United States v. Lee Farkas , 474 F. App'x 349 ( 2012 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 11-4714
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
LEE BENTLEY FARKAS,
Defendant - Appellant.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Leonie M. Brinkema,
District Judge. (1:10−cr−00200−LMB−1)
Argued: May 16, 2012 Decided: June 20, 2012
Before MOTZ, DAVIS, and WYNN, Circuit Judges.
Affirmed by unpublished opinion. Judge Davis wrote the opinion,
in which Judge Motz and Judge Wynn joined.
ARGUED: David M. Coorssen, DAVID M. COORSSEN, ATTORNEY AT LAW,
Louisville, Kentucky, for Appellant. Kirby Ann Heller, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.
ON BRIEF: Stuart A. Scherer, Louisville, Kentucky, for
Appellant. Neil H. MacBride, United States Attorney, Charles F.
Connolly, Paul J. Nathanson, Assistant United States Attorneys,
OFFICE OF THE UNITED STATES ATTORNEY, Alexandria, Virginia;
Lanny A. Breuer, Assistant Attorney General, John D. Buretta,
Acting Assistant Attorney General, Patrick F. Stokes, Deputy
Chief, Robert A. Zink, Trial Attorney, UNITED STATES DEPARTMENT
OF JUSTICE, Washington, D.C., for Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
DAVIS, Circuit Judge:
Appellant Lee Bentley Farkas challenges his convictions for
bank, wire and securities fraud, and conspiracy to commit the
same, arising from a multibillion dollar scheme to hide the
financial difficulties of Taylor, Bean, & Whitaker Mortgage
Corp. (“TBW”) during his tenure as chairman and principal owner
of TBW. Farkas contends that the district court violated his
Sixth Amendment rights in four distinct ways: (1) denying his
motion to transfer venue; (2) denying his fourth motion for a
continuance; (3) appointing counsel to represent him; and (4)
limiting his right to cross-examine a Government witness. In
addition, Farkas contends that the district court violated his
Fifth Amendment rights when it (1) declined to give an
instruction defining “beyond a reasonable doubt” and (2)
instructed the jury that its “sole interest is to seek the truth
from the evidence,” J.A. 2042. Finally, apart from the challenge
to his convictions, Farkas contends that the district court
committed clear error in adjudicating the Government’s motion
for an order of forfeiture. Having carefully considered Farkas’s
contentions in light of the record presented to us, we discern
no reversible error. Accordingly, for the reasons that follow,
we affirm the judgment.
3
I.
A.
The Government presented evidence at trial that amply
justified the jury in finding the following facts. Farkas and
his co-conspirators engaged in a multi-stage fraud scheme
between 2002 and 2009, while Farkas was chairman and principal
owner of TBW, a mortgage lending company based in Ocala, Florida
and with offices in seven states. TBW originated and serviced
residential mortgage loans and sold them, either individually,
pooled, or as part of a mortgage-backed security, to third-party
investors and commercial financial institutions in the secondary
mortgage market. To fund the loans it originated, TBW relied on
advances from various warehouse banks and purchase facilities,
which were to be repaid from the proceeds of TBW’s sales to
investors. TBW received short-term, secured funding from
Colonial Bank, a subsidiary of Alabama-based Colonial BancGroup,
and in particular Colonial Bank’s Mortgage Warehouse Lending
Division (“MWLD”).
Between 2002 and 2003, Farkas and his co-conspirators
engaged in a scheme to disguise overdrafts of TBW’s master
advance account held at Colonial Bank by “sweeping” funds from
TBW’s investor funding account, which was also held at Colonial
Bank and represented proceeds from sales of loans to investors
in the secondary market, into and out of the master advance
4
account. As a result of this sweeping scheme, Colonial Bank’s
daily reports did not show the overdrafts. Farkas’s co-
conspirators included Ray Bowman, president of TBW, Cathie
Kissick, head of the MWLD at Colonial Bank, and Teresa Kelly, a
MWLD operations supervisor.
As the deficit in TBW’s assets with Colonial Bank grew to
well over $100 million, Farkas and his co-conspirators initiated
more sophisticated schemes, including “Plan B.” Under Plan B,
they caused TBW to sell sham mortgage loans and pools of loans
to Colonial Bank. These loans and pools of loans either did not
exist or had already been sold to investors; accordingly, they
were worthless or had significantly impaired value. Colonial
Bank held approximately $250 million in Plan B individual loans
on its books by mid-2005, and by August 2009, Colonial Bank held
approximately $500 million in Plan B pools of loans. As a
result, Colonial BancGroup significantly overstated the value of
its assets in its quarterly and annual reports to the United
States Securities and Exchange Commission.
Relatedly, in furtherance of the scheme, Farkas created
Ocala Funding, a subsidiary of TBW that issued commercial paper
to investors in return for cash, which in turn was used to fund
mortgage loans at TBW. Farkas and his co-conspirators overstated
by hundreds of millions of dollars the actual value of the
collateral backing the commercial paper and underreported Ocala
5
Funding’s liabilities, ultimately resulting in a shortfall of
more than $1.5 billion. In the final stage of the scheme, Farkas
and his co-conspirators attempted to fraudulently obtain $553
million for Colonial BancGroup, Colonial Bank’s holding company,
from the Troubled Asset Relief Program, a program that Congress
created to rescue distressed financial institutions.
B.
On June 10, 2010, a grand jury in the Eastern District of
Virginia returned a sixteen-count indictment against Farkas
including, among other charges, bank and wire fraud in violation
of 18 U.S.C. §§ 1344 and 1343, respectively, and conspiracy to
commit bank and wire fraud in violation of 18 U.S.C. § 1349. The
indictment included a forfeiture provision and provided notice
that, if necessary, the Government would seek forfeiture of
substitute assets pursuant to 21 U.S.C. § 853(p). The following
day, the district court entered a restraining order enjoining
the sale or transfer of Farkas’s assets pursuant to 21 U.S.C.
§ 853(e)(1)(A).
At his arraignment on July 2, 2010, Farkas appeared with
Gerald H. Houlihan, Esq., a Florida-based attorney, and Jeffrey
Harris, Esq., his would-be local counsel, neither of whom had
entered an appearance or been retained. Houlihan explained that,
as Farkas’s assets had been frozen and coverage under the TBW
Directors & Officers insurance policy (“D&O policy”) was in
6
dispute, Farkas hoped to negotiate a carve-out from seized
assets for attorneys’ fees. The district court allowed Houlihan
and Harris to enter a limited appearance, arraigned Farkas,
accepted his Speedy Trial Act waiver, and set a trial date of
November 1, 2010. In mid-July, Houlihan and Harris notified the
court that a bankruptcy hearing concerning the D&O policy was
scheduled for July 16, 2010, and that negotiations with the
Government regarding the possibility of a carve-out from assets
frozen under the restraining order were also ongoing. When
Farkas had not resolved his representation issues as of August
10, 2010, the district court appointed William B. Cummings, Esq.
to represent him under the Criminal Justice Act, 18 U.S.C. §
3006(A). Farkas objected to the appointment of counsel. The
court responded that its appointment of counsel did not
foreclose Farkas from retaining counsel, but that “at this point
we have to get this case moving.” J.A. 84.
On August 26, 2010, Farkas moved to transfer venue to the
Middle District of Florida pursuant to Federal Rule of Criminal
Procedure 21(b). The Government opposed the motion and the
district court denied Farkas’s request orally and by written
opinion. Farkas also moved for a continuance on four separate
occasions. The court granted Farkas’s first and second motions,
7
which were unopposed by the Government, but denied his third and
fourth requests. 1
Following a nine-day jury trial, Farkas was found guilty on
fourteen counts, including conspiracy to commit bank fraud, wire
fraud, and securities fraud, in violation of 18 U.S.C. § 1349
(Count 1); six counts of bank fraud, in violation of 18 U.S.C.
§§ 1344 and 2 (Counts 2-7); four counts of wire fraud, in
violation of 18 U.S.C. §§ 1343 and 2 (Counts 8-11); and three
counts of securities fraud, in violation of 18 U.S.C. §§ 1348
and 2 (Counts 14-16). 2 The district court sentenced Farkas to 30
years of imprisonment, to be followed by three years of
supervised release. Following sentencing, the court granted the
Government’s preliminary motion for forfeiture and ordered
Farkas to forfeit $38,541,209, representing the value of
property constituting or derived from proceeds he obtained
directly or indirectly as a result of his offenses of
conviction. The court also held Farkas jointly and severally
liable for restitution payments totaling $3,507,743,557. We have
jurisdiction over Farkas’s timely appeal under 28 U.S.C. § 1291.
1
Farkas’s third motion for a continuance was styled as a
motion to amend the district court’s order granting his second
motion for a continuance.
2
Counts 12 and 13, which both charged wire fraud, were
dismissed on the Government’s motion during trial.
8
II.
We begin by addressing Farkas’s Sixth Amendment arguments.
The Sixth Amendment provides in part that “[i]n all criminal
prosecutions, the accused shall enjoy the right . . . to be
confronted with the witnesses against him . . . and to have the
Assistance of Counsel for his defence.” U.S. Const. amend. VI.
Farkas argues that the district court violated his right to
assistance of counsel when it denied his motion for a transfer
of venue, denied his fourth motion for a continuance, and
appointed counsel over his objection while negotiations bearing
on his ability to afford retained counsel were ongoing. Farkas
also argues that the district court violated his right to
confrontation when it limited his cross-examination of a
Government witness. We reject these contentions for the
following reasons.
A.
Farkas argues that the district court abused its discretion
in denying his motion to transfer venue to the Middle District
of Florida. Federal Rule of Criminal Procedure 21(b) provides
that the court may transfer a proceeding, upon the defendant’s
motion, to another district, “for the convenience of the parties
and witnesses and in the interest of justice.” This court
reviews a district court’s denial of a motion to transfer venue
for abuse of discretion. United States v. Heaps, 39 F.3d 479,
9
482 (4th Cir. 1994), abrogated on other grounds, United States
v. Cabrales, 524 U.S. 1 (1998).
In deciding a Rule 21(b) motion to transfer venue, a
district court should consider the factors enunciated in Platt
v. Minnesota Mining & Mfg. Co., 376 U.S. 240 (1964), namely, the
(1) location of the defendant; (2) location of witnesses; (3)
location of events likely to be in issue; (4) location of
documents and records; (5) disruption of the defendant’s
business; (6) expense to the parties; (7) location of counsel;
(8) relative accessibility of place of trial; (9) docket
conditions in each district; and (10) any other specific element
which might affect the transfer. Platt, 376 U.S. at 243-44; see
also Heaps, 39 F.3d at 483 (upholding use of Platt factors). No
one of these factors is dispositive, and “[i]t remains for the
court to try to strike a balance and determine which factors are
of greatest importance.” United States v. Stephenson, 895 F.2d
867, 875 (2d Cir. 1990).
Having carefully examined the record, we conclude that the
district court did not abuse its discretion in allowing this
case to proceed in the Eastern District of Virginia. The
district court properly considered each of the Platt factors,
determined that only the first of the ten non-dispositive
factors (location of defendant) weighed in favor of transfer,
and accordingly denied the motion. For the reasons stated by the
10
district court in its thorough written opinion, we find that it
did not abuse its discretion in applying the Platt factors in
the instant case. See United States v. Farkas, No. 1:10cr200
(LMB), 2010 U.S. Dist. LEXIS 100916 (E.D. Va. Sept. 10, 2010).
In addition, we note Farkas’s concession that “[t]he trial court
undertook a thorough analysis of each of the Platt factors.”
Appellant’s Br. at 15.
B.
Farkas also argues that the district court violated his
Sixth Amendment right to assistance of counsel when it denied
his fourth motion for a continuance. The denial of a continuance
contravenes a defendant’s Sixth Amendment right to counsel only
when there has been “an unreasoning and arbitrary insistence
upon expeditiousness in the face of a justifiable request for
delay.” Morris v. Slappy, 461 U.S. 1, 11-12 (1983) (internal
quotation marks omitted) (citing Ungar v. Sarafite, 376 U.S.
575, 589 (1964)). To prevail on this issue, Farkas is obliged to
show, first, that the district court abused its discretion in
refusing to continue the trial, and second, that the ruling
“specifically prejudiced” his case. United States v. Hedgepeth,
418 F.3d 411, 423 (4th Cir. 2005) (citations omitted). Farkas
has failed to make these showings here.
The district court granted Farkas’s initial motion for a
continuance filed on August 31, 2010 (continuing the trial from
11
November 1, 2010 to February 22, 2011), as well as his second
motion filed on December 6, 2010 (continuing the trial to April
4, 2011), each of which was unopposed. At the hearing on
Farkas’s second motion for a continuance, the court cautioned
the parties that it would grant no additional continuances.
Nevertheless, Farkas moved to amend the court’s order later the
same day on the basis that the new trial date conflicted with
defense counsel’s law school teaching schedule. The court denied
the motion. Several months later, on March 30, 2011, Farkas
filed a fourth motion for a continuance requesting a trial date
on or after May 30, 2011. He cited the need to review new
discovery that had been added to the electronic database created
by the Government, as well as “the ongoing invocation of
privilege by a number of legal and accounting firms,” which he
argued prevented the disclosure of potentially exculpatory
materials. J.A. 258. The court held a motions hearing, addressed
Farkas’s discovery production and privilege arguments, and
denied the motion in open court. On appeal, Farkas asserts that
the “monumental discovery production justified the defense’s
requests for continuances,” Appellant’s Br. at 18, but does not
reprise his privilege argument. 3
3
Notably, at the motions hearing Farkas backed away from
his discovery production argument and instead emphasized his
privilege argument. Defense counsel stated:
(Continued)
12
“There are no mechanical tests for deciding when a denial
of a continuance is so arbitrary as to violate due process.”
Ungar, 376 U.S. at 589. Instead, “[t]he answer must be found in
the circumstances present in every case, particularly in the
reasons presented to the trial judge at the time the request is
denied.” Id. In declining to grant a fourth continuance on the
basis of the scale of discovery in this case, the district court
emphasized that the Government had provided considerable
assistance to defense counsel in reviewing documentary discovery
production, including instituting an open file policy and
holding regular meetings. The court further noted that the case
had been continued twice, at least three attorneys represented
Farkas, and the Government had provided access to Jencks
[M]y concern is that the emphasis – and we may have
put too much on it – with regard to the discovery was
really not the focus of our motion. There’s no
question that the government has been very cooperative
with us and has provided documents. We’ve had weekly
telephone calls. Our concern has to do with the
exercise of privilege by virtue of the TBW and the
Colonial Bank both auditors and lawyers refusing to
talk to us and providing only limited documents and
continuing to assert privilege.
J.A. 291. Defense counsel later reiterated that “our concern is
more with privilege than with documents.” J.A. 293.
We need not address whether Farkas has waived his discovery
production argument, however, as we find that the district court
did not abuse its discretion in denying the motion for a
continuance.
13
material even earlier than the court’s discovery order required.
Given its thorough explanation of its reasons for refusing to
further delay the trial after having already granted two
continuances, the court’s denial of Farkas’s fourth motion for a
continuance cannot be described as “unreasoning and arbitrary.”
Thus, we find that the denial of a continuance here did not so
clearly violate fundamental fairness as to compel a conclusion
that it constituted an abuse of discretion. Nor has Farkas
plausibly identified any specific prejudice stemming from the
district court’s denial of a further continuance. Thus, Farkas
is not entitled to relief on this ground.
C.
Farkas next contends that the district court violated his
Sixth Amendment right to counsel when it appointed counsel to
represent him despite his ongoing negotiations as to his ability
to retain private counsel. We have recognized that “[a]n
essential element of the Sixth Amendment’s protection of right
to counsel is that a defendant must be afforded a reasonable
opportunity to secure counsel of his own choosing.” United
States v. Gallop, 838 F.2d 105, 107-08 (4th Cir. 1988)
(citations omitted). We have also noted, however, that “the
right to counsel of a defendant’s choosing is not absolute . . .
. Such right must not obstruct orderly judicial procedure and
deprive courts of the exercise of their inherent power to
14
control the administration of justice.” Id. (citations omitted).
Like Farkas’s other Sixth Amendment claims, we review the
district court’s decision to appoint counsel for abuse of
discretion.
While Farkas acknowledges that “[a] trial court maintains
‘wide latitude in balancing the right to counsel of choice
against the needs of fairness . . . and against the demands of
its calendar,’” Appellant’s Br. at 23 (citing United States v.
Gonzalez-Lopez, 548 U.S. 140, 152 (2006)), he argues that, in
this case, “[f]undamental fairness and [his] Sixth Amendment
right to counsel of his choice far outweighed the trial court’s
insistence on moving the case along at the pace it did,” id. at
25. We disagree. As the Government notes, Farkas apparently
contends that the district court should have held the criminal
proceedings in abeyance until the bankruptcy court and the TBW
insurance company determined whether the D&O policy would be
available for Farkas’s use. In declining to take this course of
action, the district court appropriately weighed speedy trial
concerns in the context of the uncertain circumstances
surrounding Farkas’s ability to retain preferred counsel, and
further indicated that appointment of counsel would not impede
Farkas’s retention of counsel of his choosing if and when funds
became available for his defense. Indeed, as Farkas
acknowledges, he was represented by retained counsel as of
15
December 2010, almost a full year prior to commencement of his
trial. As the Supreme Court has noted, the Sixth Amendment does
not provide an absolute right, but instead guarantees a
defendant a “fair opportunity” to secure counsel of his own
choice to represent him at trial on criminal charges. See Powell
v. Alabama, 287 U.S. 45, 53 (1932). It is clear on the record
before us that Farkas was not denied a fair opportunity to
secure counsel of his choice as a result of the district court’s
appointment of counsel. Thus, we find that the district court
did not abuse its discretion.
D.
Farkas’s final Sixth Amendment claim is that the district
court infringed his right to confront witnesses against him when
it limited his cross-examination of Neil Luria, managing
director of Navigant Consulting, Inc. (“Navigant”) and chief
restructuring officer for TBW during bankruptcy. Luria’s
testimony on direct examination primarily concerned his analysis
of the TBW bankruptcy estate. On cross-examination, Farkas
sought to question Luria regarding fees Navigant received for
managing the estate. The Government raised a relevance
objection, which the district court sustained. While we
typically review a district court’s limitations on a defendant’s
cross-examination of a prosecution witness for abuse of
discretion, United States v. Smith, 451 F.3d 209, 220 (4th Cir.
16
2006), where the defendant raises an alleged constitutional
violation for the first time on appeal, as in this case, we
apply plain error review. See Fed. R. Crim. P. 52(b); United
States v. Hughes, 401 F.3d 540, 547 (4th Cir. 2005) (citations
omitted).
“In reviewing for plain error, our initial inquiry is
whether an error occurred.” Hughes, 401 F.3d at 547 (citing
United States v. Hastings, 134 F.3d 235, 239 (4th Cir. 1998)).
“Next, the error must be plain.” Id. (citing Hastings, 134 F.3d
at 239). “Third, [Farkas] must establish that the error affected
his substantial rights, i.e., that it was prejudicial.” Id. at
548 (citing Hastings, 134 F.3d at 240). Fourth, we must
determine whether our failure to reverse the judgment of the
district court would amount to a miscarriage of justice. Id. at
555 (citing Hastings, 134 F.3d at 244). Farkas concedes that
“[t]he third and fourth Hughes prongs, requiring a showing of
prejudice and a miscarriage of justice, are virtually impossible
to establish on the record, especially given trial counsel’s
failure to further develop this issue.” Appellant’s Br. at 35.
Farkas urges us to overlook this fatal shortcoming, but we find
that it forecloses his Sixth Amendment argument.
We further note that, irrespective of Farkas’s concession
that he is unable to establish prejudice or a miscarriage of
justice, he has failed to demonstrate that the district court
17
erred in the first instance. Although “cross-examination is an
important element of the right of confrontation,” United States
v. McMillon, 14 F.3d 948, 956 (4th Cir. 1994) (citing Smith v.
Illinois, 390 U.S. 129 (1968)), “the trial court is vested with
broad discretion to control the mode of interrogation and
presentation of evidence to insure that witnesses are treated
fairly and the search for truth is not impaired by presentation
of extraneous, prejudicial or confusing material,” United States
v. Gravely, 840 F.2d 1156, 1163 (4th Cir. 1988) (citing Fed. R.
Evid. 611)). “Under Federal Rule of Evidence 611(b), ‘cross-
examination should be limited to the subject matter of the
direct examination and matters affecting the credibility of the
witness.’” McMillon, 14 F.3d at 956.
Farkas argues that the line of questioning at issue was
relevant to Luria’s credibility because he sought to demonstrate
that Luria and Navigant had a pecuniary interest in the outcome
of the trial. The record does not support this characterization
of the questioning, however, and suggests instead that Farkas
sought to show that Luria’s salary and other administrative
costs connected to the bankruptcy reduced the amount of TBW
assets available to pay its creditors. The district court stated
in sustaining the Government’s relevance objection that “it is
completely irrelevant to this case as to whether there’s a $50
billion hole or a $5 billion hole. It could be relevant to the
18
forfeiture issue, which is for down the road, but I don’t want
to waste the jury’s time . . . . It’s a fraud case, and quite
frankly, you can have fraud without a big loss.” J.A. 1693-95.
Defense counsel responded, “Yes ma’am. I was just concerned
about the prejudice with those big numbers.” J.A. 1695. Farkas
made no attempt to proffer that he sought to show bias; on the
contrary, he suggested that the large disparity between TBW’s
assets and its liabilities to creditors in bankruptcy was
prejudicial. The district court found that it was not. We
decline on appeal to find error based on Farkas’s post hoc
recasting of the evidentiary basis for his cross-examination of
Luria with respect to fees Navigant received for managing the
TBW bankruptcy estate. Thus, we find that the district court did
not err in limiting Farkas’s cross-examination of Luria.
III.
Farkas next advances two intertwined Fifth Amendment due
process claims. He argues that the district court erred when it
declined to give a jury instruction defining “beyond a
reasonable doubt,” but instructed the jury that its “sole
interest is to seek the truth.” Appellant’s Br. at 26 (citing
J.A. 2042). We review a district court’s refusal to give a
specific jury instruction for abuse of discretion. United States
v. Herder, 594 F.3d 352, 359 (4th Cir.), cert. denied, 130 S.
19
Ct. 3440 (2010). “We review the accuracy and adequacy of jury
instructions de novo,” United States v. McIver, 470 F.3d 550,
557-58 (4th Cir. 2006) (citing United States v. Scott, 424 F.3d
431, 434 (4th Cir. 2005)), and will not reverse a conviction so
long as “the instructions, taken as a whole, adequately state
the controlling law,” id. (citing United States v. Wills, 346
F.3d 476, 492 (4th Cir. 2003)). For the reasons that follow, we
find that the jury instructions in this case were proper in all
respects.
Farkas requested a jury instruction defining “beyond a
reasonable doubt” as “proof of such a convincing character that
a reasonable person would not hesitate to rely and act upon it
in the most important of his or her own affairs.” J.A. 1859-60.
The court included an instruction stating that “the burden of
proving guilt beyond a reasonable doubt is always with the
government,” J.A. 2002, but declined to adopt Farkas’s proposed
definition of “beyond a reasonable doubt.” Farkas objected at
the charging conference to the court’s refusal to give this
particular instruction. As Farkas concedes on appeal, however,
this court has repeatedly held that a trial court is not
required to define “beyond a reasonable doubt” for the jury.
See, e.g., United States v. Walton, 207 F.3d 694, 698 (4th Cir.
2000) (en banc) (“[A]lthough the district court may define
reasonable doubt to a jury . . . the district court is not
20
required to do so.”); United States v. Hornsby, 666 F.3d 296(4th Cir. 2012) (“Not requiring such an instruction is based on
this Circuit’s belief that attempting to explain the words
‘beyond a reasonable doubt’ is more dangerous than leaving a
jury to wrestle with only the words themselves.”). Thus, the
district court did not abuse its discretion in declining to give
Farkas’s requested jury instruction.
Farkas also argues that the district court erred in
instructing the jury that, as part of its duty to deliberate,
the jury’s “sole interest is to seek the truth” (hereafter the
“seek-the-truth instruction”). 4 Farkas objected to the seek-the-
truth instruction at the charging conference and renewed his
objection at trial. On appeal, he argues that the seek-the-truth
instruction, in combination with the court’s refusal to define
“beyond a reasonable doubt,” improperly diluted the Government’s
burden of proof.
Farkas relies on United States v. Gonzalez-Balderas, 11
F.3d 1218 (5th Cir. 1994), in which the Fifth Circuit considered
a jury instruction similar to the seek-the-truth instruction and
4
In the portion of the jury charge describing the duty to
deliberate, the district court instructed the jury to
“[r]emember at all times that you are not partisans. You are
judges — judges of the facts of this case. Your sole interest is
to seek the truth from the evidence received during the trial.”
J.A. 2042. Notably, Farkas initially requested the seek-the-
truth instruction, but later withdrew his request.
21
opined that “[a]s an abstract concept, ‘seeking the truth’
suggests determining whose version of events is more likely
true, the government’s or the defendant’s, and thereby intimates
a preponderance of the evidence standard.” Id. at 1223. The
court opined that “[s]uch an instruction would be error if used
in the explanation of proof beyond a reasonable doubt,” but held
that the instruction in that case was not erroneous because the
trial court had defined reasonable doubt. Id. The court reasoned
that “[t]here is no reasonable likelihood that the jury inferred
that the single reference at the end of the charge to ‘seeking
the truth,’ rendered as it was in the context of an admonition
‘not to give up your honest beliefs,’ modified the reasonable
doubt burden of proof.” Id.
As in Gonzalez-Balderas, the seek-the-truth instruction at
issue here was presented at the end of the jury charge in the
context of the court’s explanation of the jury’s duty to
deliberate. In addition to instructing the jury on the
Government’s burden to prove its case beyond a reasonable doubt,
the district court referred to the reasonable doubt standard on
at least twenty-six separate occasions in the jury instructions.
“To determine whether jury instructions require reversal . . .
we assess the instructions as a whole and view them in context.”
United States v. Hsu, 364 F.3d 192, 204 (4th Cir. 2004). In
light of the district court’s emphasis on the reasonable doubt
22
standard in the jury instructions taken as a whole, we cannot
conclude that the single seek-the-truth reference, which the
court made in the course of admonishing individual jurors not to
surrender their honest convictions, diluted the Government’s
burden, or otherwise amounted to error.
IV.
Apart from the above challenges to his convictions, Farkas
asserts that factual error infects the district court’s
forfeiture order. Specifically, he argues that the district
court clearly erred in finding that “TBW would have failed ‘but
for’ the [fraud] schemes,” thereby rendering certain funds
identified by the Government as forfeitable indirect proceeds of
his crimes. Appellant’s Br. at 37. Whether TBW would have been
insolvent but for the fraud schemes is a question of fact. We
review a district court’s findings of fact as to forfeitability
for clear error. Herder, 594 F.3d at 363-64.
Farkas is subject to mandatory forfeiture due to his
convictions for bank and wire fraud under 18 U.S.C. §§ 1344 and
1343, and for conspiracy to commit these offenses. Federal Rule
of Criminal Procedure 32.2(b)(1) provides for entry of a
preliminary order of forfeiture upon the return of a guilty
verdict if the Government proves the requisite nexus between the
identified funds and the offenses of conviction by a
23
preponderance of the evidence. See Libretti v. United States,
516 U.S. 29 (1995); United States v. Cherry, 330 F.3d 658, 669-
70 (4th Cir. 2003). Following the jury’s guilty verdict in this
case, the Government filed a preliminary motion for forfeiture
and forfeiture of substitute assets pursuant to 18 U.S.C. §§
982(a)(2) and 981(a)(1)(C). Section 982(a)(2) requires the
forfeiture of “any property constituting, or derived from,
proceeds the person obtained directly or indirectly, as the
result of” certain enumerated offenses, including bank and wire
fraud affecting a financial institution, and conspiracy to
commit these offenses. Section 981(a)(1)(C) authorizes the civil
forfeiture of “[a]ny property, real or personal, which
constitutes or is derived from proceeds traceable to” certain
enumerated offenses, such as bank and wire fraud. 5
The district court held a hearing, granted the Government’s
motion in open court and issued an Order requiring Farkas “to
forfeit a money judgment in the amount of $38,541,209.69 as the
value of the property constituting or derived from proceeds he
obtained directly or indirectly as a result of his fraudulent
activities.” United States v. Farkas, No. 1:10cr200 (LMB), 2011
5
The provisions of § 981(a)(1)(C) are applicable to this
case pursuant to 28 U.S.C. § 2461(c), which allows criminal
forfeiture where civil forfeiture is authorized.
24
U.S. Dist. LEXIS 124001, at *1 (E.D. Va. Oct. 26, 2011)
(citation and internal quotation marks omitted).
In a written opinion explaining its order, the district
court identified four sources of forfeitable funds: (1)
$15,000,000 paid to TBW for an amount due on Farkas’s
shareholder account; (2) $8,394,459.67 paid to or for the
benefit of Farkas from his shareholder account; (3) $7,330,500
in fraudulent loans originated through TBW (referred to by the
Government and the district court as “Lee loans”); and (4)
$11,474,637.80 transferred from TBW for the benefit of Farkas’s
general partnership, 3201 Partnership. Id. at *5-6. The court
then considered whether the Government had established the
requisite nexus between each category of funds and the offenses
of conviction. Id. at *6-19. The court first determined that the
$15 million applied to Farkas’s due-from-shareholder account and
the $7,330,500 in “Lee loans” were forfeitable as direct
proceeds of Farkas’s scheme. Id. at *14-15. Farkas does not
challenge the forfeitability of these funds on appeal.
The court then considered whether the Government had
established the requisite nexus with respect to the funds in the
due-from-shareholder and due-from-3201 Partnership accounts. Id.
at *5-6. Given the Government’s theory that these funds
constitute proceeds of Farkas’s crimes, the district court
applied the “but for” nexus test first articulated by the
25
Seventh Circuit in United States v. Horak, 833 F.2d 1235, 1242-
43 (7th Cir. 1987), and since applied by a number of other
courts, see United States v. DeFries, 129 F.3d 1293, 1313 (D.C.
Cir. 1997); United States v. Nicolo, 597 F. Supp. 2d 342, 346
(W.D.N.Y. 2009), aff’d, 421 F. App’x 57 (2d Cir. 2011); United
States v. Ivanchukov, 405 F. Supp. 2d 708, 712 (E.D. Va. 2005);
United States v. Benyo, 384 F. Supp. 2d 909, 914 (E.D. Va.
2005). Pursuant to this test, funds are considered proceeds and
therefore deemed forfeitable if “a person would not have [the
funds] but for the criminal offense.” Nicolo, 597 F. Supp. 2d at
346 (emphasis added) (citation and internal quotation marks
omitted).
Applying the “but for” nexus test, the district court held
that “[t]he nexus requirement is satisfied by tracing [Farkas’s]
fraud to the continued viability of TBW to [his] access to the
funds sought to be forfeited, demonstrating he obtained such
funds indirectly as a result of his crime.” Farkas, 2011 U.S.
Dist. LEXIS 124001, at *18-19. The court reasoned that “the
funds defendant obtained from TBW through the due-from-
shareholder and due-from-3201 Partnership accounts would not
have been available to him but for his fraud, because TBW would
not have remained in business in the absence of the bank and
wire fraud scheme.” Id. at *17. The court similarly stated, “TBW
was only able to continue its business activities due to the
26
ongoing fraud.” Id. Farkas challenges only this finding of fact
on appeal, which we review for clear error. See Herder, 594 F.3d
at 363-64.
Having reviewed the record, we conclude that the district
court did not clearly err in finding that TBW remained solvent
from 2002 to 2009 only as a result of Farkas’s fraudulent
conduct. The district court reasoned that “[t]he evidence
produced at trial amply demonstrates that TBW was only able to
continue its business activities due to the ongoing fraud.”
Farkas, 2011 U.S. Dist. LEXIS 124001, at *17 (citing J.A. 2093-
95) (summarizing trial evidence, including testimony of Ray
Bowman, Cathie Kissick, Teresa Kelly, and Desiree Brown, as well
as summary charts admitted at trial through witness Ray
Peroutka). The court’s reliance on the trial record is proper
under Federal Rule of Criminal Procedure 32.2(b)(1)(B), which
provides that a sentencing court may base its forfeiture
determination “on evidence already in the record, including any
written plea agreement, and on any additional evidence or
information submitted by the parties and accepted by the court
as relevant and reliable.”
Farkas argues that “[the] evidence cited by the trial court
and the government was directly controverted not only by other
trial testimony, but by the averments in the Indictment, and the
actual financial documentary evidence at trial – as admitted by
27
the government.” Appellant’s Br. at 37 (footnotes omitted). The
Government correctly responds that the indictment is not
evidence, reviews trial testimony supporting the court’s finding
that TBW would have been insolvent but for the schemes, and
refutes Farkas’s claims that this evidence was controverted by
testimony and financial documents. Having reviewed the record,
including the testimony referenced by the district court, we
conclude that the district court did not clearly err in finding
that TBW would have been insolvent during the fraud period “but
for” Farkas’s fraud schemes. Therefore, we affirm the district
court’s order of forfeiture.
V.
For the reasons set forth, the judgment is
AFFIRMED.
28