United States v. Tucker ( 2003 )

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
For the Fifth Circuit September 5, 2003
Charles R. Fulbruge III
Clerk
No. 02-41104
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
VERSUS
RICHARD JAMES TUCKER,
Defendant-Appellant.
_____________________________________________
Appeal from the United States District Court
for the Eastern District of Texas
_____________________________________________
Before WIENER and BARKSDALE, Circuit Judges, and FURGESON, District
Judge.1
FURGESON, District Judge:
Defendant-Appellant Richard James Tucker appeals from a jury
verdict finding him guilty of one count of securities fraud and one
count of mail fraud on the ground that the district court
improperly excluded his securities expert. Tucker also appeals the
district court’s 1) failure to submit an element of the crimes
charged to the jury, 2) misstatement of the intent element in the
1
District Judge of the Western District of Texas, sitting by
designation.
1
jury charge, 3)failure to provide a specific unanimity-of-theory
instruction to the jury, and 4) imposition of consecutive
sentences. For the reasons stated below we AFFIRM Tucker’s
conviction and sentence in full.
FACTS AND PROCEEDINGS
First Fidelity Acceptance Corporation (“FFAC”) was a Nevada
corporation founded in 1991 and headquartered in Plano, Texas. Its
purpose was to purchase and sell automobile loans in the form of
installment sales contracts, secured by automobiles and light
trucks. Upon acquiring the automobile loans, FFAC would then
“package” the loans and sell them to financial institutions and
large investors.
Tucker joined FFAC in April of 1992 as a consultant to aid the
corporation in its first private placement of asset-backed
securities. In September of that year, the FFAC Board of Directors
named Tucker Chief Executive Officer and Chairman of the Board.
According to Tucker, FFAC was performing exceptionally well from
1992 until the first quarter of 1996, with total assets worth
$11,672,000. The Government, however, maintains that FFAC
experienced mixed financial results from 1991 through 1995, at
which time FFAC was facing a financial crisis.
In 1996, FFAC created a wholly-owned subsidiary, Automobile
Receivables Corporation (“FFAC-ARC”), for the purpose of
establishing certain investment trusts. Thereafter, FFAC-ARC
organized three trusts with the goal of raising money to be
2
borrowed by FFAC and its subsidiaries for investment in automobile
loans. In order to generate capital, the trusts facilitated the
offer and sale of certificates; the minimum investment amount was
$25,000.
To entice potential investors to purchase the trust
certificates, Tucker drafted a Private Placement Memorandum (“PPM”)
describing the investment, the trust, and the trust’s relationship
to FFAC. The PPMs also contained a number of representations
regarding how FFAC would handle and use the money collected from
the investors. Notably, the PPMs promised that (1) the proceeds
from the sale of the certificates would be used only for the
purposes denoted in the PPM; (2) the trust at all times would have
investments and cash with an aggregate value exceeding the balance
of the certificates; (3) none of the assets in the trust would be
available to FFAC or its subsidiaries without first paying to the
trust the entire carrying value of such assets; and (4) investors
could obtain refunds of their entire investments within ninety days
of their requests. Each PPM’s “specific use of proceeds” section
indicated that the proceeds from the sale of the certificates would
only be invested in automobile loans and automobile floor planning,
or placed in insurance reserves or cash reserves.2 Finally, the
PPMs advised all potential investors that the investments were
2
In his appellate brief, Tucker also notes that “the PPMs
permitted the monies received from investors to be transferred to
FFAC and, in fact such a scenario was expected.”
3
risky and subject to total loss, and that FFAC might be unable to
sell the loans it acquired with the proceeds from the sale of
certificates.
Tucker described the investments as securities in both the
PPMs and in two Regulation D filings with the United States
Securities and Exchange Commission (“SEC”).3 Tucker also
represented to the SEC in the Regulation D filings that the money
raised would not be used for “salaries and fees” or “repayment of
indebtedness.”
The Government presented as part of its case Tucker’s
conversations with various securities brokers in which Tucker
assured them that the proceeds from the certificate sales would be
used only for the purchase of automobile loans and not FFAC’s
business costs. Tucker allegedly made the same statements to a
member of the FFAC Board of Directors.
The Government also offered evidence that Tucker prepared
false financial records demonstrating that the funds raised by the
sale of the certificates were invested as represented in the PPMs.
Securities broker Joe Miller testified that his firm continually
requested from Tucker financial statements reflecting the use of
the trust funds. In response, Tucker, in July of 1997, sent
financial statements to Miller indicating that he had purchased a
large number of automobile loans with the proceeds, and that each
3
See 17 C.F.R. §§ 230.501-.508.
4
of the trusts, not FFAC, possessed cash and automobile loans in
excess of the amounts invested. Tucker made a similar
representation to Miller’s firm in March of 1998, weeks before the
collapse of FFAC.4
The Government contended at trial that Tucker did not use the
majority of the money raised from the sale of the certificates to
purchase automobile loans. Instead, Tucker had used substantial
amounts of the investors’ funds to pay FFAC salaries, rent, legal
fees, and other operating costs such as travel and entertainment
expenses. Moreover, Tucker, it was maintained, had used the
investors’ funds raised in the third trust to repay investors in
the second trust who had demanded reimbursement; had paid interest
and principal on securities that FFAC had issued in 1995, as well
as debts incurred prior to the creation of the trusts; and had paid
a settlement in a civil lawsuit against him and FFAC with the
proceeds of the certificate sales.
In April of 1998, the Chief Financial Officer of FFAC reported
to FFAC’s Board of Directors that the corporation was insolvent.
Thereafter, the Board forced Tucker to resign. A team charged with
reviewing the books and records of the trusts and FFAC concluded
that FFAC was bankrupt and that the trusts held almost no assets of
4
Although the Government alleges that Tucker created “bogus
financial statements,” Tucker asserts that his “records disclosed
the expenditure of every dollar, whether raised from the investors
or other sources, and [that] there was no second set of sham
accounting records.” We find it difficult to reconcile these two
conflicting statements.
5
value. Those investors who had not withdrawn their investment by
April 15, 1998, lost the principal of their investment in addition
to any interest accrued. The losses incurred by all investors
totaled over $15 million.
On November 14, 2001, a federal grand jury in the Eastern
District of Texas returned a two-count indictment against Tucker,
charging him with one count of securities fraud and one count of
mail fraud.5
The first count accused Tucker of the “[u]se of interstate
commerce for [the] purpose of fraud or deceit.”6 The indictment
alleged that Tucker had engaged in all of the activities prohibited
in 15 U.S.C. § 77q(a)(1), (2), and (3).7 The Government averred in
the indictment that Tucker’s “scheme and artifice” to defraud was
evinced in the various statements contained in the PPMs, as set
5
15 U.S.C. §§ 77q(a) & 77x (securities fraud); 18 U.S.C. §
1341 (mail fraud).
6
Section 77q, entitled “Fraudulent interstate transactions,”
makes it a crime:
for any person in the offer or sale of any securities .
. . by the use of any means or instruments of
transportation or communication in interstate commerce or
by use of the mails, directly or indirectly
(1) to employ any device, scheme, or artifice to defraud,
or
(2) to obtain money or property by means of any untrue
statement of a material fact or any omission to state a
material fact necessary in order to make the statements
made, in light of the circumstances under which they were
made, not misleading; or
(3) to engage in any transaction, practice, or course of
business which operates or would operate as a fraud or
deceit upon the purchaser. 15 U.S.C. § 77q(a).
7
See id.
6
forth above.8
Specifically, count one of the indictment included charges
that while making certain promises in the PPMs, Tucker neglected to
disclose to potential investors, inter alia, that: (1) their
investments would not be held in the trusts but rather deposited
directly into FFAC’s operating account; (2) the proceeds would be
used to pay FFAC’s operating costs; (3) previously invested funds
had not been expended as promised; and (4) the “interest” paid to
some investors consisted of the proceeds from certificate sales and
not actual interest earned on investments in automobile loans. The
Government averred that Tucker sent the fraudulent PPMs to
potential investors via the United States mail, commercial
interstate carriers, and interstate facsimile, and that he directed
the investors to mail payments to FFAC’s offices in Plano, Texas.
Finally, the Government listed thirteen individuals whom Tucker had
allegedly swindled, along with the dates of their investments, the
8
According to the indictment, Tucker promised in the PPMs
that:
(1) the investors’ money would be held in the trust, (2)
the investors’ money would be used to invest in
automobile loans and not used to pay FFAC’s operating
costs, (3) the trusts would have investments and cash
with an aggregate value or “liquidation value” in excess
of the aggregate balance of the certificates at all
times, (4) none of the assets of the trusts would be
available to FFAC or its subsidiaries without first
paying the trusts the full carrying value of such assets,
(5) investors could receive their investments back in
full in less than ninety days after requesting their
funds, and(6) management of FFAC believed that there were
no legal proceedings that were likely to have a material
adverse effect on FFAC.
7
amounts, and their out-of-state addresses.
The second count of the indictment accused Tucker of mail
fraud.9 This count reiterated the allegations of count one, but
added that Tucker, in effecting his scheme and artifice to defraud,
knowingly and willfully caused investors to place into the United
States mail envelopes addressed to FFAC and containing payment for
the purchase of the trust certificates. The Government also
duplicated the listing of investors in count one.
DISCUSSION
I. Exclusion of Expert Testimony
A. Standard of Review
Tucker argues on appeal that the district court erred in
9
The Mail Fraud statute provides:
Whoever, having devised or intending to devise any scheme
or artifice to defraud, or for obtaining money or
property by means of false or fraudulent pretenses,
representations, or promises, or to sell, dispose of,
loan, exchange, alter, give away, distribute, supply, or
furnish or procure for unlawful use any counterfeit or
spurious coin, obligation, security, or other article, or
anything represented to be or intimated or held out to be
such counterfeit or spurious article, for the purpose of
executing such scheme or artifice or attempting so to do,
places in any post office or authorized depository for
mail matter, any matter or thing whatever to be sent or
delivered by the Postal Service, or deposits or causes to
be deposited any matter or thing whatever to be sent or
delivered by any private or commercial interstate
carrier, or takes or receives therefrom, any such matter
or thing, or knowingly causes to be delivered by mail or
such carrier according to the direction thereon, or at
the place at which it is directed to be delivered by the
person to whom it is addressed, any such matter or thing,
shall be fined under this title or imprisoned not more
than 20 years, or both. 18 U.S.C. § 1341.
8
preventing his securities expert from testifying. We review the
admission or denial of expert evidence for abuse of discretion.10
“District courts enjoy wide latitude in determining the
admissibility of expert testimony, and the discretion of the trial
judge and his or her decision will not be disturbed on appeal
unless manifestly erroneous.”11 If it is found that the district
court abused its discretion in denying the admission of expert
evidence, we must then consider whether the error was harmless,
“affirming the judgment unless the ruling affected a substantial
right of the complaining party.”12 In the criminal context, in
assessing whether an error affected a “substantial right” of a
defendant, the necessary inquiry is “whether the trier of fact
would have found the defendant guilty beyond a reasonable doubt
with the additional evidence inserted.”13
The Supreme Court in Daubert v. Merrell Dow Pharmaceuticals,
Inc.14 laid down the analytical framework for determining whether
10
See Moore v. Ashland Chem., Inc., 151 F.3d 269, 274 (5th
Cir.1998) (en banc) (citing General Elec. Co. v. Joiner, 522 U.S.
136 (1997)).
11
Watkins v. Telsmith, Inc., 121 F.3d 984, 988 (5th Cir.1997)
(internal quotations and citations omitted).
12
United States v. Norris, 217 F.3d 262, 268-69 (5th
Cir.2000) (citations omitted).
13
United States v. Roberts, 887 F.2d 534, 536 (5th Cir.1989)
(citing United States v. Lay, 644 F.2d 1087, 1091 (5th Cir. Unit A
1981) and United States v. Lueben, 812 F.2d 179, 187 n.7 (5th
Cir.1987)).
14
509 U.S. 579 (1993).
9
expert testimony is admissible under Federal Rule of Evidence 702.15
“Under Daubert, Rule 702 charges trial courts to act as ‘gate-
keepers,’ making a ‘preliminary assessment of whether the reasoning
or methodology underlying the testimony is scientifically valid and
of whether that reasoning or methodology properly can be applied to
the facts in issue.’”16 Accordingly, in order to be admissible,
expert testimony must be both “relevant and reliable.”17 The
Daubert considerations apply to all species of expert testimony,
whether based on “scientific, technical, or other specialized
knowledge.”18
B. Analysis
The district court concluded during trial that Rule 702 barred
all of the testimony of Tucker’s proposed expert, Joel Held. The
reliability of Held’s testimony does not seem to be in dispute.
15
Rule 702 of the Federal Rules of Evidence provides:
If scientific, technical, or other specialized knowledge
will assist the trier of fact to understand the evidence
or to determine a fact in issue, a witness qualified as
an expert by knowledge, skill, experience, training, or
education, may testify thereto in the form of an opinion
or otherwise, if (1) the testimony is based upon
sufficient facts or data, (2) the testimony is the
product of reliable principles and methods, and (3) the
witness has applied the principles and methods reliably
to the facts of the case. FED. R. EVID. 702.
16
Pipitone v. Biomatrix, Inc., 288 F.3d 239, 243-44 (5th
Cir.2002) (quoting Daubert, 509 U.S. at 592-93).
17
Id. at 244 (citing Daubert, 509 U.S. at 589).
18
FED. R. EVID. 702; see also Pipitone, 288 F.3d at 244
(citing Kumho Tire Co. v. Carmichael, 526 U.S. 137, 147 (1999)).
10
For instance, the district court declared that Held was “qualified
to give opinions on customs and practices that are followed by
competent practitioners in practicing security law and the
preparation of Private Placement Memoranda and Offerings.” The
brunt of the Government’s argument was that Held’s testimony would
not have assisted the jury. The appropriate inquiry here,
therefore, is “whether expert testimony proffered in the case is
sufficiently tied to the facts of the case that it will aid the
jury in resolving a factual dispute.”19
1. Definition of “invest”
Held was prepared to elucidate the meaning of “invest in
automobile loans” as that phrase was employed in the “specific use
of proceeds” section of the PPMs. Specifically, Held would have
refuted the Government’s contention that an investment in
automobile loans meant only the purchase of the principal amount of
the loans. Held would have urged instead that an investment in
automobile loans entails not only the purchase of loans, but also
the operating expenses and costs, such as payment of commissions,
travel and entertainment, finder’s fees, evaluation services, and
attorney’s fees.
This testimony is relevant to the issue of the definition of
“invest,” as the term was used in the PPMs. Thus, the district
court should have allowed Held to provide the jury with the usage
19
Daubert, 509 U.S. at 591 (quoting United States v. Downing,
753 F.2d 1224, 1242 (3d Cir.1985)).
11
of the word “invest” within the securities industry.
We find that the district court’s failure to allow Held to
testify as to an expanded definition of “invest,” although
improper, was not “manifestly erroneous.”20 While Held’s broader
definition might have justified some of Tucker’s expenses outside
the purchase of automobile loans, the Government offered evidence
that many of Tucker’s expenditures violated even his liberal
definition. For instance, Tucker, in addition to using the
proceeds for the operating costs of FFAC, also dispersed the funds
in payment of principal and interest on loans unrelated to FFAC-
ARC; settlement in a civil lawsuit; and interest and principal to
investors in the previous trusts, perpetuating what is known as a
Ponzi scheme.21
Tucker’s proposed expert testimony would have been limited to
an understanding of the term “invest in auto loans” that would
include various operating expenses associated with the purchase of
automobile loans. Thus, even though the district court should have
allowed Held to offer a definition that might have justified some
of Tucker’s expenses, Tucker still deceived the investors by
spending the money in other unauthorized ways. Because the expert
20
Watkins v. Telsmith, Inc., 121 F.3d at 984 (internal
quotations and citations omitted).
21
The Government also presented evidence that of the proceeds
raised in the third trust, less than one percent was used to
purchase automobile loans. Held was not prepared to testify that
the term “invest” included this kind of minimum purchase of
automobile loans.
12
only addressed a fragment of the misuse of funds, and did not
address substantial areas of Tucker’s other applications of those
funds, any error in excluding Held’s testimony in this regard was
minimal. Moreover, even if we were to conclude that the district
court abused its discretion, Tucker cannot demonstrate how
excluding the expert testimony affected a substantial right, that
is, that Held’s testimony regarding the meaning of the word
“invest” would have planted a seed of doubt in the jurors’ minds
sufficient to acquit him of fraud.
2. Nature of the certificates
Tucker argues on appeal that Held also sought to testify that
the certificates issued to the investors were not securities as
defined by the Securities Exchange Act of 1934.22 Under the terms
of the Act, a security does not include “currency or any note,
draft, bill of exchange, or banker’s acceptance which has a
maturity at the time of issuance of not exceeding nine months . .
. .”23 Held would have opined that since the certificates at issue
here were due immediately, they had a maturity date of less than
nine months and therefore did not qualify as securities. Further,
based on his expertise in the field of securities, Held would have
testified that “generally companies take the position that notes
that . . . have nine months or less of maturity and are similar to
22
15 U.S.C. § 78a.
23
15 U.S.C. § 78c(a)(10).
13
commercial transactions, . . . are generally not secured, not
treated as securities for the purpose of registration with the
SEC.” Finally, Held would have posited that the certificates were
part of a secured transaction regulated by the Uniform Commercial
Code and not the securities laws. The basis for this latter
opinion was the filing of a UCC-1 financing statement on behalf of
the three trusts, conferring upon each one an equal security
interest in all of the assets of FFAC.
Although Tucker raises this point of error on appeal, it is
apparent from the record that he never intended to submit the
information described above to the jury. Rather, Tucker agreed
throughout the trial that Held’s proffer with regard to the issue
of whether the certificates were securities was helpful only to the
district court’s separate legal determination.24 Thus, it was not
error for the district court to exclude evidence that Tucker never
intended to have the jury consider in the first place.
Moreover, even allowing that the district court somehow erred,
Tucker has failed to show that Held’s testimony with regard to the
nature of the certificates would have affected the outcome of the
trial. The fact that the certificates sold to the investors were
redeemable on demand does not automatically remove them from
24
At three points during the trial, Tucker asserted that whether
the certificates were securities was a matter of law for the district
court to decide.
14
classification as a security. In Reves v. Ernst & Young,25 The
Supreme Court determined that a demand note could properly be
considered a “security” regulated by the anti-fraud provisions.
The Reves court rejected the notion that “legal formalisms”26 were
controlling and instead found that all suspect items should be
adjudged by the “family resemblance” approach.27 The Supreme Court
in Reves also found the “fundamental essence of a ‘security’ to be
its character as an ‘investment.’”28 Under the circumstances,
notwithstanding Held’s opinion that certain qualities of the
certificates favored the position that they were not securities, we
agree with the district court’s legal conclusion that the facts
25
494 U.S. 56 (1990).
26
Id. at 61 (noting that “Congress’ purpose in enacting the
securities laws was to regulate investments, in whatever form they
are made and by whatever name they are called”).
27
Pursuant to the “family resemblance” approach, a court
must, after concluding that the disputed transaction does not
strongly resemble a member of the non-security “family,”
[f]irst . . . examine the transaction to assess the
motivations that would prompt a reasonable seller and
buyer to enter into it . . . Second, [the court must]
examine the “plan of distribution” of the instrument . .
. to determine whether it is an instrument in which there
is “common trading for speculation or investment” . . .
. Third, [the court must] examine the reasonable
expectations of the investing public . . . . Finally,
[the court must] examine whether some factor such as the
existence of another regulatory scheme significantly
reduces the risk of the instrument, thereby rendering
application of the Securities Acts unnecessary. . . .
Reves, 494 U.S. at 66-67 (citations and internal quotations
omitted); see also Trust Co. of Louisiana v. N.N.P. Inc., 104 F.3d
1478 , 1489 (5th Cir.1997).
28
Reves, 494 U.S. at 68-69.
15
overwhelmingly supported a finding that the certificates were
indeed securities.29
Additionally, the record reveals that Tucker was able to
elicit the testimony regarding the UCC-1 financial statement
through Patti Plunkett, FFAC’s former Chief Financial Officer.
Plunkett testified about the existence of the UCC-1 filing and also
explained that the trustee possessed a first lien position on all
of the assets of FFAC for the benefit of the investors in the three
trusts. Held’s testimony in this regard, which would have merely
highlighted these same characteristics, was cumulative and
unnecessary.
In light of these matters, Tucker has not convinced us that
the district court erred. Certainly, Tucker has not raised a
plausible suspicion that the trier of fact would not have found him
guilty beyond a reasonable doubt “with the additional evidence
inserted.”30
3. Tucker’s belief as to the nature of the
certificates
Much of Held’s proposed testimony centered on his
“understanding from the facts that Mr. Tucker believed, and relied
upon, advice from counsel and others that the trust certificates
29
The district court concluded that a weighing of the four
family-resemblance factors “clearly indicate[d] that the
certificates sold by FFAC were securities.”
30
United States v. Roberts, 887 F.2d at 536 (citations
omitted).
16
involved were not securities, and therefore not regulated by the
federal securities laws.”31 Tucker’s argument, boiled down, is that
he cannot be charged with a criminal violation of § 77q(a) if he
did not subjectively believe that the certificates were securities.
We believe that Held’s testimony in this regard was nothing
more than an attempt by Tucker to testify by proxy, that is, to
elicit the aid of a so-called expert to expound on Tucker’s mental
state and thereby avoid taking the witness stand and undergoing
rigorous cross-examination.
Further, with regard to Tucker’s belief concerning the nature
of the certificates, the Ninth Circuit has explained that:
the government is required to prove specific intent only
as it relates to the action constituting the fraudulent,
misleading or deceitful conduct, but not as to the
knowledge that the instrument used is a security under
the Securities Act. The government need only prove that
the object sold or offered is, in fact, a security; it
need not be proved that the defendant had specific
knowledge that the object sold or offered was a
security.32
Thus, by utilizing this view of specific intent, the Ninth Circuit
reasoned that the Securities Exchange Act’s raison d’etre, to
prevent a seller’s fraudulent behavior, was served rather than
31
Also in his written proffer, Held stated that he was
prepared to testify that although he “did not provide Mr. Tucker
with the original advice that the trust certificates were not
securities, the law nonetheless supported the proposition.”
32
United States v. Brown, 578 F.2d 1280, 1284 (9th Cir.
1978); see also Buffo v. Graddick, 742 F.2d 592, 597 (11th Cir.
1984); Cook v. State, 824 S.W.2d 634, 637 (Tex. App.– Dallas 1991).
17
undermined.33 The focus is then necessarily on whether a defendant
possessed the intent to defraud investors, his belief as to the
nature of the certificates notwithstanding.
By arguing that the certificates were not securities and
therefore not subject to the anti-fraud provisions of the
Securities Exchange Act of 1934, Tucker implicitly urges us to
conclude that he was free to make whatever kind of representation
he wanted to the potential investors, whether misleading or not.
We flatly reject this reasoning and instead adopt the Ninth
Circuit’s view that the defendant’s belief concerning the nature of
the securities is irrelevant. Additionally, we find that Tucker’s
efforts to elicit factual testimony through his expert were
impermissible. Therefore, the district court properly excluded
this portion of Held’s testimony.
4. Regulation D evidence
Finally, in what would have been Tucker’s response to the
Government’s presentation of evidence that Tucker had submitted
various filings with the SEC pursuant to Regulation D, Held sought
to testify that based on his experience, the lead underwriters of
the trusts, and not Tucker, were required to comply with the
regulation. To fall within the safe harbor provision of Regulation
D, and therefore be immune from certain registration requirements
with the Securities and Exchange Commission, there can be no more
33
Brown, 578 F.2d at 1284.
18
than thirty-five unaccredited investors in a given endeavor.34 The
regulation helps to ensure that mostly “sophisticated” purchasers
are investing in private placements.
Tucker does not refute the Government’s contention that he in
fact filed Regulation D exemptions with the SEC. Rather, Tucker
contends he was not responsible for complying with Regulation D
regarding the permissible number of unaccredited investors. Thus,
Tucker argues that Held’s testimony was relevant as to the
Regulation D information because Held “would have rebutted the
prosecution’s claim that Mr. Tucker violated Regulation D.”35 The
district court excluded the evidence on Rule 702 grounds,
concluding that Held was improperly attempting to evaluate the
evidence and render his opinion as to what the brokers should have
drawn from it.
At trial, the Government brought forth Joe Miller, who is the
Chief Financial Officer of United Pacific Securities (“UPS”), one
of the brokers offering the trust certificates. Miller testified
that UPS could only monitor the number of unaccredited investors by
cooperating with the issuer, since it only had the information of
its own investors. Miller attested that if there were several
brokers offering the same investment, it would be impossible to
34
See 17 C.F.R. § 230.501-.508.
35
Obviously, Held’s beliefs were patently unreliable insofar
as he would have opined that sellers in the securities industry
commonly seek Regulation D protection for investments they do not
consider to be securities. Thus, Held’s speculative testimony
regarding Tucker’s intent was properly excluded.
19
monitor the number of unaccredited investors without the aid of the
issuer, in this case, the trusts. The Government also offered a
facsimile cover sheet from Tucker to Miller containing notations
from a conversation between the two. Apparently, Miller had
telephoned Tucker to inquire whether Tucker was monitoring the
number of unaccredited investors. Miller wrote on the cover sheet:
“Tucker says no problem with non-accredited. Has monitored
closely.”
The Government also presented the testimony of Plunkett, who
testified that she tracked the number of accredited and
unaccredited investors in each trust and prepared a spreadsheet
containing that information, as well as the investors’ names, the
dates, and amounts of their investments. Plunkett testified that
she later noticed Tucker’s assistant concealing the accreditation
information when faxing the spreadsheet to the broker dealers.
Plunkett also claimed that Tucker subsequently instructed her to
prepare two spreadsheets, one with the accreditation information
and one without.
Finally, the Government offered the testimony of Adamont
Georgeson, an attorney who performed legal work for FFAC, regarding
the contents of a letter he prepared and sent to UPS. The letter
informed UPS that, based on Georgeson’s discussions with Tucker,
the investment would be limited to accredited purchasers.
Georgeson also testified that he had discussed the issue of the
Regulation D restrictions with Tucker who “was very clear” that
20
there would be no unaccredited investors in the investments.
At the presentation of each of these witnesses, Tucker’s trial
counsel objected to the testimony on the grounds that Tucker was
not being charged with a violation of Regulation D. In response,
the Court agreed to provide a cautionary instruction advising that
jury that it could
not find the Defendant guilty of any crime charged in the
indictment solely because he may have violated a
regulation of the Securities and Exchange Commission.
However, you may but are not required to consider
evidence of violations of these regulations as you would
any other evidence in determining whether the Defendant
had the motive or required intent to commit the crimes
charged in the indictment.
In response, Held proposed to testify that UPS, FFAC’s
principal broker, who had the list of investors, was primarily
responsible for monitoring the number of non-accredited investors.
According to Held, upon reaching thirty-five unaccredited
investors, it was incumbent upon UPS, rather than Tucker, not to
add more unaccredited investors so as to remain within the shelter
of Regulation D.
We find that Held’s testimony was not helpful to the trier of
fact, and therefore was properly excluded by the district court.
First, in the face of direct evidence that Tucker had doctored the
spreadsheets which would have demonstrated whether a particular
investor was accredited or unaccredited, and thereby aided the
brokers in monitoring the investors’ status, it is difficult to
perceive how Held’s “specialized knowledge” of the regulation would
have assisted the jury in any way. Moreover, the record reveals
21
that UPS did in fact attempt to monitor its Regulation D
obligations but was thwarted from doing so by Tucker’s
misrepresentations and omissions. Consequently, even accepting as
true Held’s assertion that it was the broker’s responsibility, and
not Tucker’s, to ensure compliance with Regulation D, the facts as
developed during the course of the trial show that, at any rate,
Tucker sabotaged this obligation. Thus, the district court weighed
the value of Held’s testimony, not in a vacuum, but by focusing
upon the particular facts and circumstances of the case, and
determined that the testimony would not aid the jury.36 We concur
with that conclusion.
II. Faulty Jury Charge
Before the jury retired to deliberate, the district court
instructed the jury on the laws that Tucker had been charged with
violating. With regard to the securities fraud charge, the
district court explained the elements of the crime.37 Although the
36
See CHARLES ALAN WRIGHT & VICTOR JAMES GOLD, FEDERAL PRACTICE AND
PROCEDURE: EVIDENCE § 6264 at 210 (1997).
37
Specifically, the district court explained that the
Government was required to prove beyond a reasonable doubt that:
(1) the defendant knowingly or willfully (a) employed a
device, scheme, or artifice to defraud, or; (b) obtained
money or property by means of an untrue statement of a
material fact or an omission to state a material fact
necessary in order to make the statement not misleading,
in the light of the circumstances under which they were
made, or; (c) engaged in a transaction, practice, or
course of business that operated or would operate as a
fraud or deceit upon the purchaser; (2) that the
Defendant’s acts or omission were in connection with the
purchase or sale of securities; (3) that the Defendant
used, or caused to be used, the United States mail or
22
jury charge did not contain the phrase “intent to defraud,”
immediately following the delineation of the elements, the district
court explained that Tucker acted with the requisite “intent to
defraud” if he “acted knowingly and with the specific intent to
deceive, ordinarily for the purpose of causing some financial loss
to another or [to] bring about some financial gain” to himself.
The district court also provided the jury with a definition of the
term “security” mirroring the definition contained in the
Securities Exchange Act of 1934.38
Then, turning to the mail fraud charge, the district court
spelled out the essential elements of that crime for the jury.39
other means of transportation or communication in
intestate commerce in furtherance of the scheme.
38
The district court described a security as:
any note, stock, treasury stock, bond, debenture, evidence of
indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate,
reorganization certificate or subscription, transferable
share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided
interest in oil, gas, or other mineral rights, any put call,
straddle, option, or privilege on any security, certificate of
deposit, or group or index of securities (including interest
therein or based on the value thereof), or any put, call,
straddle, option, or privilege entered into on a national
securities exchange relating to foreign currency, or, in
general, any interest or instrument commonly known as a
“security,” or any certificate of interest or participation
in, temporary or interim certificate for, receipt for,
guarantee of, or warrant or right to subscribe to or purchase,
any of the foregoing. See 15 U.S.C. § 78c(a)(10).
39
The district court explained that in order to find Tucker
guilty of mail fraud, the Government was required to prove beyond
a reasonable doubt:
(1) that the defendant knowingly created a scheme to
defraud, that is made false statements or omission of
23
Following the recitation of these elements, the district court
clarified that “‘knowingly,’ as that term has been used from time
to time in these instructions, means that the act was done
voluntarily and intentionally and not because of mistake or
accident.”
Tucker raises a number of potential shortcomings related to
the jury instructions. First, he complains that the district court
precluded the jury from determining whether the certificates sold
to the investors were securities, a required element of a charge of
securities fraud in violation of § 77q(a). Next, Tucker alleges
that the district court did not adequately explain the requisite
criminal intent for a § 77q(a) violation. Finally, Tucker calls
attention to the district court’s failure to include in the jury
charge an instruction on specific unanimity of theory.
A. Standard of Review
Tucker did not raise these objections to the district court’s
instructions at trial. Pursuant to Federal Rule of Criminal
Procedure 52(b), we “may correct forfeited errors only when the
appellant shows (1) there is an error, (2) that is clear or
material facts in the offer and sale of securities; (2)
that the defendant acted with the specific intent to
defraud; (3) that the defendant mailed something, or
caused another person to mail something, through the
United States Postal Service, or through a private or
commercial interstate carrier, for the purpose of
carrying our the scheme; and (4) that the scheme to
defraud employed false material representations.
24
obvious, and (3) that affects his substantial rights.”40 Once the
appellant establishes these factors, “the decision to correct the
forfeited error is within the sound discretion of the court, and
the court will not exercise that discretion unless the error
seriously affects the fairness, integrity, or public reputation of
judicial proceedings.”41
B. Analysis
1. Failure to submit “security” element to the jury
Tucker contends on appeal that the district court committed
plain error by removing the issue of whether the certificates were
securities from the jury’s consideration. As noted above, the
district court, at Tucker’s urging, determined that whether the
certificates were securities was purely a legal question.42 Post-
trial, the district court issued a ruling finding that the
certificates at issue were, as a matter of law, securities.
Tucker asserts that the district court did not instruct the
jury that in order to convict him of either count charged in the
indictment, it would have to find beyond a reasonable doubt that
the certificates sold to the investors were in fact securities.
40
United States v. Waldron, 118 F.3d 369, 371 (5th Cir.1997)
(citing United States v. Blocker, 104 F.3d 720, 735 (5th
Cir.1997)); FED. R. CRIM. P. 52(b).
41
Waldron, 118 F.3d at 371 (citing Blocker, 104 F.3d at 735).
42
It is rather disingenuous for Tucker to argue now that the
matter of whether the certificates were securities should have been
submitted to the jury when throughout the trial he argued that it
was a matter of law to be decided solely by the district court.
25
Yet a reading of the jury charge reveals that the district court
did submit this element to the jury. The district court explained
to the jury that the second element, which the Government was
burdened with proving beyond a reasonable doubt, required a showing
“that the Defendant’s acts or omissions were in connection with the
purchase or sale of securities.” As already noted, the district
court then provided the jury with the definition of a security. We
disagree with Tucker that the district court’s definition of
“security” was “cursory” and “superfluous.” Rather, the district
court furnished the definition of “security” as contained in the
Securities Exchange Act of 1934. Most importantly, the district
court at no time informed the jury that it was not to consider
whether this element of the crime had been satisfied.
In refutation of the Government’s claim that the security
issue was actually delivered to the jury for consideration, Tucker
points to the district court’s post-trial order finding that the
certificates were indeed securities. But the district court’s
later determination does not change the fact that three months
prior, the “security” element appeared in the jury charge, and the
jury made a finding that the certificates were securities in
arriving at its decision to convict on this charge. As such, the
district did not act improperly since it did not preclude the jury
from making that determination.
2. Failure to submit proper charge on § 77q(a) intent
element
26
The Government indicted Tucker for violating § 77q(a), which
prohibits the fraudulent offer or sale of securities in interstate
commerce.43 In criminal prosecutions, violations of § 77q(a) are
charged simultaneously with § 77x which contains the applicable
mens rea.44 Accordingly, § 77x provides that only “willful”
violations of § 77q(a) trigger criminal liability.45
Tucker complains that with regard to the § 77q(a) violation,
the district court failed to instruct the jury that in order to
convict, it needed to find that he acted with the specific intent
to defraud. According to Tucker, the root of the problem is the
district court’s direction that the jury could convict upon finding
that Tucker acted knowingly or willfully. To be sure, the federal
pattern jury charge for this crime employs the phrase “knowingly
and deliberately.”46 Further, Tucker argues that since the district
court did include the phrase “intent to defraud” in the elements of
43
15 U.S.C. § 77q(a).
44
Id. §§ 77q(a) & 77x.
45
Section 77x provides that:
Any person who willfully violates any of the provisions
of this subchapter, or the rules and regulations
promulgated by the Commission under authority thereof, or
any person who willfully, in a registration statement
filed under this subchapter, makes any untrue statement
of a material fact or omits to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading, shall upon conviction
be fined not more than $10,000 or imprisoned not more
than five years, or both. 15 U.S.C. § 77x.
46
2B FED. JURY PRAC. & INSTR. § 62.03 (5th ed.).
27
mail fraud, there exists a real possibility that the jury believed
the definition provided for that phrase related only to the mail
fraud count. Thus, Tucker believes that the jury might have
convicted him on a finding of lesser intent than that which is
required by § 77x. Finally, Tucker faults the district court for
failing to define the term “willfully” in the charge. All of these
arguments fail.
With regard to district court’s substitution of “or” for “and”
in the phrase “knowingly or willfully” in the jury instructions, we
find that this typographical mistake constitutes an obvious error.
However, the district court’s placement of the definition of
“intent to defraud” immediately following the elements of the first
count effaced any confusion the jury might have encountered
concerning the requisite mens rea. In addition, even assuming that
the jury convicted Tucker on the “lesser” criminal intent of
“knowingly,” the definition of that term provided to the jury in
the mail fraud count – voluntarily and intentionally – was
sufficiently like “willfully” to remove any doubt regarding the
applicable mental state.
Tucker’s second complaint that the district court failed to
add “intent to defraud” into the elements of a § 77q(a) violation
is equally unavailing. The district court’s instructions mimicked
the federal pattern jury charge, which makes no mention of “intent
to defraud.”47 Thus, the failure to include that phrase within the
47
2B FED. JURY PRAC. & INSTR. § 62.03.
28
essential elements of a § 77q(a) violation cannot constitute
reversible error.
Finally, Tucker does not point to any case requiring the trial
court to define within the jury charge “willfully,” as that term is
referred to in § 77x.
The Government points out that the evidence presented in the
case clearly bespoke of willful, fraudulent behavior on the part of
Tucker. The Government produced evidence that Tucker purposefully
deceived the brokers, investors, regulators, and FFAC’s Board of
Directors. The Government also offered proof that Tucker concealed
financial information, falsified financial summaries, drafted the
PPMs, and controlled and directed the transfer of all of the
investors’ money. Tucker did not rebut this evidence with his own
fact witnesses.
All of these factors, taken together, indicate that although
the instructions concerning the requisite intent in the first count
were not “faultless,” they nonetheless provided the jury an
adequate understanding of the intent element.48 Certainly, the
forfeited errors alleged by Tucker do not leave us “with
substantial and ineradicable doubt whether the jury has been
properly guided in its deliberations.”49
3. Failure to charge jury on specific unanimity of
48
Pierce v. Ramsey Winch Co., 753 F.2d 416, 425 (5th
Cir.1985) (citations omitted).
49
Id.29
theory
Tucker asserts that the district court further erred by not
including a specific unanimity-of-theory instruction in the jury
charge. Each count of the indictment identified thirty mailings,
each one creating a separate act of securities and mail fraud.50
Thus, Tucker argues that in the absence of a specific unanimity
instruction, the jurors might have convicted him despite internal
disagreement about which mailing or mailings he initiated.
Tucker points to two Fifth Circuit decisions which he urges
are controlling. In the first, United States v. Gibson, we
considered a defendant’s timely objection to “a court instruction
that may have judicially sanctioned a non-unanimous verdict.”51 We
found such an instruction to be reversible error. Presently,
Tucker’s reliance on Gibson is unfounded since he has not alleged
that the district court affirmatively instructed the jury to
disregard unanimity while deliberating.
In the second, United States v. Holley,52 a jury convicted the
defendant of two counts of perjury. Each count alleged that the
defendant had made multiple statements, any one of which
established criminal liability. Before submitting the instructions
50
Sanders v. United States, 415 F.2d 621, 626 (5th Cir.1969)
(reiterating that “[i]t is settled that each separate use of the
mails in the execution of a scheme to defraud constitutes a
separate offense”)(citations omitted)).
51
553 F.2d 453, 457 (5th Cir. 1977).
52
942 F.2d 916 (5th Cir.1991).
30
to the jury, the defendant in Holley “specifically objected to the
charge because it contained no . . . requirement . . . that all of
the jurors concur in the knowing falsity of at least one particular
statement.”53 Finding the indictment to be duplicitous, we
concluded that there was a “reasonable possibility that the jury
was not unanimous with respect to at least one statement in each
count” and ordered a new trial.54 Significantly, in Holley, the
defendant lodged explicit objections to the charge; here, Tucker
complains after having forfeited any potential errors in his
charge, with his only relief residing in his ability to convince us
that one or more of the errors he cites were clear and affected his
substantial rights.
The guiding principle here should be our pronouncement in
Gibson that “absent competent evidence to the contrary, a court has
no reason to assume that an inconsistent or compromise verdict is
not unanimous, and therefore has no justification for inquiring
into the logic behind the jury's verdict.”55 Moreover, we affirmed
in Holley that a specific unanimity-of-theory charge was required
under those circumstances where “there exists a genuine risk that
the jury is confused or that a conviction may occur as the result
of different jurors concluding that a defendant committed different
53
Id. at 929.
54
Id.55
Gibson, 553 F.2d at 457 (citations omitted).
31
acts.”56
Other than his bare assertion that the error “was plain and
substantially prejudiced [him],” Tucker does not corroborate his
claim of prejudicial error with a modicum of evidence tending to
show that the jury was confused or possessed any difficulty
reaching a unanimous verdict.57 Thus, even if we were to conclude
that the district court’s failure to include an instruction on
specific unanimity of theory established clear error so as to have
affected his substantial rights, Tucker cannot convince us that our
failure to correct the error will “seriously affect[] the fairness,
integrity, or public reputation of judicial proceedings.”58
III. Double Jeopardy
As a final point of error, Tucker maintains that the district
court’s imposition of consecutive sentences caused him to be
punished twice for the same offense in violation of the Fifth
Amendment protection against double jeopardy. Multiplicitous
indictments, or indictments that charge a single offense in several
counts, raise this concern.59 “A defendant must challenge the
multiplicity of an indictment before trial or forfeit the issue. .
56
Holley 942 F.2d at 926 (citations and internal quotations
omitted).
57
The Government directs our attention to the fact that the
jury took only thirty-six minutes to deliberate before finding
Tucker guilty.
58
United States v. Waldron, 118 F.3d at 371 (citing Blocker,
104 F.3d at 735).
59
United States v. Reedy, 304 F.3d 358, 363 (5th Cir.2002).
32
. . He may, however, raise claims about the multiplicity of
sentences for the first time on appeal.”60 We have consistently
held that “[t]he test for determining whether the same act or
transaction constitutes two offenses or only one is whether
conviction under each statutory provision requires proof of an
additional fact which the other does not.”61
In United States v. Bruce, this Court considered the
similarities between the crimes of mail fraud and securities fraud
and concluded that “there is one element in 77q(a) which is not
present in § 1341 – the offer or sale of a security.”62 Tucker
argues that by contrast, the district court deleted this sole
distinction by instructing the jury that, with regard to the count
of mail fraud, it could convict Tucker upon a finding that he
“knowingly created a scheme to defraud, that is made false
statements or omissions of material facts in the offer and sale of
securities.” Tucker avers that the district court’s inclusion in
the mail-fraud charge of the one distinguishing element between the
two crimes rendered them one and the same.
60
Id. at 364 (citing United States v. Soape, 169 F.3d 257,
265-66 (5th Cir.1999) and United States v. Cooper, 966 F.2d 936,
940 (5th Cir.1992)). Although Tucker mainly contests the
multiplicitous nature of the jury charge and subsequent sentencing,
he also points out the similarities between the counts charged in
the indictment. Tucker has clearly forfeited any consideration of
the latter.
61
Reedy, 304 F.3d at 363. (citations omitted).
62
United States v. Bruce, 488 F.2d 1224, 1230 (5th Cir.1973).
33
We agree with the Government’s supposition that the district
court was merely copying the Fifth Circuit pattern jury
instructions when it described the scheme or artifice to defraud.
Indeed, the first essential element for the crime of mail fraud in
the pattern jury charge is as follows: “First: That the defendant
knowingly created a scheme to defraud, that is _______ [describe
scheme from the indictment] . . . .”63 Moreover, the pattern jury
instructions provide:
It is not necessary that the government prove all of the
details alleged in the indictment concerning the precise
nature and purpose of the scheme, or that the mailed
material was itself false or fraudulent, or that the
alleged scheme actually succeeded in defrauding anyone,
or that the use of the mail was intended as the specific
or exclusive means of accomplishing the alleged fraud.64
Although the district court did not include this instruction in its
jury charge, the comment nonetheless evinces the drafters’ intent
to clarify the scheme underlying the allegation of mail fraud,
rather than an intent to add an additional element to the crime.
As such, the description of the scheme need not be proved to
establish Tucker’s guilt for the crime of mail fraud, and the
sentences imposed were not multiplicitous.
CONCLUSION
The district court erred in not allowing Tucker’s expert
witness to endorse an expanded interpretation of the term “invest,”
and thereby refute the Government’s more restrictive meaning. But
63
PATTERN CRIM. JURY INSTR. Fifth Circuit. § 2.59.
64
Id.
34
because Held’s explanation would have accounted for only a small
portion of the widespread misuse of the proceeds, the district
court’s error does not constitute grounds for reversal.
We reject Tucker’s argument that the district court improperly
excluded evidence pertaining to the nature of the certificates,
having found that it was never Tucker’s aim to submit this issue to
the jury.
Similarly, we find that the district court properly excluded
Held’s testimony as to Tucker’s belief about the nature of the
certificates.
The district court did not abuse its discretion by excluding
Held’s expert opinion that it was incumbent upon the underwriters
and not Tucker to comply with Regulation D since this information
would not have assisted the jury.
Turning to the jury charge, we conclude that the district
court did submit the issue of whether the certificates were
securities to the jury and therefore did not err by withholding
this element. Moreover, Tucker cannot demonstrate that either the
district court’s jury instruction with respect to the intent
element of a § 77q(a) violation, or its failure to instruct the
jury on specific unanimity of theory, amounted to clear error
sufficient to reverse the conviction.
Finally, Tucker failed to substantiate his claim that the
sentences imposed were multiplicitous in violation of the Fifth
Amendment protection against double jeopardy.
35
AFFIRMED.
36