United States v. Greenlaw ( 2023 )

Case: 22-10511 Document: 00516927871 Page: 1 Date Filed: 10/11/2023
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
October 11, 2023
No. 22-10511
Lyle W. Cayce
Clerk
United States of America,
Plaintiff—Appellee,
versus
Hollis Morrison Greenlaw; Benjamin Lee Wissink; Cara
Delin Obert; Jeffrey Brandon Jester,
Defendants—Appellants.
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 4:21-CR-289-1
Before Stewart, Dennis, and Southwick, Circuit Judges.
Carl E. Stewart, Circuit Judge:
Treating the petition for rehearing en banc as a petition for panel
rehearing (5th Cir. R. 35 I.O.P.), the petition is DENIED. Our prior
panel opinion, United States v. Greenlaw, 2023 WL 4856259 (5th Cir. 2023),
is WITHDRAWN, and the following opinion is SUBSTITUTED
therefor.
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In January 2022, a jury convicted United Development Funding
(“UDF”) executives Hollis Greenlaw, Benjamin Wissink, Cara Obert, and
Jeffrey Jester (collectively “Appellants”) of conspiracy to commit wire fraud
affecting a financial institution, conspiracy to commit securities fraud, and
eight counts of aiding and abetting securities fraud. 18 U.S.C. §§ 1343, 1348,
1349 & 2. Jurors heard evidence that Appellants were involved in what the
Government deemed “a classic Ponzi-like scheme,” in which Appellants
transferred money out of one fund to pay distributions to another fund’s
investors, without disclosing this information to their investors or the
Securities Exchange Commission (“SEC”). Appellants did not refute that
they conducted these transactions. They instead pointed to evidence that
their conduct did not constitute fraud because it amounted to routine
business transactions that benefited all involved without causing harm to
their investors. On appeal, they urge this court to view this evidence as proof
that they did not intend to deprive their investors of money or property as a
conviction under the fraud statutes requires.
Appellants each filed separate appeals, challenging their convictions
on several grounds. Considered together, they argue that (1) the jury verdict
should be vacated because the evidence at trial was insufficient to support
their convictions or alternatively, (2) they are entitled to a new trial because
the jury instructions were improper. As explained below, Appellants have
demonstrated at least one error in the jury instructions—the intent to
defraud instruction. Because this error was harmless, and thus, does not
warrant a new trial, we also address Appellants’ remaining challenges on the
merits.
Appellants also argue that the district court erred in (3) limiting cross-
examination regarding a non-testifying government informant; (4) allowing
the Government to constructively amend the indictment and include certain
improper statements in its closing argument; (5) imposing a time limit during
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trial; and (6) failing to apply the cumulative-error doctrine. Because these
arguments also do not warrant a new trial, we AFFIRM the jury verdict in
its entirety.
I. Background
UDF finances residential real estate developments, which entails
buying land, building the infrastructure, and selling lots or homes built on
those lots. Each phase of this development cycle increases the value of the
real estate and, in turn, the developer profits when the finished product is
sold for more than the costs of development. Real estate developers typically
need loans to finance these construction projects, and when they do, they can
call UDF. Greenlaw co-founded the company,1 which offers a group of
investment funds—UDF III, UDF IV, and UDF V—to support the
developments at each stage of the process.2 In return for its loan to
developers, the investment fund receives liens on the land, and developers
are required to pay back the loans with interest. The money from the interest
is then disbursed to the funds’ investors as distributions.
A. The Trial
1
During the indictment period, Greenlaw served as president, chief executive
officer, and chairman of the board for UDF III, UDF IV, and UDF V, and signed all of the
filings to the SEC; Wissink was the chief operating officer of UDF III and a voting member
of the investment committees for UDF III, UDF IV, and UDF V; Obert was the chief
financial officer that signed all the of SEC filings; and Jester was the director of asset
management.
2
UDF III is a publicly registered, nontraded limited partnership that financed the
acquisition of land and development into finished lots, raising approximately $350 million
from investors. UDF IV is a publicly registered, nontraded Real Estate Investment Trust
(“REIT”), and public offering, raising approximately $49.2 million from investors. UDF
V is a publicly traded REIT listed on NASDAQ, raising approximately $651 million from
investors.
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i. Evidence of Undisclosed Advances
Evidence presented at trial revealed that, between January 21, 2011
and December 29, 2015, the process in which Appellants paid UDF III
investors their distributions changed. Developers were not paying back the
loans quick enough, so UDF III was short on funds to pay its investors’ its
“general rate of return” of 9.75% per year. Even though this rate was not
promised, it was advertised in marketing materials to “broker/dealers and
financial advisors.” To remedy this, Appellants transferred money, by way
of an advance, from UDF IV and UDF V to UDF III to cover the
distributions, maintain a high distribution rate, and ensure that UDF III
continued to appear lucrative to the investing public. A Federal Bureau of
Investigation (“FBI”) forensic accountant testified that $66.8 million was
transferred to UDF III from UDF IV and UDF V during the relevant period.
Jurors heard evidence about how UDF was able to conduct these
transactions. UDF asset manager, Jeff Gilpatrick, testified that developers,
like Centurion and Buffington, that had loans from UDF entities would
generally submit a request when they needed an advance, and the approval
for the advance would come from Jester or Wissink. But emails revealed that,
as the date of each distribution drew near, Appellants diverted money from
UDF IV and UDF V to UDF III unbeknownst to the developers. As a means
to do this, Appellants relied on a clause in the loan agreement between UDF
IV and UDF V and its developers that gave Appellants authorization to make
advances without notice or input from the developer. Later, UDF relied on
this clause to control the advance requests which were funneled into UDF
III, even over the objection of the developers.
Obert, Greenlaw, and Jester testified in their own defense at the trial.
They contended that these advances amounted to a process which they
likened to refinancing a loan with common borrowers. Each time a fund
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loaned money to another fund it received a specified amount of collateral that
was worth more than the loan. Appellants further contended that the
advances were beneficial because they allowed UDF IV and UDF V to garner
collateralized loans that would generate interest and allowed UDF III to have
its loan repaid so it could make distributions to investors and pay its own
debts.
Ultimately, as UDF’s auditor explained at trial, these advances made
it appear as though UDF IV and UDF V had more notes receivable because
it was issuing new loans, and it also made it appear as though UDF III’s loans
were getting paid down successfully, when they were not. To further
exacerbate these allegations, UDF’s SEC filings stated that UDF V would
not engage in affiliate transactions3 and that the source of funds in UDF III
would be “cash . . . from operations.” The Government’s theory was that
the cash was not from operations, but from investors in UDF IV and UDF V
that Appellants used to pay distributions to investors and to repay loans from
banks. Moreover, according to the Government, affiliate transactions were
exactly what Appellants conducted when they transferred money from one
UDF fund to another, even though UDF V’s SEC filings stated that it
“would not participate in any investments with . . . any of [its] affiliates.”
ii. Evidence of Other Sources Funding the Scheme
Along with conducting undisclosed advances, jurors heard evidence
that Jester and Wissink manipulated developers’ cash-flow statements before
submitting them to auditors, which made the developers appear financially
capable of paying off their loans earlier than projected. Appellants also used
3
The term “affiliate” is defined by the SEC as one “that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under common
control with the issuer.” 17 C.F.R. § 230.144(a)(1).
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loan funds for unauthorized purposes and obtained loans from various banks
that relied on UDF’s SEC filings when deciding whether to issue loans.
Upon the conclusion of evidence, the district court delivered
instructions to the jury. After which, they deliberated for “a day and a half”
and found Appellants guilty of all charges. The trial lasted a total of seven
days.
B. Post Trial
At the presentencing stage, the United States Probation Office
collected various victim-impact statements and calculated that Appellants
caused an “intended loss” of over one million dollars. The Government
argued that this amount was properly calculated and sought restitution
reflecting that loss. However, the district court rejected this request and
determined that the Government failed to meet its burden to show that
restitution should be imposed on Appellants as part of their sentence.
Nevertheless, the district court still imposed an enhancement for intended
loss and for substantial hardship caused to 25 or more victims.
As a result, Greenlaw was sentenced to 84 months’ imprisonment,
Wissink and Obert were sentenced to 60 months’ imprisonment, and Jester
was sentenced to 36 months’ imprisonment. Appellants then filed motions
for acquittal and for a new trial in which they challenged, inter alia, the jury
instructions and several other issues they appeal herein. When those
arguments proved unsuccessful before the district court, they appealed.
II. Discussion
A. Sufficiency of the Evidence
“We review challenges to the sufficiency of the evidence de novo,
applying the same standard as applied by the district court: could a rational
jury find that all elements of the crime were proved beyond a reasonable
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doubt?” United States v. Chapman, 851 F.3d 363, 376 (5th Cir. 2017) (citation
omitted). That means, rather than “reweigh the evidence,” we must “search
the record for evidence to support the convictions beyond a reasonable
doubt.” United States v. Swenson, 25 F.4th 309, 316 (5th Cir. 2022)
(quotations omitted). In doing so, we “view[] all evidence in the light most
favorable to the government and draw[] all reasonable inferences in favor of
the jury’s verdict.” United States v. Harris, 821 F.3d 589, 598 (5th Cir. 2016)
(citing United States v. Eghobor, 812 F.3d 352, 361–62 (5th Cir. 2015)). “This
standard is ‘highly deferential to the verdict.’” Id. (quoting United States v.
Roetcisoender, 792 F.3d 547, 550 (5th Cir. 2015)).
Recall that Appellants were convicted of one count of conspiracy to
commit wire fraud affecting a financial institution, in violation of 18
U.S.C. § 1349 (18 U.S.C. § 1343); one count of conspiracy to commit
securities fraud, in violation of 18 U.S.C. § 1349 (18 U.S.C. § 1348); and eight
counts of securities fraud and aiding and abetting, in violation of 18
U.S.C. §§ 1348 & 2. Pertinent here, each conspiracy count requires that the
act be completed with a specific “intent to defraud.”4 As for the substantive
aiding and abetting securities fraud counts, the statutes both require, inter
alia, that the act be completed with a specific “intent to defraud” and
4
“Conspiracy actually has two intent elements—intent to further the unlawful
purpose and the level of intent required for proving the underlying substantive offense.”
United States v. Brooks, 681 F.3d 678, 699 (5th Cir. 2012). Because a “[v]iolation of the
wire-fraud statute requires the specific intent to defraud, i.e., a conscious knowing intent
to defraud[,] . . . proving conspiracy to commit wire fraud requires proof that [Appellants]
joined the conspiracy with the specific intent to defraud.” Id. at 700 (internal quotation
omitted). The same applies for the conspiracy to commit securities fraud count.
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prohibit the execution of a “scheme to defraud.” See 18 U.S.C. § 1348;5
United States v. Hussain, 972 F.3d 1138, 1145–46 (9th Cir. 2020).6
We have described a scheme to defraud, as including “any false or
fraudulent pretenses or representations intended to deceive others in order
to obtain something of value, such as money, from the [entity] to be
deceived.” United States v. Evans, 892 F.3d 692, 711–12 (5th Cir. 2018), as
revised (July 6, 2018) (alteration in original); United States v. Scully, 951 F.3d
656, 671 (5th Cir. 2020) (“To establish that [the defendant] engaged in a
scheme to defraud, the Government must prove that he ‘made some kind of
a false or fraudulent material misrepresentation.’” (quotation omitted)).
As for the “intent to defraud” element, the Government must prove
“an intent to (1) deceive, and (2) cause some harm to result from the deceit.”
Evans, 892 F.3d at 712 (quotation omitted). This element is generally
satisfied “when [a defendant] acts knowingly with the specific intent to
deceive for the purpose of causing pecuniary loss to another or bringing about
5
Securities fraud prohibits executing a “scheme or artifice . . . to defraud any
person in connection with any” U.S. registered security, 18 U.S.C. at § 1348(1), or “to
obtain, by means of false or fraudulent pretenses, representations, or promises, any money
or property in connection with the purchase or sale of any” U.S. registered security,
id. § 1348(2). The district court instructed the jury as to §§ 1348(1) and (2) and stated that
they must agree on which prong Appellants were guilty under. Neither party argues that
the applicable section is relevant to our analysis herein.
6
There is scant caselaw construing the securities fraud statute in this circuit.
Nevertheless, section 1348 borrows key concepts from the mail and wire fraud statutes, and
courts have given the terms similar treatment. See United States v. Coscia, 866 F.3d 782,
799 (7th Cir. 2017) (“Because section 1348 was modeled on the federal mail and wire fraud
statutes, the district court certainly was on solid ground in looking to the pattern jury
instruction for those offenses.”); United States v. Motz, 652 F. Supp. 2d 284, 296 (E.D.N.Y.
2009) (“The parties agree that because the text and legislative history of 18 U.S.C. § 1348clearly establish that it was modeled on the mail and wire fraud statutes, the [c]ourt’s
analysis should be guided by the caselaw construing those statutes.”).
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some financial gain to himself.” Id. (quotation omitted); Scully, 951 F.3d at
671.
Appellants argue that (1) the Government failed to prove that they
made material misrepresentations and (2) those misrepresentations were
made with the intent to deprive investors of money or property. Separately,
Jester argues (3) that the evidence failed to show that he had the requisite
knowledge necessary to support his convictions. We address each argument
in turn.
i. Material Misrepresentation
“The essence of fraud is that its perpetrator has persuaded his victim
to believe, beyond the dictates of reason or prudence, what is not so.” United
States v. Perez-Ceballos, 907 F.3d 863, 868 (5th Cir. 2018) (quoting United
States v. Church, 888 F.2d 20, 24 (5th Cir. 1989)). As stated, this principle
manifests under the “scheme to defraud” prong which requires that the
defendant have “made some kind of a false or fraudulent material
misrepresentation.” Scully, 951 F.3d at 671 (quotation omitted). A
misrepresentation is material if “it ‘has a natural tendency to influence, or is
capable of influencing, the decision of the decision-making body to which it
was addressed.’” United States v. Lucas, 516 F.3d 316, 339 (5th Cir. 2008)
(quoting United States v. Harms, 442 F.3d 367, 372 (5th Cir. 2006)).
The Government’s principal allegation at trial was that Appellants
used investor money from UDF IV and UDF V to pay distributions to UDF
III investors and to repay loans from banks, and then lied about it to the
investing public and the SEC. This allegation was based on two central
alleged misrepresentations. First, the Government argued that Appellants
represented on UDF III’s quarterly and annual filings that the source of
distributions to UDF III investors and lenders would be “cash . . . from
operations”—i.e., the “interest the developers were paying back on [their
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UDF III loans].” But the Government asserted that the source of the funds
was really “cash from investors in UDF IV and UDF V.” Second, the
Government argued that Appellants represented in their UDF V filings and
advertised in marketing presentations to brokers, dealers, and financial
advisors that UDF V would not engage in affiliate transactions. However, the
Government argued that the money movements from UDF V to UDF III to
pay distributions and a bank loan constituted affiliate transactions because
UDF controlled both sides of the transaction.
Throughout the trial and again on appeal, Appellants contend that the
money movement was loans to common borrowers, rather than affiliate
transactions. According to them, as projects in UDF III’s portfolio reached
later stages of development, UDF IV and UDF V provided subsequent
financing to developers for specific projects to fund new phases of
development. In such instances, the developer would become a common
borrower because they would, for example, take out a loan from UDF III and
later in the development process take out a loan from UDF IV and UDF V.
Appellants argue that when it moved money from UDF IV and UDF V to
UDF III, it was actually paying down the developer’s existing loan with UDF
III. And in return, the lender, UDF IV or UDF V, obtained an enforceable
security interest in collateral released through repayment to UDF III.
As such, Appellants argue that the statements in UDF III’s SEC
filings were not “false or fraudulent” because the money transferred to UDF
III was the repayment of an existing UDF III borrower’s debt, and thus cash
from operations. Moreover, they emphasize that the transactions were not
between affiliates because they were between UDF and a common borrower,
as the transferred funds were advanced to the same UDF III borrower
pursuant to a collateralized loan from UDF IV and UDF V. They maintain
that, although UDF V represented that it would not engage in certain
transactions with “affiliates,” that term was ambiguous, not objectively false.
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Further, they assert that UDF’s filings disclosed that it might “invest in
multiple mortgage loans that share a common borrower.” Appellants
therefore urge that there was insufficient evidence to support the jury’s
finding that they made false or fraudulent material misrepresentations
beyond a reasonable doubt. We disagree.
a. UDF III’s SEC Filings
There is overwhelming evidence showing that the cash used to pay
UDF III’s investors was not cash from operations as purported in its annual
and quarterly SEC filings. One of the Government’s key witnesses, Scott
Martinez, a forensic accountant at the FBI, exhibited a cash-tracing
mechanism and generated a report showing that the source of the money—
over $66 million of the UDF III distributions—was solely cash from investors
in UDF IV and UDF V. Although Appellants’ witness, Dale Kitchens, a
certified specialist in financial forensics, testified that the transactions were a
legitimate business practice intended to pay common borrower’s loans, the
jury was free to weigh the contrary evidence before it and our role is not to
reweigh that evidence. See Swenson, 25 F.4th at 316.
The record shows that Martinez’s cash-tracing testimony was heavily
supported by emails from several UDF employees explaining that the
purpose of the money movement was to afford UDF III’s distributions. For
example, an email of a UDF employee showed that the advances were
completed “to pay investor distributions so we can ensure it goes out today”
and another stated that the “bottom line of the transaction was to get cash
into UDF III in order to fund distributions.” From this evidence, a
reasonable juror could conclude that the money was not transferred to pay a
common developer’s loan as Appellants urge.
Furthermore, Appellants fail to refute extensive evidence showing
that they paid past due payments on a loan from Legacy Texas Bank using
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investor money from UDF V and not interest from UDF III’s operations as
represented in the SEC filings. Testimony revealed that, after Greenlaw and
Wissink spoke with employees from the bank about the past due payment,
Wissink and Jester worked together to approve two draw requests from UDF
V to UDF III’s Legacy Texas bank account to pay the past due amount. This
evidence exemplifies that their representations were not only false, but also
material. See Lucas, 516 F.3d at 339–41. The undisclosed advances allowed
Appellants to mask UDF III’s true financial health from the investing public,
as the investors in UDF IV and UDF V, along with the re-investors in UDF
III, believed that they were buying into a more successful fund. In fact,
auditors testified that they were alarmed by this practice and it would have
been salient information for their reports.
b. UDF V’s SEC Filings
As to Appellants’ filings for UDF V, the statement—that it would not
participate in affiliate transactions—is likewise materially false. The term
“affiliate” is defined by the SEC as one “that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with the issuer.” 17 C.F.R. § 230.144(a)(1). The term “control” is
defined as “the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a person, whether through
ownership of voting securities, by contract or otherwise.” 17
C.F.R. § 230.405. The jury was instructed on these definitions, and
testimony further guided them in their interpretation and application of these
terms at trial.
The Government’s witness, Michael Wilson, UDF’s marketing
director, explained that “an affiliate transaction is when one UDF fund
would engage in a transaction directly with another UDF fund. So[,] a loan
to another UDF fund or a profit participation in a loan to another UDF fund
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or a credit enhancement to another UDF fund.” Thomas Carocci, an
attorney for the Financial Industry Regulatory Authority, described UDF III,
IV, and V as affiliates and testified that transactions between them must be
disclosed in SEC filings. Moreover, William Kahane, one UDF V’s own
board members, testified that “[h]e would have considered money going
from UDF V to UDF III to pay investors to be an affiliated transaction, and
he would not have approved.” A reasonable juror could deduce from these
explanations that UDF V’s transfer of money to UDF III to pay distributions
was a “loan to another UDF fund,” and thus an affiliate transaction.7
Appellants’ argument—that the Government failed to prove an
objectively false statement—is debunked by the evidence. They rely on
United States v. Harra, a case in which the Third Circuit reversed a false
statement conviction under 18 U.S.C. § 1001. 985 F.3d 196, 225 (3d Cir.
2021). It ultimately held that “in the face of ambiguous reporting
requirements, . . . fair warning demands that the Government prove a
defendant’s statement false under each objectively reasonable interpretation
of the relevant requirements.” Id. at 211, 213. We see no reason to apply this
false statement rule here. The term “affiliate” is not undisputedly
ambiguous. Unlike the term analyzed in Harra, which had “no statutory or
regulatory definitions illuminating the definition,” the term “affiliate” is
expressly defined within the statutory and regulatory definitions. Id. at 206.
Indeed, the defining factor in determining whether these transactions
constituted affiliate transactions was control, and evidence revealed that
UDF fully controlled the transaction on each end. Instead of developers
prompting an advance when they needed money to fund a short-term special
7
Jurors also heard testimony that affiliate transactions were akin to “related-
party” transactions and the terms were used interchangeably in the industry.
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project, Appellants initiated the advances, determined the amount of these
advances, and determined which developer would fund the transfer without
any involvement from the developer. An email from an alarmed auditor
explained the process:
UDF III needed money to pay distributions, UDF IV
sent them $1.2M. On UDF IV it was recorded as a
debit to [the developer’s] notes receivable and credit
to cash. On UDF III they recorded as a debit to cash
and credit to one of [the developer’s notes]. They
don’t get any kind of approval from [the developer]
before they do stuff like this.
There is even evidence of instances where Appellants initiated an advance on
the part of a developer who expressly requested that UDF stop the practice.
Such evidence strongly supports a determination that UDF V’s statements
were false.
In the same vein, the evidence demonstrates that UDF V’s
misrepresentations were material. See Lucas, 516 F.3d at 339. Multiple
witnesses testified that the industry had shifted away from affiliate
transactions because they were disfavored and that a no-affiliate-transaction
policy in UDF V would enable it to participate in a larger network of broker,
dealers, and investors. Appellants, specifically Greenlaw and Obert,
participated in meetings with brokers, dealers, and financial advisors who
represented UDF’s products to their retail investors. To garner business,
they advertised that UDF V would not conduct affiliate transactions.
Considering this evidence and drawing all reasonable inferences in the
light most favorable to the verdict, a reasonable juror could have determined
that Appellants made material misrepresentations in UDF III and UDF V’s
filings that were sufficient to uphold their convictions. See Scully, 951 F.3d at
671.
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ii. Intent to Deprive of Money or Property
Appellants’ second argument is that there was insufficient evidence
to prove beyond a reasonable doubt that they intended to deprive the
investors of money or property.8 Specifically, Appellants state that the
“scheme to defraud” and “intent to defraud” elements require that a juror
find not only that they intended to deceive, but also that they intended to
deprive victims of money or property. According to Appellants, the
Government introduced no evidence showing that any of the investors were
harmed or that they intended to harm investors. Appellants emphasize that
the “uncontradicted evidence establishe[d] that all three funds received
significant value from the transactions at issue.” Specifically, Appellants
assert that the advances benefited all involved, including the investors.
The Government does not refute that it was required to prove that
Appellants intended to deprive investors of money or property to satisfy
these elements. It points to evidence that Appellants participated in a scheme
to defraud investors of their money, emphasizing that when UDF III lacked
sufficient money in its bank account to pay distributions to its investors, a
mad scramble ensued moving money between funds. The Government
further argues that Appellants’ concealment of these transactions from the
8
Greenlaw, Obert, and Jester make similar legal arguments regarding the
Government’s failure to present sufficient evidence of a scheme to defraud and intent to
defraud. Rather than advancing his own arguments on this issue, Wissink adopts the
arguments of his co-appellants. Citing United States v. Umawa Oke Imo, the Government
contends that we should refrain from considering these claims as to Wissink. See 739 F.3d
226, 230 n.1 (5th Cir. 2014) (citing United States v. Stephens, 571 F.3d 401, 404 n.2 (5th Cir.
2009) (“[S]ufficiency of the evidence challenges are fact-specific, so we will not allow the
appellants to adopt those arguments.”)). Nevertheless, given our holding herein, that there
was sufficient evidence to sustain each co-appellant’s convictions, we need not address
whether Wissink’s adoption of their sufficiency challenges was permissible under our
precedent.
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investing public, its current investors, and auditors, demonstrates their intent
to defraud. The Government points to evidence showing that because
distributions were not tied to the funds’ actual performance, Appellants
caused investors to believe that they were putting their money into a
successful business when they were not.
As an initial matter, Appellants are correct that the “scheme to
defraud” and “intent to defraud” elements must be based on property
interests. Although neither the wire nor securities fraud statutes provide a
definition of what constitutes fraud, we are aided by an extensive line of cases
construing these provisions from the Supreme Court and this court. These
cases draw a fine line differentiating conduct that is merely deceitful, from
conduct that “wrong[s] one in his property rights.” Cleveland v. United
States, 531 U.S. 12, 19 (2000) (citation omitted) (explaining that the fraud
statutes “protect[] property rights only”). Only the latter falls within the
“common understanding” of defraud. Id. (citation omitted). This is not a
new principle, though recent Supreme Court cases have brought it to the
forefront.
In Kelly v. United States, the Court relied on its 1987 decision in
McNally for the proposition that fraud statutes are “‘limited in scope to the
protection of property rights.’” 140 S. Ct. 1565, 1571 (2020) (quoting
McNally v. United States, 483 U.S. 350, 360 (1987)). In doing so, the Court
reversed the wire fraud convictions of defendants that “used deception to
reduce the city’s access lanes to the George Washington Bridge” for political
gain. Id. at 1574. It explained that the Government had to prove “not only
that [the defendants] engaged in deception, but that an object of their fraud
was property.” Id. at 1571 (cleaned up). Because commandeering the bridge
did not deprive victims of their “property,” the defendant’s actions were not
a crime under the fraud statutes. Id. at 1572.
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No. 22-10511
Likewise, in Shaw v. United States, the Supreme Court remanded a
case involving the bank fraud statute for the Ninth Circuit to determine
whether the jury instructions were erroneous. See 580 U.S. 63, 72 (2016).
The instructions defined a “scheme to defraud” as “any deliberate plan of
action or course of conduct by which someone intends to deceive, cheat, or
deprive a financial institution of something of value.” Id. Although the Court
did not decide the question, it stated that it agreed with the parties that “the
scheme must be one to deceive the bank and deprive it of something of
value.” Id. (emphasis in original).
Our caselaw has also consistently modeled this principle. See United
States v. Hoeffner, 626 F.3d 857, 863 (5th Cir. 2010) (per curiam) (explaining
that the mail and wire fraud statutes’ proscriptions reach schemes to deprive
another person of “money or property by means of false or fraudulent
pretenses, representations or promises” (quoting 18 U.S.C. §§ 1341, 1343));
United States v. Ratcliff, 488 F.3d 639, 645 (5th Cir. 2007) (affirming the
district court’s order dismissing an indictment where it alleged only deceitful
conduct and failed to allege a scheme that wronged the victim’s property
rights); United States v. McMillan, 600 F.3d 434, 449 (5th Cir. 2010) (“The
issue is whether the victims’ property rights were affected by the
misrepresentations.”).9 As applied to this case, the Government was
required to prove that the scheme was one in which Appellants intended to
deprive the investors of money or property through misrepresentations,
thereby wronging the investors’ property rights. See Ratcliff, 488 F.3d at 645.
We hold that it met its burden.
9
See also United States v. Godwin, 566 F.2d 975, 976 (5th Cir. 1978) (explaining in
the context of a false statements conviction under 18 U.S.C. § 1001 that deception and
defrauding “are not synonymous” because to “[d]eceive is to cause to believe the false or
to mislead [whereas] [d]efraud is to deprive of some right, interest or property by deceit”).
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No. 22-10511
Evidence strongly supports a finding that Appellants intended to
conduct a scheme to deprive investors of their money. There is proof that
they purposefully advertised a desired rate of return to brokers and continued
to solicit investors to invest their money into UDF III despite knowing that
UDF III did not have enough money to sustain its current investors.
Evidence also shows that they purposefully did not invest UDF IV and UDF
V investors’ money into the business or otherwise use the money to further
fund developer’s projects. Their intention is further displayed through
several emails evincing that they were aware that they needed to use new
investor money to fund their distributions or risk deterring current investors
from selling stock and new investors from buying stock. A rational trier of
fact could readily infer from this evidence that new investor money was the
object of Appellants’ operation because it was only after the money was
transferred that they were able to pay distributions to UDF III investors. See
Chapman, 851 F.3d at 376.
Along with evidence of the undisclosed advances, there is evidence
that Appellants used bank loans for unapproved purposes and masked the
developers’ financial health by manipulating the developers’ cash-flow
statements prior to submitting it to their auditors. By concealing information,
investors were lured into investing in a business that could not pay its
distributions in 53 out of the 60 months relevant here. We also agree with the
Government that Appellants’ concealment of these actions provide support
for an inference of intent. Scully, 951 F.3d at 671; see United States v. Dobbs,
63 F.3d 391, 396 (5th Cir. 1995) (explaining that evidence of a defendant’s
attempt to conceal his actions can support an inference of intent to defraud).
Jurors also saw that this operation was dependent on each co-
appellant. For example, they saw an email from Wissink instructing a UDF
employee to “advance $1.75 million” from UDF IV to UDF III, adding:
“This will cover the distribution for Monday.” One UDF employee testified
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No. 22-10511
that Wissink regularly told him to carry out such advance requests. As
another UDF employee explained: “The bottom line of the transaction was
to get cash into UDF III in order to fund distributions.” Along with Wissink,
Jester also directed most of these advances, with Obert included on many of
the emails. Moreover, during cross-examination, Obert admitted that she
knew UDF personnel initiated the advance requests and that she was aware
of this practice of using advance requests to transfer money between UDF
entities.
In fact, Obert and Greenlaw signed all of the SEC filings which
concealed the true source of UDF III’s funds and misrepresented the funds’
performance. Based on this avalanche of evidence, a rational trier of fact
could infer that Appellants participated in a scheme to obtain something of
value—namely, money. See United States v. Jonas, 824 F. App’x 224, 232
(5th Cir. 2020) (per curiam) (unpublished) (holding that a reasonable jury
could infer that the defendant engaged in a scheme to defraud where he used
misrepresentations “to obtain money from the investors”).
Appellants’ arguments fail to overcome the sufficient evidence at
hand. First, their characterization of these acts as normal business
transactions that benefited the investors is unpersuasive. They emphasize
that Martinez admitted that he did not assess the economic rationale for the
transactions or the value of the collateral that secured the loans from UDF
IV and UDF V. But even if we assumed that evidence of an economic benefit
to UDF funds would somehow refute that investors were deprived of their
money, a jury was entitled to reject that evidence and instead credit the
contrary testimony of the Government’s witnesses. See Scully, 951 F.3d at
671 (citing United States v. Spalding, 894 F.3d 173, 181 (5th Cir. 2018)).
Second, the fraud convictions are not undermined by the fact that the
Government did not present evidence showing that investors incurred
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No. 22-10511
monetary loss. This is because success of the scheme is immaterial. Take
Shaw for example. There, the Supreme Court rejected a bank-fraud
defendant’s argument that “he did not intend to cause the bank financial
harm.” 580 U.S. at 67. In that case, it was known that “due to standard
business practices in place at the time of the fraud, no bank involved in the
scheme ultimately suffered any monetary loss.” Id. The Court reasoned that
it is “sufficient that the victim . . . be deprived of its right to use of the
property, even if it ultimately did not suffer unreimbursed loss.” Id. at 67–68
(citing Carpenter v. United States, 484 U.S. 19, 26–27 (1987)); see id. at 68(“[W]here cash is taken from a bank but the bank is fully insured, the theft is
complete when the cash is taken; the fact that the bank has a contract with an
insurance company enabling it to shift the loss to that company is
immaterial.” (cleaned up)).
It follows that Appellants’ argument is unconvincing.10 It does not
matter that UDF IV and UDF V had collateral on the loans that it transferred
to UDF III. Nor does it matter that they did not intend to cause investors
financial loss. See Shaw, 580 U.S. at 67 (“[T]he [fraud] statute, while
insisting upon ‘a scheme to defraud,’ demands neither a showing of ultimate
financial loss nor a showing of intent to cause financial loss.”). Appellants
exposed investors to risks and losses that, if publicly disclosed, would have
decreased its value and investment power. That is enough to support a fraud
conviction. See United States v. McCauley, 253 F.3d 815, 820 (5th Cir. 2001);
10
For similar reasons, we need not address Appellants’ argument that they lacked
an intent to deprive investors of money or property because investors were given exactly
what they bargained for. See United States v. Takhalov, 827 F.3d 1307, 1314 (11th Cir.), as
rev’d (Oct. 3, 2016), opinion modified on denial of reh’g, 838 F.3d 1168 (11th Cir. 2016).
Investors were exposed to a risk of loss because they thought they were buying into a
business that was performing well but UDF III was not profitable enough to afford its
distributions.
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No. 22-10511
United States v. Saks, 964 F.2d 1514, 1519 (5th Cir. 1992) (holding that a
fraudulent loan transaction exposed financial institutions and lenders to risk
of loss even though the loan was “secured, and [defendants] assumed a legal
obligation to repay it.”).
Lastly, Appellants argue that the Government failed to show that they
affected investors’ property rights because it improperly argued that they
deprived UDF investors of accurate information about UDF III’s financial
health. The Government does not refute that it relied on this theory; it
instead argues that the accurate information theory was subsidiary to its trial
theory, i.e., that “Appellants defrauded the investing public and their own
shareholders with the intent to obtain tangible property—money—from
investors in the later funds to pay distributions on the earlier funds.”
In making this argument, Appellants highlight the Ninth Circuit’s
decision in United States v. Yates which held that “[t]here is no cognizable
property interest in the ethereal right to accurate information.” 16 F.4th 256,
265 (9th Cir. 2021) (citation and quotation omitted). The Ninth Circuit
explained that if it were to “recogniz[e] accurate information as property,”
that “would transform all deception into fraud.” Id. This is because “[b]y
definition, deception entails depriving the victim of accurate information
about the subject of the deception.” Id. We agree with this interpretation of
the accurate information theory. As a matter of logic, to deprive someone of
accurate information is to deprive them of the truth, i.e., to deceive. See
United States v. Sadler, 750 F.3d 585, 591 (6th Cir. 2014) (explaining that it
cannot “plausibly be said that the right to accurate information amounts to
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No. 22-10511
an interest that ‘has long been recognized as property.’” (quoting Cleveland,
531 U.S. at 23)).11
Nonetheless, the foremost scheme alleged here was for the
Appellants to obtain money from investors, and the Government’s mountain
of evidence supporting this theory is sufficient, regardless of the invalidity of
its subsidiary theory. See United States v. Stalnaker, 571 F.3d 428, 437–38 (5th
Cir. 2009) (upholding verdict upon finding that it did not rest on an
insufficient legal theory). Accordingly, we are convinced that the evidence is
sufficient beyond a reasonable doubt from which a rational jury could infer
that Appellants participated in a scheme to defraud and acted with an intent
to defraud investors of their money. See Chapman, 851 F.3d at 376.
iii. Jester’s Knowledge
Jester separately asserts that he did not have the requisite knowledge
to support his convictions for conspiracy to commit wire fraud, conspiracy to
commit securities fraud, and aiding and abetting securities fraud. Along with
a specific intent to defraud, to prove a conspiracy the Government must
11
When the Supreme Court issued its decision in Ciminelli v. United States,
Appellants filed a Federal Rule of Appellate Procedure 28(j) letter asserting that the case
supported their “scheme to defraud” and “intent to defraud” arguments. 143 S. Ct. 1121
(2023). In Ciminelli, the Court held that “[t]he right to valuable economic information
needed to make discretionary economic decisions is not a traditional property interest”
and, thus, a victim’s right to control their assets was not a legally valid theory of fraud. Id.
at 1128. In response, the Government argued that Ciminelli does not impact this case
because, unlike the prosecution there, the Government here did not rely on the right-to-
control theory at trial. Likewise, Appellants do not identify any evidence that the theory
was ever advanced or proven at trial. In fact, Appellants describe the right-to-control theory
as a theory of fraud that was “more demanding than anything proven or instructed” in this
case. Because we cannot alter a jury verdict based on a legal theory that was never tried
before the jury, we reject Appellants’ contention that Ciminelli applies in this case. See
McCormick v. United States, 500 U.S. 257, 270 n.8 (1991) (stating that an appellate court
may not “retr[y] a case on appeal under different instructions and on a different theory
than was ever presented to the jury”).
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No. 22-10511
prove that “(1) two or more persons made an agreement to commit an
unlawful act; (2) the defendant knew the unlawful purpose of the agreement;
and (3) the defendant joined in the agreement willfully, with the intent to
further the unlawful purpose.” United States v. Simpson, 741 F.3d 539, 547
(5th Cir. 2014) (citing United States v. Grant, 683 F.3d 639, 643 (5th Cir.
2012)); see also Brooks, 681 F.3d at 699.
Jester’s principal contention is that the Government’s case is built on
two central misrepresentations in UDF V and UDF III’s SEC filings, but,
because of his position as the director of asset management, he did not have
any knowledge of the SEC filings or of its contents. We are unpersuaded and
will not reverse a conviction for “lack of evidence that [he] knew each detail
of the conspiracy.” United States v. Vergara, 687 F.2d 57, 61 (5th Cir. 1982)
(citing United States v. Rosado-Fernandez, 614 F.2d 50 (5th Cir. 1980)).
Rather, “knowledge may be inferred from surrounding circumstances.”
Simpson, 741 F.3d at 547; United States v. Sanders, 952 F.3d 263, 273 (5th Cir.
2020) (“[A] jury can infer from the surrounding circumstances whether a
defendant participated in and knew of the conspiracy.”).
Reviewing what is now familiar, the evidence at trial established that
Jester’s role was prevalent in several parts of the overall scheme in at least
three central ways. Jester directed many of the undisclosed advance
transactions at issue; he manipulated developer’s cash flow projection
spreadsheets by inflating their amount of development projects to make it
appear as though developers were paying off their loans quicker; and he
directed that money from loans be used to pay UDF III investor’s
distributions. Put simply, Jester’s actions were the lifeline to the
misrepresentations at issue here. See United States v. Thompson, 761 F. App’x
283, 291 (5th Cir. 2019) (per curiam) (unpublished) (determining that
“repeated exposure to the fraud” was probative of the defendant’s
knowledge). Moreover, during his testimony he revealed that he knew that
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No. 22-10511
the spreadsheet with the inflated projected cash-flow spreadsheets were
“going to an independent auditor that was going to rely upon it for its audit
of the financial statements.”
His knowledge about the unlawfulness of the scheme also emanates
from his leadership in the fraudulent actions and his propensity to commit
deceitful acts that were outside of UDF’s general practice, such as directing
the undisclosed advances when UDF III had insufficient funds and
misapplying investor money when UDF was behind on loan payments. See
United States v. Willett, 751 F.3d 335, 340–41 (5th Cir. 2014) (determining
that a “position of authority” was probative of knowledge). He also played a
role in concealing UDF III’s true financial condition. For example, in August
2013, Jester suggested that distributions could be funded from a UDF loan
and told a UDF asset manager to “remember to fix this once we finalize some
of the new deals.” See United States v. Martinez, 921 F.3d 452, 470 (5th Cir.
2019) (“[E]fforts to assist in the concealment of a conspiracy may help
support an inference that an alleged conspirator had joined the conspiracy
while it was still in operation.”) (citation omitted)).
Despite the prevalence of Jester’s actions throughout this case, he
analogizes the evidence here to that which was insufficient to show that the
defendant acted “knowingly and willfully” in United States v. Nora, 988 F.3d
823 (5th Cir. 2021). Jester asserts that, like the defendant in Nora, although
he was entangled in the fraudulent transactions, he did not know about the
specific misrepresentations in the filings as he merely “performed his job
duties without visibility into that separate part of UDF’s business.” In Nora,
we held that generalized evidence that a staff member received training on
compliance which would have alerted him to the unlawful nature of his work
was insufficient to support his health care fraud and kickback scheme
convictions. 988 F.3d at 831–34. The evidence here is a far cry from the slim
evidence in Nora. Here, there is evidence that Jester was present in meetings
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No. 22-10511
with developers, bank personnel and co-appellants, and had a key role in
developing the documentation that the auditors relied upon for their reports
to the SEC. Thus, the evidence was sufficient to support the knowledge
element of Jester’s conspiracy to commit wire and securities fraud
convictions. See United States v. Scott, 892 F.3d 791, 797–98 (5th Cir. 2018).
The analysis is similar for Jester’s aiding and abetting securities fraud
counts. Id. at 799 (“Typically, the same evidence will support both a
conspiracy and an aiding and abetting conviction.”). Aiding and abetting “is
not a separate offense, but it is an alternative charge in every indictment,
whether explicit or implicit.” United States v. Neal, 951 F.2d 630, 633 (5th
Cir. 1992). It is therefore “not necessary that [Jester] commit the overt acts
that . . . accomplish the offense or that he have knowledge of the particular
means his principals . . . employ to carry out the criminal activity.” United
States v. Austin, 585 F.2d 1271, 1277 (5th Cir. 1978). There likewise does not
need to “be proof ‘that the defendant was present when the crime was
committed or that he actively participated therein.’” Sanders, 952 F.3d at 277
(quoting United States v. James, 528 F.2d 999, 1015 (5th Cir. 1976)). “[T]he
government need only establish that [he] ‘assisted the actual perpetrator of
the [fraud] while sharing the requisite criminal intent.’” Stalnaker, 571 F.3d
at 437 (quoting United States v. Rivera, 295 F.3d 461, 466 (5th Cir. 2002)).
Considering the “extremely deferential review of jury verdicts,” the
Government has met this standard as to the aiding and abetting securities
fraud counts as well. Nora, 988 F.3d at 834; see Stalnaker, 571 F.3d at 437.
B. Jury Instructions
Appellants advance two issues pertaining to the jury instructions.
They argue that the district court (1) misstated elements of the law and (2)
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No. 22-10511
abused its discretion in denying a proposed instruction. We address each
argument in turn.
i. Misstatement of Law
First, Appellants argue that even if this court determines that there
was sufficient evidence to support the “scheme to defraud” and “intent to
defraud” elements, they deserve a new trial because the district court’s
instructions defining those elements were incorrect. They insist that the
instructions did not require the jury to determine that they intended to
deprive investors of money or property.
This issue is one of statutory construction, which we review de novo.
United States v. Gas Pipe, Inc., 997 F.3d 231, 236 (5th Cir. 2021). “Generally,
failure to instruct the jury on every essential element of the offense is error.”
United States v. Williams, 985 F.2d 749, 755 (5th Cir. 1993). That error is then
“subject to harmless error” review. Gas Pipe, Inc., 997 F.3d at 236 (citation
omitted). “Erroneous jury instructions are harmless if a court, after a
thorough examination of the record, is able to conclude beyond a reasonable
doubt that the jury verdict would have been the same absent the error.”
United States v. Stanford, 823 F.3d 814, 828 (5th Cir. 2016) (internal
quotation marks and citations omitted); see also Pope v. Illinois, 481 U.S. 497,
501–02 (1987).
Before the trial, Appellants requested jury instructions which stated
that a “‘scheme to defraud’ [was] a plan intended to deprive another of
money or property” and that a “‘specific intent to defraud’ [was] a willful,
conscious, knowing intent to cheat someone out of money or property.” The
district court rejected their request and instead relied on language in the Fifth
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No. 22-10511
Circuit Criminal Pattern Jury Instructions.12 The district court instructed the
jury that:
A “scheme to defraud” means any plan, pattern, or course of
action intended to deprive another of money or property or
bring about some financial gain to the person engaged in the
scheme . . . [and]
A “specific intent to defraud” means a conscious, knowing
intent to deceive or cheat someone.
See Fifth Circuit, Pattern Jury Instructions (Criminal Cases) § 2.57 (2019)
(emphasis added).
Appellants objected to these instructions before the district court.
Specifically, they argued that in both charges, the second clause after the
disjunctive “or” results in a misstatement of the law. See Shaw, 580 U.S. at
72. They further argued that a case in this circuit applying the same jury
instruction was distinguishable, see United States v. Baker, 923 F.3d 390, 402–
03 (5th Cir. 2019), cert. denied, 140 S. Ct. 2565 (2020), and emphasized that
other circuits have changed their pattern jury instructions after the Supreme
Court’s decision in Kelly clarified that the focus of the inquiry is property
rights. These objections were overruled with little to no discussion. On
appeal, Appellants expound on the same arguments, stating that the current
model jury instructions for a “scheme to defraud” and “intent to defraud”
are “inconsistent” with the law.
Model jury instructions are only proper if they are a “correct
statement of the law.” United States v. Toure, 965 F.3d 393, 403 (5th Cir.
12
After the jury convicted Appellants, they moved for a new trial and reasserted
their objections to the definitions of “scheme to defraud” and “intent to defraud” in the
jury instructions on the same grounds argued in this appeal. The district court denied their
motion in a brief order concluding that the jury instructions were proper.
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No. 22-10511
2020) (citing United States v. Whitfield, 590 F.3d 325, 354 (5th Cir. 2009)).
As explained supra, under the fraud statutes, the proper question is “whether
the victims’ property rights were affected by the misrepresentations.”
McMillan, 600 F.3d at 449. Our next step then is to determine whether the
“scheme to defraud” and “intent to defraud” instructions were aligned with
our interpretation of the fraud statute’s required inquiry.
As to the “intent to defraud” instruction, we agree with Appellants
that the disjunctive “or” makes it a misstatement of law. Under a plain
reading of the instruction given, the jury could find that the Government
proved an “intent to defraud” if Appellants merely exhibited a “conscious,
knowing intent to deceive . . . someone.” But we have already explained that
deception is not synonymous with depriving another of their property
interests. The Government provides no argument refuting this construction
of the intent to defraud language which is directly at odds with our caselaw
holding that a jury cannot convict a defendant under the fraud statutes based
on deceit alone. Indeed, it has long been our understanding that an “‘intent
to defraud’ requires ‘an intent to (1) deceive, and (2) cause some harm to
result from the deceit.’” Evans, 892 F.3d at 712 (emphasis added) (quoting
United States v. Moser, 123 F.3d 813, 820 (5th Cir. 1997) (quoting in turn
United States v. Jimenez, 77 F.3d 95, 97 (5th Cir. 1996))); Ratcliff, 488 F.3d at
645–49.
We find support for our interpretation of the “deceive or cheat”
construction when reviewing our sister circuits’ decisions analyzing similar
challenges. See United States v. Miller, 953 F.3d 1095, 1101–04 (9th Cir.
2020). In line with then-existing Ninth Circuit pattern instructions, the
district court in Miller charged the jury “that, to be guilty of wire fraud, a
defendant must have acted with the intent to ‘deceive or cheat.’” Id. at 1101.
(emphasis in original). On appeal, the defendant argued that this instruction
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misstated the law.13 Id. The Ninth Circuit agreed, holding that several of its
cases applying that instruction “were no longer tenable in light of the
Supreme Court’s intervening ruling” in Shaw. Id. at 1102; 580 U.S. at 72. It
thus held “that wire fraud requires the intent to deceive and cheat—in other
words, to deprive the victim of money or property by means of deception.”
Miller, 953 F.3d at 1103 (emphasis in original).
Likewise, the Eleventh Circuit’s decision in Takhalov is consistent
with our view here. 827 F.3d at 1312, 1314. In that case, the defendants tricked
men to come into their bars and nightclubs by hiring “[women] to pose as
tourists, locate visiting businessmen, and lure them” in. Id. at 1310. The
defendants asked the district court to instruct the jury that the “[f]ailure to
disclose the financial arrangement between the [women] and the Bar, in and
of itself, [was] not sufficient to convict a defendant of any offense[.]” Id. at
1314. The Eleventh Circuit determined that the defendant’s instruction was
a correct statement of the law and rejected the Government’s attempt to
instruct the “jurors that they could convict only if they found that the
defendants had schemed to lie about the quality or price of the goods sold to
the [men].” Id. It therefore made clear that a defendant “cannot be convicted
of wire fraud on the basis of [a] lie alone . . . [because] deceiving is a necessary
condition of defrauding but not a sufficient one.” Id. at 1312, 1314.
Appellants point to these decisions as persuasive authority and we
agree with our sister circuit’s interpretation of similar instructions of an
13
The Ninth Circuit recognized that it was not the “the only circuit that uses the
‘deceive or cheat’ language” and cited a case recognizing that, at the time, the Third, Fifth,
Sixth, Tenth, and Eleventh Circuits had this language too. Miller, 953 F.3d at 1102 (citing
United States v. Treadwell, 593 F.3d 990, 999 (9th Cir. 2010), overruled by Miller, 953 F.3d
at 1102).
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intent to defraud.14 This element is present in each count of this case, and
when confronted with this instruction, a reasonable juror could conclude that
evidence of Appellants’ misrepresentations and lies alone obligated the jury
to infer an intent to defraud. Because deception, alone, will not suffice, the
intent to “deceive or cheat” instruction was erroneous. See Miller, 953 F.3d
at 1103.
Our analysis under the “scheme to defraud” instruction, however, is
much less clear. Appellants argue that, under a plain reading, the jury could
find that the Government proved a “scheme to defraud” if Appellants
executed a “plan . . . intended to . . . bring about some financial gain to the
person engaged in the scheme.” They further assert that this instruction is
inconsistent with the Supreme Court’s recent holding in Kelly. 140 S. Ct. at
1574. But the Government rejects this perspective and counters that the
second phrase after the disjunctive “or” simply modifies the first phrase
because “[d]epriving a victim of a property right and obtaining financial gain
from fraud are two sides of the same coin.” Moreover, the Government
highlights that this court approved of an instruction with identical language
in Baker, 923 F.3d at 402–03, and this court has relied on Baker and similar
“financial gain” language even after Kelly.
As an initial matter, we recognize, as the Government points out, that
this court has long embraced the notion that an “[i]ntent to defraud exists if
14
This requirement is crucial especially considering recent decisions in Shaw and
Kelly, in which the Supreme Court has urged courts to prevent fraud convictions based on
deceit alone or convictions that affect by their very nature the victim’s property rights.
Notably, after Miller and Takhalov, the Ninth and Eleventh Circuit changed their intent to
defraud instruction to clarify this notion. See Takhalov, 827 F.3d at 1309; Miller, 953 F.3d
at 1101–04; see also Judicial Council of the United States Eleventh Judicial Circuit, Eleventh
Circuit Pattern Jury Instructions, Criminal Cases § O51 (2022); Ninth Circuit Jury
Instructions Committee, Manual of Model Criminal Jury Instructions for the District
Courts of the Ninth Circuit § 15.35 (2022).
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the defendant acts knowingly with the specific intent to deceive for the
purpose of causing financial loss to another or bringing about some financial
gain to himself.” Jimenez, 77 F.3d at 97 (citing United States v. St. Gelais, 952
F.2d 90, 95 (5th Cir. 1992)); see also Evans, 892 F.3d at 712 (same); Moser,
123 F.3d at 820 (same); United States v. Akpan, 407 F.3d 360, 370 (5th Cir.
2005) (same); Scully, 951 F.3d at 671 (same). This statement is often
construed alongside, and read as consistent with, the understanding that
“[n]ot only must a defendant intend to defraud or deceive, but he must
intend for some harm to result from the deceit.” St. Gelais, 952 F.2d at 95;
Evans, 892 F.3d at 712. Moreover, we have explained that a “scheme to
defraud” is sufficient “insofar as victims were left without money that they
otherwise would have possessed.” Baker, 923 F.3d at 405 (quoting McMillan,
600 F.3d at 449). In Baker, when interpreting a “scheme to defraud”
instruction with identical language, we held that it “allowed for a conviction
if [the defendant] intended to deceive the victims out of their money for his
own financial benefit.” Id.Nevertheless, after our review of the arguments and the
accompanying caselaw, we decline to decide herein whether the “scheme to
defraud” instruction was erroneous, as we have done with the “intent to
defraud” instruction. Even if the instruction was another error, the error is
harmless regardless. See United States v. Barraza, 655 F.3d 375, 382 (5th Cir.
2011). Established jurisprudence makes clear that the relevant question of
our harmless analysis is whether the record “is clear beyond a reasonable
doubt that a rational jury would have found the defendant guilty absent the
error.” Neder v. United States, 527 U.S. 1, 18 (1999). Put another way, an error
in the jury instructions is harmless if it does not “contribute to the verdict
obtained.” Id. at 15; see also Stanford, 823 F.3d at 828.
Thus, we proceed to examine the harmless error standard established
in Neder. The instant case involved four defendants tried in a seven-day trial.
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The record on appeal is 255 volumes and 160 supplemental volumes. Having
thoroughly examined the record in this case, this court is convinced that a
rational jury would have found the defendants guilty absent the erroneous
instruction. Cf. United States v. Skilling, 638 F.3d 480, 483–88 (5th Cir. 2011)
(holding that one erroneous jury instruction was harmless error because
multiple pieces of “overwhelming” evidence proved guilt under a valid
instruction).
Accordingly, “even if the jury had been properly instructed, . . . we
are certain beyond a reasonable doubt that the jury would still have found
that” Appellants met the “scheme to defraud” and “intent to defraud”
elements. United States v. Allende-Garcia, 407 F. App’x 829, 836 (5th Cir.
2011) (unpublished). Because any error “did not contribute to the verdict
obtained,” Neder, 527 U.S. at 15 (quotation omitted), “the conviction can
stand.” United States v. Foster, 229 F.3d 1196, 1197 (5th Cir. 2000).
ii. Requested Falsity Instruction
Appellants next argue that the district court abused its discretion by
rejecting their proposed falsity instruction. This argument is unpersuasive.
“We ‘review challenges to jury instructions for abuse of discretion and afford
the trial court great latitude in the framing and structure of jury
instructions.’” Matter of 3 Star Properties, L.L.C., 6 F.4th 595, 609 (5th Cir.
2021) (quoting Young v. Bd. of Supervisors, 927 F.3d 898, 904 (5th Cir. 2019)).
In doing so, “we must test the instructions given not against those [that the
defendant] requested—for a criminal defendant lacks the right to have [his
or her] requests adopted word for word—but against the law.” United States
v. Hunt, 794 F.2d 1095, 1097 (5th Cir. 1986) (citation omitted). “[A] trial
judge’s refusal to deliver a requested instruction constitutes reversible error
only if three conditions exist: (1) the instruction is substantively correct; (2)
it is not substantially covered in the charge actually given to the jury; and (3)
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it concerns an important point in the trial so that the failure to give it seriously
impairs the defendant’s ability to present a given defense effectively.” Id.(citation omitted). We have interpreted this to mean that “an abuse of
discretion occurs only when the failure to give a requested instruction serves
to prevent the jury from considering the defendant’s defense.” Id.Appellants requested that the district court instruct the jury that “[a]
statement of reasonable opinion is not a false statement.” Appellants again
cite the Third Circuit’s decision in Harra, see supra Part II.1.A, for the
proposition that the Government has a burden to prove that its interpretation
of Appellants’ misrepresentations in the SEC filings were “the only
reasonable interpretation[s].” 985 F.3d at 216 (quotation omitted). The
district court denied Appellants’ request because it determined that the rest
of the charge adequately covered the issue.
Consistent with the Fifth Circuit pattern instructions, the district
court instructed the jury that “[a] representation is ‘false’ if it is known to be
untrue or it is made with reckless indifference as to its truth or falsity” and
“would also be ‘false’ if it constitutes a half truth, or effectively omits or
conceals a material fact, provided it is made with the intent to defraud.” 15
Appellants argue that their requested instruction was not adequately covered
by the other instructions given by the district court. Specifically, they take
issue with the district court stating that a true statement is “false” whenever
it is “made with reckless indifference as to its truth or falsity.” They
emphasize that “[u]nder [these] instructions it made no difference that
reasonable minds could deem the disputed statements accurate, or even
whether they were accurate—so long as the defendants were ‘reckless.’”
15
See Fifth Circuit, Pattern Jury Instructions (Criminal Cases) § 2.57 (2019).
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The Government, on the other hand, argues that the district court did
not commit reversible error in denying Appellants’ request because they
thoroughly argued throughout trial that there was a reasonable difference of
opinion as to whether the relevant representations were false.” As support,
the Government cites to United States v. Brooks, 681 F.3d 678, 705 n.22, 708
n.26 (5th Cir. 2012) and United States v. Gray, 751 F.2d 733, 736–37 (5th Cir.
1985) and contends that the district court allowed Appellants to provide
evidence of their reasonable-opinion defense and testimony explaining that
they did not believe that the transactions at issue were affiliate transactions.
In Gray, the defendant argued that the district court “erred in refusing
his requested good-faith instruction.” 751 F.2d at 736. On review, this court
acknowledged that the defendant had ample opportunity to present evidence
regarding his good faith during the trial to support his defense that he lacked
the requisite intent to defraud his customers. This court held that the district
court’s refusal to give the instruction was not error. Id. at 737. It concluded:
Taken together, the trial, charge, and closing argument laid
Gray’s theory squarely before the jury. The court’s charge
enabled the jury to recognize and understand the defense
theory, test it against the evidence presented at trial, and then
make a definitive decision whether, based on that evidence and
in light of the defense theory, the defendant was guilty or not
guilty
Id. at 736–37 (internal quotation and citation omitted).
Like in Gray, Appellants had ample opportunity to present their
reasonable opinion defense to the jury and they did so “through evidence,
closing arguments, or other jury instructions.” United States v. Williams, 774
F. App’x 247, 248 (5th Cir. 2019) (per curiam) (unpublished). In fact, on
direct examination, one of UDF’s auditors testified that affiliate transactions
were “a judgmental area.” On cross, Appellants questioned him about that
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statement, and the auditor responded in the affirmative when asked whether
his statement meant that “reasonable accountants both acting in good faith
could reach a conclusion that is different regarding whether a particular
transaction is an [affiliate] transaction.” Appellants also elicited testimony of
this nature from at least two other auditors that were before the jury.
Further, as mentioned supra, Appellants brought a witness, Kitchens,
to testify that UDF V’s money transfers to UDF III were not affiliate
transactions because they were transactions amongst common borrowers. See
supra Part II.A.i.a. Moreover, during their closing arguments, Appellants
concluded based on the culmination of the trial that there was a reasonable
difference of opinion as to whether the representations in the SEC filings
were false. In one instance, they stated:
[Affiliate transactions are] an area where reasonable people,
objective people, acting in good faith could look at the same
transaction and reach a different conclusion . . . They are not
[affiliate] transactions. But even if there was testimony going
both ways, you could still have all of the executives acting in
good faith. Why? Because it’s an area of judgment. [The
Government] cannot get there on the evidence because of this.
Lastly, the district court presented to the jury a good-faith instruction
stating:
In determining whether or not a defendant acted with criminal
intent to defraud or deceive, you may consider whether or not
the defendant had a good faith belief that what he or she was
doing was legal. If you have a reasonable doubt as to whether or
not the defendant had a good faith belief that what he or she
was doing was legal, you must acquit the defendant and say so
by your verdict [of] not guilty.
This instruction aided in supporting the crux of Appellants’ argument, which
is that they were operating under that good faith belief that the transactions
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were not “affiliate” transactions, and such was possible because reasonable
opinions could differ in good faith on the interpretation of the term. See
Lucas, 516 F.3d at 324 (holding that the district court did not abuse its
discretion in omitting a requested instruction because the instructions
substantially covered the defendants requested instructions).
Accordingly, even though the district court denied Appellants’
requested instruction on falsity, they were able to argue that reasonable
opinions could differ on the misrepresentations through evidence,
arguments, and other jury instructions. See Williams, 774 F. App’x at 248
(“Williams has not shown the omission of his requested instruction impaired
his good-faith defense because he raised the defense in several ways during
trial.” (citations omitted)). Thus, we hold that the district court did not err
in denying the addition of Appellants’ reasonable opinion charge. See id.
C. Cross-Examination
Appellants next assert that the district court improperly limited their
cross-examination regarding a non-testifying informant in violation of their
constitutional rights. We review alleged constitutional violations of the Sixth
Amendment’s Confrontation Clause de novo. See United States v. Bell, 367
F.3d 452, 465 (5th Cir. 2004). Likewise, we review “alleged violations of a
defendant’s Sixth Amendment right to present a complete defense de novo.”
United States v. Skelton, 514 F.3d 433, 438 (5th Cir. 2008) (emphasis
omitted). Both claims, however, are subject to harmless error review. See
Bell, 367 F.3d at 465. And if no constitutional violation has occurred, “we
review a district court’s limitation on cross-examination for an abuse of
discretion, which requires a showing that the limitations were clearly
prejudicial.” Skelton, 514 F.3d at 438.
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Kyle Bass was the initial informant that contacted the FBI to provide
information about UDF, which helped prompt the FBI’s investigation.16
Appellants argue that the district court’s decision to exclude evidence of
Bass’s role in the Government’s investigation violated their constitutional
right to present a complete defense and cross-examine key witnesses. They
contend that Bass’s testimony would have invalidated the prosecution’s star
witness, Martinez, by demonstrating that his cash-tracing report was tainted
by Bass’s biased version of Appellants’ actions. We disagree.
We have explained that a defendant’s right to present a complete
defense and cross-examine witnesses are “closely related.” United States v.
Ramos, 537 F.3d 439, 447–48 (5th Cir. 2008). While these two rights are
“essential,” they are still subject to limitations. See United States v. Mizell,
88 F.3d 288, 294 (5th Cir. 1996) (explaining that these protections are
“limited and must be weighed against the countervailing interests in the
integrity of the adversary process . . . the interest in the fair and efficient
administration of justice . . . and the potential prejudice to the truth-
determining function of the trial process”) (internal quotations and citations
omitted).
One example of such limitation is the district court’s broad discretion
to constrain or deny the cross-examination of a witness whose testimony
offers little probative value. See Delaware v. Van Arsdall, 475 U.S. 673, 679
(1986) (permitting trial courts to “impose reasonable limits on cross-
examinations based on . . . prejudice, confusion of the issue, . . . or
interrogation that is . . . only marginally relevant”). “[T]he Confrontation
16
Appellants made numerous allegations throughout this case that Bass was a
“disgruntled minority investor” that “hatched a plan to take UDF out.” They further
alleged that he committed illegal market manipulation by shorting UDF’s stock, which
occurred at some point after Appellants’ conduct at issue in this case.
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Clause [only] guarantees an opportunity for effective cross-examination, not
cross-examination that is effective in whatever way, and to whatever extent,
the defense might wish.” Delaware v. Fensterer, 474 U.S. 15, 20 (1985) (per
curiam) (emphasis in original).
“To establish a violation of the confrontation right, the defendant
need only establish that a reasonable jury might have received a significantly
different impression of the witness’s credibility had defense counsel been
permitted to pursue his proposed line of cross examination.” Skelton, 514
F.3d at 439–40 (internal quotation marks and citations omitted). Ultimately,
“[t]he determination of whether the exclusion of evidence is of a
constitutional dimension depends on the district court’s reason for the
exclusion and the effect of the exclusion.” Id. This determination often
entails a Rule 403 analysis. See id.; Fed. R. Evid. 403 (“The court may
exclude relevant evidence if its probative value is substantially outweighed by
a danger of one or more of the following: unfair prejudice, confusing the
issues, misleading the jury, undue delay, wasting time, or needlessly
presenting cumulative evidence.”).
At trial, Appellants sought to cross-examine Martinez about his
relationship with Bass. They contended that cross-examination was
necessary because: (1) Martinez was the key witness and responsible for the
cash-tracing theory that the Government relied on in prosecuting Appellants;
(2) Martinez could prove that Bass played a substantial role in UDF’s alleged
financial scheme; and (3) Bass was the primary reason for Martinez’s
decision to trace UDF’s cashflow and he had a tainted motive for compelling
the FBI to investigate UDF. In contrast, the Government asked the district
court to prohibit questioning related to Bass during Martinez’s cross-
examination because it was irrelevant, time consuming, and substantially
risked confusing the jury.
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The district court agreed with the Government and decided that
Martinez could not be questioned about Bass on cross-examination.17 It
reasoned that Appellants failed to demonstrate how Bass’s alleged conduct
related to or negated their potential guilt. It also explained that Appellants
had not shown how evidence of Bass’s conduct affected any “material fact of
the crimes charged” against them. Finally, after completing a Rule 403
balancing, the district court stated that this “evidence would be extremely
time consuming and confusing,” while only providing minimal “probative
value.”
Here, the district court’s decision to deny the use of Bass-related
information during Martinez’s cross-examination was not a constitutional
violation because it would not have altered the jury’s impression of
Martinez’s credibility. First, that Bass informed the FBI of potentially illegal
conduct at UDF because he intended to benefit from the investigation has no
effect on the credibility of Martinez’s cash-tracing theory. As the district
court explained, Bass’s conduct “has no bearing on whether [Appellants]
committed the crimes charged in the indictment.” Bass, regardless of his
motive, simply reported what Appellants were doing with numerous UDF
funds. The FBI chose to act on the information Bass relayed to them, but still
had to conduct its own investigation and build a case against Appellants.
17
Notably, Appellants mischaracterize the district court’s subsequent limited
permission to use “Bass-related information.” True, the district court stated that this
information could be used to “impeach potential witnesses and show potential bias.” But
it clarified that the Bass-related information could only be used against Agent Tedder
because “his brother, Michael, [was] Bass’[s] close friend and business partner.” Nothing
in the district court’s order suggests that it gave free reign to the use of Bass-related
information, so Appellants’ position that the district court changed its mind unexpectantly
mid-trial has no basis.
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Second, Appellants argue that the Bass-related information could
have demonstrated that he was the primary culprit behind UDF’s allegedly
illicit activities. That position is unpersuasive because even if Bass had
contributed to some of the allegedly fraudulent behaviors, that would not
absolve Appellants of their individual roles in the fraudulent scheme.
Furthermore, any criminal conduct by Bass would not have tainted the
discoveries Martinez and the FBI made following their discussions with him.
Third, Appellants would have this court believe that the Bass-related
information tainted Martinez’s cash-tracing model by compelling him to
ignore the potential economic benefits UDF and the UDF IV fund provided
to its investors. But whether Appellants financially harmed their investors is
not material of their guilt. See Shaw, 580 U.S. at 67–68. Furthermore, they
still presented a line of questioning regarding the potential benefits their
funding mechanisms provided to their investors. Specifically, they asked
Martinez whether he considered the economic benefit provided by UDF’s
funding scheme, to which, Martinez responded in the negative. So, the jury
was still able to consider the information that they assert the district court
deprived them of presenting.
Finally, the district court’s Rule 403 analysis was correct.18 There was
very little probative value in parsing Martinez’s relationship with Bass. The
reality is that all of Appellants’ concerns were still considered by the jury,
even if those concerns were not raised during Martinez’s cross-examination.
For example, the jury considered the novelty of Martinez’s framework at
different stages in the litigation and the lack of economic benefit
considerations in the cash-tracing model. At best, adding the Bass-related
18
Appellants and the Government agree that evidence of bias is always relevant
under Rule 401. See Fed. R. Evid. 401.
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information into the mix would be redundant. At worst, it could have
transformed this case in a trial about Bass instead of Appellants.19 In sum, the
possibility that the Bass-related information could have caused an undue
delay or substantially confused the jury far outweighed the probative value
from using it during Martinez’s cross-examination. See Fed. R. Evid. 403.
Because Rule 403 supports the district court’s decision to exclude the
Bass-related evidence and prohibiting the information did not significantly
affect the jury’s impression of Martinez’s credibility, we hold that the district
court did not violate Appellants’ constitutional rights or abuse its discretion
in doing so. See Fed. R. Evid. 403; Skelton, 514 F.3d at 440.
D. Closing Arguments
Appellants bring two issues which arise out of the closing arguments.
They argue that the district court (1) allowed the Government to
constructively amend the indictment and (2) abused its discretion in allowing
the Government to include certain improper statements in its closing
argument. We address each argument in turn.
i. Constructive Amendment of the Indictment
Appellants first argue that the district court improperly allowed, over
their objection, a constructive amendment of the indictment during the
Government’s closing argument. We review constructive amendment claims
de novo. McMillan, 600 F.3d at 450. Appellants take issue with the
Government’s assertion that “they made themselves affiliates with
Centurion and Buffington.” They aver that this sentence improperly led the
jury to convict based on a finding that two of UDF’s developers were UDF
19
The district court stated in its order granting in part the Government’s motion
in limine that it would not “permit this [trial] to become a trial over Bass’s actions with
[Appellants].”
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V’s prohibited “affiliates.” Appellants argue that this was a theory different
than what was alleged in the indictment, i.e., that UDF III and UDF IV were
the prohibited affiliates of UDF V. The Government responds that this
statement was read out-of-context and that it presented a consistent theory
throughout trial. We agree.
The constructive amendment doctrine’s core is in the Fifth
Amendment, “which provides for criminal prosecution only on the basis of a
grand jury indictment.” United States v. Doucet, 994 F.2d 169, 172 (5th Cir.
1993). “[A] court cannot permit a defendant to be tried on charges that are
not made in the indictment against him.” Stirone v. United States, 361 U.S.
212, 217 (1960). “Only the grand jury can amend an indictment to broaden
it.” Doucet, 994 F.2d at 172. “This court has held that ‘an implicit or
constructive amendment . . . occurs when it permits the defendant to be
convicted upon a factual basis that effectively modifies an essential element
of the offense charged or permits the [G]overnment to convict the defendant
on a materially different theory or set of facts than that with which she was
charged.’” United States v. Hoover, 467 F.3d 496, 500–01 (5th Cir. 2006)
(quoting United States v. Reasor, 418 F.3d 466, 475 (5th Cir. 2005)).
As explained supra, the Government’s theory throughout the case
was that Appellants conducted “affiliate” transactions when they
transferred investor’s money from UDF V to UDF III to pay distributions
and loans. Appellants argue that this theory shifted, but we see no indication,
outside of this singular statement, that would suggest that the Government
altered its theory from what was alleged in the indictment. See United States
v. Thompson, 647 F.3d 180, 186 (5th Cir. 2011) (holding that the there was no
constructive amendment where the Government maintained “a single,
consistent theory of conviction throughout” the trial). Our review of the
closing arguments indicates that the Government was not meaningfully
shifting its theory to suggest that Centurion and Buffington were affiliates,
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but instead explaining to the jury that UDF had control of both ends of the
transaction, and developers like Centurion and Buffington were just
“conduits” or “shells” through which Appellants were able to paper over
their unilateral transactions between UDF entities.20
ii. Improper Statements by the Prosecutor
Appellants next argue that prosecutors made three statements during
closing arguments that constituted reversible error. First, Appellants rehash
their constructive amendment argument, asserting that they were prejudiced
when prosecutors stated that Centurion and Buffington were affiliates of
UDF V. Second, Appellants argue that the district court committed a similar
prejudicial error by allowing prosecutors, during their rebuttal, to misstate
the evidence and claim that Susan Powell, UDF III’s auditor, did not
understand the transactions, when she in fact knew about the transactions
and how they were structured. Lastly, Appellants argue that prosecutors
misstated the law regarding the jury’s consideration of Appellants’ good
character evidence.
This court reviews challenges to the statements made by the
prosecutor for abuse of discretion when the defendant objects to them, but
20
Unlike the amendments made in the cases cited by Appellants, the Government
did not make a statement out of the indictment that was an unreasonable construction of
the evidence based on the Government’s theory of the case. Cf. Stirone, 361 U.S. at 217(reversing a conviction because although the indictment alleged that the defendants
illegally moved sand through interstate commerce, the defendant was charged for
interfering movements of steel); United States v. Salinas, 654 F.2d 319, 322–24 (5th Cir.
1981), overruled on other grounds by United States v. Adamson, 700 F.2d 953, 965 (5th Cir.
1983) (reversing an aiding and abetting conviction because the principal whom the
defendant aided and abetted was different than the principal listed in the indictment).
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the district court still admits them over the objection.21 United States v.
Alaniz, 726 F.3d 586, 615 (5th Cir. 2013) (citation omitted). First, we “decide
whether the prosecutor made an improper remark and, if an improper remark
was made, we must determine whether the remark affected the substantial
rights of the defendant.” Id. (internal quotation and citation omitted). “To
determine whether a remark prejudiced the defendant’s substantial rights,
we assess the magnitude of the statement’s prejudice, the effect of any
cautionary instructions given, and the strength of the evidence of the
defendant’s guilt.” Id. (internal quotation and citation omitted).
We have made these assessments of the prosecutor’s remarks at trial,
and we conclude that even if we were to interpret these statements as
Appellants do and hold that they were improper, the statements did not
prejudice their substantial rights. See id. The prejudicial effect of any one of
these comments, considered alone or together, was minimal. For instance,
Appellants argue that prosecutors wrongfully stated that the jury could not
consider evidence of their good character when determining whether they
possessed an intent to defraud. But they concede that the district court
charged the jury to consider Appellants’ “evidence of good general
reputation or opinion testimony concerning: truth and veracity, honesty and
integrity, or character as a law-abiding citizen” alongside “other evidence in
the case.”
21
Appellants objected to the statement regarding Powell, so that argument was
preserved. After closing arguments, Appellants asked the court for an opportunity “to
preserve . . . outside the presence of the jury,” and they objected to the two remaining
arguments. Thus, these were preserved as well, and the standard is abuse of discretion. See
Alaniz, 726 F.3d at 615. Appellants contend that the two arguments that were objected to
after the closing arguments are “arguably” preserved. However, given our determination
that these statements were not reversible error, we do not need address their arguments on
this issue.
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This court has held that “for the ‘improper comment or questioning
to represent reversible error, it generally must be so pronounced and
persistent that it permeates the entire atmosphere of the trial.’” Alaniz, 726
F.3d at 616 (quotation omitted). Additionally, “[a] prosecutor’s closing
remarks are reversible error when they ‘cast serious doubt on the correctness
of the jury’s verdict.’” United States v. Bush, 451 F. App’x 445, 451 (5th Cir.
2011) (per curiam) (unpublished) (quoting United States v. Mares, 402 F.3d
511, 515 (5th Cir. 2005). Appellants have not met this high standard given
that the effect of the statements was insignificant and the evidence against
them was strong.22
E. Time Limits
Appellate courts typically review a district court’s implementation of
time limits under an abuse of discretion standard. See, e.g., United States v.
Hay, 122 F.3d 1233, 1235 (9th Cir. 1997) (citations omitted). But because no
objections or requests for additional time were raised at trial, we proceed
under plain error review. United States v. Gray, 105 F.3d 956, 965 (5th Cir.
1997). “Plain error is error which, when examined in the context of the entire
case, is so obvious and substantial that failure to notice and correct it would
affect the fairness, integrity or public reputation of judicial proceedings.”
United States v. Vonsteen, 950 F.2d 1086, 1092 (5th Cir. 1992) (en banc)
(internal quotations and citation omitted).
22
See Bush, 451 F. App’x at 452 (“Prosecutors may use expressive language when
emphasizing the weakness of a defendant’s defense so long as it is clear to the jury that the
conclusions [the prosecutor] is making are based on the evidence.”); United States v.
Ceballos, 789 F.3d 607, 624–25 (5th Cir. 2015) (rejecting the defendant’s challenge of a
statement telling jury not to focus on sympathy because the court “assume[s] that a jury
has the common sense to discount the hyperbole of an advocate discounting the force of an
argument”).
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Jester asserts that the district court’s imposition of a shared fifteen-
hour time limit among all Appellants violated his constitutional right to
present a complete defense. He concedes that the district court is entitled to
a degree of control over the length of each party’s argument but argues that
it implemented time limits on an unreasonable and arbitrary basis. We
disagree.
The Fourteenth Amendment’s Due Process Clause guarantees
criminal defendants the right to “a meaningful opportunity to present a
complete defense.” Holmes v. South Carolina, 547 U.S. 319, 324 (2006).
Furthermore, the Sixth Amendment’s Confrontation Clause ensures a
defendant’s right to cross-examine witnesses that the Government puts forth
against him. See United States v. Moparty, 11 F.4th 280, 293 n.18 (5th Cir.
2021) (internal citations omitted) (explaining that a Confrontation Clause
violation occurs where “a reasonable jury might have received a significantly
different impression of the witness’s credibility had defense counsel been
permitted to pursue his proposed line of cross examination”).
Taken together, these constitutional guarantees protect a defendant
from arbitrary, unreasonable restrictions on his right to present his case-in-
chief and cross-examine the Government’s witnesses. See United States v.
Morrison, 833 F.3d 491, 504 (5th Cir. 2016). District courts do not run afoul
of either guarantee if an implemented time limit (1) allows a defendant the
“meaningful opportunity to present a complete defense,” and (2) does not
deprive the jury of the opportunity to “receive[ ] a significantly different
impression of [a] witness’s credibility.” Holmes, 547 U.S. at 324; Moparty, 11
F.4th at 293 n.18.
Jester alleges that the district court’s time limit violated his
constitutional right to “put on a complete defense, confront the witnesses
against him, and testify in his own defense.” He offers three examples in
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support of his argument. First, he contends that the time constraints reduced
his testimony to “mere minutes.” Second, he asserts that the limitations
demanded cursory discussions of the Government’s witnesses during cross-
examinations. Finally, he argues that the composition of the defendants left
him isolated in terms of how much time would be dedicated to his unique
arguments. On the latter point, he notes that each defendant, except for him,
was an executive at UDF, so he was outnumbered by the executive-
defendants, who had no reason to prioritize his defense in the fifteen hours
allotted to their case.
In support, Jester relies substantially on our decision in Morrison. See
833 F.3d at 503. There, the district court was dissatisfied with the pace of the
defendant’s trial and imposed a time limit on remaining witness examinations
to expedite the proceedings. See id. It required the attorneys to estimate how
long direct examinations would take for the remaining witnesses and
enforced those estimations on the Government and the defense for the
remainder of the trial. Id. The defendant ultimately appealed, arguing that
the district court’s time limits deprived her of the opportunity to present a
complete defense to her charges. On appeal, we rejected her argument
because she failed to make an offer of proof sufficient to preserve her
objection to the district court’s limits.23 Id. at 505.
Here, Jester’s arguments fail because he did not preserve his objection
during the trial and the record states that the district court would have
granted more time if he had requested it. First, Jester objected to the fifteen-
hour time limit one time before the trial but failed to do so again at any other
23
See Morrison, 833 F.3d at 504 (explaining that even if we considered her
alternative arguments, the disposition of the case would remain unchanged).
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point during the trial.24 Like in Morrison, the alleged injustice of the time
constraint was substantially curbed by Jester’s failure to make an offer of
proof to preserve his objection. See 833 F.3d at 505–06. Accordingly, his
“lack of a contemporaneous offer of proof limits our ability on appellate
review to determine whether the exclusion was harmful.” Id. at 505. Because
he made no offer of proof during the trial, thus failing to preserve the
objection, the district court did not err by implementing time constraints.
Second, the record supports that Jester’s decision not to object to the
time constraints was potentially a strategic maneuver by Appellants. As the
district court explained, Appellants likely decided against requesting
additional time during cross-examinations in hopes of making the
Government’s burden more difficult. (“The reasonable inference is that
[Appellants] strategically made no request for additional time to ensure the
Government received no additional time so as to limit the Government’s
opportunity to engage in full [cross-examination].”). Indeed, our precedent
supports the district court’s inference. See Morrison, 833 F.3d at 504 (“If
anything, it seems that time limits in criminal cases will generally pose more
of a challenge for the prosecution as it typically presents far more of the
evidence given that it has the burden of proof.”). Jester cannot benefit from
the decision not to object to the time constraints during the trial, only to
assert those same constraints as a reason for overturning his conviction.
Ultimately, Jester fails to prove that the district court committed
reversible error by imposing a fifteen-hour limit on both parties. Because the
district court’s time constraint was not an obvious or substantial error that
24
In its order denying Appellants’ post-trial motions, the district court recognized
that “[a]t no point during the trial did [Jester] request more time.”
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No. 22-10511
jeopardized the fairness or integrity of his trial, we hold in favor of the
Government on this issue. See Vonsteen, 950 F.2d at 1092.
F. Cumulative Error Doctrine
Finally, Appellants maintain that they are entitled to relief under the
cumulative error doctrine. We disagree. “The cumulative error doctrine . . .
provides that an aggregation of non-reversible errors (i.e., plain errors failing
to necessitate reversal and harmless errors) can yield a denial of the
constitutional right to a fair trial, which calls for reversal.” United States v.
Delgado, 672 F.3d 320, 343–44 (5th Cir. 2012) (internal quotations omitted)
(citing United States v. Munoz, 150 F.3d 401, 418 (5th Cir. 1998)).
“Cumulative error justifies reversal only when errors so fatally infect the trial
that they violated the trial’s fundamental fairness.” Delgado, 672 F.3d at 344(quotation marks omitted). We have explained that this doctrine is only
applied in the “unusual case in which synergic or repetitive error[s] violate [
] the trial’s fundamental fairness.” Id.Appellants argue that the cumulation of errors throughout their trial
prejudiced the outcome and deprived them of constitutional rights. In
response, the Government asserts that the cumulative error doctrine does
not apply because Appellants have identified no errors and it has presented
substantial evidence of guilt. The Government’s arguments are persuasive.
Here, Appellants fail to highlight the multiple errors that they allege occurred
throughout their trial. The only error they point to involves the district
court’s jury instructions, and we have already determined that this error was,
at most, harmless and does not warrant reversal of their convictions. See supra
Part II.B.i. Absent additional errors, there is nothing for Appellants to
cumulate. Thus, the doctrine is inapplicable here. See Delgado, 672 F.3d at
344.
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III. Conclusion
For the foregoing reasons, the jury verdict is AFFIRMED in its
entirety.
50