United States v. Muriel ( 2002 )

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 01-50670
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
PATRICIA DAVIS PETERS MURIEL; FERNANDO MURIEL, III,
Defendants-Appellants.
_________________________________________________________________
Appeal from the United States District Court
for the Western District of Texas
(A-01-CR-2-2-SS)
_________________________________________________________________
August 14, 2002
Before HIGGINBOTHAM, JONES, and BARKSDALE, Circuit Judges.
PER CURIAM:*
Fernando and Patricia Muriel having been convicted for, inter
alia, wire fraud and money laundering, primarily at issue is
whether, on this record, the payment of routine business expenses,
as well as a substantial payment to the defrauded entity,
constitute “promotion” money laundering. Also at issue are:
whether the jury charge should have included a good faith
instruction; and whether claimed prosecutorial misconduct at trial
mandates reversal. AFFIRMED.
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
I.
In 1996, Fernando Muriel founded Full Service Staffing (FSS),
a sole proprietorship providing temporary workers to client
businesses. After FSS paid the temporary employee, it billed the
client that amount, plus a mark-up.
In 1997, Muriel contracted with Phillips Financial Corporation
for it to fund FSS’ payroll through a factoring agreement. Weekly,
FSS provided Phillips a list of the hours and billing rate for its
employees who worked for clients; Phillips would advance FSS
approximately 90 percent of this amount (holding 10 percent in
reserve), less a commission of approximately 5 percent.
Phillips, in turn, would collect from the clients. If they
did not pay, FSS was assessed a service charge to ensure its help
in collection. And, Phillips had full recourse against FSS for
uncollected amounts.
In early 1998, Phillips began experiencing serious problems in
collecting from FSS’ clients. When Wiggs, Phillips’ president,
contacted Muriel about these problems, Muriel assured Wiggs he
would “get them [employees helping run FSS that Muriel relied upon]
back in shape and advise them if we needed to get things back
current”. Muriel also told Wiggs: he was hiring Patricia Peters
(now Muriel’s wife); she “was a super bookkeeper” and a “super
collector”; and “he was going to get everything straightened out”.
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In fact, FSS was submitting payroll data to Phillips for
several fictitious clients, in addition to doing so for legitimate
ones. Accordingly, Phillips paid FSS for work that never occurred
and was left to bill entities that did not exist. Between January
and July 1998, approximately 60 percent of all factored sales by
FSS were fraudulent.
Concerning Muriel, employees brought billing irregularities to
his attention at least twice; each time, he assured them he would
“investigate it and rectify the situation”. When Muriel’s brother
began receiving invoices from Phillips addressed to a fictitious
client, Muriel told his brother he needed to use his address
“because he had some things to clear up”.
Muriel also placed a laminated card on his brother’s mail box
with the name of a fictitious client and instructed his brother to
bring him the Phillips invoices when received. When an FBI agent
contacted Muriel’s brother, Muriel instructed him not to discuss
the invoices.
As for Mrs. Muriel, she prepared and filed the DBA
certificates for several of the fictitious clients. The address
for one was an office rented in her name. When Phillips’ president
(Wiggs) talked with her concerning the collection problems, she
told him she was on her way to job sites to retrieve time cards
from clients that, unknown to Wiggs, did not exist.
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The Muriels were charged with wire fraud, interstate
transportation of fraudulently obtained property, money laundering,
and related conspiracy counts. Muriel was convicted on all counts;
Mrs. Muriel, all but several substantive counts. Their motions for
judgment of acquittal were granted on several of the money
laundering counts.
II.
At issue is whether: a good faith instruction should have
been given; the prosecutor’s claimed improper questioning and
remarks mandate reversal; and payments of routine business expenses
and one payment to the defrauded entity constitute “promotion”
money laundering.
A.
The Muriels contend two instructions should have been given
concerning their claimed good faith. The first stated: the “good
faith of a defendant” is a complete defense to the charges; “good
faith” means “a belief or opinion honestly held, an absence of
malice or ill will, and an intention to avoid taking unfair
advantage of another”; and an “honest mistake in judgment or an
honest error in management does not rise to the level of intent to
defraud”. The second, entitled “FRAUDULENT INTENT”, contained
similar language.
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1.
Mrs. Muriel concedes she neither requested a good faith
instruction nor objected to not giving one. She contends
“objections made by one defendant in a multiple defendant trial are
generally presumed to have been made by all”. She also adopts by
reference, pursuant to Federal Rule of Appellate Procedure 28(i),
the portion of Muriel’s brief addressing this issue.
The Government responds: such adoption is ineffective here,
because the inquiry is highly fact specific for each defendant;
and Muriel’s objection did not preserve this issue for Mrs. Muriel.
For the reasons stated infra, we need not resolve these points
raised by the Government’s response. In any event, the applicable
standard of review is plain error; and the claim fails even if we
allow Mrs. Muriel to adopt that portion of Muriel’s brief.
2.
Usually, we review for abuse of discretion the district
court’s refusal of Muriel’s proposed good faith instructions. See,
e.g., United States v. Storm, 36 F.3d 1289, 1294 (5th Cir. 1994),
cert. denied, 514 U.S. 1084 (1995). That standard, however, is not
applicable in this instance. The Muriels’ contention on appeal is
that the good faith instructions were necessary because the charge
included a deliberate ignorance instruction. Muriel states in his
reply brief: “The government’s brief never joins issue with Mr.
Muriel’s main point: the ‘deliberate ignorance’ instruction
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distinguishes this case from all other cases in this Circuit in
which this Court has held the absence of the good faith instruction
to be harmless”. (Emphasis added.) This contention, however, was
not presented in district court.
Accordingly, because this contention is raised for the first
time on appeal, we review only for plain error. See United States
v. Threadgill, 172 F.3d 357, 370 (5th Cir.), cert. denied, 528 U.S.
871 (1999). Plain error occurs where there is “clear” or “obvious”
error that affects the Muriels’ substantial rights (the outcome).
E.g., United States v. Olano, 507 U.S. 725, 732-735 (1993); United
States v. Calverley, 37 F.3d 160, 162-64 (5th Cir. 1994) (en banc),
cert. denied, 513 U.S. 1196 (1995). Moreover, in our discretion,
we will correct plain error only if it “seriously affect[s] the
fairness, integrity, or public reputation of judicial proceedings”.
Calverley, 37 F.3d at 164 (internal quotation marks omitted).
(Even if the usual standard of review (abuse of discretion) were
applicable, and even assuming error, the result would be the same
under a harmless error analysis.)
For a refused instruction, error occurs when: it is a
substantially correct statement; the charge did not substantially
cover the requested instruction’s content; and the omission
“seriously impair[s] the defendant’s ability to present his
defense”. Storm, 36 F.3d at 1294.
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The Muriels contend that, in the light of the deliberate
ignorance instruction, their good faith instructions were necessary
to instruct that, if the failure to investigate the possibility of
fraudulent conduct was an “honest mistake in judgment” or an
“honest error in management”, there would be no basis for guilt.
(Internal quotation marks omitted.)
Even assuming these instructions are correct statements, their
substance was covered by the charge. In defining “knowingly”, the
charge stated: “While knowledge on the part of the defendant
cannot be established merely by demonstrating that the defendant
was negligent, careless, or foolish, knowledge can be inferred if
the defendant deliberately blinded himself to the existence of a
fact”. (Emphasis added.) This instruction allowed the jury to
acquit if the Muriels negligently, carelessly, or foolishly chose
not to investigate, so long as it was not a deliberate attempt to
blind themselves to the existence of fraud within FSS. It goes
without saying that deliberate ignorance of fraud is inconsistent
with any claimed good faith on their part.
Next, according to the Muriels, the absence of the requested
instructions substantially impaired their defense because it
allowed the Government “to capitalize on the deliberate ignorance
instruction”, even if Muriel “believed in good faith that [FSS] was
not engaged in fraud”. (Emphasis added.) As discussed, deliberate
ignorance of fraudulent conduct is at odds with a contention of
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subjective good faith. The existence of one necessarily negates
the existence of the other. Therefore, refusing the instructions
did not prevent the Muriels from attempting to persuade the jury
that they did believe, in good faith, that no fraudulent conduct
was occurring. See United States v. Giraldi, 86 F.3d 1368, 1376
(5th Cir. 1996) (“a district court may refuse to submit an
instruction regarding good faith if ... the defendant has had the
opportunity to argue good faith to the jury”).
In short, there was no error. Even assuming error in refusing
the instructions, for the reasons stated above, the error is
certainly not “clear” or “obvious”. Moreover, given the evidence
against the Muriels, they have not shown the refusal affected their
substantial rights. Restated, the instructions would not have
changed the trial’s outcome.
B.
Muriel next claims three instances of prosecutorial
misconduct. Under the regular standard of review, a prosecutor’s
improper comments warrant reversal only if they affect a
defendant’s substantial rights. United States v. Lowenberg, 853
F.2d 295, 302 (5th Cir. 1988), cert. denied, 489 U.S. 1032 (1989).
We consider: “(1) the magnitude of the prejudicial effect of the
statements; (2) the efficacy of any cautionary instruction; and (3)
the strength of the evidence of the defendant’s guilt”. Id.
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Muriel concedes no objection was made. Therefore, again we
review only for plain error.
The first claim concerns the cross-examination of Muriel. The
prosecutor asked him whether witnesses whose testimony conflicted
with his were lying.
Muriel cites United States v. Thomas, 246 F.3d 438, 439 n.1
(5th Cir. 2001), which stated that forcing a defendant to “call a
number of prosecution witnesses liars” was “inexcusable”; but held
that, in the context of the entire trial, reversal was not
warranted. (Any error may well have been invited; on direct,
Muriel’s counsel asked him to comment on testimony inconsistent
with his. See United States v. Young, 470 U.S. 1, 12-13 (1985)
(“if the prosecutor’s remarks were ‘invited,’ and did no more than
respond substantially in order to ‘right the scale,’ such comments
would not warrant reversing a conviction”).)
In his second claim, Muriel points to the prosecutor’s
statements during closing argument: “I don’t believe what Mr.
Muriel told us on the witness stand”; and
Part of this scheme was to make ...
Muriel inaccessible and insulated, and you
want to know why that is in my opinion? I
believe he’s a coward....
Is that a strong word? It is, but I
can’t come up with another one, and I’m not
about to start lying to y’all.
United States v. Anchondo-Sandoval, 910 F.2d 1234, 1237-38
(5th Cir. 1990), stated a prosecutor’s comment that “the defendant
9
in this case is one of the most artful liars I have ever met” was
“improper” and “inexcusable”, but held it did not constitute
reversible error. It noted any prejudice was neutralized by the
court’s cautionary instructions after defendants objected. Again,
however, Muriel did not object, much less request an instruction.
Concerning the prosecutor’s stating he believed Muriel is a
coward, United States v. Diecidue, 603 F.2d 535, 553 (5th Cir.
1979), cert. denied, 445 U.S. 946 (1980), and cert. denied, 446
U.S. 912 (1980), held that use of the term “coward” in describing
defendants who used others to do their “dirty work” was not
reversible error because it was not the “type of shorthand
characterization of an accused, not based on evidence, [which] is
especially likely to stick in the minds of the jury and influence
its deliberations”. (Internal quotation marks omitted; alteration
in original.) It also noted that “the characterization of ‘coward’
does not have the specific legal connotation of a description like
‘fugitive’ and carries no risk of being misconstrued as a legal
conclusion”. Id.
Finally, Muriel points to the prosecutor’s closing argument
statement concerning Muriel’s contention he acted foolishly, but
not criminally. The prosecutor recounted to the jury: he once
remarked to a judge for whom he worked that he could not believe
that a criminal in a particular case could be “so foolish or
stupid”; and the judge responded that, but for foolish criminals,
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there would be none. The prosecutor told the jury that it is the
foolish criminals who are caught and the smart ones who get away.
Muriel contends the statement alludes to evidence that was not
introduced at trial and was hearsay.
As described above, and for purposes of our plain error
review, the prosecutor’s challenged conduct was not “clear” or
“obvious” error. Even assuming it was, Muriel must show his
substantial rights were affected. Accordingly, he contends that,
because his conviction “hinged” upon his testimony that he was not
aware of the fraud, the questioning and comments struck “at the
heart of [his] defense”.
The evidence, however, supports not just Muriel’s knowledge of
the fraudulent scheme, but his personal participation as well. In
sum, in the absence of the contested conduct, the trial result
would not have been different.
C.
The Muriels challenge several of the substantive money
laundering convictions. They claim insufficient evidence for two
office rent payments (Counts 25 and 31) and one for copying costs
(Count 26) being intended to promote the fraudulent scheme. Mrs.
Muriel makes the same contention for an approximate $32,000 wire
transfer to Phillips (Count 30).
The Muriels moved for judgment of acquittal at the close of
the Government’s case and at the close of all the evidence. Those
11
motions were denied by written opinion. (Although Mrs. Muriel
moved for judgment of acquittal on all counts in both her oral and
written motions, she did not specifically challenge the evidence
concerning Count 30 ($32,000 wire transfer), even though she did so
for several other money laundering counts. We need not determine
whether she adequately preserved the claimed error for that count
— her contention fails even under the traditional sufficiency-of-
the-evidence standard of review.)
The denial of an acquittal motion is reviewed de novo. United
States v. Carbajal, 290 F.3d 277, 289 (5th Cir. 2002). “Viewing
the evidence in the light most favorable to the government, we must
determine whether any rational jury could conclude from the
evidence presented at trial that the government had proven all of
the elements of the offense beyond a reasonable doubt.” Id. All
“reasonable inferences from the evidence must be construed in favor
of the jury verdict”. United States v. Runyan, 290 F.3d 223, 238
(5th Cir. 2002) (internal quotation marks and citation omitted).
Pursuant to 18 U.S.C. § 1956(a)(1)(A)(i), the Muriels were
convicted of “promotion” money laundering. That statute
criminalizes conduct where the defendant,
knowing that the property involved in a
financial transaction represents the proceeds
of some form of unlawful activity, conducts or
attempts to conduct such a financial
transaction which in fact involves the
proceeds of specified unlawful activity ...
with the intent to promote the carrying on of
specified unlawful activity[.]
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18 U.S.C. § 1956(a)(1)(A)(i).
The Government must prove the defendant: (1) “conducted or
attempted to conduct a financial transaction”; (2) “which the
defendant knew involved the proceeds of illegal activity”; (3)
“with the intent to promote or further unlawful activity”. United
States v. Cavalier, 17 F.3d 90, 92 (5th Cir. 1994). The Muriels
contest only the last element; they claim insufficient evidence for
the payments being made with intent to promote the fraudulent
scheme.
Concerning this last element, there must be “some evidence
that a dirty money transaction that in fact promoted specified
unlawful activity was conducted with the intent to promote such
activity”. United States v. Brown, 186 F.3d 661, 670 (5th Cir.
1999) (first emphasis added). Although the Government is not
required to offer direct proof of the Muriels’ intending these
payments to promote the scheme, the payments must nevertheless
constitute “proof of a type of transaction ... that, on its face,
indicates an intent to promote such activity”. Id. at 670-71.
1.
In resolving whether the rent and copying expense payments are
such transactions, we must determine whether this conduct is more
akin to that in Brown, which held the payment of such expenses did
not constitute promotion, or to that in United States v. Peterson,
13
244 F.3d 385 (5th Cir.), cert. denied, 122 S. Ct. 133 (2001), and
cert. denied, 122 S. Ct. 142 (2001), which held such payments did.
In Brown, defendants engaged in several side schemes to
defraud customers of a legitimate car dealership. For example, one
scheme involved overcharging for document and license/title fees.
In holding that payments for routine business expenses such as
office and photocopier supplies were not made with the intent to
promote these fraudulent schemes, we noted that the “nexus between
the charged expenditures and any fraud activity is non-existent or
weak”. Brown, 186 F.3d at 669.
In Peterson, defendants challenged their promotion money
laundering convictions for the payment of, inter alia, “office and
administrative expenses”. 244 F.3d at 390. Yet, in Peterson, the
fraudulent scheme accounted for all but a minute portion of the
enterprise’s revenues. The entity solicited fees from landowners
to advertise the sale of their land. For such advertisements, the
entity spent only three percent of the revenue received.
Peterson held: when “the business as a whole is illegitimate,
even individual expenditures that are not intrinsically unlawful
can support a promotion money laundering charge”. Id. at 392.
Accordingly, Peterson distinguished Brown on the basis that, in
Brown, “[t]he expenditures in question, for the basic operations of
the dealership, only indirectly supported the fraudulent
operations”. Id. at 391. In contrast, in Peterson, “the fraud was
14
not restricted to isolated instances — the evidence ... supports a
conclusion that essentially all of the property owners who paid ...
were treated to the same fraudulent misrepresentations”. Id.
Unlike Brown and Peterson, we are not faced with an entity
that is nearly either 100 percent legitimate or 100 percent
fraudulent. Instead, during the period these expenses were paid
with the fraudulently received funds, the Muriels acknowledge that
“the government’s own analysis shows that [FSS’] illegitimate
business accounted for approximately 60% of total sales”. Needless
to say, a business that is 60 percent fraudulent is far removed
from the situation in Brown, where the schemes were ancillary to an
otherwise legitimate business.
Under these facts, the payments of the contested expenses are
the types of transactions that can support a promotion money
laundering conviction. To continue defrauding Phillips to the
extent that it did, FSS had to maintain office space to continue to
appear legitimate. Items such as copying expenses were necessary
to maintain this illusion.
We acknowledge “the importance of not turning the money
laundering statute into a money spending statute”, Brown, 186 F.3d
at 670 (internal quotation marks omitted); this is not such a case.
Instead, the routine business expenses of a 60 percent fraudulent
entity do more than “indirectly” support the fraudulent scheme —
they are at its heart. Therefore, a reasonable juror could find
15
beyond a reasonable doubt that these payments are of the type
intended to promote the scheme.
2.
For FSS’ approximate $32,000 payment to Phillips in April
1998, Mrs. Muriel maintains that, because FSS owed money to
Phillips for client businesses’ delinquencies, the payment was not
made with the intent to promote the fraudulent scheme. Unlike the
above-discussed payments, this transaction did not involve the
payment of a routine business expense. Instead, it was a payment
to the defrauded entity.
Even assuming there is no direct proof this payment was
intended to promote the scheme, it is certainly the type of
transaction that, by its nature, evinces such intent. Without
question, the payment directly perpetuated the fraud. A reasonable
juror could infer that this payment was designed to placate
Phillips’ growing frustration and induce it to continue to pay into
the fraudulent scheme. Therefore, because we must draw all
reasonable inferences in favor of the verdict, this claim fails.
III.
For the foregoing reasons, the judgments are
AFFIRMED.
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