United States v. E Carroll Corr Sys ( 1999 )

REVISED, October 29,1999
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 98-30411
_____________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
CAPTAN JACK WYLY; DOROTHY MORGEL;
EAST CARROLL CORRECTIONAL SYSTEMS, INC.,
Defendants-Appellants.
_____________________
No. 98-30434
_____________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
EAST CARROLL CORRECTIONAL SYSTEMS, INC.,
Defendant-Appellant.
_____________________
No. 98-30865
_____________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
DALE RINICKER; ET AL.,
Defendants,
CAPTAN JACK WYLY, JR.; KENNETH KNIGHT
KILLEN, JR., on behalf of William Bryant
Killen; JAMES PAUL BROWN, on behalf of
Matthew P. Brown, on behalf of Kathrine J. Brown;
BAHIA W. BROWN; JACK S. HAMILTON;
BONNIE G. WYLY; WILLIAM N. WYLY; HONDA W. KILLEN,
Appellants.
_________________________________________________________________
Appeals from the United States District Court
for the Western District of Louisiana
__________________________________________________________________
October 13, 1999
Before KING, Chief Judge, and SMITH and BARKSDALE, Circuit Judges.
RHESA HAWKINS BARKSDALE, Circuit Judge:
Primarily at issue in these consolidated appeals from criminal
convictions for mail fraud, conspiracy, money laundering, and
forfeiture is whether the Government’s rebuttal closing argument
deprived Captan Jack Wyly, Dorothy Morgel, and East Carroll
Correctional Systems, Inc. (ECCS), of a fair trial. They contest
their convictions and the forfeiture order; in addition, ECCS
contests its $4.8 million fine. And, various ECCS shareholders
contest not being permitted to assert a claim to ECCS’ forfeited
assets. We AFFIRM all but the forfeiture of Morgel’s seized
checking account funds and the ECCS fine.
I.
In 1990, Dale Rinicker, then Sheriff of East Carroll Parish,
Louisiana, asked Wyly, then a 72-year-old Lake Providence attorney,
to finance the construction of a private prison in the parish to
house state prisoners. Under state law, such facilities must be
sponsored by a governmental entity. Because public funding was not
available, an investor was needed.
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Wyly agreed to construct a prison and lease it to the
Sheriff’s Office. Rinicker testified that Wyly offered him 38%
(later reduced to 30%) of the profits of the corporation (ECCS)
that Wyly planned to form for purchasing and constructing the
facility. Wyly, however, testified that, after construction was
well underway, Rinicker threatened to withdraw his prison
sponsorship unless he received a 38% share; and that he ultimately
agreed to give Rinicker 30%.
In April 1990, Wyly formed ECCS as a subchapter S corporation;
he was president and Morgel, his then 62-year-old legal secretary
(she had worked for Wyly for 35 years), was secretary-treasurer.
Thirty-five of the 100 ECCS shares were issued in Morgel’s name
(representing 5 for her and 30 for Rinicker); the remainder, to
Wyly, members of his family, and Jack Hamilton, who owned land near
the facility and, post-indictment, became ECCS’ president.
Soon after its incorporation, ECCS purchased an abandoned
school building and began renovating it — the East Carroll
Detention Center (ECDC). Financing was through another of Wyly’s
corporations, Desona Dairy-Corbin Planting Company, Inc. (Desona).
On the day of the building purchase, ECCS and the Sheriff’s Office
entered into a lease agreement, pursuant to which the latter agreed
to pay ECCS 25% of the funds it received from the Louisiana
Department of Public Safety and Corrections for housing state
prisoners.
A few months later, August 1990, ECDC began housing prisoners.
Additional buildings were constructed, also financed by loans from
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Desona. Until May 1993, ECCS repaid the construction loans, making
no shareholder distributions except as needed for payment of taxes
under the subchapter S corporate structure; thereafter, shareholder
distributions were made.
The parties went to elaborate lengths to conceal Rinicker’s
interest in, and his distributions from ECCS. From May 1993
through August 1995, ECCS made distributions to Morgel based on a
35% interest in ECCS (her 5% and Rinicker’s 30%).
Although Morgel had a checking account at a bank in Lake
Providence, where she lived, she opened another in May 1993 in Oak
Grove, 15 miles away. She deposited the ECCS distribution checks
in the Oak Grove account, and then wrote checks, generally for less
than $10,000 (to avoid currency transaction reporting
requirements), payable to Glen Jordan, Rinicker’s friend.
These May 1993 through August 1995 payments totaled $286,025.
After August 1995, by six checks totaling $54,116, ECCS paid Jordan
directly (on behalf of Rinicker).
Rinicker and/or Jordan cashed these checks at a bank in
Monroe, Louisiana, where Rinicker’s sister, Myra Jackson, worked.
Rinicker received the proceeds, giving Jordan a small amount from
each check.
When questioned by the Louisiana Office of Legislative Auditor
and the FBI regarding the payments to Jordan, Morgel and Wyly gave
false explanations and incorrect information. Jordan, however,
cooperated with investigators and explained his role in funneling
money to Rinicker.
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Wyly, Morgel, ECCS, Rinicker, and Jackson (but not Jordan),
were charged with mail fraud, conspiracy to launder money, and
money laundering. The indictment sought forfeiture of: (1) ECDC;
(2) a certificate of deposit purchased by ECCS; (3) all funds in
ECCS’ bank account; (4) all funds in Morgel’s Oak Grove account;
(5) ECCS’ assets and property, including approximately $2.8 million
in rental payments from the Sheriff’s Office; and (6) the
approximate $340,000 paid Rinicker.
Jackson’s charges were dismissed pursuant to a pre-trial
diversion agreement. Rinicker pleaded guilty and testified at
trial for the Government.
A jury convicted Wyly, Morgel, and ECCS on all counts, and
found the charged property to be subject to forfeiture. Departing
downward from the Sentencing Guidelines’ range, the district court
sentenced Wyly to 48 months imprisonment and a $17,500 fine and
Morgel to prison for one year and one day and a $12,500 fine. ECCS
was fined $4.8 million. Moreover, Wyly, Morgel, and ECCS were
ordered to forfeit their interests in the property described in the
forfeiture verdict.
Following entry of an initial forfeiture order, the other ECCS
shareholders (Hamilton and members of Wyly’s family) petitioned for
a hearing on their claims to an interest in ECCS’ assets. The
district court held they lacked standing.
II.
The district court refused the Government’s downward departure
request for Rinicker and sentenced him, inter alia, to 60 months
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imprisonment and a $10,000 fine. His appeal was voluntarily
dismissed. Likewise, the Government voluntarily dismissed its
appeal contesting the departures given Wyly and Morgel.
Wyly, Morgel, and ECCS (Appellants) challenge the admission of
Rinicker’s testimony, the sufficiency of the evidence, certain jury
instructions, the denial of their new trial motions based on
prosecutorial misconduct, and the forfeiture order; in addition,
ECCS challenges its fine. The other ECCS shareholders contest
being denied a hearing.
A.
Circuit precedent forecloses the contention that Rinicker’s
testimony, pursuant to a plea agreement, violated 18 U.S.C. §
201(c)(2) (prohibiting giving, offering, or promising anything of
value to a witness for or because of his testimony). E.g., United
States v. Haese, 162 F.3d 359, 366-68 (5th Cir. 1998), cert.
denied, ___ U.S. ___, 119 S. Ct. 1795 (1999).
B.
The scope of our review of the sufficiency of
the evidence after conviction by a jury is
narrow. We must affirm if a reasonable trier
of fact could have found that the evidence
established guilt beyond a reasonable doubt.
We must consider the evidence in the light
most favorable to the government, including
all reasonable inferences that can be drawn
from the evidence. The evidence need not
exclude every reasonable hypothesis of
innocence or be wholly inconsistent with every
conclusion except that of guilt, and the jury
is free to choose among reasonable
constructions of the evidence.
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United States v. Bermea, 30 F.3d 1539, 1551 (5th Cir. 1994),
(citations omitted), cert. denied, 513 U.S. 1156, and 514 U.S. 1097
(1995).
1.
Bribery under Louisiana law is the offense the mail fraud
scheme was devised to further and conceal; that scheme and bribery
produced the illegal proceeds for laundering and concealment.
Therefore, as the parties acknowledge, bribery is an essential
element for each of the counts in the indictment. The evidence of
bribery is claimed insufficient because Wyly and Rinicker denied
any intent to offer or receive a bribe; that, instead, Rinicker
extorted an ownership interest in ECCS after ECCS was formed; and
that later acts of concealment had a non-criminal purpose because
they were undertaken, not to cover up a bribe, but out of fear of
Rinicker, who wanted his ownership concealed for his own purposes.
Under LA. REV. STAT. 14:118, the elements for public bribery are
“(1) [t]he giving or offer to give of something of apparent present
or prospective value by the Defendant; (2) [t]hat the recipient is
a public officer or public employee ...; and (3) [t]hat the gift or
offer to give is for the purpose of influencing the official duties
of the public officer or employee”. United States v. L’Hoste, 609
F.2d 796, 804-05 (5th Cir.), cert. denied, 449 U.S. 833 (1980).
The bribery evidence is more than sufficient. The Government
presented evidence of an offer by Wyly and acceptance by Rinicker,
an elected official, of a concealed interest in ECCS, for the
purpose of influencing Rinicker in the performance of his official
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duties. Although Rinicker testified that he did not think Wyly
offered him a secret ownership interest in ECCS as a bribe, he also
testified that he believed the arrangement was illegal. The jury
was entitled to reject Wyly and Morgel’s claims that, because they
feared Rinicker, they acted without specific intent, and to find,
instead, that their efforts to conceal Rinicker’s interest and the
payments to him were undertaken with the requisite specific intent.
2.
“To establish a mail fraud violation under 18 U.S.C. § 1341,
the government must demonstrate (1) a scheme to defraud; (2) the
use of mails to execute that scheme; and (3) the defendant’s
specific intent to commit fraud.” United States v. Tencer, 107
F.3d 1120, 1125 (5th Cir.), cert. denied, ___ U.S. ___, 118 S. Ct.
390 (1997).
Appellants were charged with using the mails in furtherance of
a scheme to defraud the parish citizens of the honest and faithful
services of their sheriff, the object of the scheme being to
promote and cover up the bribe. The mailings at issue were for
invoices for housing prisoners from the Sheriff’s Office to the
Department of Corrections (DOC), and checks in payment of them.
Appellants maintain that the charged scheme cannot be
prosecuted under the mail fraud statute because the indictment and
evidence did not narrow the alleged victims to a specified class to
whom Rinicker owed a state-law duty; and that the mailings were not
related to, or in furtherance of, the scheme to conceal the bribery
but were, instead, legitimate payments pursuant to the contract
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between the Sheriff’s Office and DOC. Morgel contends further that
there was insufficient evidence that she knowingly caused the items
to be mailed or that she knew, or should have known, that the
Sheriff’s Office would participate in the mailings.
The indictment charged, and the Government proved, that, in
exchange for authorizing the lease of ECDC by the Sheriff’s Office
from ECCS, Rinicker received a hidden ownership interest in, and a
share of, proceeds from ECCS, in violation of state criminal law.
See United States v. Brumley, 116 F.3d 728 (5th Cir. 1997) (en
banc). The Government proved that the scheme encompassed the
incorporation of ECCS, the purchase and renovation of ECDC, and
housing prisoners at ECDC in exchange for DOC payments. Each
mailing furthered the scheme by generating funds used to bribe
Rinicker.
The Government also proved Morgel’s involvement in all aspects
of the scheme; her knowledge that the DOC funds would be used to
pay ECCS and, after being laundered through her bank account, to
pay bribes to Rinicker; and that the use of the mails was
foreseeable to her. “[W]hen an individual does an act with the
knowledge that the use of the mails will follow in the ordinary
course of business, or when such use can reasonably be foreseen,
even though not actually intended, then he/she causes the mails to
be used”. United States v. Moser, 123 F.3d 813, 822-23 (5th Cir.
1997) (emphasis in original; internal quotation marks and citation
omitted), cert. denied, ___ U.S. ___, 118 S. Ct. 613, 642 (1997),
and 118 S. Ct. 884 (1998); see also United States v. Green, 964
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F.2d 365, 369 (5th Cir. 1992) (defendant need not be involved
directly in mailings; sufficient to show defendant acted with
knowledge that use of mails would follow in ordinary course of
business), cert. denied, 506 U.S. 1055 (1993).
3.
Money laundering was charged under 18 U.S.C. §§ 1956(a)(1) and
1957.
a.
Seven counts charged § 1956(a)(1) violations. They involved
checks drawn on the Sheriff’s Office account and deposited in ECCS’
account, on ECCS’ account and deposited in Morgel’s account, and on
ECCS’ and Morgel’s accounts payable to Jordan (on behalf of
Rinicker) and cashed at a bank in Monroe.
For a conviction under 18 U.S.C. § 1956(a)(1), the Government
must prove that the defendant (1) conducted or attempted to conduct
a financial transaction, (2) which the defendant knew involved the
proceeds of a specified unlawful activity, (3) with the intent
either to promote specified unlawful activity (§ 1956
(a)(1)(A)(i)), United States v. Cavalier, 17 F.3d 90, 92 (5th Cir.
1994), or to conceal or disguise the nature, location, source,
ownership, or control of the proceeds of unlawful activity (§ 1956
(a)(1)(B)), Tencer, 107 F.3d at 1128. See also United States v.
Brown, ___ F.3d ___, ___, 1999 WL 642214, at *5 & n.11 (5th Cir.
1999).
Appellants contend that the Government failed to prove that
the proceeds involved bribery rather than extortion and that they
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acted with the specific intent to engage in the transactions; and
claim that the funds at issue were not criminally derived property,
because the bribery scheme was not consummated until Rinicker
received the funds. They also assert that the proceeds were not
illegal because the Government failed to prove that DOC would not
have agreed to house prisoners at ECDC had it known that the
Sheriff had an interest in the corporation that owned ECDC.
As discussed supra, the jury was entitled to find bribery.
Further, there was ample evidence that Appellants knowingly
conducted financial transactions which involved the proceeds of
mail fraud and/or public bribery, and that they intended to promote
the unlawful activity or to conceal or disguise the nature and
source of the proceeds. The contention that the bribery scheme was
not consummated until Rinicker received the funds is inconsistent
with the Louisiana public bribery statute, which criminalizes the
offer or acceptance of anything of present or prospective value.
b.
The § 1957 count concerns the certificate of deposit (CD)
purchased by ECCS. “To obtain a conviction under § 1957, the
government must prove that the defendant knowingly engaged, or
attempted to engage, in a monetary transaction involving criminally
derived property, in excess of $10,000, derived from specified
criminal activity”. United States v. Leahy, 82 F.3d 624, 635 (5th
Cir. 1996).
We reject the contention that funds paid ECCS for use of ECDC
were legitimate; and that, therefore, funds used by ECCS to
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purchase the CD were not proceeds of unlawful activity. The
payments by the Sheriff’s Office to ECCS were proceeds of the mail
fraud and bribe.
4.
ECCS asserts that, because the jury rejected Wyly’s testimony
that he was extorted by Rinicker, it must have credited Rinicker’s
testimony that the illegal agreement was entered into before ECCS
was formed; and that, therefore, the evidence was insufficient to
find that, in bribing Rinicker, Morgel and Wyly acted with apparent
authority for ECCS prior to its creation.
The evidence was more than sufficient to support the jury’s
conclusion that Wyly and Morgel acted on behalf of ECCS during the
relevant time period.
C.
The jury was charged on the day after closing arguments, in
which Morgel and Wyly focused on their defense that they did not
specifically intend to violate the law; that, instead, Rinicker
extorted them and they, being much older, were afraid of him.
Moreover, Morgel claimed several times that she had not received
any financial benefit from the scheme.
In rebuttal, the Government argued, for the first time, that
Morgel and Wyly could not have been afraid of Rinicker because they
cheated him out of $195,000. The Government had neither questioned
its witnesses, nor cross-examined Morgel, about this purported
theft.
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For this position, the Government relied on its Ex. 10 (G-10)
and Defense Ex. 44 (D-44). G-10 is a chart entitled “ECCS MONEY
TRAIL”, representing that: DOC paid ECDC $12,093,251; ECDC paid
ECCS 25% of that amount, $2,820,961; of this, ECCS shareholders
other than Morgel received $1,258,704; she received $526,367, of
which she paid Jordan $286,025 (for Rinicker); ECCS paid Jordan
$54,116 (for Rinicker); and Jordan paid Rinicker $340,141 (amount
Jordan received from Morgel and ECCS).
Based on this, the Government argued that $535,129 was
Rinicker’s 30% share of the approximate $1.8 million shareholder
distributions ($526,367 to Morgel and $1,258,704 to others), but
that he received only $340,141. Therefore, according to the
Government, Morgel had stolen $195,380: the difference between the
$535,129 Rinicker should have received (his 30%) and the $340,141
actually received.
Morgel objected at a bench conference, claiming a blatant
mischaracterization of the record, because the evidence showed that
Morgel paid taxes on behalf of Rinicker; and that it was improper
for the Government to hold this argument until rebuttal, when
Morgel could not reply. The objection was overruled, on the basis
that the argument was not evidence.
Continuing its rebuttal, the Government referenced D-44, a
chart entitled “DOROTHY MORGEL, Income Tax Paid 1992-1996", which
presented her wages as $50,246; funds received from ECCS as
$702,837; and paid income tax as $221,859. According to the
Government, D-44 demonstrated that $195,000 was the difference
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between the amount Morgel received from ECCS ($702,837) and the sum
of $221,758 for taxes and $286,025 Morgel paid to Jordan (for
Rinicker), this $195,000 difference being the same as reflected on
G-10; and it again asserted that Morgel had stolen that amount from
Rinicker. Defense counsel did not object.
The Government then argued that Morgel and Wyly could not have
been afraid of Rinicker because they “didn’t have a problem
clipping him out of $195,000 of his share”; that G-10 and D-44 were
“credible, absolutely reliable evidence” that there had not been
any fear; that “there is no honor among thieves, obviously, because
the thieves were stealing from the thief”; and that the claimed
theft was “not a dispute. That’s not a guess. That’s a fact”.
Once again, Wyly and Morgel did not object.
On the morning following closing arguments, in a bench
conference prior to the jury being charged, Appellants moved for a
mistrial. In the alternative, they requested surrebuttal or that
the court instruct the jury to disregard the challenged rebuttal.
The district judge stated that he had been surprised and concerned
on hearing the rebuttal about the $195,000; but that he had also
been surprised when Morgel had argued earlier that she received
nothing. The court concluded that the rebuttal was fair, remarking
that it had struggled with the matter, and had considered, but
decided against, reopening the argument for Morgel and the
Government.
The parties were permitted to state objections on the record.
Morgel asserted that the Government had not presented evidence of
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such claimed theft; that the Government’s calculations did not
account for repayment of ECCS’ debt in 1992 and 1993, and
disregarded the tax consequences of a subchapter S corporation; and
that she was unable to correct the error because it was made in
rebuttal. Wyly pointed out that Rinicker received distributions
for which taxes had already been paid by Morgel; and that the
$195,380 difference was 36% of Rinicker’s 30% share.
The Government responded that it had properly answered
arguments that Rinicker was a thief and that Morgel had received
nothing; that G-10 and D-44 showed $240,000 unaccounted for in
Morgel’s account; and that it did not know the amount of taxes
paid.1
The court denied a mistrial, as well as the requested
instruction to disregard the challenged rebuttal. It found that
the argument was not improper because it was based on exhibits in
evidence and was responsive to Morgel’s received-nothing argument.
However, just before, and during, the charge, the court instructed
that counsels’ arguments were not evidence; that it consists only
of the testimony of witnesses and exhibits; and that the jury was
to decide the case solely on the evidence.
Post-verdict, Appellants moved for a new trial based, inter
alia, on the rebuttal, asserting that the Government knew that
Morgel had paid Rinicker’s tax share from funds deposited in her
account; that D-44 represented funds that were allocated to Morgel
1
As discussed infra, this claimed lack of knowledge is quite
inconsistent with an earlier Government TRO filing, in which the
same Assistant United States Attorney participated.
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for tax purposes, some of which she received in cash and some that
were paid by ECCS to Desona in repayment of construction loans, but
taxable as income to ECCS shareholders; that the interpretation of
D-44 was erroneous because it failed to account for Morgel’s 5%
interest in ECCS, federal and state taxes paid by Morgel on her
salary and other non-ECCS income, and $208,903.27 in loan
repayments; and that it was undisputed that no cash was distributed
prior to 15 May 1993, except for taxes.
Appellants also pointed out that 35% (Morgel and Rinicker’s
combined share) of ECCS’ $596,866.49 total loan payments is
$208,903.27, the amount claimed unaccounted for on D-44. Finally,
they asserted that Agent Rushing’s affidavit, submitted in support
of the Government’s February 1996 TRO motion to prevent the sale of
ECDC, approximately 18 months before trial, see note 1, supra,
accounted for all ECCS distributions; showed that Morgel received
only $526,367 from ECCS; refuted the argument that D-44 reflected
that Morgel actually received $702,837; acknowledged that Rinicker
benefitted in excess of $570,000, because taxes were paid on his
behalf; and confirmed that, except for distributions for taxes, no
shareholder distributions were made until May 1993, after ECCS
repaid its loans. As exhibits, Appellants included ECCS’ loan
payment checks.
The district court denied a new trial, holding that
Appellants’ alternate explanations for the $195,000 (loan
repayments or taxes) undermined their contention that the rebuttal
was false; and that the explanations by Appellants and the
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Government were plausible alternate theories for what happened to
the $195,000. The court noted that the testimony and documents
underlying the new trial motions were in evidence; therefore,
defense counsel had been free to make any arguments based upon that
evidence, and the jury had been able to consider it in assessing
the rebuttal.
“Criminal convictions are not to be lightly overturned on the
basis of a prosecutor’s comments standing alone.” United States v.
Pineda-Ortuno, 952 F.2d 98, 106 (5th Cir.), cert. denied, 504 U.S.
928 (1992). Accordingly, “[a] criminal defendant bears a
substantial burden when attempting to show that prosecutorial
improprieties constitute reversible error”. Bermea, 30 F.3d at
1563. “A conviction should not be set aside if the prosecutor’s
conduct ... did not in fact contribute to the guilty verdict and
was, therefore legally harmless”. United States v. Johnston, 127
F.3d 380, 390 (5th Cir. 1997), cert. denied, ___ U.S. ___, 118 S.
Ct. 1173, 1174, 1577 (1998).
“The standard of review for a denial of a motion for mistrial
is abuse of discretion.” United States v. Bentley-Smith, 2 F.3d
1368, 1378 (5th Cir. 1993).2 “In reviewing a claim of
2
Arguably, in that the only contemporaneous objection to the
rebuttal concerned G-10, the other now objected-to portions of the
rebuttal, including remarks about D-44, should be reviewed only for
plain error. Cf. United States v. Gallardo-Trapero, ___ F.3d ___,
___, 1999 WL 604316, at *12 (reviewing unobjected-to portions of
prosecutor’s closing argument for plain error); United States v.
Causey, ___ F.3d ___, ___, 1999 WL 618124, at *9 (5th Cir.
1999)(same). However, in that the unobjected-to remarks were, in
effect, part and parcel of the objected-to theft claim, we review
under our normal abuse of discretion standard.
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prosecutorial misconduct, [we] first determine[] whether the
prosecutor’s remarks were improper”. United States v. Fields, 72
F.3d 1200, 1207 (5th Cir.), cert. denied, 519 U.S. 807 (1996); see
also United States v. Gallardo-Trapero, ___ F.3d ___, ___, 1999 WL
604316, at *9 (5th Cir. 1999). If they were, we consider “whether
they prejudicially affected the substantive rights of the
defendant”. Fields, 72 F.3d at 1207; United States v. Cooks, 52
F.3d 101, 103 (5th Cir. 1995) (footnotes omitted).
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The rebuttal is claimed improper because the Government,
knowing that the accusation was false, accused Wyly and Morgel of
uncharged theft, deliberately waiting until they had no opportunity
to respond. The Government counters that it responded fairly to
Wyly and Morgel’s closing arguments, in which they accused Rinicker
of extortion and theft and asserted that their actions were based
on fear, as well as Morgel’s that she did not receive any money
from the scheme. On this record, the better approach is to assume
that the rebuttal was improper, placing prejudice vel non at issue.
Appellants contend that the rebuttal prejudiced their right to
a fair trial because it undermined the heart of their defense —
acting out of fear of Rinicker. The Government responds that, in
the light of the overwhelming evidence of guilt, there was no
prejudice.
For deciding whether prosecutorial misconduct constitutes
reversible error, “[w]e consider three factors: (1) the magnitude
of the prejudicial effect of the prosecutor’s remarks, (2) the
efficacy of any cautionary instruction by the judge, and (3) the
strength of the evidence supporting the conviction”. United States
v. Hernandez-Guevara, 162 F.3d 863, 874 (5th Cir. 1998), cert.
denied, ___ U.S. ___, 119 S. Ct. 1375 (1999).
“The magnitude of the prejudicial effect is tested by looking
at the prosecutor’s remarks in the context of the trial in which
they were made and attempting to elucidate their intended effect.
At the same time, the district court’s on-the-scene assessment of
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the prejudicial effect, if any, is entitled to considerable
weight”. Fields, 72 F.3d at 1207 (emphasis added). This is in
keeping with the earlier discussed rule that, “[f]or prosecutorial
misconduct to warrant a new trial, it must be so pronounced and
persistent that it permeates the entire atmosphere of the trial,
... and casts serious doubt upon the correctness of the jury’s
verdict”. United States v. Wallace, 32 F.3d 921, 926 (5th Cir.
1994) (emphasis added; internal quotation marks and citation
omitted).
The jury had the testimony regarding ECCS’ loan repayments,
the date it began making distributions to shareholders, and
Morgel’s tax payments on behalf of Rinicker. Also in evidence was
Morgel’s Oak Grove check register, showing deposits and payments to
Jordan (for Rinicker), the IRS, and the Louisiana Department of
Revenue. There was also considerable testimony regarding
Rinicker’s violent temper and his threats, not only from Morgel,
Wyly, and other defense witnesses, but also from Government
witnesses, including Rinicker. Under these circumstances, the
jury’s ability to fairly consider and evaluate the evidence was not
hampered unduly by the rebuttal. Restated, the magnitude of the
prejudicial effect is not so great as to compel reversal,
especially in the light of the other two factors to be considered:
efficacy of cautionary instructions and evidence supporting
conviction.
“We presume that the jury follows the instructions of the
trial court unless there is an overwhelming probability that the
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jury will be unable to follow the instruction and there is a strong
probability that the effect [of the prosecutorial misconduct] is
devastating.” United States v. Tomblin, 46 F.3d 1369, 1390 (5th
Cir. 1995) (internal quotation marks and citation omitted). As
noted, the court twice instructed (prior to and during the charge)
that the arguments by counsel were not evidence and that the case
was to be decided solely on the evidence. See Gallardo-Trapero,
___ F.3d at ___, 1999 WL 604316 at *10-11 (“district court helped
to mitigate any prejudicial effect [of Government’s improper
argument] by instructing the jury to base their decision solely
upon the testimony and evidence presented”).
Moreover, the timing of the charge also mitigated any
prejudicial effect. The charge, not closing arguments, immediately
preceded the jury’s deliberations. See FED. R. CRIM. P. 30 (“[t]he
court may instruct the jury before or after the arguments are
completed or at both times”). Further mitigating any prejudicial
effect was the fact that closing arguments were completed late in
the afternoon of 14 October; the jury was not charged, and,
therefore, did not conduct its deliberations, until the next day.
Finally, the evidence of guilt was overwhelming. See
Gallardo-Trapero, ___ F.3d at ___, 1999 WL 604316 at *11
(Government’s improper closing argument did “not outweigh the
strength of the multifaceted evidence and testimony presented
during trial”). For this factor, no more need be said.
In sum, assuming the rebuttal was improper, the requisite
prejudice has not been demonstrated. Restated, the rebuttal did
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not preclude Appellants’ receiving a fair trial.3 There was no
abuse of discretion.
D.
Appellants challenge the jury’s being instructed on the
affirmative defense of duress, and that a scheme to commit public
bribery is a breach of the duty owed by Rinicker to the parish
citizens. And, for the first time on appeal, ECCS challenges the
corporate criminal liability instruction.
“We review an included jury instruction objected to as
inaccurate for abuse of discretion and will reverse only if the
instruction fails correctly to state the law.” United States v.
Hebert, 131 F.3d 514, 521 (5th Cir. 1997), cert. denied, ___ U.S.
___, 118 S. Ct. 1571 (1998). “The trial judge has substantial
latitude in tailoring the instructions so long as they fairly and
adequately cover the issues presented.” Bentley-Smith, 2 F.3d at
1378 (internal quotation marks and citation omitted). “To
determine whether there was error, [we] look[] at the entire charge
in the context of the trial including arguments made to the jury.”
United States v. Willis, 38 F.3d 170, 179 (5th Cir. 1994) (internal
quotation marks and citation omitted), cert. denied, 515 U.S. 1145
(1995). “Reversible error exists when the jury charge, as a whole,
3
Our no-prejudice holding does not lessen our great concern,
notwithstanding the Government’s explanation on appeal, over the
glaring inconsistencies between the Government’s TRO papers and
rebuttal. Those papers seem to account for every penny, including
tax payment distributions and loan repayments, yet the rebuttal
argument took a quite different course, including, as noted,
disavowing knowledge of the amount of taxes paid. That the TRO
papers had been filed 18 months before trial is no excuse for this
claimed lack of knowledge.
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misled the jury as to the elements of the offense.” United States
v. Devoll, 39 F.3d 575, 579 (5th Cir. 1994) (internal quotation
marks and citation omitted), cert. denied, 514 U.S. 1067 (1995).
On the other hand, we review ECCS’ belatedly raised
contention, discussed infra, only for plain error.
1.
Appellants’ theory of defense was that Rinicker extorted money
from them, threatening to close the prison unless paid; and that,
because they feared him, they acted in good faith and without
specific intent. They acknowledge that they presented duress
evidence (threats and intimidation by Rinicker), but maintain that
they did not assert the affirmative defense of duress; and that, by
giving such an instruction, the court undermined their theory of
defense, shifted the burden of proof on intent, and confused the
jury on the application of the good faith and specific intent
instructions.
The Government did not cite, nor could we find, any authority
approving giving an instruction on an affirmative defense, for
which the defendant bears the burden of proof, when that defense
had not been raised. The Government maintains, however, that the
court had discretion to give the instruction, regardless of whether
requested by the defense.
On the other hand, Appellants did not cite, nor could we find,
any authority to support their contention that, in a criminal case,
giving an instruction on a not-asserted affirmative defense is
reversible error. Instead, they rely on the well-settled
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proposition that “[a] judge may not instruct the jury on a charge
that is not supported by evidence”, United States v. Ortega, 859
F.2d 327, 329-30 (5th Cir. 1988), cert. denied, 489 U.S. 1027
(1989); and maintain that the evidence did not support duress.
To raise an issue of duress for the jury a
defendant must present proof of four elements:
(1) that the defendant was under an
unlawful and present, imminent, and
impending threat of such nature as
to induce a well-grounded
apprehension of death or serious
bodily injury;
(2) that defendant had not recklessly or
negligently placed himself in a
situation in which it was probable
that he would be forced to choose
the criminal conduct;
(3) that defendant had no reasonable
legal alternative to violating the
law; a chance both to refuse to do
the criminal act and also to avoid
the threatened harm; and
(4) that a direct causal relationship
may be reasonably anticipated
between the criminal action taken
and the avoidance of the threatened
harm.
United States v. Posada-Rios, 158 F.3d 832, 873 (5th Cir. 1998)
(brackets, internal quotation marks, and citations omitted), cert.
denied, ___ U.S. ___, 119 S. Ct. 1280, 1487, 1792 (1999). Because
“a justification defense such as duress is an affirmative defense,
the burden of proof is on the defendant”. Willis, 38 F.3d at 179.
The evidence did not support a duress defense. For example,
Wyly admitted that there had been an alternative to violating the
law: he could have had a public entity other than the Sheriff’s
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Office sponsor the prison. Accordingly, it was error for the court
to instruct the jury on that defense, especially in view of the
fact that, not only did Appellants not request the instruction,
they objected to it.
Nevertheless, the error is harmless because, viewing the
instructions as a whole, we are convinced that the jury was not
misled or confused. The court instructed on good faith, specific
intent, and the definitions of “knowing” and “willful”; that the
Government had the burden of proving that Appellants did not act in
good faith, but instead acted with the specific intent to violate
the law.
Under the instructions, the jury could find that Appellants
did not act under duress, but still find that the Government failed
to prove that they acted with the requisite specific intent. That
it rejected the good faith defense and found specific intent does
not mean that it was confused or misled by the duress instruction.
Accordingly, that instruction did not affect Appellants’
substantial rights.
2.
The jury was instructed that a scheme to commit public bribery
is a breach of the duty owed by the sheriff to the parish citizens.
Appellants contend that this instruction usurped the jury’s
function to decide whether, notwithstanding the bribes, Rinicker
fulfilled his official duties.
We disagree. The jury still had to determine whether the
elements of public bribery had been proven.
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3.
As noted, ECCS’ belated challenge to the corporate criminal
liability instructions is reviewed only for plain error, pursuant
to FED. R. CRIM. P. 30 and 52(b). “Under [Rule] 52(b), [we] may
correct forfeited errors only when the appellant shows (1) there is
an error, (2) that is clear or obvious, and (3) that affects his
substantial rights. If these factors are established, 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”. United States v. Waldron, 118
F.3d 369, 371 (5th Cir. 1997) (internal quotation marks and
citation omitted) (emphasis added).
Relying on Standard Oil Co. of Tex. v. United States, 307 F.2d
120, 128 (5th Cir. 1962), ECCS maintains that the challenged
instructions should have required the jury to determine that Wyly
and Morgel were acting with the intent to benefit ECCS. Such an
instruction was unnecessary, because the evidence is overwhelming
that ECCS was the alter-ego for Morgel and Wyly and that they were
the only agents who acted for it.
But, even assuming a clear or obvious error that affected
ECCS’ substantial rights, we decline to exercise our discretion to
correct it, because it does not affect the fairness, integrity, or
public reputation of judicial proceedings. ECCS jointly submitted
the corporate criminal liability instructions.
E.
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The forfeiture statute for money laundering provides for
forfeiture of property “involved in” the offense or property
“traceable to such property”. See 18 U.S.C. § 982(a)(1) (“The
court, in imposing sentence on a person convicted of an offense in
violation of ... section 1956 ... of this title, shall order that
the person forfeit to the United States any property, real or
personal, involved in such offense, or any property traceable to
such property.”).
1.
Appellants challenge the forfeiture of ECCS’ assets on the
grounds that the only proceeds of bribery and mail fraud available
for laundering were the funds paid to Rinicker; and that forfeiture
is not authorized under a facilitation theory, unless the
facilitation involves intentional commingling of legitimate and
tainted funds as a method for concealing and laundering “dirty”
money, which is not present here. The Government responds that
ECDC is the only asset forfeited under a facilitation theory (this
point is of importance concerning the forfeiture of the funds in
Morgel’s account, part II.E.2. infra), and asserts that property
“involved in” money laundering includes property used “to
facilitate” the offense, as the jury was instructed.
“Facilitation occurs when the property makes the prohibited
conduct less difficult or more or less free from obstruction or
hindrance.” Tencer, 107 F.3d at 1134 (internal quotation marks and
citation omitted). The facilitation theory supports the jury’s
finding that ECDC was forfeitable, because of its substantial nexus
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to the crimes. It, the prison, was the source of the criminal
proceeds and was indispensable to the money laundering conspiracy.
Without the prison, there could have been no bribery, mail fraud,
or money laundering. ECCS’ other forfeited property is forfeitable
as proceeds.
2.
Morgel contends that the Government failed to prove a
connection between the charged illegal activity and funds that
remained in her checking account at the time of seizure, ten months
after her last payment to Jordan (for Rinicker). In closing
argument during the forfeiture phase, Morgel’s counsel stated that
her account had “$5,840.57 of her money in it”; but, at oral
argument on appeal, her counsel stated that, when seized, the
account contained approximately $15,000.
The Government does not respond in its appellate brief to this
contention. In an objection to Morgel’s closing argument, the
Government stated that “the forfeiture theory for [her] account is
that it was used to facilitate funneling of money to Rinicker”.
But, as noted, it now expressly disavows reliance on a facilitation
theory for the forfeiture of any property other than ECDC.
Accordingly, this forfeiture of funds cannot be upheld on the
ground that Morgel’s account was the conduit for laundering the
funds. Instead, the Government had to prove that those funds were
criminal proceeds.
The Government asserted at oral argument on appeal that all
funds in Morgel’s account came from ECCS; but, it seemed to concede
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that, if they did not, they would not be forfeitable. At trial,
the Government presented no evidence regarding either the amount or
source of these funds when seized. Accordingly, the evidence is
insufficient to sustain their forfeiture.
F.
In United States v. Bajakajian, 524 U.S. 321, 118 S. Ct. 2028
(1998), decided after Appellants’ sentencing, the Supreme Court
held that “a punitive forfeiture violates the Excessive Fines
Clause [of the Eighth Amendment] if it is grossly disproportional
to the gravity of a defendant’s offense”. 524 U.S. at ___, 118 S.
Ct. at 2036. The district court’s proportionality determination is
reviewed de novo, but its factual findings “in conducting the
excessiveness inquiry ... must be accepted unless clearly
erroneous”. 524 U.S. at ___, 118 S. Ct. at 2037 & n.10.
ECCS maintains that the forfeiture of more than $4 million in
assets is grossly disproportionate, claiming its involvement in the
scheme is questionable; and noting the charged laundering was for
only approximately $175,000 and Rinicker received only
approximately $340,000; much of its stock is owned by individuals
with no knowledge of, or involvement in, the crime; and it was also
fined $4.8 million.
The district court held that the forfeiture was not
disproportionate because ECCS was convicted of a comprehensive
criminal conspiracy involving bribery of the highest ranking law
enforcement officer in the parish; the scheme continued for more
than six years and involved manipulation of various financial
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accounts and institutions and at least five individuals; the
forfeited property was closely related to the money laundering
offenses; ECCS and ECDC were born out of the scheme to defraud the
citizens of the parish of the honest and faithful services of their
sheriff; the money paid Rinicker flowed through the forfeited bank
accounts; and the CD was purchased with funds derived from the
conspiracy.
The factual findings are not clearly erroneous. Nor did the
court err in concluding that the forfeiture was not grossly
disproportionate.
G.
ECCS contends, for the first time on appeal, that the district
court misapplied the Guidelines in computing the $4.8 million fine;
the Government agrees. It notes, however, that, because all of
ECCS’ assets have been forfeited, it will remit the fine if the
forfeiture order is affirmed.
In other words, the issue will be moot. Because the
forfeiture of ECCS’ assets has been upheld, the Government must
remit the fine.
H.
ECCS shareholders (other than the defendants) petitioned for
a hearing on their claims to an interest in ECCS’ assets, pursuant
to 21 U.S.C. § 853(n). That subsection provides, in pertinent
part, that, following entry of a forfeiture order, “[a]ny person,
other than the defendant, asserting a legal interest in property
which has been ordered forfeited to the United States ... may ...
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petition the court for a hearing to adjudicate the validity of his
alleged interest in the property”. 21 U.S.C. § 853(n)(2).
The district court denied a hearing, holding that the
shareholders lacked standing. “The issue of standing is one of
law, and our review is plenary”. United States v. $38,570 U.S.
Currency, 950 F.2d 1108, 1111 (5th Cir. 1992).
The shareholders bottom standing on their claim to an
equitable interest in the corporate assets, maintaining that the
§ 853(n)(2) phrase, “legal interest”, includes equitable and
beneficial interests. They contend further that the Government
cannot seek to forfeit ECCS unless it also seeks to forfeit their
stock, and that the district court erroneously failed to
differentiate between their claims to “[ECCS] itself, i.e., shares
of stock which they held” and their claims to “specific assets” of
ECCS.
The district court did not order forfeiture of the stock or
the “corporation itself”, only its assets. Under Louisiana law,
“[a] corporation is a separate entity from its shareholders”. Fina
Oil & Chemical Co. v. Amoco Production Co., 673 So. 2d 668, 672
(La. App. 1st Cir.), writ denied, 679 So. 2d 1353 (La. 1996).
Accordingly, “[t]he shareholders’ interest in the corporation does
not equate to ownership by the shareholder of specific corporation
assets”. Id.; see also Succession of Mydland, 653 So. 2d 8, 11
(La. App. 1st Cir. 1995) (“The property of the corporation is not
the property of the individual shareholders”). “A shareholder’s
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ownership interest in the corporation is in the stock issued by the
corporation and not the corporate assets”. Id. (emphasis added).
The shares are not the “corporation itself”, nor are they
ECCS’ assets or property. Because only ECCS’ assets, in which the
shareholders have no interest under Louisiana law, were ordered
forfeited, the no-standing ruling was correct.
III.
For the foregoing reasons, the judgment against Wyly and the
denial of the shareholders’ claim are AFFIRMED. The judgment
against Morgel is AFFIRMED, except for the forfeiture of her seized
account funds, which is REVERSED. And, the judgment against ECCS
is AFFIRMED, except for the $4.8 million fine, which is VACATED.
AFFIRMED IN PART; REVERSED IN PART; VACATED IN PART
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