United States v. Albert Takhalov ( 2016 )

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 13-12385
________________________
D.C. Docket No. 1:11-cr-20279-RNS-2
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
ALBERT TAKHALOV,
ISAAC FELDMAN,
STANISLAV PAVLENKO,
Defendants-Appellants.
________________________
Appeals from the United States District Court
for the Southern District of Florida
________________________
(July 11, 2016)
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Before ED CARNES, Chief Judge, MARTIN, Circuit Judge, and
THAPAR, ∗ District Judge.
THAPAR, District Judge:
The wire-fraud statute, 18 U.S.C. § 1343 does not enact as federal law
the Ninth Commandment given to Moses on Sinai. 1 For § 1343 forbids only
schemes to defraud, not schemes to do other wicked things, e.g., schemes to
lie, trick, or otherwise deceive. The difference, of course, is that deceiving
does not always involve harming another person; defrauding does. That a
defendant merely “induce[d] [the victim] to enter into [a] transaction” that
he otherwise would have avoided is therefore “insufficient” to show wire
fraud. See United States v. Starr, 816 F.2d 94, 98 (2d Cir. 1987).
Here, the defendants feared that the jury might convict them of wire
fraud based on “fraudulent inducements” alone. Hence they asked the
district court to give the jurors the following instruction: that they must
acquit if they found that the defendants had tricked the victims into entering
a transaction but nevertheless gave the victims exactly what they asked for
and charged them exactly what they agreed to pay. The district court
refused to give that instruction, and the jury ultimately convicted the
∗
Honorable Amul R. Thapar, United States District Judge for the Eastern District of
Kentucky, sitting by designation.
1
See Exodus 20:16 (“Thou shalt not bear false witness against thy neighbor.”) (KJV).
2
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defendants of wire fraud and other crimes, most of which were predicated on
the wire-fraud convictions. The question presented in this appeal is whether
the district court abused its discretion when it refused to give the requested
instruction.
I.
A.
During the defendants’ trial, the parties disagreed about much of what
happened in the clubs the defendants owned. But they did agree on one
thing: that the defendants had tricked men to come into the defendants’
clubs. The government presented evidence that the defendants had hired
Eastern European women—known as “Bar Girls” or “B-girls”—to pose as
tourists, locate visiting businessmen, and lure them into the defendants’ bars
and nightclubs. [DE 1121 at 39]. And the defendants did not seriously
dispute that evidence: they admitted that they knew the B-girls concealed
their relationship with the clubs to persuade the men to go to the clubs.
Indeed, the defendants testified that they believed this scheme was a
perfectly legitimate business model. [Id. at 59–60, 99].
The parties’ stories diverged, however, as to what happened after the
men entered the clubs. In the government’s story, the defendants’ scheme
began with the B-Girls’ lies but went far beyond that. Once inside the clubs,
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employees would pour vodka in the men’s beer to get them drunker,
misrepresent the prices of drinks, hide menus, cover up prices, and even
forge the men’s signatures on credit-card receipts. [Id. at 40–42].
The defendants’ story, on the other hand, began and ended with the B-
girls. Yes, they admitted they knew the B-girls were posing as tourists to get
the men to come to the clubs with them. From there, though, they proceeded
to mount what one might call the Casablanca defense, arguing that they
were “shocked, shocked” to learn that fraud was taking place within their
South-Beach versions of Rick’s Café Américain.2 As for the swindling
going on inside the clubs—the lying about prices, the forging of signatures,
and so on—the defendants said that they knew nothing about it. Instead, the
defendants testified, they were merely investors in the clubs—or in charge of
the credit-card transactions—but were not involved in the day-to-day
workings of the clubs. [See id. at 60, 69–70, 86, 103]. In the defendants’
story, none of these allegedly swindled men were truly victims: they
knowingly entered the clubs, bought bottles of liquor, and drank them with
2
See generally Casablanca (Warner Brothers 1942) (“Rick: How can you close [up my
bar]? On what grounds? Captain Renault: I'm shocked, shocked to find that gambling is
going on in here! Croupier: Your winnings, sir.”)
4
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their female companions. Thus, in the defendants’ view, these men got what
they paid for—nothing more, nothing less. [See id. at 62, 100–102].
B.
In addition to the factual dispute about what happened after the men
came into the clubs, the parties also disagreed about the legal significance of
the lies that the B-Girls used to get the men to come into the clubs in the first
place. In the government’s view, the jury could convict the defendants of
wire fraud based on those lies alone. [See DE 1121 at 39–40; R. 1154 at 63].
The defendants argued just the opposite—that “just because they have [used
promoters to persuade men to come back to the respective establishments]
does not constitute fraud with regard to the wire fraud or conspiracy to
commit these frauds.” [DE 1152 at 285].
At the close of evidence, the defendants asked for a jury instruction to
support this theory. Specifically, they asked the court to instruct the jury
that “[f]ailure to disclose the financial arrangement between the B-girls and
the Bar, in and of itself, is not sufficient to convict a defendant of any
offense[.]” [DE 921 at 1]. The court denied that theory-of-the-defense
instruction, however, because the court did not believe it was “an accurate
statement of the law.” [DE 1152 at 285, 289].
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During closing argument, the government argued exactly what the
defendants had expected it would argue: that the B-girls’ concealment of
their bar-affiliation to the men were material misrepresentations sufficient to
constitute fraud. [DE 1154 at 63 (“The first lie was by the girls to get them
to come to the clubs by not telling them that they work for the clubs and got
a percentage and this was material. This was important because, as even the
defendant’s own witness told you, had they known that these women worked
for the clubs they likely wouldn’t have even gone.”)]. When defense
counsel stood up to make their closing arguments, they did so in front of a
jury that had just heard that the B-girls’ lies were material and had never
received an instruction to the contrary. Perhaps for this reason, defense
counsel focused their efforts elsewhere, arguing that there was not enough
evidence to connect the defendants to the other fraudulent activities at the
clubs. Specifically, the defendants argued that they were not involved in the
alleged fraud that took place within the clubs, [id. at 147–48, 183, 191, 214–
15], and that they did not believe they were doing anything illegal. [Id. at
147–48, 170–71, 201–02]. Following closing arguments, the jury convicted
the defendants on several counts, including multiple counts of wire fraud
and money laundering. [D.E. 954; D.E. 956; D.E. 957]. This appeal
followed.
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II.
We review for an abuse of discretion a district court’s refusal to give a
requested jury instruction. United States v. Dohan, 508 F.3d 989, 993 (11th
Cir. 2007).
A.
To show that the district court abused its discretion when it refused to
give a proposed jury instruction, a defendant must first show that the
requested instruction was a correct statement of the law. United States v.
Eckhardt, 466 F.3d 938, 947–48 (11th Cir. 2006). “We review the legal
correctness of a [requested] jury instruction de novo.” Fid. Interior Const.,
Inc. v. Se. Carpenters Reg'l Council of United Bhd. of Carpenters & Joiners
of Am., 675 F.3d 1250, 1259 (11th Cir. 2012).
1.
The law in question here is the wire-fraud statute, which makes
criminal any “scheme or artifice to defraud.” 3 18 U.S.C. § 1343. The
statute itself, however, does not explain what constitutes such a scheme or
artifice. United States v. Bradley, 644 F.3d 1213, 1240 (11th Cir. 2011).
3
The statute also includes a jurisdictional provision, namely that the schemer must
transmit the fraudulent statements “by means of wire, radio, or television communication
in interstate or foreign commerce.” 18 U.S.C. § 1343. That provision is not relevant to
this appeal.
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Thus, the meaning of the phrase “scheme to defraud” has been “judicially
defined.” United States v. Pendergraft, 297 F.3d 1198, 1208 (11th Cir.
2002). And that definition is a broad one, “broad[er] . . . than the common
law definition of fraud.” Id. It is a “reflection of moral uprightness, of
fundamental honesty, fair play and right dealing in the general and business
life of members of society.” Gregory v. United States, 253 F.2d 104, 109
(5th Cir. 1958).
“[D]espite its breadth,” however, “the judicial definition” of a
“scheme to defraud” has some limits. Bradley, 644 F.3d at 1240. The most
important limit is obvious from the statute itself: the scheme must be a
scheme to defraud rather than to do something other than defraud. For
Congress could have made criminal any “scheme” simpliciter, but chose not
to do so. The first question presented in this case, then, is what the word
“defraud” means.
To answer that question, we turn first to the dictionaries. For “[t]he
ordinary-meaning rule is the most fundamental semantic rule of
interpretation.” Antonin Scalia & Bryan A. Garner, Reading Law 69 (2012).
And “to determine the common usage or ordinary meaning of a term, [we]
often turn to dictionary definitions for guidance.” CBS Inc. v. PrimeTime 24
Joint Venture, 245 F.3d 1217, 1223 (11th Cir. 2001); see also Stein v.
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Paradigm Mirasol, LLC, 586 F.3d 849, 854 (11th Cir. 2009) (noting that
“[a] term that is undefined in a statute carries its ordinary meaning” and
turning first to the dictionary to determine that meaning). Black’s defines
the word “defraud” as “[t]o cause injury or loss to (a person or organization)
by deceit.” Black’s Law Dictionary 516 (10th ed. 2014.). Webster’s says
much the same. Webster’s Third New International Dictionary 593 (2002)
(defining the word “defraud” as “to take or withhold from (one) some
possession, right, or interest by calculated misstatement or perversion of
truth, trickery, or other deception”).
These definitions make clear that there is a difference between
deceiving and defrauding: to defraud, one must intend to use deception to
cause some injury; but one can deceive without intending to harm at all. See
Black’s at 492 (defining the word “deception” as “[t]he act of deliberately
causing someone to believe that something is true when the actor knows it to
be false”); Webster’s at 585 (defining the word “deception” as “the act of
deceiving, cheating, hoodwinking, misleading, or deluding”). Thus,
deceiving is a necessary condition of defrauding but not a sufficient one.
Put another way, one who defrauds always deceives, but one can deceive
without defrauding.
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For this reason, the law in the Eleventh Circuit makes clear that a
defendant “schemes to defraud” only if he schemes to “depriv[e] [someone]
of something of value by trick, deceit, chicane, or overreaching.” Bradley,
644 F.3d at 1240. But if a defendant does not intend to harm the victim—
“to obtain, by deceptive means, something to which [the defendant] is not
entitled”—then he has not intended to defraud the victim. Id.
From that conclusion, a corollary follows: a schemer who tricks
someone to enter into a transaction has not “schemed to defraud” so long as
he does not intend to harm the person he intends to trick. And this is so even
if the transaction would not have occurred but for the trick. For if there is no
intent to harm, there can only be a scheme to deceive, but not one to defraud.
Consider the following two scenarios. In the first, a man wants to
exchange a dollar into four quarters without going to the bank. He calls his
neighbor on his cell phone and says that his child is very ill. His neighbor
runs over, and when she arrives he asks her to make change for him. She
agrees; the quarters pass to the man; the dollar passes to the woman; and
they part ways. She later learns that the child was just fine all along. The
second scenario is identical to the first, except that instead of giving the
woman a true dollar, he gives her a counterfeit one.
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The first scenario is not wire fraud; the second one is. 4 Although the
transaction would not have occurred but-for the lie in the first scenario—the
woman would have remained home except for the phony sickness—the man
nevertheless did not intend to “depriv[e] [the woman] of something of value
by trick, deceit, [and so on].” Bradley, 644 F.3d at 1240. But in the second
scenario he did intend to do so.
More specifically, the difference between the scenarios is that, in the
first scenario, the man did not lie about the nature of the bargain: he
promised to give the woman a true dollar in exchange for the quarters, and
he did just that. In the second, he lied about the nature of the bargain: he
promised to give her a true dollar but gave her a fake one instead.
Now imagine another, more common scenario: a young woman asks a
rich businessman to buy her a drink at Bob’s Bar. The businessman buys the
drink, and afterwards the young woman decides to leave. Did the man get
what he bargained for? Yes. He received his drink, and he had the
opportunity to buy a young woman a drink. Does it change things if the
woman is Bob’s sister and he paid her to recruit customers? No; regardless
4
This assumes, of course, that the man’s cell-phone signal travels across state lines, thus
constituting a “wire, radio, or television communication in interstate or foreign
commerce.” 18 U.S.C. § 1343.
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of Bob’s relationship with the woman, the businessman got exactly what he
bargained for. If, on the other hand, Bob promised to pour the man a glass
of Pappy Van Winkle 5 but gave him a slug of Old Crow 6 instead, well, that
would be fraud. Why? Because the misrepresentation goes to the value of
the bargain.
Thus, a “scheme to defraud,” as that phrase is used in the wire-fraud
statute, refers only to those schemes in which a defendant lies about the
nature of the bargain itself. That lie can take two primary forms: the
defendant might lie about the price (e.g., if he promises that a good costs $10
when it in fact costs $20) or he might lie about the characteristics of the
good (e.g., if he promises that a gemstone is a diamond when it is in fact a
cubic zirconium). In each case, the defendant has lied about the nature of
the bargain and thus in both cases the defendant has committed wire fraud.
But if a defendant lies about something else—e.g., if he says that he is the
long-lost cousin of a prospective buyer—then he has not lied about the
5
“Pappy’s,” as it is often called, is a particularly rare bourbon varietal: nearly impossible
to find, and nearly impossible to afford when one finds it.
6
Although Old Crow has a venerable pedigree—reportedly the go-to drink of Mark
Twain, Ulysses S. Grant, Hunter Thompson, and Henry Clay—it is not Kentucky’s most-
expensive liquor. Its “deluxe” version, “Old Crow Reserve,” retails for approximately
$15 per bottle.
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nature of the bargain, has not “schemed to defraud,” and cannot be convicted
of wire fraud on the basis of that lie alone.
The Second Circuit has interpreted the wire-fraud statute in precisely
this way. Their cases have “drawn a fine line between schemes that do no
more than cause their victims to enter into transactions that they would
otherwise avoid—which do not violate the mail or wire fraud statutes—and
schemes that depend for their completion on a misrepresentation of an
essential element of the bargain—which do violate the mail and wire fraud
statutes.” United States v. Shellef, 507 F.3d 82, 108 (2d Cir. 2007); see also
United States v. Starr, 816 F.2d 94, 98 (2d Cir. 1987) (“Misrepresentations
amounting only to a deceit are insufficient to maintain a mail or wire fraud
prosecution. Instead, the deceit must be coupled with a contemplated harm
to the victim [that] affect[s] the very nature of the bargain itself. Such harm
is apparent where there exists a discrepancy between benefits reasonably
anticipated because of the misleading representations and the actual benefits
which the defendant delivered, or intended to deliver.”) (internal quotation
marks omitted); United States v. Regent Office Supply Co., 421 F.2d 1174,
1182 (2d Cir. 1970) (“[W]e conclude that the defendants intended to deceive
their customers but they did not intend to defraud them, because the falsity
of their representations was not shown to be capable of affecting the
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customer’s understanding of the bargain nor of influencing his assessment of
the value of the bargain to him, and thus no injury was shown to flow from
the deception.”).
Moreover, the Second Circuit’s interpretation of the wire-fraud statute
is not a parochial interpretation of an ambiguous provision of federal law.
Their interpretation follows as a matter of logic from Congress’s decision to
use the phrase “scheme to defraud” rather than “scheme” or “scheme to
deceive.” We therefore adopt that interpretation as our own. A jury cannot
convict a defendant of wire fraud, then, based on “misrepresentations
amounting only to a deceit.” Shellef, 507 F.3d at 108. Thus, even if a
defendant lies, and even if the victim made a purchase because of that lie, a
wire-fraud case must end in an acquittal if the jury nevertheless believes that
the alleged victims “received exactly what they paid for.” Id.
2.
Here, the defendants asked the district court to instruct the jury that
“[f]ailure to disclose the financial arrangement between the B-girls and the
Bar, in and of itself, is not sufficient to convict a defendant of any
offense[.]” R. 921 at 1; see also R. 1152 at 285 (“So [Pavlenko’s] theory of
defense is just because [the defendants used the B-girls to lure men into the
clubs without disclosing their financial arrangement] does not constitute
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fraud with regard to the wire fraud or conspiracy to commit these frauds.”).
If the jury believed that the defendants had deceived the victims only about
the B-girls’ pay arrangement, then the jury would likewise believe that the
defendants’ misrepresentations “amount[ed] only to deceit” and that the
victims “received exactly what they paid for.” Shellef, 507 F.3d at 108.
Thus, “failure to disclose the financial arrangement between the B-girls and
the Bar” was not “in and of itself” sufficient to convict the defendants of
wire fraud. The defendants’ requested instruction therefore seems like a
correct statement of the law.
The government responds in a few ways. First, it argues that the
Second Circuit cases have not “been applied in this Circuit.” United States
Br. at 43. True, but neither have we rejected the Second Circuit’s
interpretation; we simply have never considered the question they answered.
And the “law” at issue is the proper interpretation of the federal statute itself,
not some common-law creature unique to the Second Circuit. After all, the
defendants’ argument is not that the Eleventh Circuit is bound by the
opinions of the Second Circuit. The argument is that the Second Circuit’s
interpretation of the statute is the right interpretation. Thus, the defendants
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argue, their proposed jury instruction was a correct statement of “the law,”
i.e., the statute. We have already explained why we agree.7
Second, the government argues that the proposed instruction “was
incorrect legally, because it proposed to tell the jury that [the] defendants’
conduct was outside the reach of the wire fraud statute.” United States Br. at
54. No, it did not. It proposed only to tell the jury what portion of the
defendants’ conduct could be criminal under the statute and what portion
could not.
Third, the government argues that “Pavlenko’s instruction was
incorrect in its portrayal of the charges” because the government “never
described the [defendants’] scheme” as one “to have attractive women
induce patrons to purchase and consume alcoholic beverages under the
7
The government argues in passing that the Second Circuit’s holding in Regent “conflicts
directly” with our holding in United States v. Svete, 556 F.3d 1157 (11th Cir. 2009) (en
banc). United States Br. at 39. We disagree. In Regent, the Second Circuit held that a
jury may convict a defendant of wire fraud only if the defendant lied about the nature of
the bargain itself. See Regent, 421 F.2d at 1182. In Svete, by contrast, we held that a jury
may convict a defendant of wire fraud even if the scheme in question would not have
deceived a person of at least ordinary prudence. See Svete, 556 F.3d at 1165. There—
like in Regent, and like here—the defendants had made false statements to induce the
victims into entering into a transaction. Id. at 1160. But there—unlike in Regent and
unlike here—those false statements were about the nature of the bargain. Id. (noting that
the defendants’ sales agents had made false statements about, among other things, “the
risks associated with the [victims’] investments”). Svete is therefore distinguishable from
Regent—and from this case. The Eleventh Circuit simply has not addressed—in Svete or
elsewhere—the precise question that the Second Circuit considered in Regent and that is
presented here.
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illusion that the patron may later persuade the women to have sexual
relations.” United States Br. at 55. Fair enough. But the question at hand is
a purely legal one: whether the defendants’ proposed instruction was a
correct statement of the law. And the government’s characterization of the
defendants’ scheme has no bearing on the answer to that question.
Finally, the government argues that the instruction “was incorrect in
its depiction of the facts” because “[t]he evidence showed convincingly that
the conspirators . . . intoxicated patrons without their knowledge or knowing
consent, forcing liquor onto patrons, adulterating beverages, and physically
pouring it down victims’ throats in some instances.” United States Br. at
55–56. Again, fair enough. But, again, totally irrelevant. What “the
evidence showed”—even “showed convincingly”—simply has no bearing
on whether the defendants’ proposed instruction was a correct statement of
the law.
In sum, the defendants asked the district court to tell the jurors that
they could convict only if they found that the defendants had schemed to lie
about the quality or price of the goods sold to the victims. And § 1343,
which we interpret de novo, requires the jury to make just such a finding
before convicting a defendant of wire fraud. Thus, the proposed instruction
was a correct statement of the law.
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B.
To show an abuse of discretion, however, a defendant must show
more than just that the requested instruction was a correct statement of the
law. He must also show that the instruction dealt with a sufficiently
important point raised during trial. Eckhardt, 466 F.3d at 947–48.
Here, the defendants’ case theory seemed to go as follows: yes, we
knew that the B-girls were tricking the victims into coming to the bar by
posing as tourists, but we nevertheless did not commit wire fraud because
we gave the victims exactly what they ordered—i.e., absurdly expensive
drinks at the bar—and thus any lies about the B-girls’ employment status did
not misrepresent the value of the bargain.8 The government’s position was
that, although there was evidence that the defendants did far more than just
trick the victims into coming to the bar, the jury could convict based on that
trickery alone.
Given the positions that the government and defendants took during
trial, the defendants’ proposed instruction—that “[f]ailure to disclose the
8
The government of course argued that, in addition to tricking the victims into entering
the bar, the defendants also charged them exorbitant drink-prices that the menus nowhere
advertised. But all that shows is that the defendants’ case theory required the jury to find
that the defendants did not monkey with the prices. And that is a perfectly valid defense
theory.
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financial arrangement between the B-girls and the Bar, in and of itself, is not
sufficient to convict a defendant of any offense”—certainly “dealt with some
point in the trial so important that failure to give the requested instruction
seriously impaired the defendant’s ability to conduct his defense.”
Eckhardt, 466 F.3d at 947–48. After all, if the jurors believed that they
could convict based only on the B-girls’ failure “to disclose the financial
arrangement between the B-girls and the Bar,” then the defense’s theory
would have collapsed entirely.
C.
Finally, to show that the district court abused its discretion by refusing
to give a proposed instruction, a defendant must show that the proposed
instruction “was not substantially covered by a charge actually given.”
Eckhardt, 466 F.3d at 948. Here, the district court gave the jury an
instruction as to the elements of the offense that in relevant part provided:
A defendant can be found guilty of [wire fraud] only if all of
the following facts are proved beyond a reasonable doubt: 1.
The defendant knowingly devised or participated in a scheme to
defraud or to obtain money by false pretenses, representations
or promises. 2. The false pretenses, representations or promises
were about a material fact. 3. The defendant acted with the
intent to defraud and; 4. The defendant transmitted or caused to
be transmitted by wire some communication in interstate
commerce to help carry out the scheme to defraud.
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The term “scheme to defraud” includes any plan or course of
action intended to deceive or cheat someone out of money or
property by using false or fraudulent pretenses, representations
or promises.
A “material fact” is an important fact that a reasonable person
would use to decide whether to do or not do something. A fact
is material if it has the capacity or natural tendency to influence
a person’s decision. It does not matter whether the decision-
maker actually relied on the statement or knew or should have
known that the statement was false.
The intent to defraud is the specific intent to deceive or cheat
someone, usually for personal financial gain or to cause
financial loss to someone else.
R. 1154 at 25–26 (emphasis added). Nowhere in that instruction—or
anywhere else—did the district court tell the jurors that “[f]ailure to disclose
the financial arrangement between the B-girls and the Bar, in and of itself, is
not sufficient to convict a defendant of any offense[.]” Nor did the district
court say anything like that. Thus, it would seem that the district court’s
instructions did not “substantially cover” the defendants’ requested
instruction.
In response, the government argues that the district court’s “good-
faith instruction” was enough. Specifically the government points out that
the court told the jury that:
Good faith is a complete defense to a charge that requires intent
to defraud. A defendant is not required to prove good faith.
The Government must prove intent to defraud beyond a
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reasonable doubt. An honestly held belief or an honestly
formed belief cannot be fraudulent intent even if the opinion or
belief is mistaken. Similarly, evidence of a mistake in
judgment, an error in management, or carelessness cannot
establish fraudulent intent. [The defense is not applicable if]
the defendant or other coconspirator, with the defendant’s
knowledge, knowingly made false or fraudulent representations
to others with the specific intent to deceive them.
R. 1154 at 37–38. That instruction, the government argues, “substantially
covered” the defendants’ requested one.
The government’s argument simply misunderstands the defendants’
case theory. They did not argue that they lacked the specific intent to
deceive the victims; indeed they admitted that they fervently hoped to do
just that. The defendants instead argued that they had intended to deceive
the victims in only one way—by tricking them into coming to the bars—and
that such a deception was not wire fraud. Put another way, the defendants
did not dispute that they lacked specific-enough intent; they argued that what
they specifically intended to do was not a crime. The district court’s good-
faith instruction concerned only what it meant for the defendants to have a
specific intent to deceive. It said nothing about what kind of deception
could constitute wire fraud. Thus, the good-faith instruction did not
“substantially cover” the defendants’ requested instruction.
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One might also argue (though the government does not) that the
district court’s definition of “scheme to defraud” substantially covered the
proposed instruction. This is a more difficult argument to answer. After all,
the court told the jurors that they could convict only if they found that the
defendants intended to “deceive or cheat someone out of money or
property.” And if someone is lured to a bar under false pretenses but
nevertheless gets precisely what he pays for, he has hardly been “deceive[d]
or cheat[ed] out of money or property.” Thus, under the given instructions,
it would have been hard for the jury to convict if they found only that the
defendants lured the victims into the bar under false pretenses. To the
contrary, to convict under the given instructions, the jury would have needed
to find—as a matter of logic—that the defendants cheated the victims out of
money or property, e.g., by running up fake bills on the victims’ credit cards
and charging absurd drink prices that the menus nowhere advertised.
The question before us, however, is not whether the proposed
instruction was “logically entailed” by the given instruction, but whether it
was “substantially covered”; and those are meaningfully different concepts.
After all, the average juror is not Mr. Spock. If he were, then a trial-court
judge’s job would be much easier. He could instruct the jury in broad
strokes—instructing only as to the bare elements of the crime, perhaps—and
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be confident that the jury would deduce all of the finer-grained implications
that must logically follow. As it stands, however, the vast majority of
American juries are composed exclusively of humans. And humans, unlike
Vulcans, sometimes need a bit more guidance as to exactly what the court’s
instructions logically entail.
For that reason, this case is distinguishable from other Eleventh
Circuit cases holding that a given instruction substantially covered a
requested one—even the two cases that are most difficult for the defendants,
Martinelli and Hill. The difference between those cases on the one hand,
and this case on the other, is the size of the logical leap that a juror would
need to make to get from the instruction the court gave to the instruction the
defendant requested.
In Martinelli, the court instructed the jury that the defendant was
guilty of money laundering only if he knew that the money was derived from
felonious activities. The defendant in turn asked the court to instruct the
jury that the defendant was not guilty if he thought the money-producing
business was a legitimate one. United States v. Martinelli, 454 F.3d 1300,
1315–16 (11th Cir. 2006). Thus, to get from the given instruction to the
requested one, the jury needed to infer only one thing: that “legitimate
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businesses” do not engage in “felonious activities.” We have no doubt that a
juror can bridge that logical gap all on her own.
Similarly, in Hill, the court instructed the jury that the defendant was
guilty of credit-application fraud only if he made false statements to the
bank knowingly and willfully. The defendant asked the court to instruct the
jury that he was not guilty if he believed the statements were true. United
States v. Hill, 643 F.3d 807, 852–54 (11th Cir. 2011). Thus, to get from the
given instruction to the requested one, the jury needed to infer only one
thing: that a person cannot lie “knowingly and willfully” if he speaks what is
in his view the truth. That inference, too, hardly requires Holmesian feats of
deduction. 9
In contrast, the court here instructed the jury that the defendants were
guilty of wire fraud only if they intended to “deceive or cheat someone out
of money or property.” The defendants asked the court to instruct the jury
that they were not guilty if they merely used lies to lure the victims into an
otherwise-legitimate transaction. To get from the given instruction to the
requested one, the jury needed to make the following inference: that a person
is not “deceived or cheated out of money or property” if he gets exactly what
9
Sherlock or Oliver Wendell: either Holmes will do here.
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he paid for even though he is deceived into paying in the first place. Suffice
it to say that, if a juror is going to make that kind of logical inference, he is
probably going to need some guidance from the district court.
Indeed, the government still refuses to make that inference without
some judicial “guidance.” The prosecution repeatedly argued below that the
B-Girls’ lies about their employment status was enough to convict the
defendants of wire fraud. See, e.g., R. 663 at 3–4; R. 1121 at 39–40; R.
1154 at 63. And even before this court, the government argues that “[t]here
is no reason that deceiving victims about the girls’ relationship to the clubs
would not be enough to sustain a wire-fraud conviction[.]” United States Br.
at 39. Although the government’s argument might be a reason to hold that
the defendants’ requested instruction was not a “correct statement of a
law”—an argument that we rejected above—it also shows that the given
instructions did not “substantially cover” the requested one. After all, if
even the government’s attorneys did not believe that the court was
instructing the jury that “deceiving victims about the girls’ relationship to
the clubs would not be enough to sustain a wire-fraud conviction,” then why
would a jury composed exclusively of lay people?
In sum, a district court does not need to tell a jury that proceeds from
a felony are not proceeds from a legitimate business. Nor does a court need
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to tell a jury that a person does not lie willfully if he thinks he is telling the
truth. The jurors will figure those things out on their own. But a court does
need to tell a jury that a scheme to trick patrons to come into a bar—without
more—is not wire fraud. That is not the sort of thing that we can expect
jurors to simply infer. The district court’s elements-of-the-crime instruction
therefore did not “substantially cover” the defendants’ requested instruction.
D.
We recognize that the district court presided over a complex criminal
trial that took many months to complete. And the court did an admirable job
in overseeing those proceedings. Indeed, we commend the court, whose
evidentiary and other legal rulings were, in our view, nearly flawless.
Nevertheless, the district court refused to give a jury instruction that was a
correct statement of the law, was critical to the defense’s case theory, and
was not substantially covered by other instructions. Thus, as a matter of
law, the district court abused its discretion by refusing to give that
instruction. The question, then becomes whether this error requires reversal
or whether it was instead harmless.
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III.
A.
This would have been an easy case to decide during the Kennedy
administration. Under the Supreme Court’s NASA-era jurisprudence, the
rules were clear with respect to botched jury instructions. If a trial judge
gave two instructions—and one turned out to be improper—then the
appellate court would reverse the conviction so long as “it [wa]s impossible
to say under which [instruction] the conviction was obtained.” Stromberg v.
California, 283 U.S. 359, 368 (1931); see also Yates v. United States, 354
U.S. 298, 311–12 (1975). Under that test, the defendants here would surely
be entitled to a new trial. After all, the district court provided the jury with
multiple paths by which they could arrive at a guilty verdict. One of those
paths—as we have explained above—was an impermissible one. It is of
course “impossible to say” which path the jury proceeded down. And thus it
is likewise “impossible to say” whether the jury would have nevertheless
arrived at the same destination—a conviction—if the trial court had
restricted the jury to the proper route.
Things are harder now. In 1967, the Supreme Court announced its
decision in Chapman v. California, 386 U.S. 18 (1967), which held that
even constitutional errors might, in certain situations, still be harmless ones.
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“In a series of post-Chapman cases,” the Court “concluded that various
forms of [jury-instruction] error[s] are not structural”—i.e., they do not
automatically require reversal, no questions asked—but are instead “subject
to harmless-error review.” Hedgpeth v. Pulido, 555 U.S. 57, 60 (2008).
And although those cases “did not arise in the context of a jury instructed on
multiple theories of guilt, one of which is improper,” the Court made clear
that the same harmless-error standard would apply in cases, like the one
here, in which a jury could have convicted based on an erroneous
instruction. Id. at 61.
That standard was framed most clearly—and most recently—in Neder
v. United States, 527 U.S. 1 (1999). There, the government indicted a man
named Ellis Neder for tax fraud. “According to the Government, Neder
failed to report more than $1 million in income in 1985 and more than $4
million in income for 1986, both amounts reflecting profits Neder obtained
from [various] fraudulent[ly] [obtained] real estate loans.” Id. at 6. He was
therefore indicted for two counts of filing a false income tax return, in
violation of 26 U.S.C. § 7206(1). Id. To convict Neder of violating that
section of the Internal Revenue Code, the government needed to prove that
he had willfully “ma[de] and subscrib[ed]” a “return, statement, or other
document, which contains or is verified by a written declaration that it is
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made under the penalties of perjury, and which he does not believe to be true
and correct as to every material matter.” 26 U.S.C. § 7206(1) (emphasis
added).
Encouraged by then-existing circuit precedent, the district court
glossed over this “every material matter” language and instructed the jury
that it “need not consider the materiality of any false statements even though
that language [was] used in the indictment.” Neder, 527 U.S. at 6 (internal
quotation marks omitted). “The question of materiality, the [district] court
instructed, ‘is not a question for the jury to decide.’” Id. By the time the
case arrived at the Supreme Court, the parties agreed that the district court
had made a mistake when it gave that instruction. Id. at 8. After all, the
statute did not forbid a taxpayer from making any false statements on his tax
return; it forbade him only from making material false statements.
The question before the Court was what to do about the error.
“Unlike such defects as the complete deprivation of counsel or trial before a
biased judge,” the Court held, “an instruction that omits an element of the
offense does not necessarily render a criminal trial fundamentally unfair[.]”
Id. at 9. The Court then imported the Chapman standard and thus framed
the harmless-error standard—at a high level of generality—as follows: the
question is whether “it appears beyond a reasonable doubt that the error
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complained of did not contribute to the verdict obtained.” Id. at 15 (internal
quotation marks omitted).
In addition to this general rule—framed, as it were, as a wide-angle
shot—the Neder Court also zoomed in to give additional guidance as to
exactly when an error would be harmless beyond a reasonable doubt.
Specifically, the Court held that the question was “whether the record
contains evidence that could rationally lead to a contrary finding with
respect to the omitted element,” id. at 19—i.e., whether a properly instructed
jury could have “reasonably f[ound]” the defendant not guilty, id. at 16. If
not, the Court held, then a jury-instruction error is harmless. Answering this
question as to Neder himself, the Court held that “no jury could reasonably
find that Neder’s failure to support [some $5 million] of income on his tax
returns was not ‘a material matter.’” Id. And thus the Court concluded that
it was “beyond cavil” that “the error ‘did not contribute to the verdict
obtained.’” Id. at 17 (quoting Chapman, 386 U.S. at 24).
The general question presented in this case is therefore as follows:
whether “it appears beyond a reasonable doubt that the [faulty jury
instruction] did not contribute to the verdict obtained.” See id. at 15
(internal quotation marks omitted). The more specific question is this: does
“the record contain[] evidence that could rationally lead” a jury to find that
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the defendants lacked the intent to defraud? See id. at 19. If so, the
defendants are entitled to a new trial. If not, the failure to give the requested
instruction was harmless. Id.
B.
1.
Here, the record contains sufficient evidence such that, had the
requested instruction been given, a rational jury could find that the
defendants lacked the intent to defraud on almost all of the wire-fraud
counts. At trial, the defendants each testified that they were aware that the
B-girls concealed their relationship to the clubs. See D.E. 1147 at 187
(Pavlenko testimony); D.E. 1149 at 95 (Feldman testimony); D.E. 1151 at
34, 38, 88, 213 (Takhalov testimony). 10 However, they each also testified
that they did not intend to defraud any customers and that they were not
aware of any (other) illicit activity by the B-girls. See, e.g., D.E. 1146 at
10
The government argues that the defendants denied knowing that the B-girls concealed
their relationship to the clubs. Even if this were true, a jury is not bound either to believe
or not believe a witness’s testimony as a whole. Rather, juries can find one part of a
witness’s testimony credible while not believing another part of the testimony. See, e.g.,
Elwet v. United States, 231 F.2d 928, 934 (9th Cir. 1956) (“The jury may conclude a
witness is not telling the truth as to one point, is mistaken as to another, but is truthful and
accurate as to a third.”). So the jury could choose not to believe the defendants about
knowing the B-girls concealed their relationships to the clubs, but still believe the
defendants when they testified that they knew nothing about hiding prices, lying about
prices, spiking drinks, etc.
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119–20 (Pavlenko testimony); D.E. 1147 at 31–32 (same); D.E. 1149 at 44–
47, 109, 181, 184, 223–24 (Feldman testimony); D.E. 1151 at 38–39, 143,
184 (Takhalov testimony). Had the requested instruction been given, a
rational jury certainly could have chosen to believe the defendants’
testimony that they did not intend to defraud customers. And in fact, the
record suggests the jury did believe the defendants, at least in part—the jury
acquitted the defendants on the majority of the counts in the indictment.
D.E. 954; D.E. 956; D.E. 957; see United States v. Thomson, 473 F.3d 1137,
1142 (11th Cir. 2006) (“The jury gets to make any credibility choices, and
we will assume they made them all in the way that supports the verdict.”).
Regardless of the verdict, though, “[i]t is not for us to decide which
witnesses we find more believable—credibility choices lie within the
province of the jury.” United States v. Johnson, 713 F.2d 654, 661 (11th
Cir. 1983) (internal quotation marks omitted). As such, the defendants’
testimony provided sufficient evidence for a rational jury to find that the
defendants lacked the intent to defraud.
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The government makes five arguments in response.11 First, the
government explains that the defendants’ fraud scheme had many
components, and the government never told the jury to convict the
defendants solely on their failure to disclose the B-girls’ relationship to the
clubs. True. But regardless of whether the government told the jury convict
on this basis, the jury still could have convicted the defendants on the wire
fraud counts solely on this basis. To convict the defendants of wire fraud,
the jury had to find, in part, that (1) the defendants “knowingly devised or
participated in a scheme to defraud or to obtain money by false pretenses,
representations or promises,” and (2) these “false pretenses, representations
or promises were about a material fact.” D.E. 1154 at 25 (jury instructions).
In the government’s closing, the government argued that the concealment of
the B-girls’ relationship to the clubs was a “material” misrepresentation. Id.
at 63. As such, even if the jury did not believe that the defendants made any
other material misrepresentations, the jury still could have convicted the
defendants because the government proved that the defendants made false
representations about a material fact: the B-girls’ relationship to the clubs.
11
The government also claims that district court’s instructions as a whole show that the
absence of the proposed instruction was harmless. The Court addressed this argument in
full in Part II of this opinion, supra.
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Second, the government argues that it presented “overwhelming
evidence” that the defendants were guilty of wire fraud beyond their failure
to disclose the B-girls’ relationship. While this may be correct, it does not
change the outcome here. The question is not whether the jury could still
have convicted the defendants if the instruction had been given. The
question is whether the jury could have acquitted them. And the evidence
against the defendants here was not so overwhelming that an acquittal would
have been irrational.
Third, the government asserts that “if the jury was truly under the
‘mistaken’ impression that simply concealing the girls’ relationship to the
clubs was sufficient to convict, there would have been no acquittals
whatsoever on the substantive fraud counts.” United States Supp. Br. at 11.
It is true that the jury acquitted the defendants on some of the substantive
fraud counts. This does not mean that the jury did not have the ‘mistaken
impression’ that concealing the girls’ relationship to the club was, on its
own, fraud. Maybe the jury did not believe the government proved the
defendants’ involvement in those counts, or maybe the jury reached
inconsistent verdicts. Regardless, the Court will not read into the split
verdict to determine whether or not the jury believed the concealment of the
B-girls’ relationship was sufficient to prove fraud. See United States v.
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Powell, 469 U.S. 57, 64–65 (1984) (“[W]here truly inconsistent verdicts
have been reached, the most that can be said . . . is that the verdict shows
that either in the acquittal or the conviction the jury did not speak their real
conclusions, but that does not show that they were not convinced of the
defendant’s guilt.” (internal quotations omitted)).
Fourth, the government states that the defendants did not argue their
proposed defense theory—that the concealment of the B-girls’ relationship
did not constitute fraud—in closing. Thus, the government claims, we
cannot find that the jury convicted the defendants solely on the concealment
of the B-girls’ relationship to the clubs. But the government does not point
the Court to a single case that requires a defendant to raise a defense theory
in closing arguments after that the trial court rejected that theory. And, even
if such a case existed, the government’s logic is flawed. Imagine that the
defendants had argued in closing that the concealment of the B-girls’
relationship did not constitute fraud. Without an instruction supporting the
defendants’ theory, the jury was not required to believe this theory. Instead,
the jury could believe what the government argued in its closing: that the
concealment was material and the defendants acted with the intent to deceive
or cheat the victims. Thus, even if the defendants had argued their theory in
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closing, the jury still could have convicted the defendants of fraud based on
the concealment of the B-girls’ relationship.
Finally, the government argues that “the jury convicted Pavlenko on a
substantive wire fraud count that was not tied to the interaction of a
customer and a B-girl, further ameliorating any doubt that the jury may have
thought the only deception here was failing to disclose the girls’ relationship
to the clubs.” United States Supp. Br. at 11. Specifically, the government
points to Count 21 of the indictment, which charged that Pavlenko carried
out the fraud scheme by sending an email to American Express regarding a
picture of Bolaris, one of the victims, with a B-girl. Id. In his email to
American Express, Pavlenko implied he did not know who the girl in the
photo was, when in fact she worked for the bar. See United States Ex. 223.
So, the government argues, the instruction at issue here would not have
altered the verdict on Count 21.
Pavlenko responds that Count 21 of the indictment was tied to the
interaction of a customer and a B-girl. The jury instructions stated that the
substantive wire fraud counts, including Count 21, did not require the wire
communication to be false. Instead, the government could prove those
counts if the wire communication contained a true statement, as long as that
communication was in furtherance of the fraud scheme. R. 1154 at 26. This
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jury instruction meant that the jury did not have to find that Pavlenko’s
email to American Express contained a lie; instead, the jury just had to find
that the email was sent in furtherance of the general scheme to defraud
customers. So, the argument seems to go, the jury could have found that this
email was in furtherance of the scheme to defraud the customers without
finding that the email contained a material misstatement with the intent to
defraud American Express. But the question this court must focus on is:
would the jury have convicted if properly instructed? In other words, what
Pavlenko is arguing is that the jury might have convicted under an improper
theory. But that is not the question. The question is whether a reasonable
jury could have acquitted when instructed under the proper theory. The
answer is no. Why? Here, the email to American Express was clearly false.
Indeed, Pavlenko himself admitted that he “didn’t want to lie to [American
Express], but [he] didn’t want them to know she was an employee.” See
D.E. 1219 at 30. And, for Count 21, this lie was both the focus of the
indictment and the government’s theory to the jury. As such, had the jury
been properly instructed, it still would have convicted. Thus, the error was
harmless as to Count 21.12
12
The government could respond that, because Pavlenko’s substantive conviction for
wire fraud under Count 21 stands, then his conviction for conspiracy to commit wire
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The government, however, has not presented the court with sufficient
evidence showing the trial court’s error was harmless as to the remaining
wire-fraud counts and conspiracy-to-commit-wire-fraud counts. 13 And it is
the government’s burden to demonstrate that the error was harmless. United
States v. Robison, 505 F.3d 1208, 1222–23 (11th Cir. 2007). The
defendants’ convictions with respect to those counts are therefore reversed.
2.
The defendants also argue that their convictions on the money-
laundering counts, Count 29 and Count 39, should be reversed because the
missing instruction tainted these counts as well. [Pavlenko Initial Brief at
24.] Count 29 charged all three defendants with conspiracy to violate two
provisions of the money-laundering statute: money laundering by
fraud under Count 1 should stand as well. Since the jury would have convicted Pavlenko
of wire fraud, the argument would go, then the jury also would have convicted him of
conspiracy to commit said wire fraud. But conspiracy to commit wire fraud requires an
agreement with others to commit wire fraud. See 18 U.S.C. § 1349. And none of the
evidence related to Count 21 suggests that Pavlenko conspired with anyone else to
defraud American Express. So the fact that the jury convicted Pavlenko of Count 21 does
not necessarily mean that the jury would have found that Pavlenko conspired with others
to commit wire fraud—rather, the jury could have found that Pavlenko acted alone in his
dealings with American Express.
13
The defendants were convicted of wire-fraud-related Counts 1, 6–8, 13, 18–21, 30, 34–
35, and 37.
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concealment and money laundering by international promotion. D.E. 953 at
20–21.14 Count 39 also charged Takhalov with conspiracy to commit money
laundering by concealment. Id. at 32–33. Although money laundering by
concealment and money laundering by international promotion involve
different elements, both offenses criminalize transactions that promote an
underlying criminal activity. 18 U.S.C. § 1956(a). But to prove either
offense, the government does not have to prove that the defendant
committed the underlying criminal activity. Id.; see also United States v.
Martinelli, 454 F.3d 1300, 1311 (11th Cir. 2006). Instead, for money
laundering by concealment, the government has to prove that the defendant
knew: (1) that the proceeds of the transaction involved proceeds of an
unlawful activity, and (2) that the transaction was designed to conceal some
aspect of those proceeds. 18 U.S.C. § 1956(a)(1). And for money
laundering by international promotion, the government has to prove that the
defendant engaged in the transaction “with the intent to promote the carrying
on of [a] specified unlawful activity.” Id. § 1956(a)(2)(A).
Here, the government charged two specified unlawful activities: wire
fraud, in violation of 18 U.S.C. § 1343, and misuse of a visa document, in
14
The jury convicted Takhalov of money laundering by concealment, and Pavlenko and
Feldman of money laundering by international promotion. D.E. 954; D.E. 956; D.E. 957.
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violation of 18 U.S.C. § 1546. D.E. 953 at 21, 33.15 The first problem for
the government is that it did not provide us any evidence to show that the
jury would have convicted the defendants of money laundering based on
misuse of a visa document. Chapman, 38 U.S. at 828 (Harmless-error
analysis puts “the burden on the beneficiary of the error either to prove that
there was no injury or to suffer a reversal of [the] erroneously obtained
judgment.”); United States v. Fern, 155 F.3d 1318, 1327 (11th Cir. 1998)
(“Here, the government’s burden, more precisely stated, is to show that the
guilty verdict against [the defendant] was ‘surely unattributable’ to the
incorrect jury instruction[.]”). And the Court’s review of the record does not
reveal sufficient evidence for such a finding. In fact, in the government’s
opening statement—a roadmap of the government’s case—the government
did not mention anything about money laundering related to misuse of a visa
document. See D.E. 1121. Instead, the government expressly tied the
money-laundering counts only to wire fraud, stating that the defendants
engaged in money laundering “because the wire fraud was being concealed.”
Id. at 51. This brings us to the second problem: we cannot be sure that a
15
The defendants do not challenge the validity of the “misuse of a visa document”
activity, so this was a proper theory of prosecution. They do, however, challenge the
validity of the money-laundering counts based on wire fraud.
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properly instructed jury would have found that the specified unlawful
activity of wire fraud actually occurred. See supra Part III.B.1. And,
without that, we cannot conclude beyond a reasonable doubt that the jury
would have convicted the defendants of money laundering. See United
States v. Neder, 197 F.3d 1122, 1129 (11th Cir. 1999) (“[T]he government
must show that the evidence [of the proper theory of guilt] is so
overwhelming . . . that no rational jury, properly instructed . . ., could have
acquitted [the defendants] on that count.”). As such, the defendants’
convictions for conspiracy to commit money laundering, Count 29 and
Count 39, must be reversed.
IV.
The remaining conviction against Takhalov, Count 38 for conspiracy
to defraud the United States Department of Homeland Security, remains
because it was unrelated to wire fraud. D.E. 953 at 30–32. Finding no other
errors that would justify reversal on Counts 21 and 38, we reverse on all but
Counts 21 and 38, and remand to the district court for further proceedings
consistent with this opinion.
41