United States v. Thornburgh

FILED
United States Court of Appeals
Tenth Circuit
May 27, 2011
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v. No. 09-5156
JOSEPH LYNN THORNBURGH,
Defendant - Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
(D.C. NO. 4:07-CR-00195-CVE-2)
Fred Randolph Lynn, Tulsa, Oklahoma, for Defendant - Appellant.
Charles M. McLoughlin, Assistant United States Attorney (Thomas Scott
Woodward, United States Attorney, with him on the brief), Tulsa, Oklahoma, for
Plaintiff - Appellee.
Before TYMKOVICH, SEYMOUR, and ANDERSON, Circuit Judges.
ANDERSON, Circuit Judge.
Defendant and appellant Joseph Lynn Thornburgh was found guilty by a
jury of conspiracy to commit mail and wire fraud and conspiracy to commit
money laundering. He was sentenced to 292 months’ imprisonment, three years
of supervised release, and $3,684,213 in restitution. Challenging his conviction
on seven grounds, Mr. Thornburgh brings this appeal. 1 We affirm his conviction. 2
BACKGROUND
Beginning in the late 1990s, Mr. Thornburgh, along with co-conspirators
Robert Searles, Wayne Davidson, Steven Fishman and others, executed a scheme
to defraud investors by inducing them to buy allegedly valuable “historic bonds.”
In reality, the bonds were century-old railroad bonds, issued by a railroad which
had long ago gone bankrupt, and bonds issued by a country which no longer
exists. The railroad bonds were issued by the defunct Galveston, Houston &
Henderson Railroad (“GH&H Railroad”), and the other type of bond was issued
by the Republic of China in the early 1900s (“Chinese bonds”).
1
Mr. Thornburgh has filed a motion for leave to file a pro se brief and an
accompanying addendum. Because Mr. Thornburgh is represented by counsel, we
deny his motion to proceed pro se with the brief and appendix. See United States
v. Guadalupe, 979 F.2d 790, 795 (10th Cir. 1992). To the extent Mr. Thornburgh
wishes to claim his counsel was ineffective at trial, that issue must typically be
raised on collateral review, not on direct appeal. See United States v. Hahn, 359
F.3d 1315, 1327 n.13 (10th Cir. 2004) (“Generally, we only consider ineffective
assistance of counsel claims on collateral review.”).
The government has also filed a motion to supplement the record on appeal.
We deny that motion as well.
2
We are releasing simultaneously with this decision our decision regarding
Mr. Fishman, one of Mr. Thornburgh’s co-conspirators and his co-defendant at
trial. United States v. Fishman, No. 09-5155 (10th Cir. May 27, 2011).
-2-
This conspiracy was much like many other such conspiracies. Mr.
Thornburgh and his co-conspirators misrepresented the value of the bonds,
claiming that interest in the amount of hundreds of millions of dollars had accrued
on the bonds since their issuance, and that payment on that interest was still due
and owing. They also misled investors by claiming that the “historic bonds” were
backed by Amtrak and/or the United States government.
The conspiracy also involved the use of exotic and enigmatic terminology.
Besides the “historic bonds,” the scheme involved using the bonds in some vague
way to lure unspecified European banks to use proceeds from the bonds (or use
the bonds as collateral) to engage in high-yield trading programs. 3 These
programs would generate vast sums of money, and the investors were told they
would soon receive weekly payments of amounts far larger than their investments.
The conspirators further bolstered their story by representing that the
Florida Supreme Court had secretly issued an opinion, being kept under seal in
chambers, which established the validity of the bonds. They also determined
“hypothecated” values of the bonds, and used individuals called “authenticators”
to purportedly verify the authenticity of the bonds. Investors were promised that
their bonds were placed in “safekeeping depositories” which issued certificates
called “safekeeping receipts.”
3
Perhaps because the whole thing was a scheme, the details of the precise
workings of the conspiracy are not completely clear.
-3-
The entity into which investors placed their money was called Caribou
Capital Corporation (“Caribou”), which had been incorporated by Mr. Searles in
1991, apparently for purposes unrelated to the conspiracy. Mr. Searles served as
the president of Caribou and the banker for the scheme. He maintained an
account for Caribou at SunTrust Bank in Loudon, Tennessee, into which the
majority of investor funds were deposited and then distributed to the conspirators.
The investors were assured that the program involved little to no risk, and that, if
the large returns did not develop, they would receive a complete refund of their
investments. Mr. Fishman apparently mentioned to some investors that Norah
Cali, allegedly the niece of Alan Greenspan, the former Chairman of the Federal
Reserve Board, was involved in the Chinese bond part of the Caribou program.
The enterprise promoted in the United States was not very large, and, at
times, it sputtered and slowed. But it still moved along, with its various
conspirators interacting with each other in greater and lesser ways. Eventually,
the co-conspirators spent much of their time and efforts trying to pacify
increasingly anxious and irritated investors, who were becoming suspicious
because they had not received the promised large returns.
Each member of the Caribou program had a specific role, although the roles
at times overlapped. Mr. Searles acted as the banker and organizer of the
conspiracy. He established Caribou as the shell corporation, served as its
president, and maintained the SunTrust account. The “authenticator” was John
-4-
Clancy, the “program manager” was Patrick Henriette, who resided in Europe,
and Mr. Thornburgh and Mr. Davidson were the salesmen who induced investors
to buy the bonds. Mr. Thornburgh’s primary area of operation was the United
States, while Mr. Davidson sought international investors, particularly from New
Zealand. Mr. Fishman was involved in many aspects of the conspiracy, including
drafting and reviewing documents for Caribou, obtaining bonds, arranging for
depositories for the bonds, finding bond “traders,” receiving funds, responding to
questions from investors, and other functions.
Mr. Thornburgh convinced approximately fifteen individuals in the United
States to invest in the Caribou bond scheme. Apparently the total number of
investors exceeded 250, the vast majority of whom were lured into the scheme by
Mr. Davidson, operating in New Zealand and Australia. Indeed, this circumstance
particularly distresses Mr. Thornburgh, as he is required to serve a lengthy prison
term and pay over three and one-half million dollars in restitution, whereas Mr.
Davidson remains out of the country and has never been convicted for his part in
the scheme. The total known loss was $4,057,846.26. 4
The conspiracy ran from the late 1990s until 2005. Not surprisingly,
despite the promises made to investors, the reality of the Caribou program was
4
The United States postal inspector who initially investigated complaints
about the Caribou conspiracy testified that there were twenty investors in the
United States and 490 international investors, mostly from New Zealand. Tr. of
Hr’g at 220, R. Vol. 2, Part 2 at 10.
-5-
quite different. The “historic bonds” had only nominal value as collector items,
and the “hypothecated” values of the historic bonds were false representations of
their worth for investment, redemption, or use as collateral. There was, in fact,
no European bank trading program through which to generate profits for the
Caribou investors. Finally, “Caribou was incapable of fulfilling its contractual
obligations to refund monies to investors because the funds were spent as soon as
Caribou received them.” Second Superseding Indictment at ¶ 7(g), R. Vol. 1 at
315. Rather than going into the bank trading programs in Europe, investor money
went from Caribou to the co-conspirators.
To prove these actions and expenditures, the government introduced
evidence of hundreds of emails, telephone calls, mailings, wires and numerous
other forms of communication by which the co-conspirators contacted investors,
made transactions among themselves, deposited funds in the SunTrust account of
Caribou, and otherwise maintained the elaborate fraudulent scheme. Money
provided by investors to the SunTrust account was disbursed to the co-
conspirators to make payments for purchasing bonds, to pay fees for allegedly
authenticating and determining the purported value of the bonds, to pay fees to
the safekeeping depositories, to pay “broker” fees to the co-conspirators
themselves, to pay personal legal fees and to make occasional payments to
investors, which they often called “loans.” Mr. Thornburgh, in particular, used
investor funds to pay some of his legal fees and to pay for his bail in a domestic
-6-
violence prosecution. Additionally, some of the co-conspirators bought a glove
manufacturing plant and shares in a gold mine.
Further, the scheme gained no returns through its claimed relationship with
European banks or based on the value of the bonds that investors bought; any
returns were derived simply from the deposits of more recent investors. Of the
$4,057,846.26 total loss to investors from this scheme, $3,819,315.13 in funds
were laundered through Caribou.
When investors became suspicious, Mr. Thornburgh and his co-conspirators
provided “lulling” reports about the progress supposedly made by
Caribou’s associates in securing Caribou’s participation in the
financial trading programs purportedly conducted by European
banks. The co-conspirators’ lulling reports repeatedly explained to
investors that unforeseen problems had arisen to prevent payments
being made to the investors, but that completion of the arrangements
for Caribou’s participation in the financial trading programs was
imminent.
Id. at ¶ 11, R. Vol. 1 at 319. The co-conspirators then attempted to convince
investors that a different type of bond (the Chinese bonds) would be another
fruitful form of investment. In March 2003, the co-conspirators attempted to
further pacify unhappy investors by offering them “hold harmless” agreements
which purported to agree to fully refund their investments if the large returns did
not materialize.
The conspiracy came to a halt following a lengthy investigation that began
with a telephoned complaint in early 2003 to the United States Postal Inspection
-7-
Service in the Northern District of Oklahoma. The caller reported that she had
made an investment into a program promoted by Caribou Capital Corporation, but
had not received the promised return on her investment and was growing
suspicious of the program. Several United States federal agencies joined in the
investigation, as well as an agency in New Zealand. This investigation led to the
indictment against Mr. Thornburgh and his co-conspirators.
Mr. Thornburgh ultimately went to trial on a second superseding
indictment, filed on June 2, 2009, alleging a conspiracy to commit mail and wire
fraud, in violation of 18 U.S.C. §§ 1341, 1343, and 1349, and a conspiracy to
commit money laundering, in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i), (h), and
1957(a). Count one addressed the promotion and sales of the bonds, whose value
Mr. Thornburgh vastly overrepresented and whose promised returns he falsified.
Count two addressed the distribution, through the SunTrust Caribou account, of
funds obtained from the unwitting investors to Mr. Thornburgh and his fellow co-
conspirators. He was also subject to forfeiture under 18 U.S.C. § 981(a)(1)(C)
and 28 U.S.C. § 2461(c).
Mr. Thornburgh was tried along with Mr. Fishman. Mr. Searles pled guilty,
and his recent challenge to his sentence was rejected by this court on direct
appeal. United States v. Searles, 2011 WL 488750 (10th Cir. Feb. 11, 2011).
During pre-trial proceedings, Mr. Thornburgh filed a Fed. R. Crim. P. 29
motion for acquittal, in which he argued that there was no evidence of an
-8-
agreement to violate the law; there was no evidence that he had a fraudulent
intent; evidence that he asked an investor to lie to government agents was not
sufficient to establish a conspiracy; and the statute of limitations shielded him
from a verdict for the government on both charges. This motion was denied.
Mr. Thornburgh now challenges his conviction, arguing: (1) he withdrew
from the conspiracy on July 23, 2002, as a result of which the statute of
limitations had expired by the time he was indicted; (2) the government neither
pled nor proved that profits from illegal activities were laundered; (3) the district
court erred when it failed to instruct the jury that they must find proof that profits
were laundered; (4) the district court failed to make findings regarding, or require
the government to prove the admissibility of, co-conspirator statements under
Fed. R. Evid. 801(d)(2)(E); (5) Mr. Thornburgh was tried for acts that were not
illegal when he committed them; (6) he should have been tried separately from his
co-defendant, Mr. Fishman; and (7) he did not receive his presentence report
(“PSR”) in a timely fashion.
-9-
DISCUSSION
I. Withdrawal and Statute of Limitations
Mr. Thornburgh argues that the five-year statute of limitations applicable to
the charges in this case had expired by the time the initial indictment was filed on
November 30, 2007. This is because he claims he withdrew from the conspiracy
on July 23, 2002. He argues that this provides him a complete defense. Mr.
Thornburgh accordingly asserts his motion for an acquittal or his motion to
dismiss the case against him should have been granted.
“A conspirator . . . is only liable for the acts of co-conspirators until the
conspiracy accomplished its goals or that conspirator withdraws.” United States
v. Cherry, 217 F.3d 811, 817 (10th Cir. 2000) (further quotation omitted). In this
case, the jury was instructed that Mr. Thornburgh claimed he had withdrawn from
the conspiracy by November 30, 2002 (five years before the indictment was
filed). In finding him guilty, the jury implicitly rejected that claim.
Mr. Thornburgh also attempts to use his claimed withdrawal to support his
argument that the statute of limitations had run by the time he was indicted.
While convictions for the conspiracies at issue here (to commit money laundering
and to commit wire and/or mail fraud) do not “require proof of an overt act in
furtherance of the conspiracy,” Whitfield v. United States, 543 U.S. 209, 219
-10-
(2005), 5 proof of overt acts can be useful for other purposes. For example, they
can be useful in “(1) showing that a conspiracy begun more than five years before
the return of an indictment continued into a period within the statute of
limitations; [or] (2) showing that a particular defendant knowingly joined (or
remained a member of) a conspiracy.” Green, 599 F.3d at 372. Similarly,
evidence of withdrawal can “have some limited uses such as . . . start[ing] the
running of the statute of limitations.” United States v. Williams, 374 F.3d 941,
950 n.11 (10th Cir. 2004).
Therefore, we will consider Mr. Thornburgh’s arguments about his
withdrawal, including evidence of overt acts occurring after the date he claims he
withdrew, because he claims they show that the statute of limitations had expired
by the time he was indicted. In considering these arguments, “[o]ur review is de
novo as to the sufficiency of the evidence and denial of a motion for judgment of
acquittal.” United States v. Smith, 2011 WL 1367032, at *4 (10th Cir. April 12,
2011). We view the evidence in the light most favorable to upholding the verdict
5
Other cases support the proposition that these conspiracies do not require
proof of overt acts to establish guilt. See United States v. Green, 599 F.3d 360,
372 (4th Cir.) (‘We are mindful that . . . a money laundering conspiracy does not
require proof of an overt act.”), cert. denied, 131 S. Ct. 271 (2010), and Boyd v.
United States, 131 S. Ct. 340 (2010). We recently stated, in the unpublished
decision relating to Mr. Searles (one of Mr. Fishman’s co-conspirators) that
“[u]nder §§ 1349 (Count One) and 1956(h) (Count Two), it is not necessary for
the government to allege that an overt act occurred within the limitations period.”
Searles, 2009 WL 302306, at *3 (citing Whitfield, 543 U.S. 209 (holding that
criminal conspiracies modeled after the Sherman Act, 15 U.S.C. § 1, rather than
18 U.S.C. § 371, do not require proof of an overt act to obtain conviction)).
-11-
as we ascertain whether any rational jury could have found the defendant guilty
beyond a reasonable doubt. We do not weigh the evidence, nor do we make
determinations of witness credibility. “[W]e merely ask whether a rational trier
of fact could find each element of the offense charged viewing that evidence in
the light most favorable to the government.” Id.“[T]he defense of termination by withdrawal requires that the defendant
show that he or she has done ‘some act to disavow or defeat the purpose’ of the
conspiracy.” United States v. Gonzalez, 596 F.3d 1228, 1234 (10th Cir.) (quoting
Cherry, 217 F.3d at 817-18 (quoting Hyde v. United States, 225 U.S. 347, 369
(1912))), cert. denied, 131 S. Ct. 172 (2010). Communicating one’s withdrawal
from a conspiracy is not overly difficult: it can be accomplished by affirmative
actions “inconsistent with the object of the conspiracy and communicated in a
manner reasonably calculated to reach co-conspirators.” United States v. United
States Gypsum Co., 438 U.S. 422, 464-65 (1978).
Mr. Thornburgh claims he withdrew from the conspiracy no later than
July 23, 2002. The government claims he continued to participate in the
conspiracy, although he no longer communicated with Mr. Searles; rather, both
Mr. Thornburgh and Mr. Searles continued to participate in the conspiracy
-12-
through Mr. Fishman. Both parties quote transcripts of trial testimony to support
their positions. 6
Mr. Thornburgh quotes from the following testimony of co-conspirator Mr.
Searles:
Q. Now, in your testimony, you alluded to the year 2002, and you
made mention that at some point during that year, you and Mr. Thornburgh
went your separate ways; is that correct?
A. July 23 rd, yes.
Q. Why did you center on the date July 23 rd?
A. That’s the day he wrote a letter and ended the thing.
....
Q. That was on July 23rd, 2002 . . . .
A. Yes.
....
Q. And you accepted that as notice that you and he were no
longer going to do business together?
A. I accepted that, that he was serious, that he meant it.
Tr. of Trial Proceedings, Fishman Record, Vol. 3, Part 8 at 1379-80. The
government responds that the only change after July 23, 2002, was that
Mr. Thornburgh and Mr. Searles stopped talking to each other and, instead,
worked with Mr. Fishman as their “mediator.” The government accordingly cites
the testimony of Mr. Searles and three investors, all of whom testified about
6
As indicated above, Mr. Thornburgh and Mr. Fishman were tried together.
While each of them provided a separate record for their appeals, the bulk of the
trial transcript is contained in Mr. Fishman’s appellate record. We will identify
any citations to Mr. Fishman’s appellate record if we cite therefrom.
-13-
continued interactions and dealings with Mr. Thornburgh after July 23, 2002.
Mr. Searles described the situation as follows:
Q. Okay. So is there, then, a falling-out between you and
Mr. Thornburgh?
A. Yes.
Q. And when that falling-out takes place, where does Mr. Fishman
land?
A. I guess in the middle. He’s still doing business with both of us,
as far as I know.
Q. All right. And are you still making contact with the investors,
the American investors?
A. Yes.
Q. To your knowledge, is Mr. Thornburgh still making contact with
those American investors?
A. I don’t know. Some of them told me they had tried to reach him.
Some of them told me they had reached him. . . .
....
Q. And did you do anything in writing with [the] American
investors? Bringing ourselves up to March of ‘03.
A. Yes.
Q. What did you do?
A. As time is progressing on, by December [2002], I’m beginning to
get written demands to me with some of these American investors to get
back their money. So by January, the pressure is building. So I told
Mr. Fishman . . . something has got to happen. So he said, well,
Mr. Thornburgh has entered into a hold harmless agreement with someone,
and . . . I think this will help you . . . .
....
So he sent me a copy of the document he had drawn up for Mr. Thornburgh.
So I took that document, and I revised it for my own needs with my 15
investors, and I sent it to Mr. Fishman. And he critiqued it for me and sent
it back to me. And I executed it with the 15 people. And basically, I said,
if I give you back your money, I don’t owe you anything else.
Id. at 1266, 1269.
-14-
The government also cites testimony from a number of investors, including
Marsha Longaberger, Jeff Hayslett and Dr. Wayne Maltz, who all described
discrete “overt acts” by Mr. Thornburgh after the time he claimed to have
withdrawn. Investor Marsha Longaberger described interactions with Mr.
Thornburgh in March and April 2003, relating to her investment, including Mr.
Thornburgh’s request in April that she lie to the postal inspector investigating the
Caribou conspiracy. Jeff Hayslett testified that in May 2003, Mr. Thornburgh
presented a document to Mr. Hayslett, explaining that “Thornburgh’s portfolio
manager is now able to provide a line of credit on the bonds, which will result in
profits from the joint venture [i.e., the Caribou scheme].” Tr. of Trial
Proceedings, Fishman Record, Vol. 3, Part 7 at 968. Furthermore, Mr. Hayslett
testified that Mr. Thornburgh convinced him in August 2003 to make yet another
bond investment, in a purportedly different type of bond (the Chinese bonds).
Additionally, Dr. Wayne Maltz testified that, in late 2002, on numerous occasions
in 2003, and on a few occasions in 2004 and 2005, he had, at Mr. Thornburgh’s
request, paid for Mr. Thornburgh’s living expenses and hotel bills incurred while
Mr. Thornburgh was in Europe allegedly following through on the bond
investments. Some of these payments were characterized by Mr. Thornburgh as
necessary to keep the whole bond enterprise afloat. Additionally, Dr. Maltz
stated that, in June 2005, Mr. Thornburgh had approached him about further bond
-15-
investments (the Chinese bonds). Investors Henry Pham and David Franco
testified as to contact with Mr. Thornburgh in 2003 and 2004.
Based on the above testimony, the jury could easily determine that while
Mr. Thornburgh may have decided not to deal directly with Mr. Searles after
July 23, 2002, he remained active in the Caribou bond conspiracy well into 2005.
Furthermore, and significantly, the district court specifically submitted to the jury
the question of whether Mr. Thornburgh withdrew from the conspiracy before
November 30, 2002 (five years before the indictment was filed). The jury
obviously rejected this defense. As indicated above, our own review of the
evidence amply supports the jury’s determination. Accordingly, the statute of
limitations affords Mr. Thornburgh no defense.
II. “Proceeds” of Money-Laundering and Santos
The federal money-laundering statute which Mr. Thornburgh conspired to
violate prohibits various activities involving criminal “proceeds.” See 18 U.S.C.
§ 1956(a)(1)(A)(i). 7 Since “proceeds” was undefined, the Supreme Court
7
The relevant money laundering statute, 18 U.S.C. § 1956(a)(1), stated as
follows at all times relevant to this case:
Whoever, knowing that the property involved in a financial
transaction represents the proceeds of some form of unlawful
activity, conducts or attempts to conduct such a financial transaction
which in fact involves the proceeds of specified unlawful activity . . .
(A)(i) with the intent to promote the carrying on of specified
(continued...)
-16-
attempted to provide some guidance in United States v. Santos, 553 U.S. 507(2008), decided prior to Mr. Thornburgh’s trial. The question in Santos was what
are “proceeds” in the context of an illegal gambling operation. In a divided 4-1-4
decision, the plurality and concurring opinions collectively held that, at least in
the context of an illegal gambling operation, “proceeds” means “profits” rather
than “gross receipts” for purposes of the money-laundering statute. See id. at 514(plurality opinion); id. at 528 & n.7 (Stevens, J. concurring in judgment).
Mr. Thornburgh made no argument about Santos in the district court. He
also failed to object to the district court’s jury instructions which used the term
“proceeds” and then stated that “‘proceeds’ can be any kind of property, not just
money.” Jury Instructions at 80. Now, however, in reliance on Santos, he argues
that the government was obligated to prove that profits from the mail and wire
fraud were laundered, not just receipts or gross receipts. He further argues that
7
(...continued)
unlawful activity . . . shall be sentenced to a fine of not more than
$500,000 or twice the value of the property involved in the
transaction, whichever is greater, or imprisonment for not more than
twenty years, or both.
The statute has since been amended (in 2009) so that “proceeds” is now defined
as “any property derived from or obtained or retained, directly or indirectly,
through some form of unlawful activity, including the gross receipts of such
activity.” 18 U.S.C. § 1956(c)(9). But because all the relevant activities in this
case occurred before 2009, we apply the old version of the money laundering
statute.
-17-
proof of profits was neither pled nor proven, and that the district court’s jury
instructions were erroneous because they did not require proof of profits.
Because Mr. Thornburgh did not challenge the definition of “proceeds” in
the district court, we review this issue for plain error only. See United States v.
Pablo, 625 F.3d 1285, 1301-02 (10th Cir. 2010), petition for cert. filed, No. 10-
9789 (March 31, 2011); see also Searles, 2011 WL 488750 (Mr. Thornburgh’s co-
defendant making the identical Santos argument). “Plain error occurs when there
is (1) error, (2) that is plain, which (3) affects substantial rights, and which (4)
seriously affects the fairness, integrity, or public reputation of judicial
proceedings.” United States v. Gonzalez-Huerta, 403 F.3d 727, 732 (10th Cir.
2005) (en banc) (internal quotation marks omitted). An error is “plain” if it is
“clear or obvious” under “current, well-settled law.” United States v. Whitney,
229 F.3d 1296, 1308-09 (10th Cir. 2000). “In general, for an error to be contrary
to well-settled law, either the Supreme Court or this court must have addressed
the issue.” United States v. Ruiz-Gea, 340 F.3d 1181, 1187 (10th Cir. 2003).
Santos has caused considerable disagreement and confusion among the
circuit courts of appeal. As we observed in Searles, “[t]he only thing that is
‘clear and obvious’ about the 4-1-4 Santos decision is that it ‘raises as many
issues as it resolves for the lower courts.’” Searles, 2011 WL 488750, at *2
(quoting United States v. Brown, 553 F.3d 768, 783 (5th Cir. 2008)). See United
States v. Halstead, 634 F.3d 270, 276-77 (4th Cir. 2011) (noting the “division
-18-
among the courts of appeal” and observing that there “are perhaps three groups
into which the courts of appeals’ decisions [interpreting Santos] might be
placed”).
Some courts have held that the five justices in the Santos majority agreed
that the term “proceeds” means “net profits” only in the context of an illegal
gambling enterprise. See United States v. Spencer, 592 F.3d 866, 879 (8th Cir.
2010); United States v. Howard, 309 Fed. Appx. 760 (4th Cir.) (unpublished),
cert. denied, 130 S. Ct. 62 (2009); see also United States v. Demarest, 570 F.3d
1232, 1241-42 (11th Cir.), cert. denied, 130 S. Ct. 421 (2009) (holding that it was
not plain error to limit Santos to illegal gambling cases); United States v. Bueno,
585 F.3d 847, 850 (5th Cir. 2009), cert. denied, 130 S. Ct. 2359 (2010) (same).
Another group of courts has noted that both the plurality and Justice
Stevens “were concerned that the same underlying transactions could support a
violation of both the predicate offense and money laundering, the so-called
‘merger problem.’” Halstead, 634 F.3d at 277. These courts conclude that
whenever there is a merger problem, the term “proceeds” should be defined as
“net profits,” and when no merger problem is present, the term “proceeds” should
be defined as “gross receipts.” See United States v. Van Alstyne, 584 F.3d 803,
814 (9th Cir. 2009); United States v. Bucci, 582 F.3d 108, 123-24 (1st Cir. 2009)
(suggesting in dicta that this interpretation is correct).
-19-
Yet another group of courts acknowledge the merger problem but also note
that Justice Stevens relied on the absence of legislative history to conclude that
proceeds from an illegal gambling enterprise should mean net profits. Thus, they
conclude that proceeds for money laundering purposes means “gross receipts”
unless there is either a merger issue or the legislative history of the money
laundering statute indicates that the “net profits” definition is the appropriate one
for the particular predicate crime. See Garland v. Roy, 615 F.3d 391, 401-02 (5th
Cir. 2010) (holding that courts must consider both merger issues and legislative
history); United States v. Kratt, 579 F.3d 558, 562 (6th Cir. 2009) (holding that
courts must look at both legislative history and the merger issue, including
whether the merger issue “leads to a radical increase in the statutory maximum
sentence”); see also United States v. Yusuf, 536 F.3d 178, 186 n.12 (3d Cir. 2008)
(holding that Justice Stevens’ concurrence rested on the narrow grounds that
proceeds means net profits when there is no contrary legislative history); United
States v. Lee, 558 F.3d 638, 642-43 (7th Cir. 2009) (same).
Halstead, one of the more recent circuit courts to address this question,
“read Santos to hold that when a merger problem arises in the context of money
laundering and illegal gambling, the required solution is to define the proceeds of
the illegal gambling business as its net profits.” Halstead, 634 F.3d at 279. When
a merger problem arises in the context of money laundering and any other
-20-
predicate illegal activity, a case-by-case approach is required, which the court left
to another day, but if a merger problem is present, it must be eradicated. Id.Our court has recently been confronted with the application of plain error
to a Santos issue. See United States v. Parra, 2011 WL 728088 (10th Cir.
March 3, 2011) (unpublished); Searles, 2011 WL 488750. In those cases, we
declined to find a plain error, noting that, in view of the “confusion created by
Santos, and the lack of guidance from our circuit, the district court did not
commit plain error in its disposition of [the defendant’s] case.” Searles, 2011 WL
488750, at *3; see also Parra, 2011 WL 728088, at *5 (“Given the lack of clear
authority on the scope of Santos, we cannot say that the district court committed a
clear and obvious error by failing to require a showing that the transaction at
issue involved profits and not merely gross revenues.”).
Against the foregoing background of case law, we can resolve the jury
instruction issue presented to us at either of the first two plain error factors.
First, as in Fishman, we confine it to its factual setting, and conclude that
“proceeds” means “profits” for the purpose of the money laundering statute only
where an illegal gambling operation is involved. Second, and alternatively,
assuming that Santos dictates that it was error in this case to not require proof of
profits, that error cannot be plain, in view of the widely differing interpretations
of Santos. See Parra, 2011 WL 728088; Searles, 2011 WL 488750. We therefore
conclude that the district court did not err when, in its instructions to the jury, it
-21-
failed to define “proceeds” as “profits” in connection with the Caribou
conspiracy.
III. Co-Conspirator Statements
Mr. Thornburgh argues that he withdrew from the conspiracy on July 23,
2002, so it was error to admit statements made by his co-conspirators after that
date. Because we have already concluded that there was ample evidence
supporting the jury’s finding that Mr. Thornburgh did not withdraw from the
conspiracy, that argument has no merit.
He also argues that the district court did not follow the proper procedure
before admitting statements by co-conspirators at trial. Mr. Thornburgh moved
before trial for a “pretrial hearing, pursuant to United States v. James, 590 F.2d
575 (5th Cir.), cert. denied, 442 U.S. 917 (1979), on the admissibility of co-
conspirator hearsay.” Jt. Mot. & Mem. Requesting Pretrial Hr’g to Determine
Admissibility of Co-Conspirator Hearsay. R. Vol. 1 at 102. The district court
denied the motion, stating that it would “follow its standard practice and consider
the admissibility of co-conspirator statements at trial.” Order at 15, R. Vol. 1 at
236. It further instructed the government to “request a hearing outside of the
presence of the jury” where the court would “make specific findings as to whether
the government has established the existence of a conspiracy by a preponderance
of the evidence,” such that co-conspirator hearsay statements could be admitted.
-22-
Id. Apparently, the government made no such requests at trial, and Mr.
Thornburgh made no further objections to the admission of statements by his co-
conspirators.
“‘Hearsay’ is a statement, other than one made by the declarant while
testifying at the trial or hearing, offered in evidence to prove the truth of the
matter asserted.” United States v. Lewis, 594 F.3d 1270, 1282 (10th Cir.)
(quoting Fed. R. Evid. 801(c)), cert. denied, 130 S. Ct. 3441 (2010). Under Rule
801(d)(2)(E), a statement by a co-conspirator is not considered hearsay if the
court finds that “1) a conspiracy existed; 2) both the declarant and the defendant
against whom the declaration is offered were members of the conspiracy; and 3)
the statement was made in the course of and in furtherance of the conspiracy.”
United States v. Eads, 191 F.3d 1206, 1210 (10th Cir. 1999) (further quotation
omitted). Thus, at some point in any trial before such statements can be admitted,
the government must establish the existence of a conspiracy.
The problem with Mr. Thornburgh’s argument here is that he fails to
identify any specific statement which he claims was improperly admitted, thereby
making it impossible for us to determine whether the statement was admissible or
not. He merely lists a string of witness names, but nothing more. As we recently
noted in a case presenting the same argument, Mr. Thornburgh “may be correct
that the district court never made findings necessary to admit under the
coconspirator rule [co-conspirator statements] . . . [b]ut the evidence would be
-23-
admissible anyway if it was not offered for the truth of the matters asserted.”
Lewis, 594 F.3d at 1284. The problem is that “[d]etermining whether a
coconspirator’s statement is being offered for the truth of the matter asserted
often requires careful consideration of both the context of the statement in the
coconspirator’s conversation and the relevance of the statement to the trial.” Id.By failing to specify which statements he claims were improperly admitted, Mr.
Thornburgh’s brief completely fails to develop this argument. Fed. R. App. P.
28(a) states that “[t]he appellant’s brief must contain . . . the argument, which
must contain: . . . appellant’s contentions and the reasons for them, with citations
to the authorities and parts of the record on which the appellant relies.” Fed. R.
App. P. 28(a)(9)(A) (emphasis added). Mr. Thornburgh’s brief completely fails
to develop this argument; we therefore do not address it further.
IV. Ex Post Facto/Due Process Problem
This argument also depends on Mr. Thornburgh’s contention that he
withdrew from the conspiracy no later than July 23, 2002. Because one of the
statutes of conviction, 18 U.S.C. § 1349, did not go into effect until July 30,
2002, Mr. Thornburgh argues it is a violation of the Ex Post Facto clause to
convict him on the basis of conduct which occurred before the statute went into
effect. No party asked for a limiting instruction to the jury about this unusual
situation and none was given. This issue was not otherwise raised in the district
-24-
court, so we review only for plain error. As indicated above, an error is plain if it
affects substantial rights and seriously undermines the fairness, integrity or public
reputation of judicial proceedings. “[I]t is the defendant rather than the
government who bears the burden of persuasion with respect to prejudice.”
United States v. Olano, 507 U.S. 725, 734 (1993).
We begin by noting that the Supreme Court has recently clarified the nature
of this claimed constitutional violation. In United States v. Marcus, 130 S. Ct.
2159 (2010), there was a situation similar to our case, in that the defendant had
been convicted of conduct (violation of the sex trafficking and forced labor
statutes) occurring both before and after the effective date of the statutes making
that conduct illegal. The defendant had not objected to the district court’s failure
to address this issue, by means of a jury instruction or some other means, so
appellate review by the Second Circuit and the Supreme Court was for plain error.
The Second Circuit, as well as the defendant, had characterized this issue
as an Ex Post Facto Clause violation. The Supreme Court disagreed with that
characterization, stating that it actually presents a due process question: “[I]f the
jury, which was not instructed about the [statute’s] enactment date, erroneously
convicted [defendant] based exclusively on noncriminal, preenactment conduct,
[defendant] would have a valid due process claim.” Id. at 2165. 8
8
The Court explained why the Ex Post Facto Clause is not involved: “‘The
Ex Post Facto Clause is a limitation upon the powers of the Legislature, and does
(continued...)
-25-
Examining the familiar plain error standard, the Supreme Court stated there
was “no reason why this kind of error would automatically ‘affect substantial
rights’ without a showing of individual prejudice.” Id. The Court therefore
remanded the case back to the Second Circuit, where it could apply the plain error
standard to the facts of that case, following the Supreme Court’s guidance.
On remand, the Second Circuit applied the plain error test and, at the third
step of the analysis (whether the error affected the appellant’s substantial rights),
the court required the appellant to “demonstrate that the error was prejudicial,”
noting that ordinarily, an error is prejudicial “where there is a reasonable
probability that the error affected the outcome of the trial.” United States v.
Marcus, 628 F.3d 36, 42 (2nd Cir. 2010) (further quotation omitted).
The Second Circuit found, with respect to the forced labor statute, that
there was “no reasonable probability that the jury would have acquitted
[defendant] absent the error.” Id. There were two reasons for that conclusion.
First, “the Government presented post-enactment evidence sufficient to satisfy the
elements of the forced labor statute.” Id. Second, the court found “no reasoned
basis to differentiate between [defendant’s] pre- and post-enactment conduct, and
[it] f[ou]nd no reason to presume that the jury did so.” Id. at 43. Additionally,
the defendant himself offered no explanation of how his pre- and post-enactment
8
(...continued)
not of its own force apply to the Judicial Branch of government.’” Marcus, 130
S. Ct. at 2165 (quoting Marks v. United States, 430 U.S. 188, 191 (1977)).
-26-
conduct differed in such a way as to create a reasonable probability that the jury
would not have convicted him without the due process error.
The Second Circuit vacated the sex trafficking conviction, however,
stating:
Unlike with the forced labor charge, the conduct supporting the sex
trafficking charge differed materially before and after [the date of
enactment], such that there is a reasonable probability that the
erroneous jury charge affected the outcome of the trial and affected
the fairness, integrity or public reputation of the proceedings.
Id. at 44. We apply that analysis to Mr. Thornburgh’s due process argument.
Mr. Thornburgh’s argument is spartan when it comes to identifying what
acts occurred pre- and post-enactment. He simply states, “[t]he volume and
frequency of the mention of pre-enactment conduct combine to make very likely
the jury found guilt based on such conduct. Almost all of the Government’s
witnesses testified about pre-enactment conduct.” Appellant’s Opening Br. at 18.
The government concedes it was error for the district court to fail to
instruct the jury on the fact that § 1349 did not come into effect until July 30,
2002. We agree that is an error, which is plain. We must next determine, as did
the Second Circuit in Marcus, whether that error was prejudicial because there is
a reasonable probability that the error affected the outcome of the trial. As in
Marcus, so too in this case, the government presented “post-enactment evidence
sufficient to satisfy the elements of” the conspiracy-to-commit-wire/mail-fraud
statute. Marcus, 628 F.3d at 42.
-27-
Additionally, we consider whether there is a “reasoned basis to differentiate
between [Mr. Thornburgh’s] pre- and post-enactment conduct.” Id. at 43. The
evidence outlined above provides no such basis. Nor does Mr. Thornburgh
provide us with such a basis except for a reference as to the volume of his
activities. But we have no reason to presume that the jury differentiated between
the two and convicted him on the basis of the volume of pre-enactment conduct
only.
In short, while it may have been an error for the district court to have failed
to specifically instruct the jury that § 1349 was not effective until part way
through the conspiracy, perhaps even a plain error, that error did not affect
Mr. Thornburgh’s substantial rights, nor did it affect the fairness of the
proceedings. There was substantial evidence that the conspiracy continued long
after § 1349 went into affect. There was therefore no due process violation in
Mr. Thornburgh’s trial.
V. Severance
Mr. Thornburgh’s next argument is that the district court should have sua
sponte severed his trial from Mr. Fishman’s because they were employing
different and conflicting defenses. Because this issue was not raised below, our
review is for plain error, employing the tests set out above.
-28-
Mr. Thornburgh claims that his defense was primarily that he withdrew
from the conspiracy in time for the statute of limitations to insulate him from
liability. He argues that Mr. Fishman’s defense was that he had acted in good
faith and therefore had not committed a crime. Mr. Thornburgh baldly asserts
that these defenses are inconsistent, but he fails to explain why. We have held
that, in considering whether to grant a motion to sever, the trial court must
“determine whether the defenses are ‘so antagonistic that they are mutually
exclusive.’” United States v. Pursley, 474 F.3d 757, 765 (10th Cir. 2007)
(quoting United States v. Peveto, 881 F.2d 844, 857 (10th Cir. 1989)).
Furthermore, “because mutually antagonistic defenses are not prejudicial per se, a
defendant must . . . show a serious risk that a joint trial would compromise a
specific trial right . . . or prevent the jury from making a reliable judgment about
guilt or innocence.” Id. (internal quotations and alterations omitted). Mr.
Thornburgh fails to identify a specific trial right or explain how the claimed
conflict between his defensive strategy and Mr. Fishman’s strategy prevented the
jury from making a reliable judgment about his guilt.
Furthermore, both Mr. Thornburgh and Mr. Fishman pursued both defenses.
And, they both requested and received a withdrawal-from-the-conspiracy
instruction and a good faith defense instruction. We accordingly can discern no
plain error.
-29-
VI. Recess
Mr. Thornburgh next argues that the district court should have ordered a
recess on the two occasions where Mr. Thornburgh was excused from attendance
so that he could receive medical care. Mr. Thornburgh, however, clearly waived
his right to be present on the day or days that he was absent. 9 He may not now
claim “error” as a result of something he both clearly waived and also invited.
The facts surrounding this issue are as follows: At one point during his
trial, Mr. Thornburgh’s attorney advised the court that Mr. Thornburgh had a
“medical situation” and that he had “been advised that he needs to seek medical
attention.” Tr. of Jury Trial, Fishman R. Vol. 3, Part 6 at 725. When the court
inquired if Mr. Thornburgh wished to go to the Oklahoma Heart Institute, his
attorney stated that he had discussed the situation with Mr. Thornburgh, and they
had decided that “today would be [a] good time for him to seek medical attention,
maybe get better, so that he can return to court in a healthy role, where he may
even be more needed to confront the witnesses.” Id. at 726. The parties then
agreed on the language to be used to instruct the jury about Mr. Thornburgh’s
absence, and Mr. Thornburgh left to receive medical treatment.
The transcript reveals that the district court was very solicitous of Mr.
Thornburgh and made it very clear that Mr. Thornburgh’s absence was voluntary.
9
It is unclear exactly how much time Mr. Thornburgh was absent from the
court for medical tests. It appears to have been for some indeterminate time on
two occasions.
-30-
Furthermore, Mr. Thornburgh’s counsel not only did not move for a continuance,
he expressly stated to the court that he thought it best for his client for the trial to
continue without interruption. Thus, the court committed no error in permitting
Mr. Thornburgh to leave for a short time to attend to his health issues.
VII. Receipt of PSR
Mr. Thornburgh’s final argument is that “[w]hile there is some evidence to
suggest otherwise . . . , Mr. Thornburgh argues that he did not receive his
Presentence Investigation Report in a timely manner.” Principal Br. of Appellant
at 21. There is indeed evidence to suggest otherwise. At his sentencing hearing,
the court specifically asked defense counsel if he “had timely receipt of the
Presentence Report?” Tr. of Sentencing Hr’g at 3, R. Vol. 2, Part 1 at 200.
Mr. Thornburgh indicated he had received it, and, furthermore, had no objections,
corrections or changes. That disposes of this issue.
CONCLUSION
For the foregoing reasons, the conviction of Mr. Thornburgh is
AFFIRMED. As indicated above, any pending motions have been denied.
-31-