United States v. Daniel Davis , 690 F.3d 330 ( 2012 )

Case: 11-40265 Document: 00511941076 Page: 1 Date Filed: 08/01/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 1, 2012
No. 11-40265 Lyle W. Cayce
Clerk
UNITED STATES OF AMERICA,
Plaintiff–Appellee
v.
DANIEL PATRICK DAVIS; PHILLIP DELL CLARK,
Defendants–Appellants
Appeals from the United States District Court
for the Eastern District of Texas
Before REAVLEY, PRADO, and OWEN, Circuit Judges.
EDWARD C. PRADO, Circuit Judge:
Defendants–Appellants Daniel Patrick Davis and Phillip Dell Clark were
convicted of illegal gambling, conspiring to commit illegal gambling, and money
laundering for their roles in a “sweepstakes” promotion at three Internet cafés
in Texas. They challenge their convictions on a variety of grounds, but contend
principally that there is insufficient evidence to support their convictions and
that the district court erred in refusing to allow them to present a “mistake-of-
law” defense. The Government concedes that there is insufficient evidence to
support their convictions for money laundering, which we now reverse; we affirm
their other convictions.
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I. FACTUAL AND PROCEDURAL BACKGROUND
A. The Statutory Framework
Davis and Clark were charged with violating and conspiring to violate 18
U.S.C. § 1955. Section 1955 makes it a federal crime to conduct, finance,
manage, supervise, direct, or own all or part of an “illegal gambling business,”
defined as a gambling business which (1) violates the law of the state in which
it is conducted, (2) involves five or more persons who conduct, manage,
supervise, direct, or own all or part of such business, and (3) continuously
operates for a period of more than thirty days or has a gross revenue of $2,000
or more on any single day. The defendants concede the second two elements; the
crux of their appeal is that the first element is not satisfied because their
conduct did not violate Texas state law.
The superseding indictment alleges that Davis and Clark operated
“electronic gambling devices” in violation of three1 Texas state laws: gambling
promotion, keeping a gambling place, and possessing a gambling device,
equipment or paraphernalia. Tex. Penal Code Ann. §§ 47.03, 47.04, 47.06. As
relevant to the conduct involved here, a person is guilty of “gambling promotion”
if the Government proves that he “intentionally or knowingly” “operates or
participates in the earnings of a gambling place” or “for gain, sets up or promotes
any lottery or sells or offers to sell or knowingly possesses for transfer, or
transfers any card, stub, ticket, check, or other device designed to serve as
evidence of participation in any lottery.” Id. § 47.03(a)(1), (5). A person is guilty
of “keeping a gambling place” if the Government proves that he “uses or permits
another to use as a gambling place any real estate, building, room, tent, vehicle,
boat, or other property whatsoever owned by him or under his control, or rents
1
A fourth Texas state law is also listed on the indictment—communicating gambling
information. Tex. Penal Code Ann. § 47.05. The facts of this case do not support that crime
and it was not charged to the jury.
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or lets any such property with a view or expectation that it be so used.” Id.§ 47.04(a). A “gambling place” is “any real estate, building, room, tent, vehicle,
boat, or other property whatsoever, one of the uses of which is . . . the conducting
of a lottery or the playing of gambling devices.” Id. § 47.01(3). A person is guilty
of “possession of gambling device, equipment, or paraphernalia” if, “with the
intent to further gambling, he knowingly owns, manufactures, transfers, or
possesses any gambling device that he knows is designed for gambling purposes
or any equipment that he knows is designed as a subassembly or essential part
of a gambling device” or “if, with the intent to further gambling, the person
knowingly owns, manufactures, transfers commercially, or possesses gambling
paraphernalia.” Id. § 47.06(a), (c).
To obtain a conviction under any one of those Texas statutes, the
Government would have to prove either that a gambling device or a lottery was
involved. A “gambling device” is “any electronic, electromechanical, or
mechanical contrivance . . . that for a consideration affords the player an
opportunity to obtain anything of value, the award of which is determined solely
or partially by chance, even though accompanied by some skill, whether or not
the prize is automatically paid by the contrivance.” Id. § 47.01(4) (emphasis
added). A lottery requires: “(a) A prize or prizes[;] (b) the award or distribution
of the prize or prizes by chance; [and] (c) the payment either directly or
indirectly by the participants of a consideration for the right or privilege of
participating.” Brice v. State, 242 S.W.2d 433, 434 (Tex. Crim. App. 1951)
(internal quotation marks omitted) (emphasis added). Therefore, in order to
convict Davis or Clark the Government had to prove the existence of some
consideration exchanged for the privilege of playing the sweepstakes. The sole
issue in each of the defendants’ insufficiency challenges is whether such
consideration was proved.
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B. The Sweepstakes’ Mechanics
In addition to providing Internet access and word processing, faxing, and
copying services, each of the three Internet cafés involved in this case—the
Dolphin in Port Arthur, Texas; the Double Click in Henderson, Texas; and the
Nederland in Nederland, Texas—offered a sweepstakes promotion that allowed
customers to win cash prizes. The sweepstakes ran on computer software that,
at the outset, created a finite number of “entries.” Within that universe of
entries, the software designated particular entries as winning entries, and
assigned a cash value to each winning entry. The software then shuffled the
universe of entries so that the winning entries were randomly distributed.
There were three ways for sweepstakes participants to acquire entries.
First, by purchasing Internet time at one of the cafés; each dollar of Internet
time purchased came with 100 entries. Second, by requesting entries in person
at the café, up to 100 entries a day. Or third, by requesting entries by mail, also
up to 100 entries a day.2 After obtaining entries, participants could choose
among three ways to find out if their entries were winners; the method chosen
did not affect whether a particular entry was a winner or a loser because, as
noted earlier, whether it was a winner or a loser was predetermined by the
computer software. First, participants could ask the clerk who sold them
Internet time to instantly reveal whether any of their entries were winners and
if so, what their total winnings were. Second, participants could swipe at a
computer terminal the card issued by the cafés that electronically stored
Internet time and entries, and then choose “reveal” or “quick win” on the screen.
That option would, like the instant reveal, immediately tell the participant
whether or not the entries were winners, and if so, for how much.
2
Although it was undisputed that entries could be requested by mail, the posters
advertising free entries by mail did not include a mailing address.
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Third, participants could reveal whether their entries were winners by
playing a variety of casino-like games available on each computer terminal. For
example, one game available looked like a video slot machine. Clicking “reveal”
caused the reels to rotate and stop, revealing whether or not the played entries
were winners, and for how much. Each time “reveal” was clicked, twenty-five
entries were played. Winnings were displayed on the screen, and the participant
could cash out those winnings in two ways. The participant could go to a clerk
and receive cash, or the participant could use the winnings to purchase more
Internet time at a computer terminal. The purchase of Internet time, as before,
came with entries—100 for each dollar of Internet time. Playing the entries on
the computer terminals did not reduce the amount of Internet time available to
the participant. After playing the sweepstakes on the computer terminals,
participants received a receipt listing any winnings from their entries and “Net
Time.” Nick Farley, an expert called by the defendants’ co-defendant Cecil
Stephens, testified that he “believe[d]” the number following “Net Time” was the
amount of Internet time remaining. One receipt entered into evidence listed
“Net Time, 356,397”; another listed “Net Time, 356,400.” When asked if that
was the number of minutes of Internet time remaining on that customer’s
account, Farley responded “Probably, yes.”
C. Police Investigations
1. The Dolphin
Because of complaints that people had been gambling and losing large
sums of money at the Dolphin, Port Arthur Police Officers Shawn Perron and
Chris Billiot, while undercover, visited the Dolphin. The Dolphin’s windows
were tinted and a sign outside the building—which was part of a strip-
center—advertised the business as Dolphin Internet. Upon entering, Perron saw
several tables containing “five or six” computers each, a main counter, an area
with food, and another room containing about fifteen computers. He observed
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“several” people at the computers playing “what appeared to be eight-liner or
electronic slot machine games.” Nobody in the Dolphin was using the computers
to do anything but play the sweepstakes. Perron was asked for his
identification, signed “some sort of a ledger or a membership type ledger,” and
was given a card with a magnetic strip. He purchased $20 of Internet time and
won $37 playing the sweepstakes. He went back to the Dolphin later that day,
purchased $40 of Internet time, and won $117 playing the sweepstakes. A
month later he visited again, purchasing $40 of Internet time and winning $233.
He made a fourth visit about two months after his third, purchased $20 of
Internet time, and won $15 playing the sweepstakes.
Billiot testified3 that when he visited the Dolphin, he was issued a card
that he took to a machine that worked “like a reverse ATM machine” in which
he put money, swiped his card, and sat down to play the sweepstakes. He
stated that in his recollection, “when you go into the sweepstakes to a game, it
converts those minutes into a cash value to where you can play these different
type machines . . . like slot machines.” Unlike Perron, Billiot did not win
anything while playing the sweepstakes. Billiot testified that in his recollection,
once he had used up all of his entries, he could not go back to surf the Internet.
He admitted during cross-examination, however, that he did not ask a Dolphin
3
Davis and Clark argue that some of the testimony by uniformed police officers was
prejudicial because the officers made “conclusions of law” by referring to the computers in the
defendants’ cafés as “gambling devices.” The district court cautioned the jury three
times—once before the start of trial, once during a police officer’s testimony, and once during
its charge—that calling a device a gambling device is not itself evidence that the machine is
in fact a gambling device, and that “[t]he government must prove to your satisfaction that the
activity is gambling or that the equipment possessed is a gambling device by credible evidence
about and beyond the characterization of the activity or equipment by simply calling it a
particular name.” The repeated cautionary instructions by the district court rendered
harmless any improper opinion testimony offered by the police officers. See United States v.
Gutierrez-Farias, 294 F.3d 657, 663 (5th Cir. 2002).
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clerk for assistance, and it was possible that all of his Internet time was still
available.
2. The Nederland
Based on information that an illegal gambling business was being
conducted at the Nederland, Nederland Police Department Officer Casey
Maxwell visited the Nederland while undercover. Like the Dolphin, the
Nederland was located in a strip-mall. Upon entering, Maxwell was asked to
sign a piece of paper stating that he was not gambling, he was buying Internet
time and playing a sweepstakes. He was handed a “credit card looking card”
which was loaded with $5 free because it was his first visit, led to one of the
computer terminals, offered free food, and shown how to access the sweepstakes
games. There were about twelve other people sitting at computers, all playing
the sweepstakes. Maxwell bought $40 of Internet time, played the sweepstakes,
and did not win any money. After using all of his entries, he testified that he
“couldn’t do anything else on the computer,” but when asked if he had tried, he
said, “No.”
Maxwell visited the Nederland again about a week later. He noticed signs
saying “Win Cash Prizes” and “All of Your Favorite Games.” Maxwell purchased
$40 of Internet time from an ATM-like terminal and played the sweepstakes
without success. He purchased another $40 of Internet time and this time won
about $640. Maxwell stated that as he played the sweepstakes and won, the
entries displayed on the screen continuously went down, and the money he won
was displayed in a different box on the screen. He approached a clerk to cash
out and was told that because he won more than $500 he had to give the clerk
his driver’s license and social security numbers to file with the IRS. Maxwell
asked if he could continue to play his winnings, was told yes, played the
winnings down to $599, then cashed out and received $599 in cash.
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3. The Double Click
There was no testimony by police officers regarding their investigation into
the Double Click. Delores Ridens, the manager of the Double Click, testified as
a cooperating witness. She estimated that Double Click customers actually used
“a little less” than $100 worth of Internet time each week. That amount was
dwarfed by the $27,770 in Internet time sales during a representative week.
D. Charges and Trial
After these investigations by local police, a federal grand jury indicted the
defendants, along with five others,4 in a nine-count superseding indictment.
Davis and Clark were each charged with one count of conspiring to “conduct,
finance, manage, supervise and direct an illegal gambling business, said illegal
gambling business involving the operation of electronic gambling devices” in
violation of 18 U.S.C. §§ 371 and 1955. In addition to that conspiracy charge,
Davis was charged with three counts of illegal gambling in violation of 18 U.S.C.
§ 1955 and two counts of money laundering in violation of 18 U.S.C. § 1957.
Clark was charged with two counts of illegal gambling and two counts of money
laundering.
Throughout the trial, Davis and Clark each maintained that they were
entitled to present a mistake-of-law affirmative defense. After holding a
hearing, at which both defendants testified, the district court denied the
defendants’ request in a oral order read into the record.
At the end of the Government’s case, Davis and Clark each moved for a
judgment of acquittal. The district court denied those motions. Davis testified,
4
The others charged in the superseding indictment were: Cecil Stephens, a part owner
of the Double Click, who was tried with Davis and Clark but is not part of this appeal; Virginia
Slaughter, manager of the Dolphin, who testified as a cooperating witness; Amirali “Azim”
Sumar, a part owner of the Nederland, who testified as a cooperating witness; Mukhtiar
Khuwaja, Sumar’s brother-in-law and a clerk at the Nederland; and Delores Gail Ridens, the
Double Click’s manager, who testified as a cooperating witness.
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called a witness on his behalf, and elicited testimony from Nick Farley, the
expert called by his co-defendant Cecil Stephens, in an attempt to bolster
Farley’s credibility. Clark did not testify or call any witnesses, but he questioned
Davis, elicited favorable testimony from Farley, and referred to Farley’s
testimony during summation. Neither Davis nor Clark renewed his motion for
judgment of acquittal at the close of all the evidence.
The jury returned a verdict, finding each defendant guilty on multiple
counts. Davis was convicted of conspiracy to commit illegal gambling, two
counts of illegal gambling, and two counts of money laundering. Clark was
convicted of conspiracy to commit illegal gambling, two counts of illegal
gambling, and two counts of money laundering. Davis was sentenced to a year
and a day of imprisonment, which was below the applicable Guidelines range of
18–24 months. Clark was sentenced to two years of probation, which was also
below the applicable Guidelines range of 24–30 months. The defendants timely
appealed, invoking our jurisdiction under 28 U.S.C. § 1291.
II. DISCUSSION
As stated previously, Davis and Clark principally contend that there is
insufficient evidence to sustain their convictions for illegal gambling (and
conspiracy to commit illegal gambling) because their conduct did not violate
Texas state law. Further, the defendants argue that the district court erred in
refusing to allow them to put on a mistake-of-law defense.
A. Sufficiency of the Evidence5
1. Standard of Review
“We review properly preserved claims that a defendant was convicted on
insufficient evidence with substantial deference to the jury verdict, asking only
5
As an initial matter, the Government concedes that the evidence was insufficient to
support the defendants’ money laundering convictions, and agrees that those convictions must
be reversed. We therefore reverse these convictions.
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whether a rational jury could have found each essential element of the offense
beyond a reasonable doubt.” United States v. Delgado, 672 F.3d 320, 330 (5th
Cir. 2012) (en banc) (internal quotation marks omitted). However, where a
defendant moves for a judgment of acquittal at the end of the Government’s case
but, after presenting evidence, fails to renew that motion, the defendant has
forfeited his insufficiency challenge and our review is for a “manifest miscarriage
of justice.”6 United States v. Salazar, 542 F.3d 139, 142 (5th Cir. 2008). Because
Davis failed to renew his motion for a judgment of acquittal after he testified, we
review his insufficiency claim for a manifest miscarriage of justice.
A manifest miscarriage of justice exists “only if the record is devoid of
evidence pointing to guilt, or because the evidence on a key element of the
offense is so tenuous that a conviction would be shocking.” United States v.
McDowell, 498 F.3d 308, 312 (5th Cir. 2007) (internal quotation marks and
ellipses omitted). We consider the evidence “in the light most favorable to the
government, giving the government the benefit of all reasonable inferences and
credibility choices.” Id. (internal quotation marks omitted).
The proper standard of review for Clark’s claim is a closer question. Clark
did not testify or call any witnesses, but he questioned Davis and elicited
favorable testimony from Farley, which he referred to during closing arguments.
Had Clark not questioned Davis or elicited testimony from Farley, he would not
have needed to renew his motion for a judgment of acquittal at the end of all the
evidence merely because his co-defendant testified. United States v. Arias-Diaz,
497 F.2d 165, 168–69 (5th Cir. 1974). If we were to determine that Clark
functionally “presented evidence” by questioning Davis and Farley, he too would
6
We have recently explained that forfeited insufficiency claims are reviewed, like other
forfeited claims, by employing the usual four-prong plain error test. United States v. Delgado,
672 F.3d 320, 330–31 (5th Cir. 2012) (en banc). “[T]he ‘manifest miscarriage of justice’
formulation is itself a reasonable restatement of the four-prong test.” Id. at 332 n.9.
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have forfeited his insufficiency claim by failing to renew his motion for a
judgment of acquittal at the end of all the evidence. We need not reach this
question because we would affirm Clark’s convictions under either the manifest
miscarriage of justice standard or the more lenient standard we apply to
preserved insufficiency claims.
2. Analysis
As noted above, both Davis’s and Clark’s insufficiency challenges turn on
whether or not there was evidence that sweepstakes participants exchanged
some consideration for the privilege of playing the sweepstakes. The defendants
argue that consideration in this context means paying money in exchange for
playing. They maintain that the record does not contain any evidence that
sweepstakes participants did, or even could, pay to play the sweepstakes.
Participants either received a limited number of sweepstakes entries each day
without purchasing Internet time, or received entries free with the purchase of
Internet time—such Internet time, the Government concedes, was sold at fair
market value.7
The defendants are correct that consideration exists if sweepstakes
participants must pay money for the privilege of playing or if participants who
pay have better chances of winning than non-paying participants. In Cole v.
State, for example, the Texas Court of Criminal Appeals affirmed the conviction
of a theater owner who randomly picked a name from a pool of names that did
7
Davis argues that the district court erred by excluding his expert, Thomas Fricke, who
he claims would have testified that the Internet time sold at the cafés had real value and was
sold at the market rate. As the Government concedes, there was testimony at trial supporting
the fact that the cafés sold Internet time at competitive prices. The district court excluded
Fricke because “his testimony amounted to his opinion that the operation conducted by
Defendants resembled others in the national gaming industry” which was “irrelevant to the
inquiry of whether this operation complied with Texas law.” We cannot say that the district
court abused its discretion, MCI Commc’ns Servs., Inc. v. Hagan, 641 F.3d 112, 118 (5th Cir.
2011), in excluding Fricke’s largely irrelevant testimony, especially where the single fact Davis
argues Fricke would have told the jury was not contested by the Government.
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not require payment to enter, but the theater owner limited the amount of time
in which the winner could claim her prize to such an extent that, in all
practicality, the only people who could win were those paying customers in the
theater. 112 S.W.2d 725, 727–27, 730 (Tex. Crim. App. 1937). The court in Brice
v. State distinguished Cole in overturning the conviction of a store owner who
gave away prizes during the three-day opening of his store by randomly drawing
a registration card out of the thousands submitted in person each day by
participants who were not required to buy anything or pay money. 242 S.W.2d
433, 434 (Tex. Crim. App. 1951). The Brice court reasoned:
[I]n the absence of any character of favoritism shown to customers,
the [gambling statute] is not violated under a plan whereby a
merchant awards a prize or prizes by chance to a registrant without
requiring any registrant to be a customer or to purchase
merchandise or to do other than to register without charge at the
store, though the donor may receive a benefit from the drawing in
the way of advertising.
Id.A more recent case with facts similar to those in this case also informs the
scope of consideration. Jester’s store contained machines that, when a dollar
was inserted, dispensed a three minute pre-paid telephone card and displayed
100 credits. Jester v. State, 64 S.W.3d 553, 554–55 (Tex. App.—Texarkana 2001,
no pet.). The credits could be used to play a game on the machines through
which it was possible to win more credits, which in turn were redeemable for gift
certificates. Id. at 555. It was also possible to play for free (to a limit of 100
credits a day) by mailing a request form, receiving a certificate in the mail, and
showing the certificate to the clerk at the store. Id. Jester argued that the
scheme did not constitute a lottery, but was instead a legal sweepstakes because
consideration was lacking—the customers either put in a dollar and received a
phone card or played for free. Id. at 556–57.
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The court stated that “consideration regarding lotteries should be
measured by the same rule as in contracts,” id. at 557, and determined on the
facts presented that a reasonable jury could have found the presence of
consideration beyond a reasonable doubt, id. at 558. The court explained that
its decision turned on “whether the sweepstakes was intended to promote the
sale of telephone cards or whether the telephone cards were there as an attempt
to legitimize an illegal gambling device.” Id. Driving the court’s finding that the
telephone cards were an attempt to legitimize an illegal gambling device, and
that therefore the consideration requirement was satisfied, were the following
facts: the telephone cards cost “much” more per minute than the market cost of
telephone time; there was testimony that the telephone cards did not work; there
was evidence that players did not value the telephone cards, and that some
players did not know they even were telephone cards; there was testimony that
the employees were aware that the customers did not value the telephone cards;
there were no signs on the outside of the building advertising or indicating that
telephone cards were sold at the store; and no employee tried to sell customers
on the telephone cards. Id.The court concluded:
The evidence in this case was legally sufficient for the jury to infer
that the main purpose and function of the machines, and the
business, was to induce people to play the game, agreeing to gain or
lose something of value at least partially by chance, and not to
promote telephone cards; that it was Jester’s intent to structure the
business to entice players to exchange money for chances to play,
which they did; and that the telephone cards were not the primary
subject of the transaction, but mere subterfuge.
Although testimony was provided regarding the redemption of the
free games and the telephone card minutes, as well as the higher
market price for smaller denominated telephone cards and Jester’s
intention to promote the telephone cards, the jury’s determination
was not so contrary to the overwhelming weight of the evidence as
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to be clearly wrong and unjust, and therefore, the evidence was
factually sufficient as well.
Id. at 558–59. As the Jester court’s reasoning shows, the consideration element
in the Texas gambling statutes can be fulfilled without an explicit exchange of
money for the opportunity to participate in a sweepstakes. We therefore reject
the defendants’ argument that consideration is limited to the exchange of money
for the privilege of participating.8
Here, as in Jester, there is legally sufficient evidence from which a
reasonable fact-finder could infer that the sale of Internet time at the
defendants’ cafés was an attempt to legitimize an illegal lottery. Customers’
receipts indicating over 300,000 minutes of Internet time remaining were
evidence that the customers did not value the Internet time they had purchased.
Further evidence that customers did not value their Internet time was the
investigating police officers’ uniform testimony that during each of their visits
to a café, all of the people there were only engaged in playing the sweepstakes—
not accessing the Internet or using any of the other services provided. In
addition to the customers’ apparent disregard for the value of Internet time,
there was evidence which casts doubt upon the defendants’ claim that they
intended to be legitimate, full-service Internet, faxing, copying, and word-
processing vendors. For example, the manager of the Nederland testified that
Davis said that he was “not worried about” the roughly $400 every two months
in revenue from services other than Internet time and simply told the manager
8
We similarly reject Davis’s argument that the district court erred by giving an
instruction on “consideration” that was too broad. Davis asked for an instruction stating that:
“Consideration means the payment of money for a chance to win a prize.” Restricting
consideration only to money conflicts with Jester’s broader conception of consideration;
therefore, the district court did not abuse its discretion by rejecting Davis’s proffered
instruction. See United States v. Wright, 634 F.3d 770, 775 (5th Cir. 2011). We also reject
Davis’s argument that the district court erred in rejecting his proffered instruction on
“sweepstakes” because his proffered instruction did not apply to the facts of this case, where
the prizes were less than $50,000. See Tex. Bus. & Com. Code Ann. §§ 622.051(a), 622.052(a).
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to keep it. The defendants’ focus on income from the sale of Internet time to the
exclusion of income derived from other services offered by the cafés could
reasonably raise the inference that the defendants offered the other services
merely as an attempt to make it appear that their sale of Internet time was part
of a full-service business, instead of a mechanism for legitimizing unlawful
activity. Further evidence that the defendants’ true purpose for the cafés was
to create a place where people would be comfortable staying for a long time,
purchasing Internet time and playing the sweepstakes, was the casino-like
atmosphere at the cafés, complete with tinted windows and free food and drink.
Finally, it is reasonable to infer that Davis’s and Clark’s purpose for the cafés
was to legitimize illegal gambling from the fact that café customers were
required to sign a form stating that they were not gambling upon entering at
least one of the cafés; legitimate businesses ordinarily do not require such
formalities. Reviewing all facts and inferences in the light most favorable to the
jury’s verdict, we conclude similarly to the Jester court that the main purpose
and function of Davis’s and Clark’s Internet cafés was to induce people to play
the sweepstakes, and that the Internet time sold by the cafés—albeit at fair
market value—was not the primary subject of the transaction, but instead mere
subterfuge.9 We therefore determine a reasonable trier of fact could conclude
that consideration was established beyond a reasonable doubt, and affirm
9
Clark argues, as part of his insufficiency challenge, that the Government failed to
prove the mens rea required in each of his two illegal gambling convictions. In Long v. State,
236 S.W.3d 220, 225 (Tex. App.—Tyler 2007, pet. ref’d), the court held that to be guilty under
the Texas gambling laws, a defendant must “intentionally or knowingly operate or participate
in the earnings of a gambling place.” “Proof of a culpable mental state almost invariably
depends upon circumstantial evidence.” Id. There is sufficient circumstantial evidence that
Clark intentionally participated in the earnings of the cafés: he was the signatory on the
account at Bank of America for the Spring Creek Cattle Company, which held money from the
Dolphin and the Nederland, he signed payroll checks for the Double Click, and he signed the
lease for the Dolphin’s building.
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Davis’s and Clark’s convictions for illegal gambling and conspiring to commit
illegal gambling.
B. Mistake-of-Law Defense
The defendants maintained throughout the proceedings below that they
were entitled to raise a mistake-of-law affirmative defense. The district court
held a hearing on this issue and issued a thorough oral ruling preventing the
defendants from raising the defense. “Whether a defendant should have been
allowed to present an affirmative defense is a legal issue that we review de
novo.” United States v. Sariles, 645 F.3d 315, 317 (5th Cir. 2011).
In general, under both federal and Texas state law, ignorance of the law
is not a defense. See, e.g., Ratzlaf v. United States, 510 U.S. 135, 149 (1994);
Tex. Penal Code Ann. § 8.03(a) (“It is no defense to prosecution that the actor
was ignorant of the provisions of any law after the law has taken effect.”).
Under federal law, a mistake-of-law defense may be allowed only where the
crime charged is a specific intent crime. Cf. United States v. Whaley, 577 F.3d
254, 262 n.6 (5th Cir. 2009); see also United States v. Schultz, 333 F.3d 393,
410–11 (2d Cir. 2003).
As correctly noted by the district court in its oral ruling, 18 U.S.C. § 1955is not a specific intent crime, see United States v. Hawes, 529 F.2d 472, 481 (5th
Cir. 1976), nor do the underlying Texas gambling laws require specific intent, see
Legere v. State, 82 S.W.3d 105, 109 (Tex. App.—San Antonio 2002, pet. ref’d).
As for the conspiracy charge, “[t]he government must prove the same degree of
criminal intent as is necessary for proof of the underlying substantive offense.”
United States v. Dadi, 235 F.3d 945, 950 (5th Cir. 2000). Because neither 18
U.S.C. § 1955 nor the relevant Texas gambling laws require specific intent, the
conspiracy charged here also does not require specific intent. Consequently, a
federal mistake-of-law defense is unavailable to the defendants.
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Davis and Clark argue that in this sort of “hybrid” prosecution, where
federal law borrows state substantive law, defendants should be able to raise a
mistake-of-law defense that is rooted in state law. Texas allows an affirmative
defense where:
the actor reasonably believed the conduct charged did not constitute
a crime and that he acted in reasonable reliance upon:
(1) an official statement of the law contained in a written
order or grant of permission by an administrative agency
charged by law with responsibility for interpreting the law in
question; or
(2) a written interpretation of the law contained in an opinion
of a court of record or made by a public official charged by law
with responsibility for interpreting the law in question.
Tex. Penal Code Ann. § 8.03(b)(1)–(2). The Government argues that this defense
should not be available to the defendants, who were prosecuted for violating
federal law, not state law. Even assuming that the defendants were entitled to
present their Texas state-law mistake-of-law defense, we find that the district
court was correct to reject it.10
Davis claims to have reasonably relied upon a variety of “official
statements of the law” and “written interpretations of the law.” Clark claims to
have relied upon a single judicial opinion. First, Davis claims to have read “five
or six” Texas Attorney General (“AG”) opinions, and to have relied upon three.11
We agree with the district court that Davis’s reliance on those AG opinions was
not reasonable because, as noted by the district court, he ignored more recent
10
In a somewhat analogous case, we rejected defendants’ argument that they may raise
in a federal prosecution an affirmative defense rooted in state law. See Sariles, 645 F.3d 315,
318 n.2 (“[E]ntrapment by estoppel requires a defendant charged with a federal crime to show
the actual authority of a government official to render the advice about federal law.”); see also
United States v. Ormsby, 252 F.3d 844, 851 (6th Cir. 2001) (holding that a defendant in a
§ 1955 case cannot rely on official statements by state officials in pressing an “entrapment by
estoppel” defense because state officials have no authority to interpret federal law).
11
There is no record of which opinions he read and did not rely upon.
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and more factually analogous opinions that would support a conclusion that his
conduct was illegal. Next, Davis claims that he relied upon three cases: G2, Inc.
v. Midwest Gaming, Inc., 485 F. Supp. 2d 757 (W.D. Tex. 2007); Brice; and In re
$1,189.51 U.S. Currency, No. 2009-01-160A (107th Dist. Ct., Cameron County,
Tex. Apr 24, 2009). The Texas mistake-of-law defense “was not created to allow
a criminal defendant to rely upon old interpretive opinions, opinions that conflict
with others, or on overruled opinions.” Green v. State, 829 S.W.2d 222, 223 (Tex.
Crim. App. 1992) (en banc) (internal quotation marks omitted). Davis’s reliance
on G2 was not reasonable because its discussion of the gambling statutes
followed immediately after the court had determined that it lacked jurisdiction.
G2, 485 F. Supp. 2d at 766. Clark only claims to have relied upon G2; for the
same reason as for Davis, Clark’s reliance on G2 was not reasonable. Davis’s
reliance on Brice was not reasonable because the language in it that is most
helpful to Davis conflicts with language in Jester—a much more recent decision.
Finally, Davis’s reliance on In re $1,189.51 was not reasonable because the court
there did not actually rule on the scheme’s illegality, as the parties had
stipulated to its illegality for the purpose of civil forfeiture.
We further agree with the district court that Davis’s claimed reliance on
the texts of the Texas Sweepstakes Act, Tex. Bus. & Com. Code Ann. § 622.001et seq., and the Texas Gambling Act, Tex. Penal Code Ann. § 47.01 et seq., was
not reasonable because the texts of statutes are not “an official statement of the
law . . . by an administrative agency charged with responsibility for interpreting
the law” or “a written interpretation of the law” as required by § 8.03(b). Lastly,
we agree with the district court that Davis’s claimed reliance on a letter opinion
by the Texas Alcoholic Beverage Commission regarding a different sweepstakes
was not reasonable because it was not factually analogous to the facts here.
We therefore conclude that the district court did not err in preventing
Davis and Clark from putting on a mistake-of-law defense because they did not
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reasonably rely on any “official statements” or “written interpretations” as
required by § 8.03(b).
VI. CONCLUSION
For the foregoing reasons, we affirm Davis’s and Clark’s convictions for
illegal gambling and conspiracy to commit illegal gambling; reverse Davis’s and
Clark’s convictions for money laundering; and remand to the district court for
resentencing and a forfeiture redetermination.
AFFIRMED in part; REVERSED in part; and REMANDED.
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