression that they are established truths, such that the jury may not deviate from them"). In United States v. Marion, 477 F.2d 330 (6th Cir. 1973), this court reversed a conviction where the district judge commented on the credibility of a witness. We stated: "Of pivotal significance is the omission to include the cautionary instruction that, regardless of the judge's opinion, final determination of credibility of the witness is a responsibility reserved to the jury." Id. at 332.

The trial judge's comment in this case must be viewed in context. As the judge noted to counsel, the scam was in fact "inexplicable." Because, under the uncontroverted evidence, there are no such things as "documentary letters of credit" or "prime bank notes," World Bank participation was impossible and the financial transactions themselves were impossible. It follows that an explanation of the scheme was therefore impossible.

Nevertheless, the district judge regretted having made the comment and gave the following special instruction to the jury:

Early on in the case I made a remark with respect to some of the testimony. I should not have done it. You must disabuse your minds of that. And please don't assume from anything I've said throughout this trial that I have any opinion whatsoever on how you ought to decide this case. You are the exclusive judges of the facts and it's entirely up to you to decide this case and disregard anything I may have said in the trial in arriving at your own findings as to the facts.

In view of the circumstances surrounding the comment, the overwhelming evidence of defendant's guilt, and this special instruction, we are unable to say that defendant's cause was prejudiced by the judge's comment.

B. Sentencing of Organizing Extensive Criminal Activity

The district judge increased defendant's sentencing offense by four levels pursuant to section 3B1.1(a) of the Sentencing Guidelines, which provides: "if the defendant was an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive, increase by 4 levels." Defendant contends that the district court made no findings of fact which would support the conclusion that this criminal activity involved four other participants or was extensive. He points out that "this guideline requires that a defendant engage in criminal activity with at least one other criminally culpable person," United States v. Carroll, 893 F.2d 1502, 1509 (6th Cir. 1990), and argues that, because the jury did not convict him of the conspiracy count, the district court could not find that the other participants in the scheme were criminally culpable.

At defendant's sentencing hearing, the district judge found that "under 3(b)1.1 there may not have been five participants but the criminal activity and the organization was, quote, otherwise extensive, end quote, and a four level increase is appropriate under these circumstances." This court must accept the district court's finding unless it is clearly erroneous. United States v. Perez, 871 F.2d 45, 47-48 (6th Cir.), cert. denied, 492 U.S. 910 (1989).

The trial judge found that there was a conspiracy for the purpose of admitting into evidence the statements of other participants in the scheme under Fed. R. Evid. 801(d)(2)(E). Such a finding, like the one that a defendant organized extensive criminal activity under U.S.S.G § 3B1.1(a), requires a determination that more than one of the participants in the scheme was criminally culpable. Carroll, 893 F.2d at 1509. Under United States v. Vinson, 606 F.2d 149 (6th Cir. 1979), cert. denied, 444 U.S. 1074, 445 U.S. 904 (1980), a finding of a conspiracy must be supported by a preponderance of evidence, the same standard of proof required to support a finding that the defendant engaged in criminal activity with at least one other criminally culpable person under U.S.S.G. § 3B1.1(a). Carroll, 893 F.2d at 1506. The determination that defendant's scheme involved more than one culpable person is amply supported by the record. The fact that the jury did not convict him of the conspiracy count does not demonstrate otherwise; such a conviction would require proof "beyond a reasonable doubt," a substantially higher standard of proof than the "preponderance of evidence" standard required for the finding under U.S.S.G. § 3B1.1(a).

In view of the evidence that defendant organized and operated his scheme for several years with the direct aid of three subordinates, in the process victimizing over 160 people, we cannot say that the district court's finding that defendant was the organizer or leader of extensive criminal activity was clearly erroneous.

C. Restitution

Defendant argues that the district judge exceeded his authority by ordering him to pay restitution in an amount up to $550,000, which covered losses to victims of his scheme other than those named in the indictment, and improperly delegated to the United States Probation Office the authority to determine the victims to whom restitution must be paid. The language of the court's order follows: "Restitution to be made to those who lost money, in an amount to be determined by the United States Probation Office; not to exceed $550,000.00."

The government contends that, since the indictment charged a scheme to defraud "persons" of money over a period of five years, the order for restitution properly included all victims defrauded by the scheme. The indictment names five victims, accounting for losses of $96,000. At trial, the government presented several other victims, and introduced evidence that there were over 160 victims.

In Hughey v. United States, 495 U.S. 411, 110 S. Ct. 1979, 109 L. Ed. 2d 408 (1990), the Supreme Court construed the Victim and Witness Protection Act of 1982, 18 U.S.C. §§ 3579 and 3580 (later recodified as 18 U.S.C. §§ 3663 and 3664), to hold that a court may award restitution "only for the loss caused by the specific conduct that is the basis of the offense of conviction." 495 U.S. at , 110 S. Ct. at 1981, 109 L. Ed. 2d at 413. The Court reversed a restitution order that encompassed losses stemming from the theft and use of credit cards alleged in counts of the indictment other than the one to which the defendant pleaded guilty, even though this conduct had a "significant connection" with the crime of conviction. The Supreme Court cited the language of the Act, which provides that "a defendant convicted of an offense" may be ordered to "make restitution to any victim of such offense," 18 U.S.C. § 3663(a)(1), and stated:

A straight forward reading of the provisions indicates that the referent of "such offense" and "an offense" is the offense of conviction. . . The focus in [section 3663] on the offense of which the defendant was convicted suggests strongly that restitution as authorized by the statute is intended to compensate victims only for losses caused by the conduct underlying the offense of conviction.

495 U.S. at , 110 S. Ct. at 1982, 109 L. Ed. 2d at 415. The issue in the instant case is the scope of the "offense of conviction."

The Eighth Circuit recently addressed this issue in United States v. Marsh, F.2d 710 (8th Cir. 1991). In that case, the defendant pleaded guilty to only three counts of a multiple-count mail fraud indictment, but each of the three counts incorporated by reference all of the paragraphs describing the defendant's alleged scheme, as well as an attached list of seventy-one alleged victims. The district court held that because each count incorporated as an element of the offense the allegation that the defendant engaged in a scheme to defraud seventy-one people, it was authorized to award restitution for the total amount of loss resulting from the underlying scheme. See United States v. Marsh, 741 F. Supp. 1361, 1363 (D. Minn. 1990), aff'd, 932 F.2d 710. The Eighth Circuit, however, while upholding the district court's award because the plea agreement specifically authorized the imposition of restitution for the full loss suffered by all seventy-one named victims, rejected the district court's rationale. The appeals court pointed out that footnote 2 of Hughey, describing the split in authority which the Supreme Court was resolving, cited United States v. Pomazi, 851 F.2d 244 (9th Cir. 1988), which held that restitution could be required for all losses resulting from the mail fraud scheme alleged as an element of the offense even where the charging instrument providing the basis for the guilty plea only described two specific mailings. The circuit court in Marsh reasoned that because Pomazi was listed as one of the authorities holding that restitution could be ordered for offenses other than the offense of conviction, a proposition rejected by the Supreme Court in Hughey, the Supreme Court implicitly rejected the Ninth Circuit's theory in Pomazi.*fn1 The court further reasoned that, under Hughey, "even in an ongoing, unitary scheme, the defendant can be held liable in restitution only for the specific acts to which he pleads or is found guilty . . . even though the entire scheme was incorporated by reference into each count." 932 F.2d at 712.

Defendant's indictment nowhere listed or referred to any victims other than those involved in the specific transactions enumerated in each count of the indictment. Under the rationale of Hughey, then, we hold that the restitution ordered in this case should be limited to the $96,000 accounted for by the specific transactions described in the indictment.

III.

For the reasons stated above, the judgments of conviction and sentencing are affirmed, with the exception that we vacate the portion ordering restitution, and remand that portion to the district court for further proceedings in accordance with this opinion.

Opinion Footnotes

*fn1 The court in Marsh stated that its analysis was supported by the Ninth Circuit's decision in United States v. Sharp, 927 F.2d 1083 (9th Cir. 1991); the publication of Sharp, however, has since been withdrawn and superseded by United States v. Sharp, 941 F.2d 811 (9th Cir. 1991) (recognizing that Hughey overruled Pomazi).

[Sapphire Capital]

Part 1:
264 F.3d 391 (4th Cir. 06/07/2001)
U.S. Court of Appeals, Fourth Circuit

No. 00-4337, No. 00-4347, No. 00-4406

June 07, 2001

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE
v.
GARY D. BOLLIN, DEFENDANT-APPELLANT


UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE
v.
ERNST N. TIETJEN, DEFENDANT-APPELLANT


UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE
v.
JAMES GORMLEY, DEFENDANT-APPELLANT

Appeals from the United States District Court for the Southern District of West Virginia, at Huntington. Robert C. Chambers, District Judge. (CR-98-152)

Counsel Argued: Jane Moran, Jane Moran Law Offices, Williamson, West Virginia, for Appellant Bollin; George A. Mills, III, Huntington, West Virginia, for Appellant Tietjen; Mark Jeffery Kadish, The Law Office OF Mark J. Kadish, Atlanta, Georgia, for Appellant Gormley. Philip Henry Wright, Assistant United States Attorney, Charleston, West Virginia, for Appellee. ON Brief: Rebecca A. Betts, United States Attorney, Charleston, West Virginia, for Appellee.

Wilkinson, Chief Judge, Motz, Circuit Judge, and Cynthia Holcomb Hall, Senior Circuit Judge of the United States Court of Appeals for the Ninth Circuit, sitting by designation.

The opinion of the court was delivered by: Hall, Senior Circuit Judge.

As amended September 6, 2001, and September 19, 2001.

PUBLISHED

Argued: March 2, 2001

Affirmed by published opinion. Senior Judge Hall wrote the opinion, in which Chief Judge Wilkinson and Judge Motz joined.

OPINION

Appellants raise numerous challenges to their convictions and sentences stemming from their involvement in an investment fraud scheme and the subsequent coverup. We conclude that their challenges lack merit and therefore affirm the judgments below. We also conclude that pursuant to the Clause, federal forfeiture law supersedes the garnishment protections that Georgia state law provides for funds in an individual retirement account.

I. FACTUAL AND PROCEDURAL BACKGROUND

This case arose out of a wide-ranging investment fraud scheme, carried out by a network of conspirators, who bilked millions of dollars from investors across the country. The investments were programs that promised enormous profits, supposedly derived from secret trading in debentures issued by European "prime" banks. The conspirators included Stephen Oles, a self-described"trader" in the fraudulent investment programs; appellant Ernst Tietjen, another trader; Ramona Holcombe and Stanie Benz, who served as "project managers" or "directors" for the programs; appellant Gary Bollin, a "broker" for the fraudulent investments; Roger Damron, who offered the investments in and near Huntington, West Virginia; David Raimer and his wife, Jennifer, who conducted numerous bank transactions involving investors' funds; and appellant James Gormley, an attorney from Atlanta, Georgia, who advised and assisted Oles, David Raimer, Bollin, and Damron with the fraudulent investments and money laundering. The cast of characters relevant to Appellants also included Finbar F. Dempsey & Company, a law firm in the Turks and Caicos Islands; Robert Edwards, an escrow agent and attorney in Atlanta; Dr. Ralph and Rita Touma, investors; and other investors in the programs.*fn1

In mid-1995, David Raimer and Oles began offering investment programs under the name "Exodus International." The programs involved supposed trading of European "prime bank" debentures and promised very high rates of return with little or no risk to investors. According to the Exodus literature that they distributed, the programs were available on a limited basis to groups of investors whose money would be pooled and delivered to a "prime" bank. The investment principal was supposedly secured by a bank guarantee and, therefore, was never at risk. Millions of dollars in profits were to be generated within a few months from the trading of debentures. For example, one program, "Program 39," offered a profit of $73,000,000 in ten months, based on an investment of $400,000. To carry out the scheme, bank accounts were established with the guidance and assistance of Oles's attorney, appellant Gormley. Raimer established an escrow account in Orlando, Florida, under the name "Exodus International." Per Gormley's advice, the account was to be non-interest bearing so as to avoid attracting the IRS's attention. The account was to be used ostensibly to deliver investors' funds into a debenture trading program. Gormley also helped establish an offshore account in the Turks and Caicos Islands in the name of "BCI Corporation," which was part of a so-called "three-tiered" offshore trust. According to Gormley, the offshore trust would shield income from taxation and was the "vehicle" through which the debenture trading program was to be conducted.

Appellant Bollin learned about Exodus International Program 39 in May 1995. At Oles' suggestion, Bollin discussed the program with Gormley. Gormley explained to Bollin how the program worked and drew a sketch for him showing how funds would move through the program. Gormley told Bollin that debenture trading programs work "if they're handled right" and that "once they start paying, they pay forever." After Bollin gave Gormley literature about Program 39, Gormley told him that the program looked "pretty good."

Gormley also recommended the Exodus International Program to Stanie Benz. Gormley told Benz that he had extensive experience reviewing debenture trading programs and that he had reviewed the Exodus Program and found it to be a good investment. Gormley explained the relationship between debenture trading programs and offshore trust accounts, and described how such an account could be used as a holding point for pooling investors' funds and for transferring funds without their being traceable.

Bollin introduced the Exodus Program 39 to Roger Damron. At Bollin's recommendation, on July 20, 1995, Damron met with Gormley. Gormley advised Damron concerning the Program 39 literature and debenture trading programs in general, and advised him on foreign grantor trusts to facilitate the investments and avoid tax liability. Gormley had Finbar F. Dempsey & Company set up foreign grantor trusts in the Turks and Caicos Islands for Damron and Bollin. Gormley also established international business corporations for Damron and Bollin and advised them about their use in conducting business for the trusts. In addition, Gormley prepared several documents for Bollin and Damron, such as profit sharing agreements. The idea was that Damron would bring investors into the programs, Bollin would act as the broker, and Ramona Holcombe would serve as the program manager and link to the trader, Stephen Oles, who would conduct the actual trading.

Damron approached a couple with whom he had a previous investment relationship, Dr. Ralph and Rita Touma, and sought money to place in Exodus Program 39.*fn2 The Toumas decided to invest, and, in late July 1995, gave Damron $750,000. Damron put $400,000 in an escrow account held by Robert Edwards, another Atlanta attorney, awaiting an opening in Program 39. Unbeknownst to the Toumas, Damron paid Bollin $75,000 from this money.

On September 13, 1995, Holcombe faxed to Gormley the wire coordinates to transfer funds into Program 39. Gormley forwarded the fax to Bollin, who then faxed it to Damron.*fn3 Then, on September 19, 1995, Gormley drafted a letter for Damron's signature, directing the transfer of the $400,000 from Edwards' escrow account to Bollin's foreign grantor trust in the Turks and Caicos Islands, an account set up by Gormley. Damron signed the letter and sent it to Edwards. Edwards wired the money as instructed on September 20, 1995.*fn4 A few days later, the money was again transferred, this time from Bollin's trust account to Damron's trust account, also set up by Gormley in the Turks and Caicos Islands. From Damron's account, the money was sent to the BCI Corporation account in the Turks and Caicos Islands, an account controlled by Oles and Raimer.

After the Toumas' money was sent off, Damron began collecting money from other people for investment in another, similar trading program, the "second deal." Bollin told Damron that the second deal would again involve Oles as the trader, but would involve Benz as the "project director." Oles later "lateraled" his role as the trader to appellant Tietjen. Although the second deal was similar to Exodus Program 39, instead of the money going to Oles' BCI Corporation account in the Turks and Caicos Islands, the money was transferred to an account in England.

Oles had introduced Tietjen to Benz. Tietjen was the head of a church known as the Apostolic Order of the Remnant House of Israel (AORHI). According to Tietjen, AORHI existed wherever he lived, supposedly for the purpose of funding humanitarian projects. To fulfill its purpose, AORHI created other entities, which Tietjen called limited trusts, to hold assets, and an entity called General Securities, Ltd. (GSL), to "assist in the money-making." Under cover of these entities, Tietjen created official-looking financial documents, such as a "Zero Coupon Prime Capital Note," and offered debenture trading programs with very high rates of return. In all, Tietjen received, or expected to receive, $2.4 million of investors' funds for placement in his debenture trading program.

After Damron sent the money for the second deal, he collected another $140,000 from investors in November and December 1995 for placement in yet another debenture trading program, the "third deal." In January 1996, Damron wired $130,000 of the investors' money to his account in the Turks and Caicos Islands. The money was to be sent off for investment.

As it turned out, the debenture trading programs were complete frauds. The Government's expert explained that investment programs involving the trading of debentures or other financial instruments issued by so-called "prime banks" do not exist. Indicators of the fraudulent nature of such programs include the use of the term "prime bank;" convoluted and nonsensical descriptions of the investment program itself; very unrealistic rates of return with little or no risk; an assertion that investors' funds represented "good, clean cleared funds of non-criminal origin;" and the claim that entities such as the Federal Reserve Bank or the World Bank had approved the programs or accepted the documents. These characteristics of fraud were present in the Exodus Program 39 documents.

Instead of placing the money into bank debentures, Oles transferred the money from the BCI Corporation account to the Exodus International account in Orlando. David Raimer withdrew funds from the account and sent cash to Oles upon request. Oles used these funds for himself, and Raimer also kept large sums. The funds sent to Tietjen similarly were not placed in a debentures trading program, but instead worked their way through various accounts in the names of AORHI and others, with much of the money being used by Tietjen for his own purposes.

When the Toumas, Damron's investors in Program 39, did not receive payments as promised, they began to call Damron regularly to find out when their payouts would materialize. Oles reportedly assured Bollin that payments were imminent. In turn, Bollin reassured Damron, who, in turn, reassured the Toumas. After more time passed without a payout, the Toumas eventually spoke with Bollin and Gormley. Bollin assured them that the payout would come and that he, like them, was waiting for money. He also told them that he had previously traded in these programs and that while it was normal for payment to be delayed, the programs always paid. Bollin said that he would get paid only if the investment paid out, failing to disclose that Damron had already paid him $75,000 out of the Toumas' money. Gormley told the Toumas that he did not know much about their investment, but that he knew these programs did pay out in the past, and that the delays "usually work themselves out in a week or so." Gormley told the Toumas that they had the option to sue Oles for their money, but warned that a law suit would only lead to more delays in receiving their money.

Bollin also spoke with another investor, Marianne Bradley, who had invested as part of the second deal. When Bradley asked about the status of her investment, Bollin stated that "trades are being made," that trading had started on January 16, and that "we" had "frozen the account to protect the money." Bollin also stated that he had invested $100,000 in the same program as Bradley and that he would occasionally get involved in a trading program with $100,000 to $500,000. He stated that based on his experience, the program would either pay out as promised in ten days or Bradley would get her money back. Bollin, however, did not invest any of his own money in the second deal, and his only investment experience had been a $100 investment several years before. Finally, in January 1996, the Toumas reported their dealings with Damron to the FBI. On February 9, 1996, the FBI conducted a search of Damron's house. Shortly thereafter, a grand jury investigation was commenced in Huntington, West Virginia.

Damron decided to return to the investors the $130,000 sent to his account in the Turks and Caicos Islands for the third deal. Damron wired over $120,000 of the money to Gormley and $8,000 to himself so that Gormley could arrange for checks to the investors. Gormley also arranged for backdated paperwork to be created by the attorneys in the Turks and Caicos Islands to explain the earlier transfer of $130,000 as a "loan" from one of Damron's companies to another. The loan paperwork was created in March 1996, but was backdated to January 17, 1996, the date of the $130,000 transfer.

Damron was eventually indicted for his involvement in the investment fraud scheme. After the indictment, Oles decided to send Damron $50,000. Damron was then under a financial reporting requirement with the court. He contacted Gormley, who advised him how to structure the transaction so as to avoid the court-imposed reporting requirement. On Gormley's advice, the transfer was structured as a loan from Bollin's wife to Damron's wife. Bollin kept $10,000 for himself and sent the remaining $40,000 to Damron in increments of $5,000. Gormley also assisted in Damron's receipt of an additional $100,000 from Oles, again funneled through the Turks and Caicos Islands.

In August 1997, Gormley informed Damron that Oles was again sending money to Damron, $400,000, to be used to pay back certain investors. Gormley and Damron discussed how to use the money for "damage control." They decided to repay Damron's numerous investors in the second deal but not the Toumas. Damron prepared a list of investors who had invested in the program and how much they had invested. He gave the list to Gormley. Later, Damron sent a separate letter to Paul Dempsey in the Turks and Caicos Islands, detailing the investors who were to receive payments and directing that the payments be made. A copy of that letter with Damron's handwritten notation that it had been faxed to Dempsey was found in Gormley's office. The investors listed in Damron's letter were all paid, receiving checks from the Turks and Caicos Islands in plain envelopes with no return address and no cover letter. Approximately $400,000 was repaid to twenty investors. Gormley was paid $20,000 by Oles for his services.

When the Government learned of the payments to the investors, who were potential witnesses against Damron, it sought to have the money placed in escrow pending resolution of Damron's case. At a hearing in October 1997, Gormley testified that to his knowledge, Damron had not directed, coordinated, or orchestrated the payments to investors.

Damron eventually pleaded guilty to mail fraud and money laundering and agreed to cooperate with the United States in its investigation of the other conspirators. On September 9, 1998, Appellants Gary Bollin, Ernst Tietjen, and James Gormley were charged in a fourteencount indictment, along with co-defendants Stephen Oles, Ramona Holcombe, Stanie Benz, David Raimer, and Jennifer Raimer, for criminal acts stemming from the fraudulent investment scheme.

Count One charged all defendants with conspiring to commit wire fraud, securities fraud, and obstruction of justice, in violation of 18 U.S.C. § 371. Count Two charged all defendants with violating 18 U.S.C. § 1956(h), conspiracy to launder money. The indictment also included a forfeiture provision as to all defendants, premised upon a conviction for money laundering, and included a notice to seek substitute assets. Tietjen was not named in any of the other counts.

Both Gormley and Bollin faced additional charges. Both were charged in Count Three with aiding and abetting wire fraud, in violation of 18 U.S.C. §§ 1343 and 2. Count Six charged them with aiding and abetting money laundering, in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i) and 2. Bollin was also charged in Count Four with an additional count of wire fraud, and in Counts Seven and Eight with two more counts of money laundering. In Counts Nine and Ten, Bollin was charged with selling securities without having registered with the Securities and Exchange Commission, in violation of 15 U.S.C. §§ 78o(a)(1) and 78ff. Gormley was charged in Counts Thirteen and Fourteen with perjury, in violation of 18 U.S.C. § 1623. The district court dismissed Count Fourteen at trial. Before trial, defendants David Raimer and Stanie Benz pleaded guilty to charges in the indictment. The charges against Jennifer Raimer were dismissed. Stephen Oles fled and remained a fugitive throughout the trial. On November 19, 1999, a jury returned a guilty verdict against the remaining defendants on each count submitted to the jury. The jury also returned a $1.2 million forfeiture verdict. The district court denied the post-trial motions for judgment of acquittal and/or a new trial made by Gormley, Bollin, and Tietjen.

The district court sentenced Bollin to 108 months imprisonment, three years supervised release, and restitution in the amount of $783,535.*fn5 The court sentenced Tietjen to 135 months imprisonment, two years supervised release, and $1,761,035 in restitution.*fn6 The court sentenced Gormley to 97 months imprisonment, three years supervised release, and $783,545 in restitution.*fn7 Each defendant was also found jointly and severally liable for the $1.2 million forfeiture.*fn8 Following the entry of judgment against each defendant, each defendant filed a timely notice of appeal.

II. SUFFICIENCY OF THE EVIDENCE

Appellant Gormley challenges the sufficiency of the evidence supporting his convictions on Counts One, Two, Three, Six, and Thirteen. In reviewing the sufficiency of the evidence, a reviewing court must take the evidence in the light most favorable to the government and must determine whether any rational juror could have found the elements of the offense beyond a reasonable doubt. United States v. Burgos, 94 F.3d 849, 862 (4th Cir. 1996).

A. Sufficiency of the Evidence on Count One--Conspiracy to Commit Wire Fraud, Securities Fraud, and Obstruction of Justice

To support a conviction for conspiracy, "the government must show, first, that a conspiracy existed; then that the defendant had knowledge of the conspiracy; and finally, that the defendant voluntarily became a part of the conspiracy." United States v. Bell, 954 F.2d 232, 236 (4th Cir. 1992), overruled on other grounds by Burgos, 94 F.3d at 862. Gormley contends that the Government proved three distinct conspiracies instead of the single conspiracy alleged in Count One of the indictment: one conspiracy to commit wire fraud, a second conspiracy to commit securities fraud, and a third conspiracy to obstruct justice. Gormley argues that the Government's proof resulted in a material variance.

A "variance" occurs when "the evidence at trial establishes facts materially different from those alleged in the indictment." United States v. Kennedy, 32 F.3d 876, 883 (4th Cir. 1994). A defendant may establish that a material variance occurred "by showing that the indictment alleged a single conspiracy but that the government's proof at trial established the existence of multiple, separate conspiracies." Id.; see also Kotteakos v. United States, 328 U.S. 750, 755-56 (1946). The question whether the evidence shows a single or multiple conspiracies is for the jury, and the finding of a single conspiracy must stand unless the evidence, taken in the light most favorable to the Government, would not allow any reasonable juror to reach such a verdict. United States v. Urbanik, 801 F.2d 692, 695 (4th Cir. 1986).

We are satisfied that the jury's finding of a single conspiracy was supported by substantial evidence. Although the conspiracy had multiple objects--wire fraud, securities fraud, and obstruction--the objects clearly were related to the overall goal of defrauding investors through fraudulent offshore debentures trading programs. See United States v. Squillacote, 221 F.3d 542, 574 (4th Cir. 2000) (explaining that a close relation between the objects of alleged separate conspiracies supports a finding of a single conspiracy), cert. denied, 121 S.Ct. 1601 (2001); United States v. Walsh, 544 F.2d 156, 161 (4th Cir. 1976) (noting that a single conspiracy may have multiple objects). The co-conspirators obtained funds from investors through securities fraud. The wire fraud was used to move the investors' funds into the hands of Oles, the Raimers, and Tietjen. The obstruction was part of controlling the damage after Damron came under investigation for his role in the fraudulent debentures trading program.

The fact that some of the co-conspirators, including Gormley, never marketed the debentures trading programs to the actual investors does not prevent a finding of a single conspiracy because a defendant may be a member of a conspiracy without taking part in all of its activities. See United States v. Banks, 10 F.3d 1044, 1054 (4th Cir. 1993). Similarly, a single conspiracy may be found even though Tietjen, Holcombe, and Benz were not active in returning money to investors. The very structure of the scheme in this case required the conspirators to play different roles--brokers, project managers, and traders--to carry out the fraud and obscure the disposition of funds placed in the trading programs. Gormley prepared the different instruments used to carry out the scheme to defraud investors and directed the opening of the offshore trusts. Further, because a shifting membership in the conspiracy does not preclude a finding of a single conspiracy, a single conspiracy may be found even though Benz and Tietjen were involved only in later deals. United States v. Lozano, 839 F.2d 1020, 1023 (4th Cir. 1988). Finally, regardless of whether "hostility" arose between Oles on one side and Damron, Gormley and Bollin on the other after Damron was indicted in 1997, Oles was the source of the funds sent to Damron and the source of the funds used to repay investors, thus supporting the conclusion that they were participating in a common scheme. In sum, the evidence was sufficient to support the jury's finding of a single conspiracy.*fn9 Moreover, even if the evidence established separate conspiracies, a variance is grounds for reversal only if it infringed the defendant's "`substantial rights' and thereby resulted in actual prejudice." Kennedy, 32 F.3d at 883. "In order to show actual prejudice stemming from a multiple conspiracy variance, an appellant must prove that `there are so many defendants and so many separate conspiracies before the jury' that the jury was likely to transfer evidence from one conspiracy to a defendant involved in an unrelated conspiracy." Id. (quoting United States v. Caporale, 806 F.2d 1487, 1500 (11th Cir. 1989)).

In Kennedy, we held that an alleged variance had no prejudicial effect because there was "no possibility that evidence from unrelated conspiracies would be improperly attributed to individual defendants." Kennedy, 32 F.3d at 883. Kennedy involved eight defendants and, at most, three related conspiracies. We recognized that "cases involving similar numbers of defendants and conspiracies are `not so complex by definition that the jury will be unable to segregate the evidence properly.'" Id. (quoting Caporale, 806 F.2d at 1501 (eleven defendants and two conspiracies)). Further, the fact that the district court ordered a severance, and each defendant thus faced trial alone, virtually eliminated any likelihood of prejudicial "spillover" of evidence. Id.

Like in Kennedy, this case involves only eight named defendants and, if there was a variance, at most three conspiracies. Although the district court did not order a severance, only four of the eight defendants named in the indictment were tried together. Further, the district court granted Gormley's request for a multiple objects jury instruction, instructing the jury to consider each defendant's role in the conspiracy. The verdict form required the jury to make particularized findings about which objects each defendant conspired to violate, further helping the jury to compartmentalize the evidence as to each defendant. Any risk of a "spillover effect" was slight. Gormley's conviction on Count One is affirmed.

B. Sufficiency of the Evidence on Count Three, Wire Fraud

To convict Gormley for wire fraud in violation of 18 U.S.C. § 1343, "the government must prove: `1) a scheme to defraud and 2) the use of a wire communication in furtherance of that scheme.'" United States v. ReBrook, 58 F.3d 961, 966 (4th Cir. 1995) (quoting United States v. Brandon, 50 F.3d 464, 467 (7th Cir. 1995)); see also 18 U.S.C. § 1343. Gormley argues that the evidence is insufficient to prove that he transmitted or caused to be transmitted to Damron a September 13, 1995, memorandum, which furnished the wire coordinates for investors to send funds to Oles' offshore Exodus account. Gormley also argues that the Government failed to prove that Gormley knew the funds to be sent to Oles' offshore account came from the Toumas, and thus the Government failed to prove that Gormley had the requisite fraudulent intent. We conclude that the evidence was sufficient to support the jury's verdict.

Holcombe testified that she faxed the memorandum containing the wire coordinates to Gormley's office on September 13, 1995, and the fax headers on the document confirm her testimony. Damron testified that he received the memorandum from Bollin on September 13, 1995. Bollin testified that he could not recall how he obtained the document. Holcombe, however, testified that she faxed the memorandum only to Gormley because she believed that he was the person controlling the funds. Although Gormley shared office space with seven to nine other attorneys, he was a sole practitioner, and the attorneys in Gormley's space-sharing arrangement did not share clients. There is no evidence that Bollin worked with any of the other attorneys in Gormley's office. The evidence supports the conclusion that Gormley received the memorandum from Holcombe and furnished it to Bollin, who in turn sent the memorandum to Damron.

Further, assuming that Gormley did not know the $400,000 came from the Toumas,*fn10 Gormley's lack of knowledge is irrelevant because, as the Government points out, it was not required to prove that anyone had put up any money and had actually been defrauded in the wire fraud scheme (i.e., that the scheme succeeded), so long as the act of wire fraud was in furtherance of the scheme. See United States v. Bryan, 58 F.3d 933, 943 (4th Cir. 1995), abrogated on other grounds by United States v. O'Hagan, 521 U.S. 642, 650 (1997). Gormley's delivery of the wire coordinates for Oles' offshore account was in furtherance of the fraudulent investment scheme. Moreover, there is sufficient evidence from which the jury could infer that, by the time of the September 13, 1995, fax, Gormley knew the scheme was fraudulent. Gormley was a self proclaimed securities lawyer, and he claimed to be an expert on investment programs. Gormley reviewed the Exodus Program documents and was aware that the Program was a prime bank debentures trading program. The Government's expert testified that there were numerous indicators of fraud in the Exodus Program documents that should have raised a red flag to an experienced securities lawyer. If Gormley was not already aware that the debentures trading program was a scam, on August 17, 1995, Gormley met with Agent David Caruso of the Federal Bureau of Investigations, who explained the fraudulent nature of investment programs involving "prime bank" financial instruments, like the Exodus Program. We conclude that Gormley's wire fraud conviction was supported by the evidence.

C. Sufficiency of the Evidence on Count Six, Money Laundering, and Count Two, Money Laundering Conspiracy

A money laundering conviction under 18 U.S.C. § 1956 requires:

(1) that the defendant conduct a financial transaction with at least a de minimis effect on interstate commerce; (2) that the transaction involved the proceeds of a specified unlawful activity; (3) that the defendant knew that those proceeds were derived from that specific unlawful activity; and (4) that the defendant engaged in the transaction intending to promote that unlawful activity. United States v. France, 164 F.3d 203, 208 (4th Cir. 1998), cert. denied, 527 U.S. 1010 (1999); 18 U.S.C. § 1956(a)(1)(A)(i).

Funds are the proceeds of unlawful activity if they "are derived from an already completed offense, or a completed phase of an ongoing offense." United States v. Conley (Conley I), 37 F.3d 970, 980 (3d Cir. 1994); see also United States v. Butler, 211 F.3d 826, 829 (4th Cir. 2000), cert. denied, 121 S. Ct. 1091 (2001). "This is true even if the money laundering transaction can also be considered a part of the continuing specified unlawful activity." United States v. Morelli, 169 F.3d 798, 804 (3d Cir.), cert. denied, 528 U.S. 820 (1999). A defendant must have subjective knowledge that the funds were the proceeds of unlawful activity. United States v. Campbell, 977 F.2d 854, 857 (4th Cir. 1992).

Gormley's money laundering conviction is based on the September 20, 1995, transfer of $400,000 from Edwards' escrow account to Bollin's trust account in the Turks and Caicos Islands. Gormley drafted a letter dated September 19, 1995, from Damron to Edwards directing Edwards to release the $400,000.*fn11 Gormley disputes only whether the Government proved that he knew the funds were the proceeds of fraud. Gormley argues that the evidence failed to establish that Gormley knew the Toumas had put up the $400,000, but instead established that Gormley had been informed by Damron that the money came from Damron's profits from trading in Gold Eagle coins. There was substantial evidence, however, from which the jury could reasonably infer that Gormley knew the $400,000 was the proceeds of fraud.

In July 1995, Damron discussed with Gormley the Exodus Program documents, foreign bank debenture trading programs, and foreign grantor trusts. Damron testified that he wanted a foreign grantor trust because the money he planned to place in the Exodus Program would be his clients' money: "If I participated in the program, it would be with money from my clients. So I felt that I should have control over it, I should have my own foreign grantor trust." Damron's client with regard to the $400,000 was Dr. Touma. To protect Dr. Touma's interest, Damron asked Gormley about designating beneficiaries of his foreign grantor trust:

Q: When did you have your discussion with Mr. Gormley about foreign grantor -- beneficiaries of foreign grantor trusts?

A: That was -- would be just probably late July. It was before Dr. Touma -- or maybe shortly thereafter -- when Dr. Touma was getting ready to make that large investment, he was concerned that if I was okay, it was okay, but what if something happened to me. He wanted some protection for his money. And so I asked Mr. Gormley what could we do.

Q: What did Mr. Gormley tell you?

A: Well, that's what we did. We set up that successor ben eficiary thing so that if something happened to me, it was all spelled out who would get what percentage of the money.

This testimony supports an inference that Gormley knew Dr. Touma had contributed to the $400,000.

Further, Gormley confirmed in a letter dated July 24, 1995, that Dr. Touma was set up as the beneficiary of the trust. In the same letter, Gormley mentioned that "as to the investment matter we discussed," the funds would be held in Gormley's escrow account pending receipt of documents and a bank guarantee. Damron testified that the "investment matter" was the placement of $400,000 into the Exodus Program. Gormley was aware that Damron had deposited the $400,000 with an escrow agent, Edwards, in preparation for the investment. At this point, Gormley refused to give Damron the "green light" because no bank guarantee had yet been provided.

A short time later, in August 1995, Gormley met with Agent Caruso of the FBI, who explained to Gormley the fraudulent nature of prime bank debenture trading programs. By this point, if not earlier, Gormley knew these debenture trading programs were fraudulent. Nonetheless, on September 13, 1995, in furtherance of a program he knew was a scam, Gormley sent to Bollin the fax from Oles and Holcombe containing the wire coordinates to Oles' offshore Exodus account, thereby participating in wire fraud.

Gormley then prepared and faxed a profit sharing agreement between Damron and Bollin, dated September 18, 1995. The agreement noted that "Damron has introduced Bollin [sic] certain individuals who have placed U.S. $400,000 in Escrow for investment." This agreement contemplated Damron and Bollin splitting profits of over $1.8 million per week. Gormley then prepared for Damron the September 19, 1995, letter instructing Edwards to transfer the $400,000 to Bollin's foreign grantor trust. The funds were transferred the next day.

There is sufficient evidence to establish that Gormley knew the Exodus Program was a fraud, knew the $400,000 was being invested in this fraud, and knew he was facilitating the transfer of the funds to the perpetrators of this fraud. Furthermore, based on his knowledge that Dr. Touma was the beneficiary of Damron's foreign grantor trust, the reference to "certain investors" in the Bollin/Damron profit sharing agreement, and Gormley's connections with and knowledge of the relationships among Oles, Bollin, Damron, their offshore accounts, and the Exodus Program, the jury could reasonably infer that, at the time Gormley participated in the transfer of the $400,000 to Bollin's offshore account, Gormley knew the money was the proceeds of fraud.*fn12 We are satisfied that there was sufficient evidence to support Gormley's money laundering conviction.

Gormley raises the same arguments as to the sufficiency of the evidence on Count Two, the money laundering conspiracy charge. For the same reasons, we conclude that there was sufficient evidence to support the jury's verdict.

D. Sufficiency of the Evidence on Count Thirteen, False Declarations before the Court

Gormley was convicted of making false declarations before the court under 18 U.S.C. § 1623(a), based on two allegedly false statements that he made at an October 23, 1997, contempt hearing. In 1997, after Damron was placed under investigation, a financial restraining order was issued against Damron. While that restraining order was in effect, approximately $400,000 was repaid to certain investors. When questioned about the $400,000 in repayments, Gormley testified as follows:

Q: And what is your understanding as to those disburse ments and how they occurred?

A: And I believe that those are the bank drafts that these individuals received. And from everything I know, that money was not Mr. Damron's money, he didn't own it, he didn't control it.

And I don't know what this word "expectancy interest" is in the Court's order, exactly what that means, but I don't believe that Mr. Damron had any such interest in that money.

Q: Did Roger A. Damron direct or coordinate or orches trate the disbursement of these funds to these individual investors?

A: To my knowledge he did not.

The indictment alleged that at the time of his testimony, Gormley knew Damron had an interest in the $400,000 and knew Damron had coordinated, orchestrated and directed the repayments. Gormley contends that his perjury conviction should be reversed because (1) there was insufficient evidence to show that Gormley knew of Damron's role in the repayment; (2) the examiner's questions before the grand jury were fundamentally ambiguous and were insufficient as a matter of law to support a perjury conviction; and (3) his responses were literally true.

The evidence was sufficient to show that, at the time of his testimony, Gormley knew of Damron's role in returning the money to the investors. Before any money was sent to the investors, Damron and Gormley discussed who should be paid. Damron prepared a list of the amounts due to the investors and sent the list to Gormley. The persons on that list were the persons who were eventually paid. Further, discovered in Gormley's office was a copy of a handwritten fax from Damron to Paul Dempsey in the Turks and Caicos Islands, directing the repayment of money to the investors. The fax was dated August 27, 1997, and a notation indicated that it was faxed "before 10:30 am." Damron testified that it was his practice to make a notation in the upper right corner of a document when he faxed it. Moreover, based on the presence of the notation on faxes that Gormley received from Damron, the jury could reasonably infer that Gormley was fully aware of Damron's practice. Although Damron testified that Gormley refused to forward to Dempsey the list of investors to be repaid and advised Damron not to do it himself, there is sufficient evidence to support the conclusion that, at the time of his October 23, 1997, testimony, Gormley knew Damron had directed Dempsey to send the money to the investors.

Gormley argues that the examiner's question whether Damron "directed, coordinated, or orchestrated" the disbursement of funds to the investors was fundamentally unclear and impossible to answer, and therefore an improper basis for a perjury charge. Gormley argues that the question asked of him is like the question found insufficient to support a perjury conviction in United States v. Rendon-Marquez, 79 F. Supp. 2d 1361 (N.D. Ga. 1999), aff'd mem., 228 F.3d 416 (11th Cir. 2000). In Rendon-Marquez, the defendant was asked on an INS form, "Have you knowingly committed any crime or offense, for which you have not been arrested; or have you been arrested, cited, charged, indicted, convicted, fined, or imprisoned for breaking or violating any law or ordinance, including traffic violations?" The form provided for only a "yes" or a "no" response. The defendant answered in the negative, but had once been arrested. The district court granted a judgment of acquittal because it found the question to be a confusing compound question that asked two separate and distinct questions, but provided for only a yes/no response. Id. at 1363. The result was that the defendant would give a partially false answer no matter how he responded, making the defendant's response to the question an improper basis for a perjury conviction. Id.

"

recise questioning is imperative as a predicate for the offense of perjury." Bronston v. United States, 409 U.S. 352, 362 (1973). Unlike in Rendon-Marquez, Gormley was asked a single question, to which he gave a fully false response. The question asked of Gormley presented three possibilities, all of which--direct, coordinate, and orchestrate--are similar in meaning. All three refer to some conduct on Damron's part intended to bring about the repayment of investors. The evidence showed that Damron engaged in such conduct and that Gormley knew Damron engaged in such conduct. We find the question to be perfectly intelligible.*fn13 The question asked of Gormley was not ambiguous or unanswerable, and the matter was properly submitted to the jury. See United States v. Heater, 63 F.3d 311 (4th Cir. 1995) (affirming a perjury conviction based on the defendant's false response to the question whether he had ever "bought or sold " because the question did not contain any fundamental ambiguity that would have prevented the jury from considering the question).

Gormley next argues that his response to the second question was literally true because it was Oles, not Damron, who provided the funds to be used for repayment. "A literally true answer, even though unresponsive or `shrewdly calculated to evade,' cannot form the predicate for a perjury conviction." United States v. Sainz, 772 F.2d 559, 563 (9th Cir. 1985) (quoting United States v. Cowley, 720 F.2d 1037, 1042 (9th Cir. 1983)). However, "`an answer that is responsive and false on its face does not come within literal truth analysis simply because the defendant can postulate unstated premises of the question that would make his answer literally true.'" United States v. Fulbright, 804 F.2d 847, 851 (5th Cir. 1986) (quoting United States v. Cuesta, 597 F.2d 903, 920 (5th Cir. 1979)). Even though Oles provided the $400,000, there was sufficient evidence to establish that Damron was the one who instructed Dempsey to repay certain investors and how much to pay them. Gormley knew of Damron's role in the repayment but testified to the contrary.*fn14 Gormley's perjury conviction is affirmed.

[Sapphire Capital]

Part 2:

III. TRIAL ERRORS

Bollin and Tietjen challenge several of the district court's evidentiary rulings. Decisions regarding the admissibility of evidence are committed to the sound discretion of the trial court and will not be reversed absent an abuse of discretion. United States v. Bostian, 59 F.3d 474, 480 (4th Cir. 1995). Where a defendant fails to object to an asserted error at trial, the "plain error" standard applies. United States v. Olano, 507 U.S. 725, 731-32 (1993); Fed. R. Crim. P. 52(b).

A. Attorney-Client Privilege

Bollin contends that Robert Edwards' testimony was admitted in violation of Bollin's attorney-client privilege. The district court's decision whether certain evidence is subject to the privilege is a mixed question of law and fact subject to de novo review. In re Grand Jury Proceedings, 33 F.3d 342, 353 (4th Cir. 1994). The party claiming the privilege bears the burden of demonstrating that: "the attorney-client privilege applies; (2) the communications were protected by the privilege; and (3) the privilege was not waived." United States v. Aramony, 88 F.3d 1369, 1389 (4th Cir. 1996). Assuming that an attorney-client relationship existed between Bollin and Edwards,*fn15 Bollin does not identify any particular testimony that allegedly was privileged, but instead argues that Edwards should not have been allowed to testify at all. It is well-established, however, that the attorney-client privilege protects only confidential communications made for the purpose of seeking legal advice. E.g., United States v. Tedder, 801 F.2d 1437, 1441-42 (4th Cir. 1986). The privilege does not prevent an attorney from testifying as to non-confidential matters.

Moreover, we agree with the district court that Bollin waived any privilege that may have attached when he testified to the grand jury regarding the same transactions and communications about which Edwards testified. See United States v. Plache, 913 F.2d 1375, 1380 (9th Cir. 1990) (finding a waiver of the attorney-client privilege where the defendant testified before the grand jury regarding his conversations with counsel). The fact that Bollin was testifying before the grand jury pursuant to a subpoena does not preclude effective waiver. See id. The district court did not err in allowing Edwards to testify.

B. Exclusion of Evidence of Oles' Flight

Bollin further contends that the district court abused its discretion by excluding evidence that co-defendant Stephen Oles absconded. Bollin argues that the evidence of Oles' flight would have shown Oles to be a man who manipulated Bollin into participating in the events in this case, and would have been highly probative of Bollin's intent. Although a co-defendant's flight may be relevant to show the guilt of that defendant, see United States v. Porter, 821 F.2d 968 (4th Cir. 1987), it does not tend to show that another defendant is , at least not where, as here, there can be more than one guilty party. See United States v. Ortland, 109 F.3d 539, 545 (9th Cir. 1997). Further, any probative value of Oles' flight was substantially outweighed by the danger of confusing the issues where Oles was not being tried with the rest of the defendants. See Fed. R. Evid. 403. The district court did not abuse its discretion.

C. Admission of Bollin's Grand Jury Testimony

Bollin contends that the district court abused its discretion when it allowed the Government to present a redacted version of his grand jury testimony but refused to allow him to present the omitted portions under the rule of completeness or the former testimony exception to the hearsay rule. We find no abuse of discretion.

1. Former Testimony Exception

Federal Rule of Evidence 804(b)(1) provides an exception to the hearsay rule for the former testimony of a declarant where the declarant is unavailable as a witness.*fn16 A declarant is "unavailable" when the declarant "is exempted by ruling of the court on the ground of privilege from testifying concerning the subject matter of the declarant's statement." Fed. R. Evid. 804(a)(1). Bollin contends that he was "unavailable" because he had invoked his Fifth Amendment privilege against self-incrimination.

A criminal defendant who invokes his Fifth Amendment privilege makes himself unavailable to any other party. United States v. Bumpass, 60 F.3d 1099, 1102 (4th Cir. 1995). Rule 804(a) provides, however, that " declarant is not unavailable as a witness if exemption, refusal, claim of lack of memory, inability, or absence is due to the procurement or wrongdoing of the proponent of a statement for the purpose of preventing the witness from attending or testifying." Fed. R. Evid. 804(a). By invoking his Fifth Amendment privilege, Bollin made himself unavailable for the purpose of preventing his testimony, and he therefore cannot invoke the exception in Rule 804(b)(1). Accord United States v. Peterson, 100 F.3d 7, 13 (2d Cir. 1996) (holding that a defendant who exercises his privilege not to testify at a second trial of his case is not entitled to introduce the testimony he gave at the first trial); United States v. Kimball, 15 F.3d 54, 55-56 (5th Cir. 1994) (same).

2. Rule of Completeness

The "rule of completeness" is found in Federal Rule of Evidence 106, which provides:

When a writing or recorded statement or part thereof is introduced by a party, an adverse party may require the introduction at that time of any other part or any other writ ing or recorded statement which ought in fairness to be con sidered contemporaneously with it. Fed. R. Evid. 106.

The purpose of the rule is "to prevent a party from misleading the jury by allowing into the record relevant portions of the excluded testimony which clarify or explain the part already received." United States v. Wilkerson, 84 F.3d 692, 696 (4th Cir. 1996). The portions of the excluded testimony thus must be relevant to an issue in the case, and the court need only admit the portions that are necessary to clarify or explain the portion of the testimony already admitted. Id.

Bollin identifies several portions of his grand jury testimony that he contends should have been admitted under Rule 106. We have reviewed Bollin's grand jury testimony as admitted and his unredacted grand jury testimony. Like the district court, we conclude that the omitted testimony was not necessary to avoid misleading the jury or otherwise place the admitted testimony in context. The fact that some of the omitted testimony arguably was exculpatory does not, without more, make it admissible under the rule of completeness.

D. Admission of Tietjen's Grand Jury Testimony

The Government introduced against Tietjen a redacted version of his grand jury testimony. Because Tietjen did not raise at trial his objections to the admission of his grand jury testimony, the plain error standard of review applies. See Olano, 507 U.S. at 731-32.

Tietjen first argues that his grand jury testimony was taken in violation of his Fifth Amendment right against self-incrimination, and therefore should not have been admitted. His claim is foreclosed by United States v. Washington, 431 U.S. 181, 188 (1977). Like in Washington, after being sworn, Tietjen was explicitly advised that he had the right not to incriminate himself and that if any questions tended to incriminate him, he had the right under the Fifth Amendment not to answer the question. He was advised that anything he said could be used against him by the grand jury or in subsequent legal proceedings, and was advised of his right to counsel. The Government correctly and completely answered Tietjen's later questions regarding his Fifth Amendment privilege. These warnings eliminated any possible compulsion to self-incrimination. See id. at 188. Whether Tietjen was a target of the grand jury investigation is irrelevant under Washington. See id. at 189; United States v. Goodwin, 57 F.3d 815, 818-19 (9th Cir. 1995).

Tietjen also maintains that his Sixth Amendment right to counsel had attached at the time of his grand jury testimony. But at the time Tietjen testified to the grand jury, no adversary judicial proceedings against him had yet been initiated. See United States v. Gouveia, 467 U.S. 180, 187 (1984) ("[The Sixth Amendment] right to counsel attaches only at or after the initiation of adversary judicial proceedings against the defendant."). The Government's warnings to Teitjen regarding his Fifth Amendment rights do not show that a prosecution had commenced. Indeed, no indictment was returned against Tietjen until over one year after he testified to the grand jury. His Sixth Amendment right to counsel thus had not yet attached.

Tietjen further contends that his redacted grand jury testimony, read at trial, was not sufficiently complete under the "rule of completeness." Tietjen's grand jury testimony was redacted to remove all references to co-defendant Stanie Benz in order to comply with the rule in Bruton v. United States, 391 U.S. 123 (1968). Benz entered a plea on the day before trial and then testified against Tietjen. The redacted version of Tietjen's testimony nonetheless was introduced. However, the omitted portions of Tietjen's testimony were not necessary to avoid misleading the jury or to clarify or explain any portion of the admitted testimony, and the rule of completeness does not require the court to admit Tietjen's complete grand jury testimony solely because some portions might be exculpatory. See Wilkerson, 84 F.3d at 696. Moreover, Tietjen suffered no prejudice. Stanie Benz testified at trial, and Tietjen had full opportunity to cross examine her. The district court did not err.

IV. SENTENCING

The district court's factual findings underlying sentencing enhancements are reviewed for clear error. The district court's legal interpretations are reviewed de novo. United States v. Akinkoye, 185 F.3d 192, 201 (4th Cir. 1999), cert. denied, 528 U.S. 1177 (2000).

A. Two-Level Enhancement for Abuse of a Position of Trust

Both Bollin and Tietjen appeal the district court's application of a two-level enhancement under U.S.S.G. § 3B1.3 for abuse of a position of trust. Under § 3B1.3, a defendant's sentence is increased by two levels "if [the district court] determines that the defendant abused a position of trust and that abuse significantly contributed to the commission or concealment of the crime." Id. at 203; U.S.S.G. § 3B1.3. "Whether a defendant occupied a position of trust warranting a twolevel enhancement under U.S.S.G. § 3B1.3 is a factual determination reviewable for clear error." United States v. Glymph, 96 F.3d 722, 727 (4th Cir. 1996).

Whether a defendant held a position of trust must be "approached from the perspective of the victim." United States v. Gordon, 61 F.3d 263, 269 (4th Cir. 1995). Thus, the § 3B1.3 adjustment may be applied "in a case in which the defendant provides sufficient indicia to the victim that the defendant legitimately holds a position of private or public trust when, in fact, the defendant does not." U.S.S.G. § 3B1.3, cmt. n.2; see also United States v. Queen, 4 F.3d 925, 929 (10th Cir. 1993) (holding that the § 3B1.3 enhancement may apply to imposters). In the case of an imposter, it is not merely the defendant's misrepresentation that justifies the § 3B1.3 enhancement. In every case of fraud, the defendant will have created confidence and trust in the victim. But fraud alone does not justify the enhancement. We must "carefully distinguish between those arms-length commercial relationships where trust is created by the defendant's personality or the victim's credulity, and relationships in which the victim's trust is based on the defendant's position in the transaction." United States v. Koehn, 74 F.3d 199, 201 (10th Cir. 1996). Section 3B1.3 penalizes defendants who take advantage of a position that provides them with the "freedom to commit a `difficult-to-detect wrong.'" United States v. Moore, 29 F.3d 175, 179 (4th Cir. 1994) (quoting United States v. Hill, 915 F.2d 502, 506 (9th Cir. 1990)).

Tietjen argues that he does not qualify for the § 3B1.3 enhancement because he did not have a trust relationship with the investors and because the enhancement may not be applied by imputing to him a co-conspirator's abuse of a position of trust. The district court applied the enhancement based on Tietjen's own abuse of a position of trust; the court did not impute to him Benz's alleged abuse of a position of trust. See Moore, 29 F.3d at 179 (holding that one coconspirator's abuse of a position of trust is not attributable to another co-conspirator). The district court found that Tietjen falsely held himself out as having a high level of skill and experience in debentures trading. Although it was Benz who actually solicited the investors, Tietjen caused the impression that he was a legitimate, experienced debentures trader to be passed on to the ultimate investors to induce them to invest. See Queen, 4 F.3d at 930 (affirming an enhancement under § 3B1.3 where the defendant caused his employees to hold him out as a legitimate investment advisor/broker). In entrusting Tietjen with their money, the investors provided Tietjen with the discretion to invest on their behalf and expected Tietjen to make trades in their best interest, which he did not do. See United States v. Davuluri, 239 F.3d 902, 909 (7th Cir. 2001) (noting that what distinguishes situations in which § 3B1.3 should apply is "whether the defendant has broad discretion to act on behalf of the victim and the victim believes the defendant will act in the victim's best interest"). The district court did not clearly err in finding that Tietjen had abused a position of trust justifying an enhancement under § 3B1.3.

Bollin also argues that the district court erred in applying the § 3B1.3 enhancement to him because he did not actually possess any specialized knowledge and did not actually assume a position of trust vis-a-vis the victims. The district court found that although Bollin may have lacked the specialized knowledge of an actual investment broker, Bollin represented that he knew about debentures trading programs, knew their track record, and had experience investing in them. Bollin held himself out as experienced in debentures trading and caused that impression to be extended to the ultimate investors. Bollin represented that he was the "broker" in the investment program, and the investors' funds were entrusted to him when they were transferred to his offshore trust account. Bollin demonstrated that, as far as the investors were concerned, he was vested with discretionary authority over their money when he falsely claimed to have "frozen" the funds in order to protect them. Bollin used his position as the "broker" in the transaction to lull the investors into delaying going to the authorities or suing to recoup their losses. Although Bollin also falsely represented that he was a co-investor in the debentures trading program, we cannot say the district court clearly erred in finding that Bollin occupied and abused a position of trust justifying the § 3B1.3 enhancement.

B. Two-Level Enhancement for Obstruction of Justice

Tietjen contends that the district court erred by applying a twolevel enhancement under U.S.S.G. § 3C1.1 for obstruction of justice. Because Tietjen failed to raise his objection at sentencing, we review for plain error. See United States v. Kinter, 235 F.3d 192, 199 (4th Cir. 2000), cert. denied, 121 S. Ct. 1393 (2001). The district court did not err. Tietjen was convicted of conspiracy to obstruct justice under 18 U.S.C. § 1503. The applicable Guideline for obstruction of justice is § 2J1.2. Note 3 of the § 2J1.2 Commentary provides: "In the event the defendant is convicted under this section as well as for the underlying offense (i.e., the offense that is the object of the obstruction), see the Commentary to Chapter Three, Part C (Obstruction), and to § 3D1.2(c) (Groups of Closely Related Conduct)." U.S.S.G. § 2J1.2, cmt. n.3. Tietjen argues that Note 7 of § 3C1.1 governs his sentence and precludes the enhancement. We disagree. Because Tietjen was also convicted of conspiracy to commit fraud and money laundering, the offenses with respect to which the obstruction conduct occurred, Note 8 governs. Note 8 provides:

If the defendant is convicted both of an obstruction offense . . . and an underlying offense (the offense with respect to which the obstruction conduct occurred), the count for the obstruction offense will be grouped with the count for the underlying offense under subsection (c) of § 3D1.2 . . . . The offense level for that group of closely related counts will be the offense level for the underlying offense increased by the 2-level adjustment specified by this section. . . . U.S.S.G. § 3C1.1, cmt. n.8.

The enhancement for obstruction of justice was proper.

C. Relevant Conduct

Tietjen contends that the district court erred by using $2.4 million as the relevant conduct amount in the Guidelines calculations for Counts One and Two. Tietjen objects to the inclusion of $1 million that he never actually received because the funds were returned to Benz by Dean Witter, who refused to complete the transfer.*fn17 Tietjen, however, expected to receive the $1 million from Benz. He did not actually receive the funds only because the bank refused to complete the transfer. The $1 million thus was properly attributed to Tietjen. Further, there is no error in the district court's calculation under Apprendi v. New Jersey, 530 U.S. 466 (2000), because Tietjen's sentence--60 months on Count One and 135 months on Count Two to run concurrently--did not exceed the statutory maximums. See 18 U.S.C. § 371 (maximum 5 years); 18 U.S.C. § 1956(a), (h) (maximum 20 years); Kinter, 235 F.3d at 199-200 (recognizing that the Apprendi holding is limited to factual determinations that increase the penalty for a crime beyond the prescribed statutory maximum, and holding that the prescribed statutory maximum is found by looking to the language of the statute criminalizing the offense). The district court did not err.

D. $1.2 Million Forfeiture Judgment

Gormley contends that his $1.2 million forfeiture judgment violates the Excessive Fines Clause of the Eighth Amendment to the United States Constitution. This court considers de novo whether a forfeiture is a constitutionally excessive fine. United States v. Bajakajian, 524 U.S. 321, 336-37 (1998). The burden is on the party challenging the constitutionality of the forfeiture to demonstrate its excessiveness. United States v. Ahmad, 213 F.3d 805, 813 (4th Cir.), cert. denied, 121 S. Ct. 573 (2000). " punitive forfeiture violates the Excessive Fines Clause if it is grossly disproportional to the gravity of a defendant's offense." Bajakajian, 524 U.S. at 334. To determine the proportionality of a forfeiture, a court should consider "the nature and extent of the criminal activity, its relation to other crimes, its penalties, and the harm it caused." Ahmad, 213 F.3d at 813; see also Bajakajian, 524 U.S. at 337-40.

Gormley argues that his $1.2 million forfeiture judgment is excessive under United States v. Van Brocklin, 115 F.3d 587 (8th Cir. 1997), in which the Eighth Circuit held that a forfeiture judgment of over $1.3 million against a defendant who played a secondary role in the fraudulent scheme violated the Excessive Fines Clause. Id. at 601-02. Gormley argues that his forfeiture judgment is excessive in light of his minor role in the money laundering activities, the small personal benefit that he received, approximately $30,000 in legal fees, and his lesser culpability compared to that of the other defendants.

In United States v. Bajakajian, the defendant pleaded guilty to failure to report exported currency in the amount of $357,144. 524 U.S. at 337. Although 18 U.S.C. § 982(a)(1) required forfeiture of the entire amount involved in the offense, the Supreme Court concluded that forfeiture of the entire $357,144 violated the Excessive Fines Clause because the amount of the forfeiture was grossly disproportional to the gravity of the defendant's offense. Id. The defendant's crime was "solely a reporting offense," and his violation was "unrelated to any other unlawful activities." Id. at 337-38. Although the maximum statutory sentence was five years and/or a $250,000 fine, the maximum sentence that could have been imposed on the defendant under the Sentencing Guidelines was six months and a $5,000 maximum fine, thus indicating a minimal level of culpability. Id. at 338. Moreover, the defendant caused only minimal harm, merely depriving the government of information, but causing no loss to the public fisc. Id. The gravity of the defendant's offense thus was low, while the amount of the forfeiture was very high. Id. at 339-40. The forfeiture of the entire $357,144 therefore violated the Excessive Fines Clause. Id. at 340.

After considering the factors set forth in Bajakajian, we are satisfied that Gormley's $1.2 million forfeiture judgment is not grossly disproportional to the gravity of his offense.*fn18 Unlike in Bajakajian, the nature of Gormley's criminal activity in this case was not merely a reporting violation. Gormley was involved in money laundering, and the money laundering arose out of and involved a continuing securities fraud scheme that defrauded multiple investors out of millions of dollars. See Ahmad, 213 F.3d at 817 (finding the defendant's reporting offense to be serious in part because it was part of a larger customs fraud scheme). The forfeiture judgment was not based on a single occurrence of money laundering. Instead, the defendants conducted multiple transactions over a period of nearly two years. Further, the statutory maximum for Gormley's offense was twenty years and/or a $500,000 fine, thus indicating that Congress has found the offense to be serious. See Bajakajian, 524 U.S. at 336 (noting that "judgments about the appropriate punishment for an offense belong in the first instance to the legislature"). Under the Sentencing Guidelines, Gormley faced a sentence of ninety-seven to 121 months and a $500,000 fine. See U.S. Sent. Guidelines Manual, Sent. Table. Although the district court found Gormley eligible for a reduction in his sentence based on his "minor role" in the offense, the significant penalties Gormley faced demonstrate the gravity of his offense.

Moreover, although Gormley received only about $30,000, he is liable in a forfeiture judgment for the foreseeable criminal conduct of his co-conspirators. See United States v. McHan, 101 F.3d 1027, 1043 (4th Cir. 1996); United States v. Hurley, 63 F.3d 1, 22 (1st Cir. 1995); see also United States v. Gormley, 176 F.3d 476, 1999 WL 212008 (4th Cir. 1999) (per curiam) (unpublished) (affirming in Gormley's interlocutory appeal the district court's ruling that Gormley may be held jointly and severally liable for any forfeitable assets possessed by his co-defendants). As the First Circuit has noted, "holding a defendant liable for an amount of money foreseeably laundered by himself and his own co-conspirators is quite rational based on a proportionality analysis." Hurley, 63 F.3d at 23. In light of the extent of the money laundering, its relationship to the securities fraud scheme, and the harm caused, Gormley's $1.2 million forfeiture judgment is not excessive.

E. $783,545 in Restitution

Gormley contends that the order to pay restitution in the amount of $783,545 violates the Excessive Fines Clause based on the same arguments that he raised regarding his forfeiture judgment. For the same reasons that Gormley's forfeiture judgment is not excessive, we find that the restitution order is not excessive.

Gormley also argues that remand is in order because the district court failed to make factual findings that Gormley has, or may have, an ability to pay restitution. Under the Victim and Witness Protection Act (VWPA), the sentencing court must make specific factual findings with respect to a defendant's financial resources, financial needs, and earning abilities before ordering restitution. See 18 U.S.C. § 3663(a) (1994); United States v. Karam, 201 F.3d 320, 329 (4th Cir. 2000). In his reply brief, Gormley suggests for the first time that the district court ordered restitution pursuant to the Mandatory Victims Restitution Act of 1996 (MVRA). The MVRA amended the VWPA by requiring sentencing courts to impose "full" restitution without considering the defendant's economic circumstances. See 18 U.S.C. §§ 3663A, 3664(f)(1)(A) (Supp. V 1999); Karam, 201 F.3d at 330. Under the VWPA, the court must first consider the defendant's financial situation before determining the amount of restitution to be paid. See 18 U.S.C. § 3664(a) (1994). Because Gormley's restitution was based on criminal activity that occurred before the MVRA's effective date, Gormley contends that application of the MVRA would violate the Ex Post Facto Clause of the United States Constitution.*fn19 Assuming without deciding that the district court was required to apply the VWPA, Gormley failed to object to the district court's alleged failure to make the required findings at the time of sentencing. Because Gormley failed to object at sentencing, we review only for plain error.*fn20 See Karam, 201 F.3d at 330. We conclude that Gormley has failed to show that the alleged lack of factual findings prejudiced his rights in any way.

A sentencing court "satisfies its duty [under the VWPA] to make specific findings if it adopts a presentence report`that contains adequate factual findings to allow effective appellate review of the fine or restitution.'" Id. (quoting United States v. Castner, 50 F.3d 1267, 1277 (4th Cir. 1995)). The district court adopted the factual findings of Gormley's presentence report (PSR). The PSR indicates that Gormley is well-educated and industrious. Gormley obtained scholarships for his preparatory and college education. He worked his way through college and law school. Although Gormley likely will lose his law license as a result of his conviction and will no longer have earning potential as a lawyer, the loss of his license does not render him completely unable to earn a living, particularly because Gormley is welleducated, is in good health, and has no history of substance abuse. The PSR recommended that an installment plan be established so that Gormley could pay a restitution obligation, which the district court ordered. Moreover, Gormley does not explain how, or even whether, the district court's restitution order would have been different had the court made factual findings. See Castner, 50 F.3d at 1278 (noting that under the plain error standard, appellants bear the burden of proof with respect to prejudice of their rights); 18 U.S.C. § 3664(d) (1994) ("The burden of demonstrating the financial resources of the defendant and the financial needs of the defendant and such defendant's dependents shall be on the defendant."). The PSR contained sufficient facts to support the imposition of restitution. Gormley fails to demonstrate a probability that the amount of restitution would have been different had the court made specific findings regarding his ability to pay.

Gormley also argues that the district court violated the requirement in United States v. Johnson, 48 F.3d 806, 808-09 (4th Cir. 1995), that the district court retain authority over restitution orders. At sentencing, the district court ordered the full amount of restitution payable in monthly installments. The district court also ordered that Gormley's "ability to pay restitution will be reassessed by the probation officer after his release from custody. And if a modification is in order, report that modification to this Court for action." The court clearly stated that the probation officer should report to the court, but that the court would take any action. Thus, the court "retained both the right to review the probation officer's findings and to exercise ultimate authority regarding the payment of restitution." United States v. Dawkins, 202 F.3d 711, 717 (4th Cir.), cert. denied, 529 U.S. 1121 (2000). The district court did not improperly delegate its authority. Gormley's restitution order is affirmed.

F. Use of IRA Funds to Retain Appellate Counsel

Gormley's assets were subject to a restraining order that required him to obtain court permission for expenditures beyond ordinary living expenses. After he was convicted, Gormley asked the court for permission to spend $80,000 from his individual retirement account (IRA) to retain appellate counsel. Gormley argued that the funds in his IRA were protected from levy under Georgia law. The district court denied Gormley's request, holding that the funds in Gormley's IRA were potentially subject to forfeiture as substitute assets under 18 U.S.C. § 982(b)(1), which incorporates the substitute asset provision of 21 U.S.C. § 853(p), and that the protections for IRAs provided by Georgia law would not extend to IRA funds subject to criminal forfeiture. Gormley appeals the district court's denial of his motion. The district court's order is an order denying modification of an injunction, which we review for an abuse of discretion. See United States v. Snepp, 897 F.2d 138, 141 (4th Cir. 1990). We conclude that the district court did not abuse its discretion. Gormley's forfeiture judgment was entered pursuant to 18 U.S.C. § 982(a)(1). Section 982(b)(1) incorporates the forfeiture provisions of 21 U.S.C. § 853. Under § 853(p), where the property initially subject to forfeiture is unavailable, the government may forfeit substitute assets:

If any of the property described in subsection (a) of this sec tion, as a result of any act or omission of the defendant-

(1) cannot be located upon the exercise of due dili gence;

(2) has been transferred or sold to, or deposited with, a third party;

(3) has been placed beyond the jurisdiction of the court;

(4) has been substantially diminished in value; or

(5) has been commingled with other property which cannot be divided without difficulty;

the court shall order the forfeiture of any other property of the defendant up to the value of any property described in paragraphs (1) through (5). 21 U.S.C. § 853(p).

In money laundering cases, § 982(b)(2) places a narrow limitation on the forfeiture of substitute assets by protecting against forfeiture a defendant who "acted merely as an intermediary who handled but did not retain" the laundered funds, unless the defendant conducted "three or more separate transactions involving a total of $100,000 or more in any twelve month period." 18 U.S.C. § 982(b)(2).

The Government has not yet moved to amend Gormley's forfeiture judgment to forfeit substitute assets. The order that Gormley appeals is an order leaving in place a restraining order under 21 U.S.C. § 853(e), not an order forfeiting Gormley's IRA funds. Under § 853(e), the district court may issue a restraining order to preserve the availability of the assets for forfeiture, "based on a finding of probable cause to believe that the assets are forfeitable." United States v. Monsanto, 491 U.S. 600, 615 (1989); 21 U.S.C.§ 853(e); see also In re Billman, 915 F.2d 916, 919 (4th Cir. 1990). The probable cause found by the grand jury satisfies the government's burden of proving the allegations of the indictment. Id. This court has held that the pretrial restraint provision of the RICO forfeiture statute, 18 U.S.C. § 1963(d), permits the restraint of substitute assets under § 1963(m) pending resolution of the defendant's case. Id. at 921. The restraint and substitute assets provisions of § 853 are identical to those in the RICO statute, and we see no reason to construe them differently. See id. (noting that "[§ 853] and RICO forfeiture statutes should be similarly construed"). Gormley's substitute assets thus were subject to restraint to preserve their availability for forfeiture pending the outcome of his case.

The jury found Gormley liable for forfeiture of $1.2 million, and the indictment included a notice to seek substitute assets.*fn21 There is probable cause to believe that at least a significant portion of the $1.2 million in laundered funds is no longer available; the funds were transferred to overseas accounts beyond the jurisdiction of the district court and were used to repay investors and other individuals. As a member of a conspiracy, Gormley is vicariously liable for the reasonably foreseeable conduct of his co-conspirators, both substantively and at sentencing. See McHan, 101 F.3d at 1042-43; Hurley, 63 F.3d at 23. His substitute assets thus may be subject to forfeiture in the event the laundered funds are determined to be unavailable. See id. (affirming the forfeiture of substitute assets where the defendants were held vicariously liable for a $136 million forfeiture based on the reasonably foreseeable money laundering activities of their coconspirators). Gormley argues that he was merely an intermediary and is therefore entitled to the benefit of the safe harbor provided by § 982(b)(2). Gormley did not raise this argument before the district court, however, and we decline to address it at this time. We leave it to the district court to address this argument and make the appropriate findings if and when the Government moves for an order to forfeit Gormley's substitute assets.

Gormley further argues, however, that the district court should have released his IRA funds because Georgia law insulates all but 25% of the funds from forfeiture. Under Georgia Code § 18-4-22, funds in an IRA are "exempt from the process of garnishment until paid . . . . Such funds or benefits, when paid . . ., shall be exempt from the process of garnishment only to the extent provided in Code Section 18-4-20 for other disposable earnings, unless a greater exemption is otherwise provided by law." Ga. Code Ann.§18-4-22. Section 18-4-20 limits the garnishment to 25%. Ga. Code Ann.§ 18-4-20. We have found no federal or state case applying § 18-4-22 to a criminal forfeiture, and Gormley provides no such authority. As the district court noted, the cases that address §§ 18-4-20 and 18-4-22 discuss shielding an IRA from a creditor attempting to collect a debt. See, e.g., Davis v. Davis, 288 S.E.2d 748 (Ga. Ct. App. 1982); Cooper v. Atlanta Policemen's Pension Fund, 249 S.E.2d 684 (Ga. Ct. App. 1978). Gormley's forfeiture judgment is not merely a debt, but is part of his criminal sentence. See 18 U.S.C.§ 982(a)(1) (instructing the court to order forfeiture of property involved in the offense "in imposing sentence" on a person convicted of a money laundering offense).

Moreover, under the Clause of the United States Constitution, Georgia law could not insulate Gormley's assets from forfeiture to the extent that federal law provides otherwise. A state law is preempted to the extent that it conflicts with federal law. Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248 (1984). In making the determination of whether state law conflicts with federal law, "the test to apply is whether `it is impossible to comply with both state and federal law' or whether `the state law stands as an obstacle to the accomplishment of the full purposes and objectives' of the relevant federal law." National Home Equity Mortgage Ass'n v. Face, 239 F.3d 633, 637 (4th Cir. 2001) (quoting Silkwood, 464 U.S. at 248).

As noted above, a forfeiture under 18 U.S.C. § 982 is ordered as part of a defendant's sentence for a federal money laundering conviction. See 18 U.S.C. § 982(a)(1). Federal sentencing laws supersede state laws that purport to place limits on a federal defendant's criminal sentence when federal law provides otherwise. See United States v. Daniels, 929 F.2d 128, 130 (4th Cir. 1991) (noting that under the Clause, state law could not prevent consideration of juvenile proceedings by a federal court in determining a sentence, when federal law provides otherwise).

Further, under federal law, the funds in Gormley's IRA may be forfeited in their entirety. Section 982(a)(1) states that "any property, real or personal, involved in" the money laundering offense, without limitation or qualification, is subject to forfeiture. 18 U.S.C. § 982(a)(1) (emphasis added). The statute makes no allowance for property protected by state law. Similarly, the substitute assets provision provides that the court "shall order the forfeiture of any other property up to the value of" the initially forfeited property, in the event the original property is unavailable. 21 U.S.C. § 853(p) (emphasis added); 18 U.S.C. § 982(b)(1). Congress requires the forfeiture of any other property as substitute assets and again makes no allowance for protections offered under state law. Cf. United States v. Lot 5, 23 F.3d 359, 363 (11th Cir. 1994) (holding that because 21 U.S.C. § 881(a)(7) makes no exception for property protected by state law, the Florida homestead exemption does not protect real property from forfeiture under federal law). As this court has recognized, the substitute assets provision in § 853(p) "was enacted to make the government's forfeiture efforts more effective." United States v. Moffitt, Swerling & Kemler, P.C., 83 F.3d 660, 669 (4th Cir. 1996). Because Georgia law would insulate all but 25% of a defendant's IRA funds from forfeiture while federal law provides for full forfeiture, Georgia law conflicts with federal law and "stands as an obstacle to the accomplishment of the full purposes and objectives" of the federal money laundering forfeiture laws.

Although state law "has traditionally been relied upon to resolve questions of property rights and interests arising under [the forfeiture laws]," once a defendant's property interest has been identified, federal forfeiture law determines whether the property may be forfeited. Id. at 670; accord United States v. Dicter, 198 F.3d 1284, 1290 (11th Cir. 1999) (holding that 21 U.S.C. § 853(a) applies "irrespective of any provision of state law"), cert. denied , 121 S. Ct. 77 (2000); United States v. 18755 North Bay Road, 13 F.3d 1493, 1498 (11th Cir. 1994) (holding that federal forfeiture law preempts the Florida homestead exemption); United States v. Curtis, 965 F.2d 610, 616 (8th Cir. 1992) (holding that § 853(a) supersedes the Iowa homestead exemption); see also United States v. Rodgers, 461 U.S. 677 (1983) (holding that federal tax collection laws supersede state homestead laws); United States v. Allen, 247 F.3d 741, 794 (8th Cir. 2001) ("[W]e think the legal principles are clear that state law determines whether a property interest exists in the first instance, but federal law determines whether and how that property may be attached."). Indeed, to hold otherwise would virtually destroy the uniformity of application of the money laundering forfeiture laws and would interfere with Congress' intent. See Curtis, 965 F.2d at 616-17. We conclude that federal forfeiture law supersedes Georgia's statutory protections for IRAs. The district court did not abuse its discretion in declining to modify its restraining order.

V. CONCLUSION

For the foregoing reasons, we affirm the convictions and sentences of appellants Gormley, Bollin, and Tietjen. We also affirm the district court's order denying Gormley permission to spend funds from his IRA pending the outcome of his case.

AFFIRMED.

Opinion Footnotes

*fn1 Because only the appeals of Bollin, Tietjen, and Gormley are before us, we limit our discussion of the facts to those facts relevant to Appellants.

*fn2 According to Damron, Dr. and Mrs. Touma were his "best customers" in the Gold Eagle Program, a program run by Damron that involved investments in gold coins.

*fn3 This fax is the basis for the wire fraud charge in Count Three.

*fn4 The transfer of the $400,000 is the basis for the money laundering charge in Count Six.

*fn5 Bollin was sentenced to 108 months imprisonment on Counts Two, Six, Seven, Eight, Nine and Ten, and 60 months on Counts One, Three and Four, to run concurrently.

*fn6 Tietjen was sentenced to 60 months imprisonment on Count One and 135 months on Count Two, to run concurrently.

*fn7 Gormley was sentenced to 60 months imprisonment on Counts One, Three, and Thirteen, and 97 months on Counts Two and Six, to run concurrently.

*fn8 In an interlocutory appeal, Gormley challenged the district court's ruling that he could be held jointly and severally liable for any forfeitable assets possessed by his co-defendants. This court affirmed in an unpublished opinion. United States v. Gormley, 176 F.3d 476, 1999 WL 212008 (4th Cir. 1999) (per curiam) (unpublished).

*fn9 The evidence also was sufficient to support the jury's conclusion that Gormley was part of the conspiracy. Gormley was involved with Oles, the Raimers, Bollin, and Damron from the very beginning. Gormley knew how the Exodus Program worked, as we discuss in more detail below, knew the program was fraudulent, and took actions in furtherance of the scheme. After Damron was placed under investigation, Gormley also played a role in the return of funds to investors.

*fn10 As we discuss below, there was sufficient evidence from which the jury could infer that Gormley was aware that the Toumas had contributed to the $400,000.

*fn11 Gormley suggests that the evidence showed that Damron drafted the release letter, not Gormley. We disagree. Damron testified on direct examination that Gormley drafted the release letter, which Damron then signed and sent to Edwards. Damron did not repudiate his testimony that Gormley drafted the letter, but merely confirmed on cross examination that he instructed Edwards in a letter that the $400,000 was to be transferred.

*fn12 Thus, it is irrelevant whether Gormley, as an attorney, had a duty to inquire as to the source of his client's funds because he knew the $400,000 was the proceeds of fraud. Indeed, Gormley knew the $400,000 was the proceeds of a fraudulent scheme when he participated in wire fraud in furtherance of that scheme on September 13, 1995.

*fn13 Moreover, the question appears to have been perfectly intelligible to Gormley. As his response to the first question indicates, when Gormley did not understand a question or a term, he communicated his lack of understanding.

*fn14 We need not reach Gormley's argument that his response to the first question was literally true because his false response to the second question was sufficient to support his conviction. The jury was entitled to find Gormley guilty for either response because the United States charged in the conjunctive, charging that Gormley falsely testified about whether Damron had an interest in the $400,000 and whether he had, in fact, coordinated, orchestrated, and directed the repayment of investors. See Turner v. United States, 396 U.S. 398, 420 (1970) (reaffirming the "general rule" that where an indictment charges several acts in the conjunctive, a guilty verdict stands if the evidence is sufficient with respect to any one of them); United States v. Sarihifard, 155 F.3d 301, 310 (4th Cir. 1998) (applying the Turner rule to a perjury charge).

*fn15 The record shows that Bollin contacted Edwards to act as an escrow agent and not for the purpose of seeking legal advice. The district court assumed, without finding, that an attorney-client relationship existed between Bollin and Edwards.

*fn16 Bollin also argues that his grand jury statements are not hearsay. His statements to the grand jury were made out of court, and Bollin would introduce them to prove the truth of the matter asserted. They are hearsay. See Fed. R. Evid. 801(c). The statements were admissible by the Government as admissions under Rule 801(d)(2).

*fn17 Tietjen also objects to the inclusion of a $250,000 sum that was also returned to Benz by the bank. Because the threshold for the relevant conduct is $2 million, see U.S.S.G. § 2S1.1(b)(2)(G), and the district court attributed to Tietjen $2.4 million, only the $1 million sum could affect Tietjen's sentence. We therefore do not reach his challenge to the inclusion of the $250,000.

*fn18 Gormley's forfeiture was imposed under 18 U.S.C. § 982(a)(1), the same provision at issue in Bajakajian, and as part of his criminal sentence. Thus, there is no question that the forfeiture ordered against Gormley is punitive and therefore subject to analysis under the Excessive Fines Clause.

*fn19 The MVRA provides that it "shall, to the extent constitutionally permissible, be effective for sentencing proceedings in cases in which the defendant is convicted on or after [April 24, 1996]." 18 U.S.C. § 2248, statutory notes. The circuits are split on whether applying the MVRA to criminal conduct committed before the MVRA's enactment violates the Ex Post Facto Clause. Compare United States v. Edwards, 162 F.3d 87 (3d Cir. 1998) (holding that applying the MVRA to criminal conduct committed before the MVRA's enactment violates the Ex Post Facto Clause); United States v. Siegel, 153 F.3d 1256, 1259-61 (11th Cir. 1998) (same); United States v. Williams, 128 F.3d 1239, 1241 (8th Cir. 1997) (same); United States v. Baggett, 125 F.3d 1319, 1322 (9th Cir. 1997) (same); United States v. Thompson, 113 F.3d 13, 15 n.1 (2d Cir. 1997) (same); with United States v. Nichols, 169 F.3d 1255, 1279-80 (10th Cir.) (holding that restitution is not criminal punishment for the purposes of the Ex Post Facto Clause), cert. denied, 528 U.S. 934 (1999); United States v. Newman, 144 F.3d 531, 538-40 (7th Cir. 1998) (same). This circuit has not yet decided the issue.

*fn20 In order to correct plain error, four conditions must be met: (1) there must be an error; (2) the error must be plain, meaning obvious or, at a minimum, clear under current law; (3) the error must affect substantial rights; and (4) the reviewing court must determine if the error "seriously affects the fairness, integrity or public reputation of judicial proceedings." United States v. Olano, 507 U.S. 725, 736 (1993); see also Castner, 50 F.3d at 1277. "Appellants bear the burden of proof with respect to prejudice of their rights." Id. at 1278 (citing Olano, 507 U.S at 735).

*fn21 We reject Gormley's argument that his IRA is not subject to forfeiture because it was not included in the indictment's list of proposed substitute assets. The indictment did not purport to set out an exhaustive list of substitute assets, but instead set out a list"including but not limited to" certain identified assets. See United States v. Moffitt, Swerling & Kemler, P.C., 83 F.3d 660, 664 (4th Cir. 1996).

[Sapphire Capital]

330 U.S.App.D.C. 420, 146 F.3d 933 (D.C.Cir. 06/26/1998)
U.S. Court of Appeals, District of Columbia Circuit

No. 97-3035 Consolidated with No. 97-3036

June 26, 1998

UNITED STATES OF AMERICA, APPELLEE

v.

ARTHUR R. ANDREWS, APPELLANT

Appeals from the United States District Court for the District of Columbia (No. 96cr00139-01) (No. 96cr00139-02)

L. Barrett Boss, Assistant Federal Public Defender, argued the cause for appellants, with whom A.j. Kramer, Federal Public Defender, and Joseph R. Conte, appointed by the court, were on the briefs. Barbara J. Valliere, Assistant U.s. Attorney, argued the cause for appellee, with whom Mary Lou Leary, U.s. Attorney, John R. Fisher and Harry R. Benner, Assistant U.s. Attorneys, were on the brief. Elizabeth Trosman, Assistant U.s. Attorney, entered an appearance.

Before: Williams, Rogers and Garland, Circuit Judges.

The opinion of the court was delivered by: Garland, Circuit Judge:

Argued October 23, 1997

Opinion for the Court filed by Circuit Judge Garland.

Appellants are the chief executive officer and president of a corporation against which the Securities and Exchange Commission (SEC) secured a civil monetary penalty in 1995. In 1996, a grand jury indicted appellants for essentially the same conduct. Appellants contend that the SEC penalty constitutes a punishment that bars their subsequent criminal prosecution under the Double Jeopardy Clause of the Fifth Amendment. We disagree. Whether or not such a penalty would implicate the Clause if imposed on appellants, we hold that the penalty imposed on the corporation constitutes neither a punishment of appellants, nor a sufficiently choate "attempt to punish" the appellants, to implicate their constitutional rights. Accordingly, we do not reach the question whether the SEC penalty would constitute a criminal punishment for double jeopardy purposes under the test the Supreme Court recently announced in Hudson v. United States, 118 S. Ct. 488 (1997), which replaced the test previously employed in United States v. Halper, 490 U.S. 435 (1989).

I.

Appellant Arthur Andrews is the chief executive officer, and appellant Thomas Green is the president, of Fulcrum Holding Co., Inc., a District of Columbia corporation. Andrews is Fulcrum's sole shareholder. According to the SEC, in 1994 Fulcrum offered prospective investors an opportunity to purchase "prime bank bills of exchange," which it promised would yield a return of at least 50% by the end of one year.

One such investor was Bayport Holdings, Ltd., which in May 1994 wired Fulcrum $1.5 million for the purchase of prime bank bills. Instead of using the money to buy an investment for Bayport, however, the SEC contends that Fulcrum and its principals used the money for a variety of unrelated purposes, including the purchase of personal automobiles and jewelry, and the payment of personal hotel bills. Moreover, Fulcrum allegedly sent Bayport back some of Bayport's own money, misrepresenting it as profit on the trading of prime bank bills, in order to lull Bayport into believing that Fulcrum had made the promised investment.

On October 31, 1994, the SEC filed a civil complaint against Fulcrum and Andrews, charging that the prime bank bills scheme violated the antifraud provisions of the securities laws. The complaint did not name appellant Green. It sought injunctive relief, disgorgement of the proceeds of the illegal conduct, and civil penalties, against both Fulcrum and Andrews.*fn1

On February 10, 1995, the SEC moved for summary judgment solely against Fulcrum. The district court granted the motion, and ordered Fulcrum to pay Bayport disgorgement in the amount of $1.5 million and to pay the SEC a civil penalty in the amount of $500,000. In response to Fulcrum's representation that it had filed for protection under the Bankruptcy Code, the district court suspended Fulcrum's obligation to pay the disgorgement and penalty amounts pending further order.

On June 1, 1995, the SEC moved for partial summary judgment against Andrews, requesting injunctive relief and disgorgement, but expressly not seeking civil penalties from him. See Mem. in Supp. of Mot. for Partial Summ. J. at 1 n.1, 12. The district court's final judgment, entered on July 31, 1995, granted the SEC's request for injunctive relief, and held Fulcrum and Andrews jointly and severally liable for the payment of $1.5 million in disgorgement to Bayport (plus preand post-judgment interest). The court noted that the SEC had filed a status report indicating it no longer was seeking civil penalties from Andrews. Accordingly, the court ordered Fulcrum alone to pay the $500,000 civil penalty to the SEC.

On April 30, 1996, a grand jury in the District of Columbia indicted appellants for essentially the same conduct at issue in the civil suit, charging criminal violations of the federal mail fraud, wire fraud, and money laundering statutes.*fn2 Appellants moved to dismiss the indictment on double jeopardy grounds, arguing that the $500,000 penalty imposed on Fulcrum constituted prior punishment under the test employed in United States v. Halper, 490 U.S. 435 (1989); that the punishment was imposed for the same offense as that charged in the indictment under the test employed in Blockburger v. United States, 284 U.S. 299 (1932); and that the punishment imposed on Fulcrum was effectively a punishment of its officers, Andrews and Green.

The district court denied appellants' motion. The court did not consider whether the civil penalty constituted punishment under Halper, or whether the offenses were the same under Blockburger. Instead, the court held the Double Jeopardy Clause inapplicable because "[t]he prohibition against multiple punishments does not attach until a punishment is imposed," and because the Judge in the SEC action had imposed the civil penalty only against Fulcrum and not against Andrews or Green. Andrews and Green immediately appealed the denial of their motion to dismiss.

II.

We must first consider whether we have jurisdiction to hear this interlocutory appeal. Under the final-judgment rule, we ordinarily do not have jurisdiction to hear a defendant's appeal in a criminal case prior to conviction and sentencing. See generally 28 U.S.C. § 1291. In Abney v. United States, however, the Supreme Court held that a pretrial denial of a motion to dismiss an indictment on double jeopardy grounds was immediately appealable under the " 'collateral order' exception to the final-judgment rule." 431 U.S. 651, 657, 659-62 (1977). Noting that the Double Jeopardy Clause "is a guarantee against being twice put to trial for the same offense," the Court held that this aspect "of the guarantee's protections would be lost if the accused were forced to 'run the gauntlet' a second time before an appeal could be taken." Id. at 661.

Abney involved the Double Jeopardy Clause's protection against successive prosecution. But the Supreme Court has held the Clause to have two prongs: it protects not only against "successive prosecution," but also against "successive punishment." Witte v. United States, 515 U.S. 389, 395-96 (1995). See also United States v. Ursery, 116 S. Ct. 2135, 2139 (1996) (quoting United States v. Dixon, 509 U.S. 688, 696 (1993)).*fn3 Appellants here do not allege a violation of the successive prosecution prong; instead they charge that the government is seeking to impose a second punishment.

It might be argued that a claim brought under the successive punishment prong does not require an interlocutory appeal for its vindication. If appellants ultimately are acquitted, they will not have been punished twice; if they are convicted, a court can vacate the second punishment on appeal. Abney itself seemed to give support to such an argument, for it noted that the protection against double punishments, unlike the guarantee against being twice put to trial, "can be fully vindicated on an appeal following final judgment." 431 U.S. at 660.

This line of argument, however, was foreclosed by the Court's subsequent opinion in Witte v. United States, 515 U.S. 389 (1995). There, the Court permitted an interlocutory appeal alleging that a pending prosecution on charges was barred by the successive punishment prong because the conduct at issue had already been taken into account in defendant's sentencing for a prior conviction. The Court held that the defendant's successive punishment claim was ripe for review, although he had not yet been convicted or sentenced on the charges, because the Clause protected not just against "more than one punishment for the same offense" but also against "an attempt to secure that punishment in more than one trial." 515 U.S. at 397 (emphasis added). Accordingly, multiple punishment claims, like multiple prosecution claims, are appropriate subjects for interlocutory appeal. See United States v. Perez-Herrera, 86 F.3d 161, 163 (10th Cir. 1996); United States v. Baird, 63 F.3d 1213, 1215 & n.4 (3d Cir. 1995); United States v. Woods, 949 F.2d 175, 177 n.1 (5th Cir. 1991).*fn4

But that does not end the matter. A defendant cannot obtain interlocutory review of a motion to dismiss an indictment simply by characterizing his claim as one involving double jeopardy. If that were the rule, defendants could disrupt their trials at will, pending the resolution of appeals. Instead, the Supreme Court held in Richardson v. United States that a claim of double jeopardy must be at least "colorable" to confer interlocutory jurisdiction on an appellate court. 468 U.S. 317, 322 (1984). The standard is a lenient one. Indeed, the Court made clear just how lenient the standard was in Abney itself where, although it found jurisdiction to hear the defendant's interlocutory appeal, it disposed of defendant's argument on the merits in a single paragraph. See 431 U.S. at 664-65.

Even under this lenient standard, however, we cannot describe Green's claim as colorable. He and Andrews contend that the civil penalty imposed on Fulcrum was effectively a prior punishment imposed on Fulcrum's officers. They claim that the district court in the SEC civil litigation found Fulcrum to be a mere sham, that that finding makes Fulcrum's corporate form void, "not merely voidable," and that as corporate officers they therefore are liable for the judgment.

This novel claim must clear a number of logical hurdles before it can prevail-hurdles which we explore in Part III below with respect to Andrews. But whatever this argument's general difficulties, as applied to Green it fails at the start. As the face of the pleadings makes clear, Green was never a party to the SEC civil suit. The complaint did not name him as a defendant; indeed, it did not mention him at all.

The constitutional protection against double jeopardy is "intrinsically personal." Department of Revenue v. Kurth Ranch, 511 U.S. 767, 779 (1994) (quoting Halper, 490 U.S. at 447). A defendant cannot invoke it to prevent his punishment on the ground that another already has been punished. See United States v. Louisville Edible Oil Prods., Inc., 926 F.2d 584, 586 (6th Cir. 1991) (rejecting claim that punishment of Subchapter S corporation constituted punishment of employees paid on the basis of the corporation's profits); Woods, 949 F.2d at 177 & n.3 (action against corporation does not constitute punishment of its sole shareholder). As the Supreme Court said in United States v. MacDonald, "a double jeopardy claim ... requires at least a colorable showing that a defendant once before has been in jeopardy...." 435 U.S. 850, 862 (1978). Moreover, "[w]ithout risk of a determination of guilt, jeopardy does not attach...." Serfass v. United States, 420 U.S. 377, 391-92 (1975).

Green has never been in that position. He owns no stock in Fulcrum. He neither has been held liable for any monetary penalty, nor has he ever been party to a proceeding in which he was at risk of being held liable for the penalty imposed on Fulcrum. Indeed, defense counsel conceded at oral argument, and the government did not dispute, that Green was not and cannot be bound by the judgment in the SEC action against Fulcrum.*fn5 At a minimum, some additional proceeding will be necessary before the corporation's penalty can be imposed on Green-assuming, without deciding, that such a penalty could be imposed on him at all. He thus is in no more difficult a position than that of a yet-unindicted grand jury subject who watches his confederate proceed to trial. He may be apprehensive about his own fate, but until he himself goes to trial he cannot claim to have been placed in jeopardy. See generally United States v. Gartner, 93 F.3d 633, 635 (9th Cir. 1996) (no double jeopardy where defendant was not jointly and severally liable for civil penalty assessed in prior proceeding); Baird, 63 F.3d at 1219 (because defendant never became a party to forfeiture proceeding, he never was placed in jeopardy); United States v. Torres, 28 F.3d 1463, 1465 (7th Cir. 1994) (same).

It is a "fundamental principle that an accused must suffer jeopardy before he can suffer double jeopardy." Serfass, 420 U.S. at 393. Because Green never has "suffered jeopardy," his claim of double jeopardy is not colorable. Accordingly, we dismiss his appeal for lack of jurisdiction.

Andrews presents a more complicated story. Unlike Green, the SEC did file a civil complaint against him and did, at least initially, seek the imposition of a civil penalty against him. Moreover, as the sole shareholder and chief executive officer of Fulcrum, he is not an unlikely target for liability through piercing of the corporate veil, and the SEC action has at least increased the chance that one day he will be held liable. Hence, even if punishment has not yet been imposed, we cannot dismiss as non-colorable the possibility that it has been attempted in the Witte sense. Given the lenient standard employed by the Supreme Court for finding interlocutory jurisdiction, we must proceed to the merits of Andrews' claims.

III.

As already noted, the Supreme Court has held the Double Jeopardy Clause to possess two prongs, protecting against both multiple prosecutions and multiple punishments. In Halper, the Supreme Court held that the protection against multiple punishments was triggered where a civil sanction was so "overwhelmingly disproportionate" to the damages the defendant caused that it could not "fairly be characterized as remedial, but only as a deterrent or retribution." 490 U.S. at 449.

Invoking Halper's formulation of the protection against multiple punishments, Andrews argues that the civil money penalty imposed on Fulcrum constituted punishment for his allegedly fraudulent activities relating to Bayport and that the Double Jeopardy Clause therefore bars his criminal prosecution. Apparently because of our decision in SEC v. Bilzerian, 29 F.3d 689, 696 (D.C. Cir. 1994), holding that under Halper disgorgement of ill-gotten gains in an action brought by the SEC is remedial rather than punitive, Andrews does not argue that the disgorgement remedy here was punitive. Instead, he argues that because the money penalty was exacted on top of disgorgement, the punitive nature of that penalty is manifest.

Like the district court, we do not determine whether the SEC civil money penalty constituted a prior criminal punishment, or whether under Blockburger it covered the same offenses as the indictment. Our consideration of the prior punishment issue would be particularly problematic at this stage, since after this court heard oral argument, the Supreme Court issued its opinion in Hudson v. United States, 118 S.Ct. 488 (1997). There, the Court disavowed Halper's conclusion that punishment, rather than criminal punishment, could trigger the Double Jeopardy Clause. 118 S.Ct. at 493-94. To determine whether criminal punishment was at issue, the Court focused not just on whether a prior penalty was proportional to a victim's injury, but rather on the multi-factor test it previously had employed in United States v. Ward, 448 U.S. 242 (1980), and Kennedy v. Mendoza-Martinez, 372 U.S. 144 (1963). See 118 S.Ct. at 491, 49396. Although there are striking similarities between the sanctions the Office of Comptroller of the Currency imposed in Hudson, which the Court declined to characterize as criminal, and the SEC civil money penalty sought in this case,*fn6 that issue was never briefed in this court and we are loath to proceed without the views of the parties.

In any event, we find no need to consider the Hudson/Halper or Blockburger issues because we find that Andrews-like Green-suffered no prior jeopardy, and hence could not have suffered double jeopardy. The district court reached this conclusion by finding that no punishment had yet been imposed on Andrews. We agree that no punishment has yet been imposed although, as noted in Part IV infra, we are not certain that necessarily disposes of the issue.

Andrews has two arguments in support of the claim that he already has been punished. His first requires three steps: (1) the district court in the SEC litigation "has already" found Fulcrum "to be merely a cloak for fraud"; (2) therefore, the corporate form is void, "not merely voidable"; and (3) therefore, the judgment imposed on Fulcrum "immediately became a liability of the defendants." See Appellants' Br. at 6, 10, 12.*fn7 We need not examine the validity of the second and third steps, because the premise is factually incorrect. The district court did not find that Fulcrum was a sham. To the contrary, the court paid obeisance to the corporate form, accepting Fulcrum's representation that it had filed for bankruptcy protection and suspending payment of the judgment pending further proceedings. Indeed, the court made virtually no findings at all. Because Fulcrum refused to answer the complaint, citing purported Fifth Amendment concerns, the district court treated the SEC's allegations as conceded and entered judgment accordingly.

But, Andrews contends, because the SEC had alleged that Fulcrum was merely a cloak for the fraudulent activities of its officers, the court effectively adopted that allegation by treating it as conceded. Again, Andrews' problem is with his factual premise. The SEC did not allege, as Andrews asserts, that Fulcrum was merely a "fraudulent enterprise aimed at wealthy investors." Appellants' Br. at 12. That quotation leaves out some important words from the SEC's original sentence-which is found not in the complaint but in an SEC memorandum in support of temporary relief. The full sentence alleges that Fulcrum "embarked on a fraudulent enterprise aimed at wealthy investors." Pl. Mem. in Supp. of Temp. Relief at 2 (emphasis added). That plainly is not an allegation about what Fulcrum was, but about what it did. The difference between being a fraud and conducting one is important. Even a fully-capitalized, Fortune 500 corporation can embark on a fraud, but that would not make its corporate form a sham or its shareholders personally liable.

Andrews' second argument in support of the notion that he has been punished is that even if the government has never sought to pierce the corporate veil, "in this jurisdiction" he has as much right to pierce it as the government does. For this proposition, Andrews cites our opinion in Quinn v. Butz, 510 F.2d 743 (D.C. Cir. 1975).

This argument suffers from a number of significant flaws. Although Quinn does hold that penetration of the corporate veil can be urged against as well as by the government, we emphasized there that "the ultimate principle is one permitting its use to avoid inJustice." 510 F.2d at 759. Avoiding "inJustice" is not the same as avoiding indictment. The inJustice Andrews claims here is that, unless the veil is pierced, he will be subject to double jeopardy. In fact, Andrews has the point backwards. Even on his own theory, he will confront the possibility of double jeopardy only if the veil is pierced. If it is not, he will not be liable for Fulcrum's penalty and hence will not have been subjected to prior jeopardy.

Moreover, Andrews' asserted right to pierce the veil runs counter to the rule that piercing the corporate veil is an equitable remedy, whose exercise is subject to the sound discretion of the trial Judge. See Valley Fin., Inc. v. United States, 629 F.2d 162, 171-72 (D.C. Cir. 1980); see also Kinney Shoe Corp. v. Polan, 939 F.2d 209, 211 (4th Cir. 1991). In Quinn, for example, the court entertained the possibility of piercing against the government only because it feared the corporate form may have operated at an "innocent party's expense." 510 F.2d at 758. But if Fulcrum is a sham, it is because Andrews, as its sole shareholder and chief executive officer, made it one in order to facilitate his fraudulent scheme. Under such circumstances, Andrews cannot don the mantle of an party in order to pierce the cloak of his own fraud.

Finally, even if Quinn applied here, the veil would at best be "pierce-able"; it has not yet been "pierced." See Quinn, 510 F.2d at 760 (petitioner entitled "to an opportunity to show that the company was not in truth a corporation"). Nor is Andrews quite so eager to pierce the veil as his briefs would suggest. At oral argument, the court asked Andrews' counsel whether his client actually concedes that Fulcrum was a sham. Counsel demurred. He was not, he said, authorized to make such a concession. But in the context of Andrews' argument, this is not a concession-it is a cornerstone. Andrews, apparently, would like to have his cake and eat it too: he would like to pierce the veil for the purpose of dismissing the present indictment, but preserve it as a defense in case the SEC ever does try to collect. We reject this argument and conclude that no criminal punishment has yet been imposed on appellant Andrews.*fn8

IV.

Andrews' brief states his agreement with the "undisputed proposition, that a punishment must be imposed in the first proceeding before jeopardy can attach." Appellants' Br. at 13. As discussed in Part III, if Andrews is correct about this proposition, then his appeal must fail because no punishment has yet been imposed upon him.

We are not certain, however, that Andrews is correct. After all, we have Witte's admonition that the Double Jeopardy Clause protects not just against multiple punishments, but against multiple attempts to punish. See Witte, 515 U.S. at 396; see also Kansas v. Hendricks, 117 S. Ct. 2072, 2085 (1997) (citing Witte ). Indeed, in Hudson, the Court not only repeated this admonition, it used it to support its Conclusion that Halper had applied the wrong analysis. Halper had directed courts to look at the "sanction actually imposed" in order to determine whether it was so disproportionate as to be punitive. The consequence of this direction, the Hudson Court said, was that it would "not be possible to determine whether the Double Jeopardy Clause is violated until a defendant has proceeded through a trial to judgment." 118 S. Ct. at 495. But that, the Court charged, "flies in the face of the notion that the Double Jeopardy Clause forbids the government from even attempting a second time to punish criminally." Id. (internal quotations and citations omitted).

We need not over this problem because not only was no punishment imposed upon Andrews, none was attempted-at least not in any constitutional sense. For purposes of the multiple prosecutions prong of the Double Jeopardy Clause, an attempt does not attain constitutional significance until jeopardy has attached. See Serfass, 420 U.S. at 390-92. This accords with the language of the Clause itself, which bars neither "attempts" nor "prosecutions," but rather prohibits being "twice put in jeopardy" for the same offense. In a criminal trial, jeopardy does not attach until a jury is empaneled and sworn or, in a non-jury trial, until the court begins to hear evidence. See id. at 388. The underlying principle is that "jeopardy does not attach, and the constitutional prohibition can have no application, until a defendant is 'put to trial before the trier of facts, whether the trier be a jury or a Judge.' " Id. (citation omitted).

Although the Supreme Court has not had occasion to consider when jeopardy might attach outside the context of a criminal trial, or whether the timing of attachment is different for the multiple punishments prong as compared to the multiple prosecutions prong, no court has concluded that attachment in such circumstances should come any earlier than it would in a criminal trial. To the contrary, some courts have held it to come at an analogous time,*fn9 while others have found it to come considerably later.*fn10

There are two stages of the civil SEC proceedings that one might loosely characterize as "attempts" to impose punishment here. But even if we were to apply an analogy to the attachment of jeopardy in a criminal trial, neither was sufficiently advanced to constitute attachment.

The first possible "attempt" was the filing of the SEC's complaint, which named Andrews and sought penalties from him. The closest criminal trial analogy would be to an indictment. But the filing of an indictment does not create jeopardy. As we have noted, a jury must be empaneled or a judge must begin to hear evidence on the charge before attachment occurs. See Serfass, 420 U.S. at 388-89. Neither happened here. Evidently awakening-somewhat belatedly, but still in time-to the possibility that it was creating a "Halper " problem for future criminal prosecutors, the SEC withdrew its request for civil penalties against Andrews before it ever presented evidence in support of that request.

Alternatively, one might characterize the judgment against Fulcrum as an initial step in an "attempt" to hold Andrews personally responsible for the monetary penalty. But this step has not put Andrews at personal risk of paying that penalty. Because the SEC civil action ended in a final judgment that did not include a penalty against Andrews, a new proceeding would still be required before the SEC could collect anything from him. A complaint in that new proceeding, and further action on that complaint, would thus be the earliest stage at which jeopardy could attach. Cf. United States v. Sanchez-Escareno, 950 F.2d 193, 203 (5th Cir. 1991) (although defendants executed promissory notes in acknowledgment of punitive civil fines, jeopardy would not attach until government tried to collect on notes and "court begins to hear evidence in that action").

In sum, we conclude that even were an "attempts" analysis appropriate here, the SEC action simply did not progress sufficiently against Andrews to constitute an attempt to impose criminal punishment for purposes of the Double Jeopardy Clause.

V.

We dismiss Green's appeal for lack of jurisdiction because it does not present a colorable claim of double jeopardy.

Andrews' appeal, while colorable, fails on the merits, and we therefore affirm the district court's denial of his motion to dismiss the indictment.

Opinion Footnotes

*fn1 The complaint charged violations of Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a), Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b5, 17 C.F.R. § 240.10b-5. It sought civil penalties pursuant to Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d), and Section 21(d)(3) of the Exchange Act, 15 U.S.C. § 78u(d)(3).

*fn2 The indictment charged violations of 18 U.S.C. §§ 2, 1341, 1343, 1956, 1957.

*fn3 The Court has described the successive prosecution prong as protecting against two more distinct abuses: "a second prosecution for the same offense after acquittal [and] a second prosecution for the same offense after conviction." North Carolina v. Pearce, 395 U.S. 711, 717 (1969). The prohibition against successive prosecution protects against a third distinct abuse as well: even without acquittal or conviction, this prong bars a second prosecution for the same offense if the first prosecution is dismissed after jeopardy has attached, see Crist v. Bretz, 437 U.S. 28, 35 (1978), where the dismissal was not caused by "manifest necessity," see United States v. DiFrancesco, 449 U.S. 117, 130 (1980).

*fn4 Many other courts have assumed without Discussion that multiple punishment claims may be appealed before final judgment. See United States v. Reyes, 87 F.3d 676, 678 (5th Cir. 1996); United States v. Salinas, 65 F.3d 551 (6th Cir. 1995); United States v. Morgan, 51 F.3d 1105, 1109-10 (2d Cir. 1995); United States v. Louisville Edible Oil Prods., Inc., 926 F.2d 584 (6th Cir. 1991). But cf. United States v. Stoller, 78 F.3d 710, 714-15 (1st Cir. 1996) (noting that, prior to Witte, the First Circuit had held Abney inapplicable to multiple punishment claims).

*fn5 As the Supreme Court stated in Martin v. Wilks, "t is a principle of general application ... that one is not bound by a judgment in personam in litigation in which he is not designated as a party." 490 U.S. 755, 761 (1989) (internal citation and quotations omitted), superseded by statute on other grounds. See 18 Charles A. Wright, et al., Federal Practice and Procedure § 4449, at 411 (1981). Appellants do not suggest that any of the limited exceptions to this general rule would apply here. See Martin, 490 U.S. at 761 n.2.

*fn6 See SEC v. Palmisano, 135 F.3d 860, 865-66 (2d Cir. 1998) (applying Hudson's analysis to hold that SEC civil monetary penalties are not criminally punitive).

*fn7 Andrews does not argue that a sole or controlling shareholder of a bona fide corporation would be punished for double jeopardy purposes if punishment were imposed upon his corporation. Such an argument was rejected by the Fifth Circuit in Woods, on the ground that "bsent individual liability, there [is] no claim for double jeopardy." 949 F.2d at 177 n.3. A similar argument made on behalf of employees of a Subchapter S (26 U.S.C. § 1361 et seq.) corporation was rejected by the Sixth Circuit in Louisville Edible Oil Products, on the ground that the theory would extend protection from prosecution to any individual who receives income on a percentage-of-profit basis from any entity if the entity were punished. See 926 F.2d at 586.

*fn8 Because Andrews cannot even establish that the civil judgment imposed any obligation upon him, we need not consider whether a judgment alone would have been enough to constitute the imposition of punishment where the penalty has not only not yet been paid, but has been suspended pending bankruptcy proceedings. Cf. United States v. Sanchez-Escareno, 950 F.2d 193, 201 (5th Cir. 1991) (holding that an unpaid judgment does not constitute punishment, even where the defendant executes a promissory note to pay it).

*fn9 See Torres, 28 F.3d at 1465 (jeopardy attaches in civil forfeiture hearing when evidence is first presented to trier of fact); cf. Sanchez-Escareno, 950 F.2d at 201 (jeopardy attaches in action to collect on notes when court begins to hear evidence). After Hudson there is further reason to conclude that courts should treat criminal trials and other proceedings that may lead to double jeopardy in a similar way. The holding of Hudson, after all, was not that the sanction imposed was civil rather than criminal, but that the prior "administrative proceedings were civil, not criminal." 118 S. Ct. at 491 (emphasis added). See also id. at 496 n.6 (favorably citing Kurth Ranch, 511 U.S. at 781, for focusing on whether the alleged punishment was "the functional equivalent of a successive criminal prosecution"). Hence, the "attempting a second time to punish criminally" proscription may not be a subsidiary element of the multiple punishments prong, but rather a more generalized restatement of the multiple prosecutions prong: that is, double jeopardy protects against multiple punishments, and against multiple attempts to impose criminal punishments-regardless whether such attempts occur in the form of criminal trials or other kinds of proceedings. See also Witte, 515 U.S. at 396 (appearing to equate "attempting a second time to punish criminally" with "being twice put in jeopardy for such punishment"). If the "attempts" proscription is just a restatement of the multiple prosecutions prong, then there would be good reason to apply as similar as possible "attachment" rules regardless whether the attempt occurs in a criminal trial or otherwise.

*fn10 See, e.g., United States v. Tamez, 881 F. Supp. 460, 465-66 (E.D. Wash. 1995) (jeopardy does not attach in civil forfeiture proceedings until final judgment is entered), aff'd, 95 F.3d 1160 (9th Cir. 1996) (table); United States v. Polichemi, 1995 WL 387833 (N.D. Ill. 1995) (prohibition against multiple punishments does not attach in SEC civil action until civil penalty is imposed); cf. United States v. Von Moos, 660 F.2d 748, 749 (9th Cir. 1981) (jeopardy on multiple punishments claim involving multiple sentences does not attach until defendant begins serving sentence).

[Sapphire Capital]

17 F.3d 737 (5th Cir. 03/17/1994)
UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 93-4436

decided: March 17, 1994.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,

v.

RATTAN LAL AGGARWAL, DEFENDANT-APPELLANT.

Appeal from the United States District Court for the Eastern District of Texas. D.C. DOCKET NUMBER 4 92 CR 19. JUDGE Paul Brown

For Plaintiff-Appellee: Bob Wortham, USA, H.S. Garcia, AUSA, Sherman, TX.

For Defendant-Appellant: E.X. Martin, III, Dallas, TX. SLOTNICK & BAKER, Mark M. Baker, New York, NY.

Before Jones and DeMOSS, Circuit Judges, and Cobb,*fn* District Judge.

Author: Demoss

DeMOSS, Circuit Judge:

A jury convicted defendant/appellant Rattan Lal Aggarwal of one count of conspiracy and four counts of wire fraud in connection with his participation in a fraudulent loan scheme. Aggarwal appeals on several grounds. Finding no basis for reversal, we AFFIRM Aggarwal's conviction and sentence.

Aggarwal raises seven points of error, claiming that: (1) there was insufficient evidence to convict him; (2) the trial court erred in denying Aggarwal's motion to depose an unavailable witness; (3) the trial court erred in refusing to dismiss the indictment due to late disclosure of Brady material; (4) the government's expert witnesses violated Federal Rule of Evidence 704 by giving legal definitions and implied opinions on the defendant's state of mind; (5) the trial court erred by refusing to dismiss the indictment for vindictive prosecution; (6) the trial court erred by refusing to give Aggarwal's proposed jury instructions on knowledge, willfulness and intent; and (7) the trial court erred during sentencing by refusing to consider Aggarwal's request for downward departure.

I. DISCUSSION

A: Sufficiency of the Evidence

Aggarwal claims there was insufficient evidence to support his conviction because the government did not prove that he had the required specific intent to commit a fraud.

Aggarwal was convicted of wire fraud under 18 U.S.C. § 1343*fn2 and of conspiracy under 18 U.S.C. § 371.*fn3 The government thus had the burden of proving (1) a scheme to defraud that involved use of the wires; and (2) that Aggarwal had the specific intent to commit fraud in furtherance of the scheme. United States v. Rochester, 898 F.2d 971, 976 (5th Cir. 1990); United States v. f*gan, 821 F.2d 1002, 1008 (5th Cir. 1987), cert. denied, 484 U.S. 1005, 98 L. Ed. 2d 649, 108 S. Ct. 697 (1988).

In assessing a challenge to the sufficiency of the evidence, we must consider the evidence in the light most favorable to the verdict and must afford the government the benefit of all reasonable inferences and credibility choices. United States v. Stouffer, 986 F.2d 916, 921-22 (5th Cir.), cert. denied, 126 L. Ed. 2d 80, 114 S. Ct. 115 (1993). The evidence is sufficient if a rational trier of fact could have found the essential elements of the offense beyond a reasonable doubt based upon the evidence presented at trial. Jackson v. Virginia, 443 U.S. 307, 319, 61 L. Ed. 2d 560, 99 S. Ct. 2781 (1979); United States v. Kim, 884 F.2d 189, 192 (5th Cir. 1989). The intent necessary to support a conviction can be demonstrated by direct or circumstantial evidence that allows an inference of an unlawful intent, and not every hypothesis of innocence need be excluded. United States v. McAfee, 8 F.3d 1010, 1014 (5th Cir. 1993); United States v. Aubrey, 878 F.2d 825, 827 (5th Cir.), cert. denied, 493 U.S. 922, 107 L. Ed. 2d 269, 110 S. Ct. 289 (1989); United States v. Henry, 849 F.2d 1534, 1536 (5th Cir. 1988).

According to the indictment, Aggarwal was involved in a scheme in which the conspirators collected "advance fees" of $10,000 to $120,000 from potential borrowers by fraudulently promising to arrange pre-approved multi-million-dollar loans from foreign lending institutions. The conspirators were Aggarwal, who was self-employed as a broker of financial loan packages under the name of RACORP, Inc.; Edwin E. Whitis, II and Deanna J. Whitis, who were officers and directors of Commerce National Exchange Corporation ("CNEC"); and John Brumfield, a CNEC employee. Edwin Whitis pleaded guilty to a lesser charge and testified at trial for the government. Whitis admitted to having sought to defraud the potential borrowers, and testified that Aggarwal was part of the scheme. Other government witnesses, including Deanna Whitis and other former CNEC employees, testified that Aggarwal was the "big boss" who gave Edwin Whitis instructions, and that Whitis could not have come up with such a scheme on his own. CNEC placed advertisements in the Wall Street Journal claiming it could pre-approve 100 percent funding of loans with lending commitments direct from banks via fax or letter. Aggarwal provided a reference letter for CNEC, allowing it to meet the strict requirements of the Wall Street Journal advertisement acceptance policy. Victims were told falsely that the conspirators had been successful in obtaining funding for numerous clients. In reality, no potential borrower ever received a loan. Victims who asked for a reference were directed to call a pre-arranged number, where they talked to a "former client" who was in reality Deanna Whitis using a false name.

Aggarwal was in charge of arranging the loan commitments from European banks through the ExportFinazierungsBank ("Export Bank") in Vienna, Austria.*fn4 Aggarwal also gave Edwin Whitis instructions on drafting the contracts to be signed by the victims. The contracts obligated the borrower to acquire an irrevocable letter of credit or prime bank guarantee to serve as collateral. The conspirators did not help the victims obtain the guarantees; they wanted the victims to default in this obligation, because then the victims would lose the advance fee. The government, in its arguments to the jury, characterized the scheme as a "chicken-and-egg" situation. Edwin Whitis testified that Aggarwal told him that the guarantee companies "couldn't deliver the collateral in the first place." According to trial testimony, funding was highly unlikely because the required collateral/guarantee was virtually impossible to obtain for the required terms. Several government witnesses testified that if a borrower had the credit to obtain that kind of collateral, he or she would have no reason to purchase one of CNEC's "loan commitments." The government's expert witness on international banking, Robert Rendell, put it this way:

"This security provision was something impossible for [the victim] to meet, because she could not obtain the letter of credit without the funds, and she could not get the funds without the letter of credit, so she was sort of stuck in limbo. And therefore, this [loan] commitment was of no use to her because she could never draw down the funds."

Whitis said he and Aggarwal had an agreement to split the advance fees, which amounted to more than $3 million. Aggarwal admitted having received at least $1.5 million in transfers from CNEC. Whitis and Aggarwal spoke daily and Aggarwal gave instructions on how to handle disgruntled victims. The business plans taken from the victims by CNEC were placed in a file cabinet and never sent to Aggarwal, and thus never sent to any source of funding. Whitis testified that the only purpose for taking the business plans was to lend the scheme an air of legitimacy. The government's expert Rendell stated that no legitimate institution would lend or commit the millions of dollars contemplated in this scheme without a detailed business plan setting out how the money would be used. Another government expert, John Shockey, called the scheme "a typical advance fee scam."

Aggarwal testified in his own defense and claimed that he was unaware of the scheme to defraud committed by Whitis, and that he earned whatever fees he received because he was ready and willing to provide the loan commitment if the borrower would obtain the required collateral.

The government argued that Aggarwal's intent to defraud the potential borrowers can be inferred from the evidence, including the facts that Aggarwal received $1.5 million in transfers from CNEC, that he was in contact with Whitis daily, and that, of the dozens of "clients," not one ever received the promised loan.

Considering the evidence in light most favorable to the verdict, we hold that a rational jury could have found the required elements of wire fraud and conspiracy, including the most contested element, namely Aggarwal's intent to join the conspiracy and defraud the potential borrowers. Therefore, we hold that the evidence is sufficient to support Aggarwal's conviction.

B: Denial of Rule 15(a) Motion to Take Deposition

Aggarwal claims the trial court erred by denying his motion under Federal Rule of Criminal Procedure 15(a) to depose an unavailable witness. The rule allows such depositions when "due to exceptional circumstances of the case it is in the interest of Justice that the testimony of a prospective witness of a party be taken and preserved for use at trial." Fed. R. Crim. P. 15. The district court decides when "exceptional circumstances" exist, subject to appellate review for abuse of discretion. United States v. Allie, 978 F.2d 1401, 1405 (5th Cir. 1992), cert. denied, 123 L. Ed. 2d 281, 113 S. Ct. 1662 (1993).

In this case, the trial court denied Aggarwal's motion to depose Charles Zani, a consultant of the Export Bank, regarding the status of the Export Bank's license.*fn5 The court refused to allow the deposition on the basis that Aggarwal's motion was untimely, that the testimony would be hearsay, and that the issue was "not essential to the defense of this case." Aggarwal argues that exceptional circumstances existed because Zani, a citizen of France, would not voluntarily enter the United States because he feared arrest. He also contends that the Export Bank's ability or inability to do business was "crucial to the government's case."

The district court did not abuse its discretion in finding that there were no exceptional circumstances. The government's central theory of the case at trial did not rest on the Export Bank's inability to do business. Rather, the government's main argument was the "chicken-and-egg" analogy -- that the victims were put into a no-win situation where they could not obtain the required collateral and were forced to default. In addition, Aggarwal's expert was allowed to explain that the Export Bank was not the lending bank, but merely an agent bank, a function it could serve regardless of the formal status of its license in Austria.

Alternatively, we affirm the trial court's denial of Aggarwal's motion on the basis of unexcused delay. Even though the 15(a) motion was filed about a month before the case finally went to trial on its third setting, it was untimely in that it was about a month after the court's line for pretrial motions. Aggarwal contended that it took until November 19, 1992, to "identify and locate" Zani, but the evidence shows that Aggarwal knew of Zani and how to contact him as early as 1986.

Denial of a Rule 15(a) motion for untimeliness is not an abuse of discretion. United States v. Dearden, 546 F.2d 622, 625 (5th Cir.), cert. denied, 434 U.S. 902, 54 L. Ed. 2d 188 (1977); United States v. Whiting, 308 F.2d 537, 541 (2d Cir. 1962), cert. denied, 372 U.S. 919, 9 L. Ed. 2d 725, 83 S. Ct. 734 (1963); United States v. Broker, 246 F.2d 328, 329 (2d Cir. 1957), cert. denied, 78 S. Ct. 63, 2 L. Ed. 2d 49, 355 U.S. 837 (1957); See also 2 CHARLES A. WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 242 & nn. 4-5 (1982 & Supp. 1993)("The rule is silent on when a motion for a deposition is to be made. It should be made promptly, and a motion for a deposition that will delay the trial may be rejected as untimely.").*fn6 In addition, we will not disturb the trial court's determination that this was not an exceptional circumstance.

C: Late Disclosure of Brady Material

Aggarwal claims that the trial court erred by refusing to impose sanctions on the government for violation of his rights under Brady v. Maryland, 373 U.S. 83, 87, 10 L. Ed. 2d 215, 83 S. Ct. 1194 (1968). Brady and its progeny hold that the government violates due process when it suppresses material evidence favorable to the defense. Evidence is "material" only if there is a reasonable probability that the verdict would have been different had the evidence been disclosed to the defendant, or if, in light of the nondisclosure, the reviewing court's confidence in the guilty verdict is undermined. Jones v. Butler, 864 F.2d 348, 354 (5th Cir. 1988), cert. denied, 490 U.S. 1075, 104 L. Ed. 2d 653, 109 S. Ct. 2090 (1989).

About two weeks before Aggarwal's trial, the government obtained several documents, written in German, which stated that the Export Bank retained some ability to do business even after its license was revoked. According to an informal translation obtained by defense lawyers, a letter from a "Dr. Gruber," an Austrian Judge, explained that in Austria, an administrative appeal of the bank's license revocation restores the status quo, as if the license had never been revoked. The government did not give these documents to the defense until the morning trial began.

Aggarwal contends that the Export Bank's license status was a material issue, and that therefore the late disclosure of these documents was a Brady violation obligating the trial court to dismiss the indictment, order a mistrial, or alternatively allow continuance to depose "Dr. Gruber" under Rule 15(a). He is mistaken. Even though the indictment alleged that the loan commitments were worthless because the Export Bank's license had been revoked, the government avoided the license issue at trial and instead focused on its "chicken-and-egg" argument. The fact of the revocation came up several times during testimony, but, as stated above, Aggarwal's expert was given a chance to explain that the bank could still serve as an agent bank. In the trial, the Export Bank's license was a peripheral issue not material to the defense. We hold that no Brady violation occurred.

D: Opinions on Ultimate Issues

Aggarwal claims that the government's expert witnesses, by using terms like "scam," "fraudulent," and "fraud," violated Federal Rule of Evidence 704(b).*fn7 Aggarwal says the government's experts used the words too often in characterizing the loans in this case, thus implying that Aggarwal had the required intent to commit fraud. The government, however, points out that (1) its witnesses used these words mostly to describe the area of their expertise (Shockey worked for the "fraud unit" of the Office of the Comptroller of the Currency); (2) the defense expert used the "offending words" even more than the government experts; and (3) the government experts never commented directly on Aggarwal's state of mind; and (4) Rule 704(a) allows expert testimony that "embraces an ultimate issue to be decided by the trier of fact," so an expert opinion that the loan scheme was "fraudulent" is not improper. In addition, because the defense did not object to these words during trial, we will reverse only for plain error, United States v. Vaquero, 997 F.2d 78, 83 (5th Cir.), cert. denied sub. nom., Taylor v. United States, 126 L. Ed. 2d 578, 114 S. Ct. 614 (1993)., and no such error is apparent here.

E: Vindictive Prosecution

The conviction now on appeal was based on the second indictment of Aggarwal in this case. Aggarwal was initially indicted on November 16, 1988 for wire fraud, conspiracy and other crimes in connection with the same loan scheme that was made the basis of this appeal. He agreed to cooperate with the government and entered into an agreement to waive indictment and plead guilty to a one-count information alleging misprision of felony, with the indictment being dismissed at sentencing. Aggarwal was sentenced to 12 months and appealed his sentence to the Fifth Circuit. The Fifth Circuit, 909 F.2d 1480 (5th Cir. July 18, 1990, TABLE), vacated the guilty plea and sentence because Aggarwal had not been adequately informed that he was subject to a term of supervised release, and because the base offense level was incorrectly calculated. On remand, Aggarwal refused to again waive indictment and plead to the information. The government re-indicted Aggarwal on May 21, 1992.

Aggarwal argues that the 1992 indictment carried "far more severe penalties," than the one-count information alleging misprision of felony, and therefore improperly penalized him for exercising his right to appeal. However, this argument misses the point. The 1992 indictment should be compared with the 1988 indictment, not with the misprision charge in the information to which Aggarwal agreed to plead guilty. The government points out correctly that when Aggarwal after his appeal refused to waive indictment and plea to the information, "the deal was off and the parties were back to square one." Under the original indictment in 1988, Aggarwal was subject to possible statutory punishment of 250 years of imprisonment. In contrast, the re-indictment in 1992 subjected him to a possible 45 years of imprisonment. The misprision charge in the information carried a maximum penalty of 3 years. The proper comparison is between the two indictments, and there was no vindictiveness, because Aggarwal's exposure to punishment decreased, rather than increased, in the second indictment. Byrd v. McKaskle, 733 F.2d 1133, 1136 (5th Cir. 1984)(stating that "threshold question" in examining a claim of vindictiveness is whether the defendant was subjected to a more severe charge).

Even if Aggarwal had been subjected to a harsher penalty after his appeal, the inquiry would not end there. United States v. Guthrie, 789 F.2d 356, 361 (5th Cir. 1986) ("That more severe charges have been employed is not dispositive, for the Due Process Clause is not offended by all possibilities of increased punishment upon retrial after appeal, but only by those that pose a realistic likelihood of vindictiveness."). The appellate court "must examine the prosecutor's actions in the context of the entire proceedings," and if there is any indication that the prosecutor had a legitimate reason (other than vindictiveness) for increasing the charges, then no presumption of vindictiveness is created. United States v. Krezdorn, 718 F.2d 1360, 1365 (5th Cir. 1983)(en banc), cert. denied, 465 U.S. 1066, 79 L. Ed. 2d 742, 104 S. Ct. 1416 (1984). The prosecutor's decision to re-indict Aggarwal on considerably lesser charges than those brought in the original indictment was motivated by the desire to see that Justice was done, not to punish appellant for taking an appeal. The district court, in its order denying Aggarwal's motion for release pending appeal, stated this view:

"The fact that plaintiff decided to appeal his initial sentence after his plea of guilty to an information charging misprision of felony, and now faces possible incarceration on a longer duration, is evidence of a calculated gamble on the part of the defendant, and not malicious prosecution by the government. Plaintiff's malicious prosecution claim is without merit and does not raise a substantial question of law or fact."

The trial court's argument is convincing. The Supreme Court has held that changes in the charging decision are often an integral part of plea negotiations and are an inaccurate measure of improper prosecutorial "vindictiveness." United States v. Goodwin, 457 U.S. 368, 380, 73 L. Ed. 2d 74, 102 S. Ct. 2485 (1982). There was no "vindictiveness" in this case.

F: Refusal of Proposed Jury Instructions

Aggarwal claims the trial court erred in refusing to give his proposed jury instructions, which read as follows:

"Members of the Jury: In evaluating whether the defendant acted 'knowingly,' 'willfully,' or 'intentionally' with regard to the fraudulent scheme alleged in the indictment and to which Edwin Whitis has testified, you may consider whether defendant needed to have knowledge of any of Mr. Whitis' actions or statements to have met his responsibilities of securing commitments from different banks in Europe. Thus, if you find that all that defendant needed to do in order to earn his fee was simply secure a commitment from a European bank, and that such fee was thereupon rightfully earned regardless of any false representations that Whitis would have made to the borrowers, then you may consider such finding in furtherance of determining whether defendant lacked any motive to have knowingly aided Whitis to commit the alleged fraud.

Similarly, if you find that despite the revocation of its license, the Export Finance Bank was fully authorized to act as a fiduciary and thereby secure loan commitments for American borrowers from other European banks, which loan commitments had the effect of authorizing defendant to collect a fee, then you may consider that factor as well in determining whether defendant needed to have any knowledge of Mr. Whitis' admitted false representations to borrowers and hence whether, here again, defendant lacked any motive to have been a part of Mr. Whitis' fraudulent scheme."

A district court's refusal of a defendant's proposed jury instructions is reviewed for abuse of discretion; the trial Judge has substantial latitude in formulating the jury charge. United States v. Sellers, 926 F.2d 410, 413 (5th Cir. 1991); United States v. Rochester, 898 F.2d 971, 978 (5th Cir. 1990). We may reverse only if the requested instruction (1) is substantially correct; (2) was not substantially covered in the charge actually delivered to the jury; and (3) concerns an important point such that failure to give it seriously impaired the defendant's ability to effectively present a given defense. Rochester, 898 F.2d at 978; United States v. Mollier, 853 F.2d 1169, 1174 (5th Cir. 1988).

Here, the court instructed the jury basically that to find defendant guilty of aiding and abetting a fraud, the jury must find that he had the intent to defraud. Aggarwal argues that the given charge did not adequately present his defense to the jury, because the jury did not fully understand that he did not need to know about Whitis' actual criminal activities in order to legitimately benefit from them in good faith. We disagree. The government points out, and Aggarwal concedes, that the given jury charge was taken substantially from the Fifth Circuit Pattern Jury Instructions and gave correct legal definitions of "knowingly" and "willfully." Aggarwal, through his own testimony and arguments of counsel, was able to adequately present his defense. We hold that there was no abuse of discretion in refusing the requested instructions.

G: Refusal to Consider Downward Departure

At sentencing Aggarwal asked the trial court to depart downwards to bring his sentence more in line with the sentence he received for pleading guilty to misprision of felony. The trial court said nothing, and did not depart downwards. Aggarwal argues on appeal that perhaps the court mistakenly believed that it did not have the power to depart. The record does not support this contention. At the beginning of the sentencing hearing the court commented that it realized counsel was making legal arguments to support a downward departure. The court went on to hear these arguments, plus those of the government for an upward departure, before imposing a term of imprisonment within the guideline range. We will not review a district court's refusal to depart from the Sentencing Guidelines unless the refusal was in violation of the law. United States v. McKnight, 953 F.2d 898, 906 (5th Cir.), cert. denied, 119 L. Ed. 2d 594, 112 S. Ct. 2975 (1992).

II. CONCLUSION

For the reasons we have stated, we find no basis for reversal; therefore we AFFIRM Aggarwal's conviction and sentence.

Disposition

AFFIRMED.

Judges Footnotes

*fn* District Judge of the Eastern District of Texas, sitting by designation.

Opinion Footnotes

*fn2 This provision punishes one who "transmits [money or messages] by means of wire" to further "any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses." 18 U.S.C. 1343.

*fn3 This provision provides penalties when "two or more persons conspire ... to commit any offense against the United States ... and one or more of such persons do any act to effect the object of the conspiracy." 18 U.S.C. § 371.

*fn4 At some point the Export Bank's license was revoked, but as we explain in Parts B and C, the license issue was not crucial to the government's case.

*fn5 The trial court also denied Aggarwal's later request to depose "Dr. Gruber," an Austrian administrative Judge identified in a German-language letter dealing with the Export Bank's license. This letter is discussed in connection with Aggarwal's Brady claim.

*fn6 Aggarwal cites United States v. Farfan Carreon, 935 F.2d 678, 680 (5th Cir. 1991), claiming that it supports his position that his motion was not untimely. But Farfan Carreon can be distinguished. In that case, even though the motion was filed on the morning of trial, neither side objected on the basis of timeliness, and timeliness was not at issue on appeal. Instead, the trial court's denial of the Rule 15(a) motion was reversed when the appellate court found "exceptional circumstances."

*fn7 Rule 704 states: "(a) Except as provided in subdivision (b), testimony in the form of an opinion or inference otherwise admissible is not objectionable because it embraces an ultimate issue to be decided by the trier of fact.

(b) No expert witness testifying with respect to the mental state or condition of a defendant in a criminal case may state an opinion or inference as to whether the defendant did or did not have the mental state or condition constituting an element of the crime charged or of a defense thereto. Such ultimate issues are for the trier of fact alone."