United States v. Brennan

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
4-7-2003
USA v. Brennan
Precedential or Non-Precedential: Precedential
Docket 01-3148
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2003
Recommended Citation
"USA v. Brennan" (2003). 2003 Decisions. Paper 598.
http://digitalcommons.law.villanova.edu/thirdcircuit_2003/598
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2003 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
PRECEDENTIAL
Filed April 7, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-3148
UNITED STATES OF AMERICA
v.
ROBERT E. BRENNAN,
Appellant
On Appeal From the United States District Court
For the District of New Jersey
(Crim. No. 00-cr-490)
District Judge: Honorable Garrett E. Brown, Jr.
Argued January 9, 2003
Before: SCIRICA, BARRY and SMITH, Circuit Judges
(Opinion Filed: April 7, 2003)
Lisa Van Hoeck, Esq. [Argued]
Office of Federal Public Defender
22 South Clinton Avenue
Station Plaza No. 4, Fourth Floor
Trenton, New Jersey 08609
Counsel for Appellant,
Robert Brennan
2
George S. Leone
Office of United States Attorney
970 Broad Street, Room 700
Newark, New Jersey 07102-2535
Glenn J. Moramarco [Argued]
Office of United States Attorney
Camden Federal Building &
Courthouse
401 Market Street
P.O. Box 2098, 4th Floor
Camden, New Jersey 08101
Counsel for Appellee,
United States of America
OPINION OF THE COURT
SMITH, Circuit Judge:
I. Introduction
A jury convicted appellant Robert E. Brennan of seven
counts of money laundering and bankruptcy fraud on April
11, 2001. On appeal, Brennan contends that this
conviction should be reversed because of certain trial
errors. He also asserts that the District Court made several
sentencing errors. For the reasons set forth below, we will
affirm.
II. Facts and Procedural History
Robert Brennan has a long history of improper and
fraudulent activities in the securities industry. In 1974, he
was suspended from selling mutual funds when his
improper activities were brought to the attention of the
Securities and Exchange Commission (“SEC”). Brennan
later founded First Jersey Securities, Inc. (“First Jersey”)
which served as a brokerage and underwriter. The SEC
brought administrative proceedings against Brennan and
First Jersey for violation of federal securities laws in 1978
and sought injunctive relief in 1983. These proceedings
were settled, but on October 31, 1985 the SEC once again
sued Brennan and First Jersey for new fraudulent market
3
activities and stock manipulation. This suit was pending for
almost ten years. Finally, on July 14, 1995, the United
States District Court for the Southern District of New York
entered judgment against Brennan and First Jersey, and
ordered that they discharge $22,288,099 in profits gained
from their fraudulent activity and pay prejudgment interest
in the amount of $52,689,894. SEC v. First Jersey
Securities, Inc., 890 F. Supp. 1185 (S.D.N.Y. 1995), aff ’d in
part, rev’d in part, 101 F.3d 1450 (2d Cir. 1996).
Just one month before the adverse ruling, in June of
1995, Brennan met in New Jersey with Peter Bond, the
Chief Executive of Valmet Group (“Valmet”), a company
based in the Isle of Man which advised and assisted
individuals in shielding their assets from potential
creditors. Brennan delivered to Bond a briefcase full of New
York State and New York City bearer bonds with a total
face value of $3,975,000.00, and asked him to use the
bonds to set up a “dummy” trust which would identify
someone other than Brennan as the settlor. Bond flew back
to the Isle of Man with the bonds, and upon return, placed
them in a cabinet in his office.
On August 7, 1995, a few weeks after the judgment was
entered in the Southern District of New York, Brennan filed
for bankruptcy protection in the United States Bankruptcy
Court for the District of New Jersey under Chapter 11 of
the Bankruptcy Code. Brennan failed to disclose his
ownership of the bearer bonds in his bankruptcy petition or
the attached schedules. On September 4, 1995, while in
Las Vegas, Nevada, Brennan cashed in approximately
$500,000 in casino gaming chips at the Mirage hotel. Then,
in October of 1995, he directed Bond to cash in the bearer
bonds. The proceeds from the sale of these bonds were later
invested in various entities at Brennan’s direction.
As a debtor in possession,1 Brennan had an obligation to
file monthly operating reports with the Bankruptcy Court.
He failed to disclose the transactions involving the bearer
bonds, as well as the casino chips and the cash received in
1. In a Chapter 11 bankruptcy, unless a trustee is appointed, the debtor
is a “debtor in possession” and has the same powers and duties as a
trustee. See 11 U.S.C. §1107(a).
4
exchange for his casino chips, in reports filed for the
months of August, 1995 through June, 1997. Nor did he
list these assets in any of the three amended schedules he
filed between August and September of 1995.
On July 19, 2000, Brennan was indicted on charges that
he concealed from the Bankruptcy Court the approximately
$500,000 in casino gaming chips and the cash received in
exchange for those gaming chips. The Government brought
a first superceding indictment on November 1, 2000, which
contained additional counts of bankruptcy fraud charging
the concealment of the approximately $4 million in bearer
bonds, together with charges of money laundering. A
second superceding indictment was filed on December 20,
2000 and a third superceding indictment, containing
thirteen counts, was filed on January 24, 2001. Brennan’s
bankruptcy proceeding was still ongoing at the time this
last indictment was filed.
On April 16, 2001, a jury convicted Brennan of seven of
the thirteen counts. United States v. Brennan, Crim. No.
00-490 (D.N.J. April 16, 2001). The jury found Brennan
guilty of four counts of illegally laundering the proceeds of
bearer bonds that he owned, in violation of 18 U.S.C.
§ 1956(a)(1)(B)(i), two counts of bankruptcy fraud for his
failure to declare the bearer bonds in his bankruptcy
proceeding, in violation of 18 U.S.C. § 152(1) and (3), and
one count of bankruptcy fraud for his failure to include the
$500,000 in cash he received for the casino chips in his
September financial report, in violation of 18 U.S.C.
§ 152(3).
Brennan filed a motion for a new trial under Fed. R.
Crim. P. 33, which the District Court denied on June 22,
2001. On July 26, 2001, the District Court sentenced
Brennan to 110 months imprisonment and a five year term
of supervised release. Judgment was entered on July 31,
2001.
On appeal, Brennan asserts that the convictions should
be reversed because: (1) there was prosecutorial
misconduct during closing arguments; (2) the weight of the
evidence failed to support his convictions; and (3) there was
a coercive supplemental charge following a report by the
5
jury that it was deadlocked. In addition, Brennan contends
that the District Court made three sentencing errors: (1) in
calculating the amount of the loss; (2) in applying the fraud
enhancement in U.S. Sentencing Guidelines Manual
§ 2F1.1(b)(4)(B) (Nov. 2000); and (3) in assessing a two-point
enhancement for obstruction of justice pursuant to U.S.
Sentencing Guidelines Manual § 3C1.1.
III. Jurisdiction
The District Court had jurisdiction pursuant to 18 U.S.C.
§ 3231. We have jurisdiction over the appeal pursuant to 28
U.S.C. § 1291 and 18 U.S.C. § 3742(a).
IV. Prosecutorial Misconduct in the Closing Statement
Brennan asserts that the prosecution made several
improper and prejudicial comments in its closing and that
it vouched for the credibility of its key witness, Peter Bond.
Brennan also contends that the prosecutor improperly
argued that Brennan had an obligation to produce evidence
and commented on Brennan’s failure to testify.
We review the District Court’s ruling on any
contemporaneous objections for abuse of discretion. See
United States v. Brown, 254 F.3d 454, 458 (3d Cir. 2001),
cert. denied, 535 U.S. 944 (2002). A finding of prosecutorial
misconduct requires reversal unless the error is harmless.
See Fed. R. Crim. P. 52(a); United States v. Zehrbach, 47
F.3d 1252, 1265 (3d Cir. 1995) (en banc). Any non-
contemporaneous objections are subject to plain error
review.2 See Fed. R. Crim. P. 52(b); United States v. Olano,
2. Federal Rule of Criminal Procedure 52(b) provides that “plain errors or
defects affecting substantial rights may be noticed although they were
not brought to the attention of the court.” Fed. R. Crim. P. 52(b).
Accordingly, there must be an “error” which is “plain” and that “affects
substantial rights.” United States v. Olano, 507 U.S. 725, 732 (1993).
“Affecting substantial rights” means that the error must have been
prejudicial to the defendant and have affected the outcome of the district
court proceeding. Id. at 734. The decision to correct the forfeited error is
“within the sound discretion of the court of appeals, and the court
should not exercise that discretion unless the error ‘seriously affect[s]
the fairness, integrity or public reputation of judicial proceedings.’ ” Id.(quoting United States v. Young, 470 U.S. 1, 15 (1985)).
6
507 U.S. 725, 731-32 (1993). “In order to demonstrate
prosecutorial misconduct under a plain error standard, the
review must reveal ‘egregious error or a manifest
miscarriage of justice.’ ” Brown, 254 F.3d at 458 (quoting
United States v. Price, 76 F.3d 526, 530 (3d Cir. 1996)).
A. Vouching
In United States v. Young, 470 U.S. 1, 11 (1985), the
Supreme Court reiterated that “a criminal conviction is not
to be lightly overturned on the basis of a prosecutor’s
comments standing alone, for the statements or conduct
must be viewed in context; only by so doing can it be
determined whether the prosecutor’s conduct affected the
fairness of the trial.” The Court explained:
The prosecutor’s vouching for the credibility of
witnesses and expressing his personal opinion
concerning the guilt of the accused pose two dangers:
such comments can convey the impression that
evidence not presented to the jury, but known to the
prosecutor, supports the charges against the defendant
and can thus jeopardize the defendant’s right to be
tried solely on the basis of the evidence presented to
the jury; and the prosecutor’s opinion carries with it
the imprimatur of the Government and may induce the
jury to trust the Government’s judgment rather than
its own view of the evidence.
Id. at 18-19 (citing Berger v. United States, 295 U.S. 78, 88-
89 (1935)). In United States v. Walker, 155 F.3d 180 (3d
Cir. 1998), we extensively reviewed our caselaw regarding
vouching, observing that
two criteria must be met [to find vouching]: (1) the
prosecutor must assure the jury that the testimony of
a Government witness is credible; and (2) this
assurance is based on either the prosecutor’s personal
knowledge, or other information not contained in the
record. . . . The defendant must be able to identify as
the basis for [the prosecutor’s comment on witness
credibility] explicit or implicit reference to either the
personal knowledge of the prosecuting attorney or
information not contained in the record.
7
Id. at 187.
The Walker panel declared that a “prosecutor is engaging
in proper argument and is not vouching” when he argues
that “a witness is being truthful based on the testimony
given at trial, and does not assure the jury [of] the
credibility of the witness based on his own personal
knowledge[.]” Id. Nor is it improper, according to Walker, for
a prosecutor to comment on the “lack of evidence in the
record” to support a “defendant’s argument that the witness
is not credible . . . so long as the comment does not
constitute an assurance by the prosecutor that the witness
is credible.” Id. In other words, a “prosecutor may argue in
the negative that the assertions made by defense counsel
that a witness is lying are not supported by the testimony
in the record.” Id.Since our decision in Walker, we have had several
opportunities to revisit the vouching issue. In almost every
instance, we have held that the district court did not err in
denying a mistrial. See United States v. Milan, 304 F.3d
273, 289-90 (3d Cir. 2002); United States v. Nelson, 284
F.3d 472, 476 n.3 (3d Cir. 2002); United States v. Saada,
212 F.3d 210, 225 (3d Cir. 2000); United States v. Helbling,
209 F.3d 226, 240-41 (3d Cir. 2000) (holding that any
vouching by prosecutor was harmless error because the
judge informed the jury not to consider the relevant
comments, there was a great deal of evidence to support
the conviction and defendant was not prejudiced); cf. Lam
v. Kelchner, 304 F.3d 256, 271-72 (3d Cir. 2002) (vouching
did not so infect the trial with unfairness as to constitute
a violation of due process as is required on habeas review);
Marshall v. Hendricks, 307 F.3d 36, 65, 70 (3d Cir. 2002)
(same); Hartey v. Vaughn, 186 F.3d 367, 372-73 (3d Cir.
1999) (on habeas review, concluding that Pennsylvania
Superior Court did not act unreasonably in finding that
there had been no improper vouching).
In Milan, the defendant alleged for the first time on
appeal that the prosecutor engaged in improper vouching
by eliciting testimony on the district court’s role in
approving wiretaps, the truthfulness of cooperating
witnesses, and the prosecution of Government witnesses
before they decided to cooperate. Milan, 304 F.3d at 289-
8
90. We held that there was no plain error because the
prosecutor was not offering his personal opinion based on
facts not before the jury. Id.Similarly, in Saada, the defendant alleged for the first
time on appeal that the prosecution improperly vouched for
the credibility of its two informant witnesses by suggesting
in closing argument that the two would be entitled to a
reduced sentence in exchange for their cooperation only if
they were truthful, and that they had numerous other
crimes on which to cooperate and no motive to falsely
implicate the defendant. Saada, 212 F.3d at 225. Noting
that there was evidence introduced at trial that cooperation
agreements were in place requiring the witnesses to testify
truthfully, and also evidence that they had spent thousands
of hours cooperating with the Government on other
matters, we held that there was no plain error since the
prosecutor was not referring to evidence outside the record.
Id.After Walker, the only case in which we found improper
vouching requiring a mistrial was United States v. Dispoz-O-
Plastics, Inc., 172 F.3d 275 (3d Cir. 1999). During the
closing argument in Dispoz-O-Plastics, the prosecutor
stated, “[the Government witnesses] told the Government
they fixed prices twice and I can guarantee you the Justice
Department doesn’t give two for one deals; they had to
plead guilty to both price-fixing conspiracies and their
sentence reflected that.” 172 F.3d at 283. We concluded
that this statement was improper vouching because it was
intended to convey to the jury that the prosecutor knew the
witnesses were telling the truth when they testified about
the conspiracies. Id. Moreover, we held that the statement
did not constitute harmless error because the testimony
from the witnesses was essential to the Government’s case,
the other evidence against the defendant was not
overwhelming, and the judge failed to instruct the jury that
the prosecutor’s statement could not be considered as
evidence. Id. at 286-87.
Here, Brennan contends that the prosecutor vouched for
Bond’s credibility. To be sure, Peter Bond’s credibility was
hotly contested and vigorously challenged by the defense.
In summation, the prosecutor discussed Bond’s credibility
9
at length by pointing out that he was examined for
approximately five days on the witness stand and by
asserting that Bond “stood by what he had originally told
you. He never waivered [sic]. He never flagged. You had a
chance to look him in the eye. . . And it comes down to
credibility, you have to make the judgment.” The prosecutor
then reviewed Bond’s agreement to cooperate with the
Government and addressed the defense’s contention that
Bond was not believable. In particular, the prosecution
referred to a defense attack on Bond’s credibility which
accused him of laundering money for Russian criminals.
The prosecutor sought to meet this challenge by arguing:
Where’s the proof? Where’s the evidence? You’re going
to have a whole lot of documents that were shown to
Mr. Bond. Take as long as you need. Pass them
around. Read them from top to bottom, backwards to
forwards. And if anybody can find anything that
indicates Mr. Bond was laundering money for Russian
criminal interests, by all means disregard his
testimony. The FBI has conducted an investigation of
this matter since 1998. The FBI. And as Special Agent
Sica told you, there’s no evidence that Mr. Bond
laundered money for anybody in Russia or anywhere
else.
The prosecutor also disputed the defense’s contention that
Bond was arms dealing with Russians and embezzling
Brennan’s money. After praising the jury system, the
prosecutor then stated:
But one very prominent feature that [sic] about this
system, one — one hallmark of our system is that we
don’t make accusations without proof. Even if it’s
against a man who lives in another country. And that’s
what’s happened here.
Peter is not lying to you. You have the proof in the
form of corroboration. You have the proof in the form
through looking at him for five days and watching him
testify. He’s not a Russian money launderer. He’s not
a Russian arms dealer. He’s not a thief. Those are
accusations and accusations without proof are
unacceptable and you can’t accept them.
10
On rebuttal, a second prosecutor told the jury that the
evidence demonstrated that Bond committed crimes with
Brennan, not that Bond was dealing arms. Again,
attempting to blunt the impact of the defense’s attack on
Bond’s credibility, the prosecutor declared:
Evidently, . . . judgment was made that it was more
important to obtain Mr. Bond’s cooperation than to
prosecute Mr. Bond. He was somebody . . . in the
business of hiding money, and fell into this
relationship with Mr. Brennan. That’s what this is
about. But that’s not what you hear. What you hear is
that this is about Russian money laundering. There’s
no evidence to that.
Brennan takes issue with several comments made by the
prosecutors to the jury: (1) the reference to the FBI’s
investigation of Bond with respect to Russian money
laundering; (2) the statement that “one hallmark of our
system is that we don’t make accusations without proof ”;
and (3) the assertion in rebuttal that the Government made
the judgment that it was “more important” to obtain Bond’s
cooperation than to prosecute him. In Brennan’s view, the
assertion that the Government does not make accusations
without proof indicates that “there has been a
predetermination of [Brennan’s] guilt.” Referring to the
FBI’s investigation, Brennan submits, amounted to
improper vouching for Bond’s credibility since it suggested
to the jury the prosecutor’s belief that Bond was not
involved in such criminal activity. In short, Brennan
contends that these statements pointed to evidence outside
of the record, namely the FBI’s investigation and conclusion
that Bond was not involved in Russian money laundering.
In determining whether these remarks warrant reversal,
it is important to note that the defense objected during a
break in the summation to the Government’s statement
that it does not “make accusations without proof.” Thus,
any potential prosecutorial misconduct related to this
statement is reviewed for harmless error under Fed. R.
Crim. P. 52(a). See, e.g., Zehrbach, 47 F.3d at 1265.
The defense also objected to the argument about the
absence of proof of money laundering, but on different
11
grounds than those now raised on appeal. At trial, the
defense objected because the Government had prevented
the admission of documents which the defense claimed
demonstrated Bond’s involvement in money laundering and
arms dealing. Those documents showed Bond’s company
sending money to a company listed in his cooperation
agreement and contemplating membership in a defense
manufacturers association. Bond was cross-examined
about these documents when he testified, but the District
Court did not allow them to be admitted at that time. Later,
however, following a defense objection during summation,
the District Court allowed the defense to reopen its case
and admitted into evidence the previously excluded
documents.
Although the defense objected to the exclusion of these
documents, no objection was made that the argument
about absence of proof and the FBI investigation vouched
for Bond’s credibility. Brennan contends that he objected
during the trial to any expression by Special Agent Sica of
his opinion about Bond’s character for truthfulness. Agent
Sica’s testimony regarding the results of the FBI’s
investigation into money laundering, however, does not
relate to Bond’s truthfulness. For that reason, we review
the challenge to this portion of the summation for plain
error under Fed. R. Crim. P. 52(b). See Olano, 507 U.S. at
731-32. We likewise review for plain error the prosecutor’s
speculation regarding the comparative importance of
securing Bond’s cooperation rather than prosecuting him
because the defense first objected to that statement in its
motion for a new trial.
In determining whether these statements to the jury
improperly vouched for Bond’s credibility, we must consider
them in context. See Young, 470 U.S. at 11-12. We believe
that the prosecutor’s initial rhetorical question regarding
any proof of Russian money laundering and his comment
regarding Sica’s testimony constituted appropriate
argument that merely reviewed the evidence admitted at
trial. That evidence included Sica’s testimony that the FBI
did not uncover evidence that Bond was involved in
Russian money laundering. As we recognized in Walker, a
“prosecutor may argue in the negative that the assertions
12
made by defense counsel that a witness is lying are not
supported by the testimony in the record.” 155 F.3d at 187.
To preclude a prosecutor from making such an argument
would deny him use of a legitimate tool of effective
advocacy.
The assertion that the Government does not make
accusations without proof is, at first blush, more
problematic because it could be read to suggest that
evidence outside the record demonstrated Brennan’s guilt.
Read in isolation, this statement is not unlike the comment
in Dispoz-O-Plastics that the government does not give “two
for one deals.” 172 F.3d at 283. However, immediately
following his assertion that the Government does not make
accusations without proof, the prosecutor directed the jury
to consider the corroborating evidence and Bond’s
demeanor during his five days of testimony. This assertion
was made in the midst of the prosecutor’s discussion of
Brennan’s accusations against Bond and his argument that
there was no evidence to support such accusations. This
was also permissible argument under Walker. 155 F.3d at
187.
Significantly, when read in context, neither of these brief
statements made during summation suggest that the
prosecutor had personal knowledge or possessed other
information not contained in the record that would have
supported Bond’s credibility. Neither statement occasioned
error. Both statements were intended to call the jury’s
attention to the absence of any evidence to support the
defense’s accusations against Bond. In both instances, the
prosecutor immediately followed his statements with
instructions to the jury to examine the evidence of record.
Indeed, the FBI’s investigation of Bond for his involvement
in money laundering, the results of that investigation, and
his eventual agreement to cooperate with the Government
were all matters of record testified to by Special Agent Sica.
Finally, while Brennan may take issue with the statement
that “judgment was made” that Bond’s cooperation was
more important than his prosecution, considering the
context, we can find no error, let alone plain error. That
statement related to the evidence of record which showed
that Bond’s testimony was gained by virtue of an agreement
13
and that the Government’s star witness had his own
credibility problems. Indeed the making of such
“judgments” — routine exercises of prosecutorial discretion
— commonly form the basis of defense attacks upon the
prosecution when an uncharged accomplice cooperates by
providing testimony. Since it was obvious to the jury that
the Government had charged Brennan, and since they
learned from the testimony that the Government had not
charged Bond, the prosecutor’s remark conveyed to the
jurors no more than they already knew. See Saada, 21 F.3d
at 225 (holding that prosecutor’s reference to cooperation
agreements with Government witnesses was not plain
error); Milan, 304 F.3d at 289-90 (holding that it was not
improper for prosecutor to refer to testimony about
prosecution of Government witnesses before they decided to
cooperate).
Accordingly, we conclude that none of the challenged
remarks constitute improper vouching.
B. Comment on Brennan’s Failure to Testify
In Griffin v. State of California, the Supreme Court held
“that the Fifth Amendment, in its direct application to the
Federal Government . . . forbids either comment by the
prosecution on the accused’s silence or instructions by the
court that such silence is evidence of guilt.” 380 U.S. 609,
615 (1965). A remark is directed to a defendant’s silence
when “ ‘the language used was manifestly intended or was
of such character that the jury would naturally and
necessarily take it to be a comment on the failure of the
accused to testify.’ ” Bontempo v. Fenton, 692 F.2d 954, 959
(3d Cir. 1982) (quoting United States v. Chaney, 446 F.2d
571, 576 (3d Cir. 1971)). Statements regarding the
“absence of facts in the record[,]” however, “need not be
taken as comment on [a] defendant’s failure to testify.”
Bontempo, 692 F.2d at 959 (citing Braxton v. Estelle, 641
F.2d 392, 397 (5th Cir. 1981)); see also Brown, 254 F.3d at
462-63 (statements by prosecutor in summation did not
impermissibly comment on defendant’s silence or shift
burden of proof to the defense); United States v. Isaac, 134
F.3d 199, 206-07 (3d Cir. 1998) (prosecutor did not violate
5th amendment by stating in his closing argument that
“[the defendant] captained that boat from Jamaica, and the
14
only people who would know that [the defendant] captained
that boat from Jamaica are [the defendant], Conrad Brown,
Irvin Reid, and that fourth individual in Jamaica. Those are
the only people”).
In the instant case, Brennan argues that the prosecution
improperly commented on his failure to testify and
suggested to the jury that he had the burden to produce
evidence. He points to the following remarks by the
prosecution on rebuttal regarding the transfer of the bearer
bonds:
The next thing that happened is in June, 1995 Mr.
Bond says, Mr. Brennan gave him $4 million
thereabouts in bearer bonds. We agree there’s no direct
evidence of this, except Mr. Bond’s testimony. There
was nobody else there except Mr. Brennan and Mr.
Gaito [Brennan’s accountant]. There’s also no evidence
that this didn’t happen. Mr. Critchley [defense counsel]
spent a lot of time on this. On the plane record, the
telephone record, credit card record. None of it proves
anything. It’s — it is an argument that Mr. Bond
changed the date from June 5 to June 10th. Somehow
this is supposed to show that Mr. Bond is lying about
the whole thing. This is more a power of suggestion. If
you hear it often enough that it — you know, it’s
changed from June 5th to June 10th indicates that
he’s lying, maybe you’ll believe it. But there’s no
indication that it means anything. The evidence is that
he always said he never knew exactly what the date
was. What he knew is that it happened when he was
taking a trip with his family to Disneyland . . . That’s
what he always said. He was here in late May, early
June. He didn’t know exactly when during that trip
this occurred. What’s clear is that he was in the United
States during that period. What’s also clear is that he
was at Due Process Farm. He described it to you in
detail. You didn’t hear that description challenged by
the defense. Why? Because it was very, very accurate.
In addition, Brennan challenges the rhetorical questions of
the prosecutor in his initial closing which asked where the
proof was that Bond had engaged in money laundering,
arms dealing, or embezzlement. He also contends that the
15
prosecution improperly compared the number of witnesses
and exhibits put forth by the prosecution and defense,
thereby “direct[ing] the jury to consider why Brennan had
not testified.” Moreover, Brennan asserts that the
prosecution shifted the burden by commenting that the
three defense witnesses “knew nothing about the case” and
then asked the jury to “think about the defense witnesses,
and just reflect upon the fact that after four weeks of trial,
they called no one who knows anything about the case.”
Brennan concedes in his brief that he did not object to the
remarks that he claims shifted the burden of proof, and
that the issue was first raised when he filed his motion for
a new trial. Thus, in the absence of an objection at trial, we
must review for the presence of plain error. See Olano, 507
U.S. at 731-32.
With respect to the prosecution’s remarks during rebuttal
concerning the transfer of the bearer bonds, nothing in the
remarks suggested that the jury should consider the fact
that Brennan failed to testify. Viewed in context, the
statements concerned Bond’s credibility and the fact that
the record lacked evidence contradicting his testimony
concerning the point in time he claimed to have received
the bonds from Brennan. This was permissible argument
regarding what evidence was, and was not, in the record.
We declared supra that the rhetorical question
concerning any proof of record that Bond engaged in money
laundering was not improper vouching. Likewise, comment
on the absence of evidence on this issue did not
impermissibly direct the jury to consider Brennan’s election
not to testify.
Nor were the prosecution’s remarks about the defense’s
failure to call anyone who knew anything about the case a
comment on Brennan’s failure to testify. The context of this
statement reveals that it was directed toward the weight the
jury should accord to the testimony of the three defense
witnesses. At the conclusion of the prosecutor’s review of
the testimony of these witnesses, he emphasized that the
jury must honor the presumption of innocence and “hold
us to the burden of proof and you must be convinced of Mr.
Brennan’s guilt, beyond a reasonable doubt.” Under these
circumstances, this remark did not constitute an
16
impermissible reference to Brennan’s failure to take the
witness stand. See United States v. Balter, 91 F.3d 427,
441 (3d Cir. 1996) (observing that prosecutor’s comment,
which focused on pointing out to the jury the holes in the
defense’s theory, was permissible argument).
In sum, nothing in either the Government’s summation
or rebuttal was improper argument. There was, therefore,
no error.
V. The Weight of the Evidence
This Circuit has described a district court’s consideration
of a Fed. R. Crim. P. 33 motion for a new trial based on the
“weight of the evidence” as follows:
A district court can order a new trial on the ground
that the jury’s verdict is contrary to the weight of the
evidence only if it “believes that ‘there is a serious
danger that a miscarriage of justice has occurred—that
is, that an innocent person has been convicted.’ ”
United States v. Santos, 20 F.3d 280, 285 (7th Cir.
1994) (quoting United States v. Morales, 902 F.2d 604,
606 (7th Cir. 1990)). Unlike an insufficiency of the
evidence claim, when a district court evaluates a Rule
33 motion it does not view the evidence favorably to the
Government, but instead exercises its own judgment in
assessing the Government’s case. See United States v.
Lacey, 219 F.3d 779, 783-84 (8th Cir. 2000); United
States v. Ashworth, 836 F.2d 260, 266 (6th Cir. 1988).
United States v. Johnson, 302 F.3d 139, 150 (3d Cir. 2002).
Thus, “[m]otions for a new trial based on the weight of the
evidence are not favored. Such motions are to be granted
sparingly and only in exceptional cases.” Government of
Virgin Islands v. Derricks, 810 F.2d 50, 55 (3d Cir. 1987)
(citations omitted). We review the denial of a Rule 33
motion for abuse of discretion. See United States v. Jasin,
280 F.3d 355, 360 (3d Cir. 2002).
Here, appellant argues that the guilty verdicts on six of
the seven bankruptcy fraud and money laundering counts
were against the weight of the evidence due to
inconsistencies in Bond’s testimony about the transfer of
the bearer bonds.3 While the Government was investigating
3. The exception is Count 7, which charged Brennan with failing to
disclose to the Bankruptcy Court his receipt of $525,594 from the
17
its case against Brennan, Bond provided investigators with
a credit card receipt for airfare from Orlando, Florida, dated
June 5, 1995. Based on this credit card voucher, the
Government proceeded on a theory that, on June 5, 1995,
Bond flew to New York, then traveled to New Jersey, to
meet with Brennan. There, the Government theorized Bond
took possession of the bearer bonds from Brennan, whose
use and concealment formed the basis of most of the
counts on which Brennan was convicted.
Shortly before trial, the Government obtained a copy of
the actual airline ticket associated with this credit card
voucher. As it turned out, the ticket was for a morning
flight to Washington, D.C., with a return flight to Orlando
occurring the afternoon of June 5. No documentary
evidence of Bond’s taking a flight to New York on any other
date was ever uncovered.
At trial, Bond testified that, on the return leg of his
holiday, he traveled to New York to meet with Brennan
before flying home. He testified that he could not recall the
exact date of this travel, but “believed it was the 10th of
June,” not June 5. Confronting Bond on cross-examination,
defense counsel pursued Bond about the credit card
voucher, the discovered ticket, and the travel it indicated he
took to Washington, D.C., not New York. Bond denied that
he ever told the FBI that the date of the meeting was June
5; rather, he could not remember the exact date, but stated
that he saw Brennan “towards the end of that holiday. We
hadn’t tied down a date.” Bond testified that he had “always
said” the day of the meeting was the day he left Florida. The
prosecution then established the likely date of this meeting
to be June 10, 1995, by the credit card receipt that
indicated Bond checked out of his Disneyworld hotel that
day.
Brennan now argues that “the weight of the evidence did
not support a finding that the alleged June 1995 transfer
[of bearer bonds] occurred.” Brennan describes the “bond
transfer in June 1995 as the predicate unlawful activity”
Mirage hotel casino in September 1995. All of the other convicted counts
involved the bearer bonds.
18
that all the money laundering convictions stem from;
therefore, according to the defense, it was necessary for the
Government to prove this particular event beyond a
reasonable doubt. Through this argument, Brennan is
attempting to make the evidence regarding the transfer of
the bearer bonds to Bond in June of 1995 critical to
proving the elements of the offense. It is not. Liability for
money laundering is imposed on:
Whoever, [1] knowing that the property involved in a
financial transaction represents the proceeds of some
form of unlawful activity, [2] conducts or attempts to
conduct such a financial transaction which in fact
involves the proceeds of specified unlawful activity . . .
[3] (B) knowing that the transaction is designed in
whole or in part— (i) to conceal or disguise the . . .
ownership, or the control of the proceeds of specified
unlawful activity . . . .
18 U.S.C. §§ 1956(a)(1)(B)(i).
The actual transfer of the bearer bonds to Bond on June
5/10 was not itself a financial transaction to conceal or
disguise the ownership or control of the proceeds of an
unlawful activity. Rather, the Government’s theory was that
the offending transactions took place later when, at
Brennan’s direction, Bond cashed the bonds and invested
the proceeds. Brennan seems to suggest that, unless the
Government proved that Brennan passed the municipal
bonds to Bond on June 10, the Government cannot be said
to have linked the money Bond later invested to Brennan,
and thereby failed to prove “the property involved in [the
subsequent] financial transaction[s] represent[ed] the
proceeds of some form of unlawful activity;” specifically,
that the proceeds laundered were undeclared “property
belonging to the estate of a debtor [Brennan].” See 18
U.S.C. §§ 1956(a)(1)(B)(i), 152(1). We do not agree.
Logically, proof of the existence of any bearer bonds or
proceeds after Brennan declared bankruptcy on August 7,
1995 would be circumstantial evidence that those bonds
existed and belonged to Brennan prior to the declaration,
provided there is no explanation for how those bonds and
proceeds came into Brennan’s possession once he had filed
19
for bankruptcy. Our review of the record revealed that such
evidence existed. This evidence included the fact that the
bearer bonds in question were redeemed through Bond’s
company, Valmet; the proceeds were invested in companies
with connections to Brennan; the profits from those
investments were again invested into yet other entities with
connections to Brennan; and Brennan’s personal
accountant was communicating with Valmet and directing
other transactions that produced benefits for Brennan.
There was evidence that proceeds from these transactions
were returned to Brennan in various ways. Furthermore,
Brennan’s income tax returns showed significant municipal
bond income in years 1993 and 1994, but no such income
appeared in taxable year 1995. We agree with the District
Court that all of “these facts are nearly impossible to
explain unless Bond’s testimony was truthful.” Thus, even
if there was no testimony of any witness as to when Bond
acquired the bearer bonds from Brennan, it still appears
that Brennan could have been convicted of the money
laundering counts based on this other circumstantial
evidence.
Assuming, arguendo, defense counsel’s premise that
proving the transfer of June 1995 was of predicate
significance, the jury was reasonable in concluding that the
transfer actually occurred. Brennan describes Bond’s
testimony as “simply unbelievable,” but that determination
was, first and foremost, one for the jury. See Derricks, 810
F.2d at 55. While the June 5 airline ticket to Washington,
D.C. may contradict any notion that the transfer occurred
on that date, and while the “Used” stamp is confusing
considering Bond’s testimony that he only recalled
interrupting his vacation one time, the mere existence of
that ticket does not disprove that Bond traveled to New
Jersey on June 10, 1995.
On cross-examination, Brennan’s counsel questioned
Bond extensively on this subject, and the transcript reveals
considerable testimony that helps explain the events of that
period, testimony that the jury must have found credible.
While Bond admitted to purchasing an airline ticket on
June 5th, he denied that he used an airline ticket that day.
He stated that he did not “believe” he traveled to
20
Washington on June 5th. As defense counsel persisted, the
following cross-examination took place:
A When I got the other ticket, it jogged my memories
to the circumstances I believed happened.
Q When you got the other ticket, you mean the ticket
— the ticket [from June 5] that said [“Used”] when you
got [it] that February 26th.
A That jogged my memories that — chronology of the
events. Yes.
Q So this June 10th date — this June 10th date, the
first time you decided to go with this version was after
February 26th, 2001. Isn’t that a fact?
A No, because I never said a date. I’d always actually
said it was towards the end of my holiday. In fact —
and my testimony on several times said I left the
Florida — left the airport — left my wife at the airport
in Orlando. She came home, and I traveled up. That
tagged the date to the end of my holiday. The fact that
the ticket turned up with an earlier date was confusing
to me at that time. It would always be in my mind, and
I believe I testified to the effect that, I believed it to be
at the end of my holiday which is always around the
tenth.
The defense succeeded in showing that an airline ticket
was purchased to Washington, D.C. on June 5. Bond
conceded that he also could not explain that ticket.
However, Bond “always” stated that he traveled to New
Jersey “towards the end of my holiday,” not on any
particular date. From Bond’s credit card statement, one
could reasonably conclude that he traveled to New Jersey
after checking out of his Florida hotel, on June 10.
Regardless, our review of all of the other evidence of
Brennan’s guilt indicates that there is not a “serious danger
that a miscarriage of justice has occurred—that is, that an
innocent person has been convicted.” Johnson, 302 F.3d at
150. Therefore, the District Court did not abuse its
discretion in refusing to grant a new trial on the basis of
the weight of evidence.
21
VI. Coerced Verdict Based on Improper Jury Instruction
After five days of deliberation, the jurors informed the
District Judge that they were deadlocked. In response to
their note, the Court gave a supplemental jury charge
pointing out the importance of the case to both parties and
the desirability of a verdict. The District Court also noted
that the jury had “deliberated for only five days.”4 Following
4. The exact charge was as follows:
All right. Now, in regard to that, as I told you in my original
instructions, this case is an important one to the Government. It is
equally important to the defendant. It is desirable if a verdict can be
reached but your verdict must reflect the consent, conscientious
judgment of each juror. Under no circumstances must any juror yield
his conscientious judgment.
You have deliberated for only five days in a case that previously took
19 days to try. It is normal for jurors to have differences. This is quite
common. Frequently, jurors, after extended discussions may find that a
point of view, which originally represented a fair and considered
judgment, might well yield on the basis of argument and upon the facts
in the evidence.
However, and I emphasize this, no juror must vote for any verdict
unless after full discussion or consideration of the issues in exchange of
views it does represent his or her considered judgment.
Further consideration may indicate that a change in original attitude
is fully justified upon the law and all of the facts. I do want to read to
you a statement contained in the Supreme Court Opinion which is well-
known to the bench and Bar and it is this. “That although a verdict
must be the verdict of each individual juror and not a mere acquiescence
in the conclusion of his or her fellows, yet they should examine the
question submitted with candor and with a proper regard and deference
to the opinion of each other, that is with their duty to decide the case if
they could conscientiously do so.
You’re reminded also that the Prosecution bears the burden of proving
each element of the offense beyond a reasonable doubt. Do not ever
change your mind just because the other jurors see something different
or just to get the case over with. As I’ve told you before, in the end your
vote must be exactly that, your vote. And important as it is for you to
reach a unanimous agreement, it is just as important that you do so
honestly and in good conscience.”
With that instruction, I will return you to the jury room. Thank you.
22
the charge, the jury deliberated for two more days and then
returned a verdict. Appellant contends that the
supplemental jury charge was unduly coercive because it
gave the jurors the impression that deliberations could last
indefinitely. We must review the instructions to a jury not
“ ‘in artificial isolation, but . . . in the context of the overall
charge.’ ” United States v. Park, 421 U.S. 658, 674 (1975)
(quoting Cupp v. Naughten, 414 U.S. 141, 146-47 (1973)).
Since Brennan failed to object to the supplemental charge
we review only for plain error. See United States v. Eastern
Medical Billing, Inc., 230 F.3d 600, 610 (3d Cir. 2000).
The leading case addressing allegations of a coercive
supplemental jury charge is well known. In Allen v. United
States, 164 U.S. 492 (1896), the Supreme Court upheld a
supplemental jury charge which recommended that the
jurors with views in the minority consider whether their
views might be erroneous. Nonetheless, in 1969, this
Circuit developed a prophylactic rule prohibiting the use of
such an Allen charge because of its power to coerce. See
United States v. Fioravanti, 412 F.2d 407 (3d Cir. 1969); see
also Eastern Medical Billing, Inc., 230 F.3d at 613-15(holding that Allen charge given by court was coercive and
required a new trial). We suggested, however, that a charge
would not be coercive if it contained language urging the
jurors to re-examine their own view but not to “surrender
[their] honest conviction as to the weight or effect of
evidence solely because of the opinion of [their] fellow
jurors, or for the mere purpose of returning a verdict.”
Fioravanti, 412 F.2d at 420 n.32; see also United States v.
Alper, 449 F.2d 1223, 1234 (3d Cir. 1971) (holding that a
supplemental jury charge was not unduly coercive because
although it suggested jurors re-examine their views, it told
them not to surrender their honest convictions); cf. also
Gov’t of the Virgin Islands v. Gereau, 502 F.2d 914, 935-36
(3d Cir. 1974) (holding that a statement that the jurors
were not required to reach a verdict but should try to do so
was not coercive).
Although the Supreme Court held in Allen that the
“minority” jury charge was not coercive, it subsequently
declared that where the district court told a deadlocked
jury in a supplemental charge: “[y]ou have got to reach a
23
decision in this case,” this was unduly coercive and
warranted a new trial. Jenkins v. United States, 380 U.S.
445, 446 (1965) (per curiam). Similarly, in United States v.
Burley, 460 F.2d 998, 999 (3d Cir. 1972), this Court held
that where a district judge instructed a deadlocked jury to
consider the burdens and expense to the government of a
new trial, this too was unduly coercive.
In addition to the “minority” jury charge, the charge
mandating a decision, and the charge stressing the expense
of a new trial, this Circuit has also addressed the
coerciveness of potentially lengthy deliberations. In United
States v. Graham, 758 F.2d 879 (3d Cir. 1985), we
considered whether the district court’s failure to respond to
a juror’s request to be excused for Yom Kippur was
coercive. We noted that a judge’s actions “in requiring
further deliberation after the jury has reported a
disagreement does not, without more, constitute coercion.”
Id. at 884 (quotation omitted). In addition, we held that the
imminent onset of Yom Kippur was not coercive in itself,
and defendant failed to introduce any evidence that the
jurors were in fact coerced to agree upon a verdict because
of the impending holiday. Id. at 885. We stated that:
While some courts have found the length of time that
the jury was made to deliberate, to be coercive, . . .
these cases have involved affirmative coercive conduct
of the district court, such as reminding the jury that
the weekend was approaching . . . or creating the
impression that the jury would be locked up all night.
Id.Reviewing in its entirety the supplemental charge given
by the District Court to the jury, we do not believe that it
even came close to being coercive. The Court’s charge did
express a belief to the jury that it had not deliberated for a
sufficient period of time, but this was not affirmative
coercive conduct akin to that described in Graham. In
addition, while the Court emphasized the desirability of a
verdict, this instruction was tempered by the caution that
“[u]nder no circumstances must any juror yield his
conscientious judgment.” The Court also warned the jurors:
“[d]o not ever change your mind just because the other
24
jurors see something different or just to get the case over
with.” Perhaps most importantly, the Court reminded the
jury: “As important as it is for you to reach a unanimous
agreement it is just as important that you do so honestly
and in good conscience.” Just as in Alper, these warnings
and reminders removed any possibility that the
supplemental charge could be considered as coercive.
Moreover, the District Court did not suggest that the jury
was required to reach a verdict, nor did it emphasize the
burdens or costs of a new trial. Accordingly, the District
Judge’s supplemental charge to the jury was not error,
plain or otherwise.
VII. Loss under U.S. Sentencing Guidelines Manual § 2F1.1
Appellant was convicted for, inter alia, concealing bearer
bonds with a face value of $3,795,000.00 from the
bankruptcy estate; however, the District Court imposed its
sentence based on an estimated loss to the bankruptcy
estate of $22 million. As a debtor in possession, Brennan
was obligated to file monthly operating reports with the
Bankruptcy Court from the time he declared bankruptcy in
August 1995 until June of 1997, when the Bankruptcy
Court appointed a trustee to take possession of the
bankruptcy estate. However, in October of 1995, Brennan
had ordered the bearer bonds cashed and the bonds’
proceeds otherwise invested. By June of 1997, when
Brennan ceased to be a debtor in possession, those
investments had netted an additional $18 million in profits,
none of which Brennan reported. The Bankruptcy Code, 11
U.S.C. § 541(a)(6) provides that “proceeds, products,
offspring, or profits of or from, property of the estate” are
included in the bankruptcy estate. The District Court
therefore reasoned that because bankruptcy law considers
investment profits from estate funds part of the bankruptcy
estate, the $18 million in profits should also have been
reported. The District Court added those profits to the base
$4 million value of the bonds to determine the loss under
the Sentencing Guidelines. This analysis resulted in a 16
level enhancement pursuant to U.S. Sentencing Guidelines
Manual § 2F1.1(b)(1)(Q) (2000) for a loss greater than $20
million, rather than the 13 level enhancement that would
have applied to a loss of less than $5 million under
§ 2F1.1(b)(1)(N).
25
We exercise plenary review over a district court’s
conclusion of what constitutes loss under the Sentencing
Guidelines, see United States v. Maurello, 76 F.3d 1304,
1308 (3d Cir. 1996), but we must accept the District
Court’s factual finding as to the amount of loss unless it is
clearly erroneous. See, e.g., United States v. Cherry, 10 F.3d
1003, 1009 (3d Cir. 1993) (clearly erroneous standard
applies to findings of fact).
Brennan argues that under the Sentencing Guidelines,
the profits from the bonds should not be included in the
amount of loss, and alternatively, that the $18 million loss
figure was not properly found by the District Court, nor
supported by the evidence.
A. Whether the $18 Million in Profits Were Part of the
Loss
Brennan contends that under U.S. Sentencing Guidelines
Manual § 2F1.1, Note 8 (2000), a loss “does not . . . include
interest the victim could have earned on [money, property,
or services unlawfully taken] had the offense not occurred.”
Analogizing the $18 million in profits earned on the bond
proceeds after redemption to earned interest, Brennan
asserts that the District Court improperly counted those
profits as loss to the bankruptcy estate. Brennan’s
argument fails because his concealment was a continuing
offense. See 18 U.S.C. § 3284 (“concealment of assets of a
debtor . . . shall be deemed to be a continuing offense . . .”).
Thus, the actual loss includes the $18 million in profits
because Brennan was obligated to declare those proceeds
every month through June of 1997, not just in August of
1995.
Although we have not previously addressed the issue of
the duration of a bankruptcy fraud for the purpose of
setting loss under the Guidelines, other circuits have held
that bankruptcy fraud is a continuing offense which lasts
until it is detected or its consequences are purged. See
United States v. Stein, 233 F.3d 6, 18-19 (1st Cir. 2000)
(“concealment by its nature is an act which goes on until
detected or its consequences are purged . . . [h]ence it was
proper for the court to base its intended loss findings on
the value of the property at the time of the sale,” not at the
26
time of concealment); cf. United States v. Butner, 277 F.3d
481, 487-88 (4th Cir. 2002) (in bankruptcy concealment
action, calculation of fraud loss should take into account
relevant conduct under Guideline § 1B1.3 that occurred
after defendant’s initial bankruptcy filing where it was
linked to the bankrupt estate); United States v. Moody, 923
F.2d 341, 351 (5th Cir. 1991) (noting that concealment of
bankruptcy assets is a “continuing offense”). We concur
with this approach.
As Brennan implicitly admits, the District Court correctly
applied § 2F1.1 at sentencing. See 18 U.S.C. § 152 (“A
person who . . . (1) knowingly and fraudulently conceals
. . .”). In interpreting that Guideline, this Circuit has
acknowledged that “basing all fraud sentences on a simple
‘amount taken’ rule without regard to actual or intended
harm would contravene [§ 2F1.1’s] purpose.” United States
v. Kopp, 951 F.2d 521, 527 (3d Cir. 1991), superceded on
other grounds as recognized by U.S. v. Sharma, 190 F.3d
220 (3d Cir. 1999). The “fraud guideline defines ‘loss’
primarily as the amount of money the victim has actually
ended up losing at the time of sentencing, not what it could
have lost”; therefore, “loss should [be] revised upward to the
amount of loss that the defendant intended to inflict on the
victim . . . if . . . estimatable and higher.” Id. at 531.
Likewise, we conclude that limiting Brennan’s sentence
to the $4 million he concealed from the Bankruptcy Court
in August of 1995 would be an overly simplistic application
of the Guidelines. Due to the continuing nature of
Brennan’s offense, “the amount of loss that the defendant
intended to inflict on the victim” was $22 million. Id. The
bankruptcy estate was not only entitled to the bearer
bonds, but all of their proceeds. 11 U.S.C. § 541(a)(6).
Brennan’s concealment was of this total amount, and not
simply the value of the bearer bonds.
Even if these profits were not considered actual loss from
the continuing fraud on the Bankruptcy Court, Brennan’s
concealment of them was at least uncharged relevant
conduct the District Court was entitled to consider. Under
U.S. Sentencing Guidelines Manual § 1B1.3(a) (2000),
specific offense characteristics, such as the amount of loss,
are “determined on the basis of . . . all acts . . . committed
27
. . . by the defendant . . . that occurred during commission
of the offense of conviction” and “all harm that results from
[such] acts.” As Brennan’s concealment of the $18 million
profit occurred during the continued concealment of the
bearer bonds, the District Court could also consider the
profits’ concealment in Brennan’s sentencing.5
Either way, the profits were properly a part of the
bankruptcy estate which were concealed from the
Bankruptcy Court each time Brennan filed a monthly
report to the Bankruptcy Court from August 1995 until
June of 1997, when the total amount concealed from the
bankruptcy trustee stood at $22 million. Because the
concealment for which Brennan was formally indicted was
still ongoing in 1997, and the original concealment of the
bearer bonds had not yet been detected at that date, the
further concealment of the $18 million in profits was either
direct actual loss from the continuing offense or relevant
uncharged conduct committed during the original offense.
Therefore, those profits were properly considered in
establishing the total loss.
B. Whether the $18 Million Profits Were Properly Found
by the Court
Brennan argues that even if it is proper to consider the
profits made as part of the bankruptcy fraud, the District
Court did not make its own factual findings with respect to
the profits, but merely adopted the facts in the pre-
sentence investigation report, in violation of former Fed. R.
Crim. P. 32 (c)(1) (2001) (now Fed. R. Crim. P. 32(i)(3)(B)).
See United States v. Evans, 155 F.3d 245, 253 (3d Cir.
1998) (holding that the district court must make findings
on the record as to the basis for its conclusion about the
5. In addition, the District Court might have applied Section 1B1.3(a)(2),
which includes as relevant conduct all acts that were part of the “same
course of conduct or common scheme or plan” as the offense conduct if
those acts would be grouped as multiple counts under U.S.S.G.
§ 3D1.2(d). Here, both offenses are bankruptcy fraud in which the
offense level is based on total amount of loss, as required by Section
3D1.2(d). Therefore, if both the concealment of the bearer bonds and the
concealment of the profits are part of the same course of conduct, the
profits may be included in the loss calculation.
28
amount of actual loss); Cherry, 10 F.3d at 1013-14 (Fed. R.
Crim. P. 32(c) requires that “where a defendant alleges any
factual inaccuracy in the presentence report, the Court
must make: (1) a finding as to the allegation, or (2) a
determination that no such finding is necessary because
the matter controverted will not be taken into account in
sentencing”); see also United States v. Parrott, 148 F.3d
629, 633 (6th Cir. 1998) (holding that former Fed. R. Crim.
P. 32(c) prohibits a court faced with a disputed fact in the
sentencing report from adopting it without making a factual
finding of its own). While both Bond and David Donnelly,
Valmet’s accountant, testified to the amount of Brennan’s
profit, Brennan alleges that the District Court did not
consider that Donnelly admitted to “cooking the books” and
that Bond was unclear as to the actual amount of profit.
Despite Brennan’s assertions, it appears that the District
Court did not rely solely on the pre-sentence investigation
report but rather made its own finding that the testimony
of Donnelly and Bond was credible. The District Court
stated:
Brennan was required to report [the profits] and
didn’t do so. So the question is really whether Mr.
Donnelly’s estimation or other evidence supports the
amount claimed in the presentence report.
The Government asserts in its reply sentencing
memorandum, that although Donnelly was cross
examined on aspects as to the reliability of his records,
he “never wavered from his insistence that the bottom
line, total of his statements were accurate.”
And the 22 million dollar figure is supported by
extensive other evidence. According to testimony by
Bond, which was totally corroborated by documents,
Bond paid out the following amounts from the pot of
money, consisting of the proceeds of Brennan’s bearer
bonds plus the trading profits earned by investing
those proceeds, at page 10 of the Government’s brief.
They go through an amount of the sum of 14 million
dollars plus numerous smaller payments that they say
corroborates this as being in excess of 20 million
dollars, given the test under the guidelines, I find that
29
the position taken there is credible. That the defense
has not rebutted the presentence report. And that the
presentence report is credible, the amount in
controversy will remain as set forth in the presentence
report at paragraph — or objection number eight.
Taken out of context, the last two sentences could give
the impression that the District Court was improperly
relying on the presentence report to derive the amount of
the profits. Properly read in context, it is clear that the
Court weighed the testimony of Donnelly and Bond and
found it credible with respect to the total amount of
Brennan’s profits. Accordingly, the District Court’s finding
that there was $18 million in profit was not clearly
erroneous.
VIII. Application of the November 2000 Guidelines
Enhancement for Bankruptcy Fraud
Brennan was first indicted on July 19, 2000 on charges
that he concealed casino gaming chips and cash received in
exchange for gaming chips from the Bankruptcy Court. The
Government later filed a first superceding indictment on
November 1, 2000, which alleged additional charges of
bankruptcy fraud involving the concealment of bearer
bonds, and money laundering. A second superceding
indictment on December 20, 2000, added two money
laundering counts. A third superceding indictment on
January 24, 2001, made minor changes to the factual
allegations. Since all the violations were alleged to have
continued through the date that the last superceding
indictment was filed, the District Court held that
application of the new 2000 Sentencing Guidelines to
Brennan’s sentence did not implicate the ex post facto
clause.
Brennan now argues that this application of the
November 1, 2000, U.S. Sentencing Guidelines Manual
violated the ex post facto clause because his bankruptcy
fraud concluded prior to November 2000, when the first
superceding indictment containing the bearer bond
concealment charges was issued. We exercise plenary
review over whether the District Court applied the correct
version of the Sentencing Guidelines. See United States v.
Bertoli, 40 F.3d 1384, 1403 (3d Cir. 1994).
30
The ex post facto clause is violated when a court applies
a change in the law which is adverse to the interests of a
defendant where that change occurred after the commission
of the crime. See U.S. Const., art. I, § 9, cl. 3. Accordingly,
when the court in a criminal case is confronted with post-
offense amendments which call for a more severe sentence
than that prescribed by the Guidelines in effect at the time
of the offense, the court must apply the Guidelines as they
existed at the time of the crime. See U.S. Sentencing
Guidelines Manual § 1B1.11(b)(1) (2000); United States v.
Omoruyi, 260 F.3d 291, 297 (3d Cir. 2001).
Prior to November 1, 2000, U.S. Sentencing Guidelines
Manual § 2F1.1(b)(4)(B) (1999) provided for a two level
increase in offense score if the offense involved a “violation
of any judicial or administrative order, injunction, decree or
process.” In interpreting that version of § 2F1.1(b)(4)(B), we
held that a bankruptcy proceeding was not a “judicial
process” and that a bankruptcy rule did not constitute a
“judicial order.” See United States v. Thayer, 201 F.3d 214,
226-28 (3d Cir. 1999). However, on November 1, 2000,
Section 2F1.1(b)(4)(B) was changed to include a two-point
enhancement if the offense involved “a misrepresentation or
other fraudulent action during the course of a bankruptcy
proceeding.” U.S. Sentencing Guidelines Manual
§ 2F1.1(b)(4)(B) (2000). Thus, the District Court’s
application of the 2000 Guidelines Manual resulted in a
harsher sentence for Brennan than that called for by earlier
versions of the Manual, potentially implicating the ex post
facto clause.
Nonetheless, when an amendment is a mere clarification,
rather than a substantive change to the Guidelines, its
application does not violate the ex post facto clause. See
Bertoli, 40 F.3d at 1405. The Government argues that
because Amendment 597 to U.S. Sentencing Guidelines
Manual § 2F1.1(b)(4)(B) resolved a Circuit split on whether
the “judicial process” included a bankruptcy proceeding, it
was a clarifying amendment. However, where an
amendment overrules a prior judicial construction of the
guideline it is substantive. See Bertoli, 40 F.3d at 1405;
United States v. Diaz, 245 F.3d 294, 303 (3d Cir. 2001).
Because this Circuit has previously held that “judicial
31
process” did not include bankruptcy proceedings, see
Thayer, 201 F.3d at 226-28, Brennan argues the change
rendered by Amendment 597 is substantive. Cf. also United
States v. Butner, 277 F.3d 481, 489 (4th Cir. 2002) (holding
that Amendment 597 is substantive, and noting that the
Sentencing Commission did not label it as clarifying).
If the amendment is indeed substantive in nature,
application of the November 2000 Sentencing Guidelines
would still not violate the ex post facto clause if the fraud
continued after the effective date of the amendment. See,
e.g., United States v. Moscony, 927 F.2d 742, 754 (3d Cir.
1991) (holding that application of Guidelines did not violate
the ex post facto clause because RICO offense was a
“straddle” crime that continued before and after the
effective date of the Guidelines); United States v. Zimmer,
299 F.3d 710, 718 (8th Cir. 2002) (holding that application
of an amended version of the Guidelines to a conspiracy
which continues both before and after the amendment does
not violate the ex post facto clause). According to Brennan,
the ending date of the concealment of assets listed in Count
One of the indictment was determined by either the
evidence produced at trial, or the date the concealment was
detected, both of which he claims point to an end date prior
to November 2000. See United States v. Bakker, 925 F.2d
728, 739 (4th Cir. 1991) (holding that court should not use
ending date of indictment as determination of when
continuing violation ended, but should look at the evidence
introduced at trial); United States v. Stein, 233 F.3d 6, 18-
19 (1st Cir. 2000) (stating that bankruptcy concealment
goes on “until detected or its consequences are purged”);
United States v. Nash, 115 F.3d 1431, 1441 (9th Cir. 1997)
(looking beyond indictment to evidence produced at trial in
order to determine whether bank fraud continued beyond
the start date of the Sentencing Guidelines). Brennan
presumes the relevant detection is detection by government
prosecutors, which he argues necessarily occurred prior to
the filing on November 1, 2000 of the indictment containing
charges involving bearer bonds.
The Government argues that the relevant date is the date
the concealment was detected by the Bankruptcy Court and
the United States Trustee. Since the first superceding
32
indictment containing the bearer bond charges was not
filed until November 1, 2000, and Brennan did not reveal
the existence of his bonds to the Bankruptcy Court or any
trustee until the indictment was filed, the Government
suggests the fraud was ongoing as of the effective date of
the amendment. In addition, the Government argues that
proof at trial established that the violation continued after
November 2000 since Brennan was convicted under Count
One of concealing assets from August 7, 1995 until
January 24, 2001.6
A debtor violates 18 U.S.C. § 152(1) by “knowingly and
fraudulently conceal[ing] from a custodian, trustee,
marshal, or other officer of the court charged with the
control or custody of property, or, in connection with a case
under title 11, from creditors or the United States Trustee,
any property belonging to the estate of a debtor.” Brennan
filed for bankruptcy under Chapter 11, so under § 152(1)
the concealment was ongoing as long as Brennan did not
reveal the existence of his assets to the United States
Trustee. The date the prosecutors discovered the crime
does not affect whether the crime was still being
perpetrated. Thus, since Brennan admittedly did not reveal
the existence of the bearer bonds to the Bankruptcy Court
or United States Trustee until after the indictment, the
concealment component of the fraud was ongoing as of
November 1, 2000, and there is no violation of the ex post
facto clause.
IX. Two Level Enhancement for Obstruction of Justice
Count 13 of the third superceding indictment charged
Brennan with laundering $100,000 in bearer bond proceeds
through a nominee account with New World Aviation to pay
6. Alternatively, the Government argues that bankruptcy fraud is a
continuing violation which only ends when the debtor is discharged or a
discharge is denied, and because the civil bankruptcy proceeding was
still ongoing at the time of the criminal trial, the District Court properly
applied the November 2000 Guidelines. See 18 U.S.C. § 3284 (“The
concealment of assets of a debtor . . . shall be deemed to be a continuing
offense until the debtor shall have been finally discharged or a discharge
denied, and the period of limitations shall not begin to run until such
final discharge or denial of discharge.”)
33
for the charter of aircraft for Brennan and related travel
expenses.
On March 2, 2001, less than one week before trial,
Brennan produced copies of eight letters to the Government
as reciprocal discovery. The letters, which were dated from
November 9, 1998 to December 21, 1999, were addressed
from Brennan to Bond. They purported to show that the
$100,000, as well as an additional $675,000 Bond had
wired to New World Aviation on Brennan’s behalf, had come
from investors associated with Bond who had hired
Brennan as a consultant to research ports of call around
the world. Brennan asserted that his around-the-world
travel was undertaken in preparation for the creation of a
time-share club on the Savarona, the largest private yacht
in the world.
After conducting an investigation regarding the letters,
the Government believed that Brennan had fabricated the
letters in an attempt to provide a legitimate explanation for
the $100,000 in bearer bond proceeds. In order to refute
Brennan’s explanation, the Government submitted evidence
at trial demonstrating the following: (1) that, on January
25, 1999, Bond transferred $100,000 to New World
Aviation on Brennan’s behalf, which was used for a private
jet trip to the Carribean; and (2) Bond subsequently
transferred an additional $675,000 which Brennan used for
an around-the-world trip. During direct examination, Bond
testified that he had never heard of a ship called the
Savarona, that he was not involved in any project with
Brennan relating to this ship and that he had not put
together a group of investors for this ship. Bond
acknowledged that he had recently been shown Brennan’s
letters regarding the Savarona, but he affirmed that he
never received any of the eight letters. Ultimately, Brennan
decided not to use the letters as evidence in his case.
In addition to Bond, three other witnesses were
questioned at trial about the Savarona venture. Robert
Ettinger, the president of New World Aviation, testified that
although he helped Brennan plan his around-the-world
trip, Brennan had never mentioned the Savarona to him.
Suzanne Citron, a part-owner of New World Aviation and
social friend of Brennan’s, accompanied him on the
34
February trip to the Caribbean that was supposedly related
to the Savarona, but testified that Brennan made no
mention of the Savarona to her. Donald Conway, the
bankruptcy trustee, testified that Brennan never told him
anything about a business deal involving the Savarona.
Conway further testified that when he became aware of
Brennan’s travels, Brennan informed him that the trips
were being funded by the family of Brennan’s girlfriend. At
sentencing, during the direct examination of Special Agent
Sica, the Government established that these eight letters
were the only written communication in the entire record
addressed to Bond directly from Brennan. With the
exception of these self-serving letters, Brennan had
attempted to keep his dealings with Bond private. Brennan,
according to Bond’s trial testimony, even had Bond use a
code name when they spoke on the phone and asked Bond
to destroy copies of all statements relating to Brennan’s
holdings. Notably, no reply letters from Bond to Brennan
were produced or introduced at trial.
At sentencing, the District Court concluded that Brennan
had fabricated the letters, and enhanced Brennan’s total
offense score by two levels for obstruction of justice.
Brennan argues that the District Court erred in imposing
the two level enhancement for obstruction of justice
because it impermissibly shifted the burden to Brennan to
prove that the letters were not fabricated.
We review adjustments under § 3C1.1 of the Sentencing
Guidelines under a two part standard. A district court’s
factual determination of willful obstruction of justice is
reviewed for clear error, while its legal interpretation and
application of the sentencing guidelines is reviewed under
a plenary standard. See United States v. Powell, 113 F.3d
464, 467 (3d Cir. 1997). However, Brennan’s failure to
object at sentencing to the District Court’s erroneous legal
determination regarding allocation of the burden of proof
limits our review to plain error. See United States v. Clark,
237 F.3d 293, at 299-300 (3d Cir. 2001).
In seeking a sentencing enhancement, the Government
acknowledged that it had the burden of establishing, by a
preponderance of the evidence, the facts that would
support the enhancement. See United States v. Helbling,
35
209 F.3d 226, 250 (3d Cir. 2000). However, at Brennan’s
sentencing hearing, the District Court incorrectly stated, on
three separate occasions, that Brennan had the burden of
proving by a preponderance of evidence that the
enhancement for obstruction of justice was not applicable.
Nonetheless, Brennan did not object to any of the District
Court’s misstatements concerning the burden of proof.
The Government concedes that the District Judge’s
misstatements regarding the appropriate burden of proof
constituted an “error” that was “plain,” but argues that the
error was harmless because it did not affect the outcome of
the sentencing. See United States v. Olano, 507 U.S. 725,
732 (1993). The error was harmless, according to the
Government, because the District Court found that the
facts as presented in the presentence report were “fully
supported by the evidence,” and essentially corrected the
earlier misstatements by declaring that the Government
“clearly and convincingly at least establishes that what we
have here are false statements.” Although the District
Court’s statements regarding the burden of proof were
plainly wrong, we conclude that the Court ultimately placed
the burden where it belonged: on the Government.7 For that
reason, we turn to whether the Court’s finding was clearly
erroneous.
In making its determination that Brennan fabricated the
letters, the District Court relied on trial testimony by Bond,
Robert Ettinger and Donald Conway, which the Court
deemed “credible.” The District Court emphasized that the
record contained no responses from Bond to Brennan’s
letters. Finally, the District Court evaluated the letters and
found them to be “inherently unbelievable and incredible,”
and determined that “it’s been established by clear and
convincing evidence that we do have obstruction of justice
here.” We conclude that the District Court’s factual findings
regarding the authenticity of the letters were not clearly
erroneous.
7. If anything, the District Court raised the bar for the Government by
applying the clear and convincing evidence standard, rather than the
easier standard that was applicable here, preponderance of the evidence.
36
Because the District Court did not clearly err in
determining that the Government established that the
letters were fabricated and constituted obstruction of
justice, its misstatements regarding the burden of proof did
not affect the outcome of the sentence. Therefore, we will
affirm the judgment of the District Court with respect to the
sentence enhancement for obstruction of justice.
X. Conclusion
We conclude that there was no prosecutorial misconduct,
Brennan’s conviction was not against the weight of the
evidence, the supplemental charge was not coercive, the
loss calculation for the purpose of sentencing was correct,
there was no violation of the ex post facto clause, the
findings supporting the obstruction of justice enhancement
were not clearly erroneous, and the District Court’s
misstatement of the burden of proof constituted harmless
error. Accordingly, the District Court will be affirmed.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit