United States v. Caldwell

REVISED SEPTEMBER 24, 2002
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 99-60908
_____________________
UNITED STATES OF AMERICA
Plaintiff - Appellee
v.
STEVE D CALDWELL
Defendant - Appellant
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Mississippi
_________________________________________________________________
August 13, 2002
Before KING, Chief Judge, and PARKER and CLEMENT, Circuit Judges.
KING, Chief Judge:
After a jury trial, Defendant-Appellant Steve Caldwell was
convicted of three counts of mail fraud and one count of money
laundering. On appeal he challenges his convictions and sentence
on several grounds. Finding no reversible error, we AFFIRM
Caldwell’s conviction and sentence.
I. BACKGROUND
1
On November 4, 1998, a grand jury returned an indictment
charging Steve Caldwell with six counts of mail fraud in
violation of 18 U.S.C. §§ 1341, 1346, and 2 (2000), and two
counts of money laundering in violation of 18 U.S.C. §§ 1957 and
2 (2000). On the government’s motion, the district court
dismissed two of the mail fraud counts prior to trial.
At Caldwell’s trial, the government presented testimonial
and documentary evidence regarding his activities from
approximately March 1993 to December 1996 in connection with the
corporate entities that were created by the Venture Capital Act
of 1994, MISS. CODE ANN. §§ 57-77-1, et seq. (1996), amended by
MISS. CODE ANN. §§ 57-77-2, et seq. (Supp. 2001).1 Caldwell played
a large role in bringing the Venture Capital Act into existence.
In advocating this legislation, he represented himself to
governmental officials as being associated with Capital
Strategies Group (“CSG”), a company that he formed and wholly
owned. In March 1993, Caldwell and Lee Gilliand, who was the
president and the sole employee of CSG, assisted officials of the
Mississippi Department of Economic and Community Development (the
“DECD”) in developing and drafting legislation creating a
publicly-funded entity designed to attract venture capital from
1
In 1998, after the events underlying Caldwell’s
convictions occurred, the Mississippi Legislature amended the
Venture Capital Act. See MISS. CODE ANN. § 57-77-2 (Supp. 2001).
All subsequent citations to the Venture Capital Act in this
opinion are to the original version unless otherwise specified.
2
private investors. Once the DECD submitted the draft legislation
to the Mississippi legislature, Caldwell and Gilliand lobbied to
secure its passage, which occurred in January of 1994.
The Venture Capital Act provided for the formation of three
entities —— the Magnolia Capital Corporation (“Magnolia
Capital”), the Magnolia Venture Capital Corporation (“Magnolia
Venture”), and the Magnolia Venture Capital Fund Limited
Partnership (“Magnolia Fund”) —— “for the purposes of increasing
the rate of capital formation; stimulating new growth-oriented
business formations; creating new jobs for Mississippi;
developing new technology; enhancing tax revenue for the state;
and supplementing conventional business financing.” Id. § 57-77-
3. Magnolia Capital, a non-profit corporation, was the sole
shareholder of Magnolia Venture, a for-profit corporation that
was the general partner of Magnolia Fund. See id. §§ 57-77-9(1),
(3), 57-77-11(1), (3). The Venture Capital Act further provided
for the issuance of state bonds, see id. § 57-77-29, and
authorized the DECD to disburse money from the bond proceeds as a
loan to Magnolia Capital to be used to give Magnolia Venture
funding “for the purpose of providing venture capital to
Mississippi businesses,” id. § 57-77-17(a)-(b).
Caldwell was among the five members of Magnolia Venture’s
board of directors, all of whom the director of the DECD
appointed pursuant to the Venture Capital Act. See id. § 57-77-
11(2). At the first board meeting, held on June 6, 1994,
3
Caldwell was elected chairman of the board. In this capacity,
Caldwell called a special meeting of the board approximately one
month later for the purpose of presenting for the board’s
approval (1) an employment contract hiring Caldwell as CEO and
(2) a consulting contract with CSG. Caldwell’s employment
contract provided for a starting annual salary of $150,000 to be
increased by a minimum of 10% each year. The consulting contract
retained CSG to raise capital from the private sector (which was
mandated by the Venture Capital Act) and to advise Magnolia
Venture regarding investment decisions. For these and other
related services, CSG was to receive an initial payment of
$75,000, subsequent payments of $25,000 per month, and a 5%
commission on each $5,000,000 in private investment that CSG
raised. The board unanimously approved both contracts.2
In justifying the two contracts, Caldwell represented to the
board that he and Lee Gilliand were co-owners of CSG.3 As noted
above, Caldwell was in fact the sole owner of CSG. In a document
entitled “Brief on Specifics of Contract,” which Caldwell
distributed to the board members at the special meeting, he cited
Gilliand’s background as a reason for approving the CSG contract.
Specifically, Caldwell noted that Gilliand “was Chairman of the
2
Caldwell abstained from voting on both contracts.
3
A booklet containing information about Magnolia Venture,
created under Caldwell’s direction to be distributed to potential
private investors, stated that Caldwell owned 50% of CSG.
4
Governor’s Task Force” and “has worked for 18 months without
compensation to pass the Venture Capital Legislation.”
Caldwell’s focus on Gilliand in promoting CSG’s contract
presumably would have made sense to the board members, who, in
the words of one board member in her testimony at the trial,
“really thought Lee [Gilliand] . . . was the main person [at
CSG].”
In the “Brief on Specifics of Contract,” Caldwell also
stated that the DECD “approved” of his relationship with CSG and
that CSG was the only securities dealer in Mississippi licensed
to perform the services needed by Magnolia Venture. At trial,
however, the DECD official who was primarily responsible for
drafting the legislation with Caldwell and Gilliand disavowed any
“approval” by the DECD of Caldwell’s relationship with CSG. In
addition, Mississippi’s assistant secretary of state for
securities testified that, at the time that the board approved
the consulting contract with CSG, 900 firms were registered in
Mississippi to perform the services in question. The assistant
secretary further testified that CSG was not among these 900
registered firms.
Caldwell was apparently quite certain that his appointment
as chairman and the board’s approval of the contracts would come
to pass even before the Venture Capital Act went into effect in
1994. On December 6, 1993, Caldwell wrote a letter to an
investment broker at Merrill Lynch suggesting that it would be
5
beneficial to Merrill Lynch to finance an existing business loan
of Caldwell’s because of the income that he expected to obtain as
a result of the formation of Magnolia Venture. Specifically,
Caldwell wrote:
Lee and I have worked extensively on the State of
Mississippi’s new Venture Capital program. . . . [T]he
highlights are that the State will put up $20
million. . . . It is planned that I will be Chairman of
the Board of the Venture Capital Corporation (a healthy
salary included). We will then sign a management
contract in the $350,000 range to Capital Strategies to
do background and management work for prospective
companies. . . . All of this will become public knowledge
in January when the legislation is introduced to the
. . . Mississippi Legislature.
Caldwell indicated that he would open an account with Merrill
Lynch in CSG’s name if Merrill Lynch financed his loan.
Shortly after the formation of the Magnolia entities, the
DECD loaned Magnolia Capital $20,000,000, the amount generated
from the state bonds issued pursuant to the Venture Capital Act.
Magnolia Capital then transferred $13,000,000 of the loan amount
to Magnolia Venture.4 As a result of Magnolia Venture’s
contracts with CSG and with Caldwell, Caldwell obtained
significant amounts of Magnolia Venture’s funds. Initially,
pursuant to its contract with CSG, Magnolia Venture paid CSG
$75,000 up front and $25,000 per month thereafter. Additionally,
the contract obligated Magnolia Venture to pay for any CSG
4
Magnolia Capital placed the remaining $7,000,000 in zero
coupon bonds that would yield the principal amount of the loan in
fifteen years.
6
expenses that were approved by Magnolia Venture’s CEO (i.e.,
Caldwell). The evidence presented by the government at trial
indicated that Caldwell —— in his capacity as the owner of CSG ——
billed Magnolia Venture a total of $14,000 over the course of
four months for a non-existent “secretary” and —— in his capacity
as CEO of Magnolia Venture —— authorized the payment of this
$14,000 to CSG.
Further, after successfully persuading a private investor,
Billy Clements, to invest $5,000,000 in Magnolia Venture,
Caldwell claimed CSG’s entitlement to a $250,000 commission (5%
of the $5,000,000 investment) under its contract with Magnolia
Venture. Originally, Clements agreed to invest only $4,500,000,
the amount that the Venture Capital Act required Magnolia Venture
to raise before it could invest venture capital in Mississippi
businesses. See MISS. CODE ANN. § 57-77-11(6) (1996). When
Clements expressed his reluctance to increase the amount to
$5,000,000 because he needed the difference to pay his taxes,
Caldwell promised Clements that he would be permitted to withdraw
from the Magnolia Fund the portion of his investment necessary to
satisfy his tax obligations. Clements subsequently withdrew
$650,000 from the Magnolia Fund.
In his capacity as CEO of Magnolia Venture, Caldwell
approved the issuance of a $250,000 check to CSG for securing the
$5,000,000 investment from Clements. In Magnolia Venture’s check
register, the payee for this check was recorded as
7
“confidential.” Subsequently, Caldwell’s wife (Sandra Caldwell)
signed a CSG check in the amount of $225,000 payable to Caldwell,
which he deposited in his personal account. Caldwell later sent
a letter to Liza Looser, who was on the board’s compensation
committee, suggesting that he deserved “a nice bonus” of $75,000
for obtaining the $5,000,000 investment from Clements. The
committee gave him this requested bonus.
Unbeknownst to the other board members, in addition to the
$25,000 monthly fee that Magnolia Venture paid CSG for providing,
inter alia, advice on investment decisions, CSG secured the
agreement of Pat Gilliand, a local securities broker,5 to give
CSG 50% of the commissions that he received from Magnolia Venture
for purchasing securities on its behalf. Gilliand paid CSG a
total of $38,730.56 in these “split commissions,” which Caldwell
subsequently deposited in his personal bank account.
Also without the board’s knowledge, Caldwell instructed
David Crawford, whom Caldwell had hired as Magnolia Venture’s
“vice president of investments,” to distribute 10% of the general
partner’s share of profits from Magnolia Venture’s investments to
Caldwell in his monthly paychecks. Consequently, over the course
of several months in 1996, Caldwell was paid a total of
$44,302.50 from Magnolia Venture’s profits. Caldwell’s
employment contract with Magnolia Venture provided for a
5
Pat Gilliand is the father of Lee Gilliand, the president
of CSG.
8
distribution of 10% of the general partner’s share of profits
“upon liquidation of the Fund, or in advance at the discretion of
the Board.” Two board members testified that the board never
approved of such a distribution, and Crawford testified that the
Fund was never in liquidation.
The board became concerned about Caldwell’s performance as
CEO after receiving an audit report and management letter
produced by an outside accounting firm. The management letter
flagged a number of Caldwell’s activities as improper or
potentially problematic, including: (1) CSG’s failure to provide
“detailed billing indicating what work was performed for
[Magnolia Venture] each month and the applicable dates of
performance,” particularly in light of the fact that Caldwell was
both CEO of Magnolia Venture and the sole owner of CSG, (2)
certain payments made by Magnolia Venture to CSG, including the
$14,000 for a “secretary” and $767 in rent each month for office
space, (3) CSG’s cut of the commissions that Magnolia Venture
paid to brokers, (4) Magnolia Venture’s payments to American
Telesys, a company of which Caldwell owned 72.9%, “for various
services,” (5) the fact that “no further investors [had been]
sought” after Billy Clements invested $5,000,000, even though
“other investors had submitted subscription agreements and
written investment checks to the [Magnolia] Fund[, which were]
returned prior to the closing [of the Magnolia Fund],” and (6)
Billy Clements’s withdrawal from the Magnolia Fund of $650,000
9
pursuant to his agreement with Caldwell, thereby reducing the
amount of money attributable to private investment “below the
$4,500,000 . . . threshold required by the [Venture Capital]
Act.” According to the management letter, these and other
“matters and practices . . . raise concerns about [Magnolia
Venture’s] long-term financial stability and [about] whether the
original spirit of the Venture Capital Act of 1994 . . . is being
adhered to in [Magnolia Venture’s] operations.”
In response to the audit report and management letter, the
board appointed Johnny Clements (who became a board member in
April 1996 and is the brother of Billy Clements) and another
board member to an internal audit committee to investigate
Caldwell’s activities. Johnny Clements wrote two memoranda
reporting on the committee’s findings and its conclusion that
many of Caldwell’s actions constituted breaches of his fiduciary
duty to Magnolia Venture. For example, the audit committee
determined that Caldwell had acted in the best interest of CSG,
rather than of Magnolia Venture, in attributing Billy Clements’s
investment to Caldwell as owner of CSG, rather than as CEO of
Magnolia Venture (in which case Magnolia Venture would not have
been obligated to pay the $250,000 commission).
The board members held two meetings at which they discussed
the findings in the memoranda with Caldwell. At trial, Johnny
Clements testified that at one of these meetings, Caldwell
insisted that the $250,000 commission to CSG was proper because
10
Lee Gilliand had been primarily responsible for securing Billy
Clements’s investment. Shortly after these two meetings, the
board terminated Caldwell. Magnolia Venture subsequently
declared bankruptcy.6
The jury entered specific findings supporting its guilty
verdict on three of the four mail fraud counts and on both of the
money laundering counts. The district court set aside the jury’s
verdict on one of the money laundering counts on the ground that
the amount of money necessary for conviction could not be
6
As noted above, the Mississippi Legislature amended the
Venture Capital Act in 1998. Section 57-77-2 of the new version
explains that because “[t]he Legislature finds that the Venture
Capital Act of 1994 . . . has not been implemented in accordance
with legislative intent,” the Act “needs to be amended for the
purpose of clarifying the legislative intent and for the further
purpose of ensuring public trust in the venture capital loan
program by providing safeguards in the operation of the program
and over the proper administration of the use of public funds.”
MISS. CODE ANN. § 57-77-2 (Supp. 2001). The new clarifications and
safeguards include, inter alia:
(1) that the three Magnolia entities “shall be
instrumentalities of the State of Mississippi and their
operations and activities shall be subject to review by
the State Auditor of Public Accounts, the Attorney
General of Mississippi, the Mississippi Ethics
Commission, the Joint Legislative Committee on
Performance Evaluation and Expenditure Review, and any
other state officer or agency as provided by law,” id.
§ 57-77-3,
(2) that money in or obtained from the Magnolia Fund
“and any earnings on such amounts . . . shall remain,
and shall be considered to be, public funds,” id., and
(3) that no money in or obtained from the Magnolia Fund
“may be used to provide financing for, or to contract
for goods or services with, any business in which a
director, employee, or limited partner of [any of the
Magnolia entities], or the spouse of any such [person]
has a direct or indirect interest,” id. § 57-77-29(1).
11
aggregated. The district court sentenced Caldwell to sixty
months’ imprisonment on each of the mail fraud counts and to
seventy-five months’ imprisonment on the money laundering count,
all to run concurrently, followed by three years of supervised
release. The court ordered Caldwell to pay the state of
Mississippi restitution in the amount of $1,377,830.52 and
imposed a special assessment of $250. Caldwell timely appeals
his convictions on all counts and his sentence.
III. CHALLENGES TO THE CONVICTIONS
Caldwell attacks his convictions primarily on grounds of
alleged indictment defects and insufficiency of the evidence. He
also raises a number of challenges to the district court’s
evidentiary rulings and jury instructions, most of which are more
properly framed as challenges to the sufficiency of the evidence.
We accordingly address them as such.
As noted above, Caldwell was convicted of three counts of
mail fraud in violation of 18 U.S.C. § 1341. The offense of mail
fraud has two basic elements: “(1) having devised or intending to
devise a scheme to defraud (or to perform specified fraudulent
acts), and (2) use of the mail for the purpose of executing, or
attempting to execute, the scheme (or specified fraudulent
acts).” Carter v. United States, 530 U.S. 255, 261 (2000)
(quoting Schmuck v. United States, 489 U.S. 705, 721 (1989)).
The first element may be satisfied (1) by proof that the
12
defendant devised a scheme or artifice to defraud, which
“includes a scheme or artifice to deprive another of the
intangible right of honest services,” 18 U.S.C. § 1346, or (2) by
proof that the defendant devised a scheme or artifice to engage
in one of the two fraudulent acts specified in § 1341, which are
“[to] obtain[] money or property by means of false or fraudulent
pretenses, representations, or promises,” and “to sell, dispose
of, loan, exchange, alter, give away, distribute, supply, or
furnish or procure for unlawful use any counterfeit or spurious
. . . article,” 18 U.S.C. § 1341.7 In the instant case, Caldwell
7
Section 1341 provides in full:
Whoever, having devised or intending to devise any scheme
or artifice to defraud, or for obtaining money or
property by means of false or fraudulent pretenses,
representations, or promises, or to sell, dispose of,
loan, exchange, alter, give away, distribute, supply, or
furnish or procure for unlawful use any counterfeit or
spurious coin, obligation, security, or other article, or
anything represented to be or intimated or held out to be
such counterfeit or spurious article, for the purpose of
executing such scheme or artifice or attempting so to do,
places in any post office or authorized depository for
mail matter, any matter or thing whatever to be sent or
delivered by the Postal Service, or deposits or causes to
be deposited any matter or thing whatever to be sent or
delivered by any private or commercial interstate
carrier, or takes or receives therefrom, any such matter
or thing, or knowingly causes to be delivered by mail or
such carrier according to the direction thereon, or at
the place at which it is directed to be delivered by the
person to whom it is addressed, any such matter or thing,
shall be fined under this title or imprisoned not more
than five years, or both. If the violation affects a
financial institution, such person shall be fined not
more than $1,000,000 or imprisoned not more than 30
years, or both.
18 U.S.C. § 1341 (2000).
13
was charged with, and the jury found him guilty of, devising a
“scheme or artifice” both to obtain money and property by means
of false and fraudulent representations and to deprive another of
the right to honest services.
Caldwell was also convicted of one count of money laundering
in violation of 18 U.S.C. § 1957, which prohibits “knowingly
engag[ing] in a monetary transaction in criminally derived
property of a value greater than $10,000 [that] is derived from
specified unlawful activity.” Id. § 1957(a). The monetary
transaction underlying the charge for which Caldwell was
convicted is the deposit in his personal account of the CSG check
paying Caldwell $225,000 of the $250,000 commission that Magnolia
Venture paid CSG for Billy Clements’s $5,000,000 investment. The
indictment alleges that the $225,000 was derived from mail fraud
in violation of § 1341, which is among the “specified unlawful
activities” that can form the basis of a money laundering
conviction. See 18 U.S.C. §§ 1957(f)(3), 1956(c)(7)(A),
1961(1)(B) (2000).
A. Challenges to the Indictment
1. The mail fraud charges
Caldwell challenges the mail fraud counts in his indictment
on two grounds: (1) the counts are duplicitous, and (2) the
indictment insufficiently alleges the elements of the offense.
Duplicity of a count and the sufficiency of an indictment are
14
both issues of law that this court reviews de novo. United
States v. Sharpe, 193 F.3d 852, 865-66 (5th Cir. 1999)
(duplicity); United States v. Alford, 999 F.2d 818, 823 (5th Cir.
1993) (sufficiency of the indictment).
A duplicitous indictment is one that alleges “two or more
distinct and separate offenses” in a single count. United States
v. Morrow, 177 F.3d 272, 296 (5th Cir. 1999). Accordingly, in
determining whether an indictment is duplicitous, the inquiry is
“whether [the indictment] can be read to charge only one
violation in each count.” Sharpe, 193 F.3d at 866.
Caldwell’s indictment alleges that he “intentionally devised
and carried out a scheme”:
(1) to defraud the taxpayers and officials of the State
of Mississippi, the Board of Directors for [Magnolia
Venture], and others to obtain money and property by
means of false and fraudulent representations, pretenses
and promises, and (2) [to] depriv[e] [Magnolia Venture]
of its intangible right of honest services by breaching
his fiduciary duty owned to [Magnolia Venture] as [its]
Chairman of the Board of Directors and Chief Executive
Officers.
After detailing Caldwell’s alleged conduct in devising this
scheme, the indictment alleges that Caldwell knowingly mailed
certain letters via the U.S. Postal Service for the purpose of
executing the scheme to obtain money and to deprive of honest
services, “each [letter] constituting a separate count.”
Relying on United States v. Curry, 681 F.2d 406 (5th Cir.
1982), Caldwell argues that the mail fraud counts are duplicitous
because each count alleges more than one scheme, i.e., each count
15
alleges both (1) a scheme to defraud Mississippi officials and
taxpayers and the board of Magnolia Venture to obtain money by
false and fraudulent representations and (2) a scheme to deprive
Magnolia Venture of the right to honest services. We agree with
the government that Caldwell’s indictment alleges only one scheme
with two objects. However, even if each mail fraud count did
allege multiple schemes, it does not follow, as Caldwell argues,
that the counts would be duplicitous. While Caldwell is correct
that this court described the indictment at issue in Curry as
alleging “two separate and distinct fraudulent schemes,” 681 F.2d
at 411, we did not hold that each separate scheme constitutes a
separate mail fraud offense. Instead, we explicitly recognized
that “[u]nder the mail fraud statute, each mailing is a separate
violation.” Id. at 409 n.5 (emphasis added); see also United
States v. St. Gelais, 952 F.2d 90, 97 (5th Cir. 1992) (“It is not
the scheme to defraud but the use of the mails or wires that
constitutes mail or wire fraud.”).
In United States v. Harvard, 103 F.3d 412 (5th Cir. 1997),
we rejected essentially the same duplicity argument as Caldwell’s
in reviewing a bank fraud count alleging that the defendant had
devised a scheme “to defraud” and “to obtain monies by false
representation.” Id. at 420. We reasoned that these two
allegations were “alternative ways in which [the] offense c[ould]
be committed,” not allegations of multiple violations of § 1344.
Id.; cf. Sanabria v. United States, 437 U.S. 54, 66 n.20 (1978)
16
(“A single offense should normally be charged in one count rather
than several, even if different means of committing the offense
are alleged.”) (citing FED. R. CRIM. P. 7(c)(1)).
Accordingly, where a mail fraud count alleges only one
instance of use of the mail in furtherance of multiple schemes
(or a single scheme with multiple objects), the jury can find the
defendant guilty of only one mail fraud offense on that count ——
regardless whether the jury finds that the defendant devised one
or all of the alleged schemes associated with that particular use
of the mail. Each mail fraud count in Caldwell’s indictment
contains only one allegation of use of the mail. Thus, none of
the counts is duplicitous.
Caldwell also mounts several challenges to the sufficiency
of the mail fraud charges in his indictment. First, he contends
that the indictment insufficiently alleges mail fraud because
Magnolia Venture is a private corporation, and private
corporations cannot be deprived of the right to “honest services”
for purposes of mail fraud. In support of this position,
Caldwell relies on McNally v. United States, 483 U.S. 350 (1987),
a pre-§ 1346 case in which the Supreme Court held that § 1341 was
“limited in scope to the protection of property rights,” and thus
reversed the defendants’ mail fraud convictions based on a scheme
to deprive the citizens and government of Kentucky of honest
services. Id. at 352, 360-61. The McNally Court reasoned that
“[i]f Congress desires to go further, it must speak more clearly
17
than it has.” Id. at 360. As this court recognized in United
States v. Brumley, 116 F.3d 728 (5th Cir. 1997) (en banc),
“Congress accepted the Court’s invitation [in McNally]” by
enacting § 1346, id. at 732, which makes explicit that “the term
‘scheme or artifice to defraud’ [in § 1341] includes a scheme or
artifice to deprive another of the intangible right of honest
services,” 18 U.S.C. § 1346.
According to Caldwell, because § 1346 does not explicitly
indicate that it applies to “private corruption,” the McNally
Court’s requirement that Congress make its intentions unequivocal
indicates that § 1346 should not be construed as reaching private
corruption. This court has concluded otherwise. In United
States v. Gray, 96 F.3d 769 (5th Cir. 1996), a post-§ 1346
decision, we affirmed a conviction of “honest services” mail
fraud based on conduct undertaken in the private sphere. Id. at
774-75. Accordingly, Caldwell’s contention that § 1346 does not
extend to “private corruption” lacks merit.
Caldwell further contends that, even assuming § 1346 applies
to cases involving private-employer victims, the indictment is
nevertheless deficient because it fails to allege all the
essential elements of the “honest services” form of mail fraud.
Specifically, Caldwell maintains that under this court’s decision
in Brumley, a violation of state law is an essential element of
“honest services” mail fraud that must be alleged in the
indictment. Thus, Caldwell argues, the allegation in his
18
indictment that he deprived Magnolia Venture of the right to
honest services by breaching “fiduciary duties” that he owed to
Magnolia Venture as chairman of its board and CEO is not
sufficient because the indictment does not allege a state-law
source of these fiduciary duties.
The essential elements of mail fraud that must be alleged in
the indictment are “(1) having devised or intending to devise a
scheme to defraud (or to perform specified fraudulent acts), and
(2) use of the mail for the purpose of executing, or attempting
to execute, the scheme (or specified fraudulent acts).” Carter,
530 U.S. at 261 (internal quotations and citation omitted); see
also, e.g., United States v. Reyes, 239 F.3d 722, 735 (5th Cir.
2001).8 Caldwell’s indictment clearly alleges that he deprived
Magnolia Venture of its right to his honest services, one of the
types of scheme that satisfies the first element of mail fraud.
The government correctly points out that the Brumley court did
not hold that the state-law source of the right to honest
services must be alleged in the indictment. Rather, this court
held that, properly interpreted, “honest services” are services
owed to an employer under state law and, thus, that the
government must prove that the defendant deprived the employer of
such services. See Brumley, 116 F.3d at 734.
8
Although “[a] specific intent to commit fraud” is also an
essential element of mail fraud, this court has held that an
indictment “need not specifically charge” this mens rea element.
United States v. Gordon, 780 F.2d 1165, 1170 (5th Cir. 1986).
19
Caldwell also claims that the charges based on deprivation
of “honest services” are insufficient because the indictment
fails to allege that the “breach of the fiduciary duty was
‘material’.” This court has held that “a violation of the
[fiduciary] duty to disclose [can] only result in criminal mail
fraud where the information withheld from the employer [i]s
material,” Gray, 96 F.3d at 774 (quoting United States v.
Ballard, 680 F.2d 352, 353 (5th Cir. 1982 Unit B)), and that
materiality must be alleged in an indictment charging mail fraud,
see United States v. Richards, 204 F.3d 177, 192-93 (5th Cir.
2000). However, “[i]f the facts alleged in the indictment
warrant an inference [of] material[ity], the indictment is not
fatally insufficient for its failure to allege materiality in
haec verba.” Id. at 192 (quoting United States v. McGough, 510
F.2d 598, 602 (5th Cir. 1975)) (first alteration in original).
Caldwell’s indictment alleged sufficient facts to warrant an
inference that the information that he failed to disclose was
material. The indictment alleges several instances of Caldwell’s
failure to disclose information to the board of Magnolia Venture,
including the failure to disclose (1) his promise to Billy
Clements that he could withdraw part of his $5,000,000 investment
in the Magnolia Fund “to satisfy [his] tax liability in 1996,”
(2) his payment to himself of $225,000 drawn from the Magnolia
Fund, (3) his solicitation and receipt of $38,730.96 from Pat
Gilliand “for a substantial investment in a number of securities
20
[purchased] through [Gilliand] for and on behalf of [Magnolia
Venture],” and (4) his direction to Crawford to pay Caldwell a
certain percentage of Magnolia Venture’s profits each month. The
indictment also alleges that, in urging the board to approve the
contract with CSG, Caldwell falsely represented that he shared
ownership of CSG with Lee Gilliand, that the DECD “approved” of
the relationship between Caldwell and CSG, and that CSG was the
only firm licensed to perform the services necessary for Magnolia
Venture to carry out its mission. Finally, the indictment
alleges that Caldwell falsely represented in CSG’s bills to
Magnolia Venture that CSG had incurred $14,000 in expenses that
it did not in fact incur. This information that the indictment
alleges Caldwell failed to disclose or misrepresented ——
involving significant sums of money and important business
decisions —— clearly warrants an inference of materiality.9
9
In connection with his argument that the indictment
failed to allege materiality, Caldwell contends that the mail
fraud charges are insufficient because they fail to specify
whether the government considered Magnolia Venture to be a
private or public entity. He does not cite any authority for
this proposition, but rather asserts that it was necessary for
him to know whether the government considered Magnolia Venture to
be a private or public entity because in the case of private
entities, the government must prove (and he must also defend
against) the allegation that the breach of fiduciary duty is
material. However, this court has not limited the materiality
requirement to cases of “honest services” mail fraud involving
private employers. See Gray, 96 F.3d at 774-75. Consequently,
the indictment’s failure to specify whether Magnolia Venture is a
private or a public entity did not deprive Caldwell of notice of
the materiality requirement.
21
Finally, Caldwell argues that his indictment is insufficient
because it did not provide the factual specificity necessary to
give him adequate notice of the mail fraud charges against him.
Specifically, Caldwell objects to the indictment’s failure to
“specify which action[s],” including the alleged mailings,
“furthered which scheme.” Federal Rule of Criminal Procedure
7(c) requires that “[t]he indictment or the information shall be
a plain, concise and definite written statement of the essential
facts constituting the offense charged.” FED. R. CRIM. P. 7(c).
In applying this rule, this court has noted that “[p]ractical,
not technical, considerations govern the validity of an
indictment, and the test of the validity of an indictment is ‘not
whether the indictment could have been framed in a more
satisfactory manner, but whether it conforms to minimal
constitutional standards.’” United States v. Chaney, 964 F.2d
437, 446 (5th Cir. 1992) (quoting United States v. Webb, 747 F.2d
278, 284 (5th Cir. 1984)). In addition to containing all the
elements of the charged offense, a constitutionally sufficient
indictment “fairly informs” the defendant of the charge that he
or she faces and is precise enough to preclude the risk that the
defendant may be prosecuted for the same offense in the future.
Alford, 999 F.2d at 823.
As noted above, the first paragraph of the mail fraud counts
alleges that Caldwell devised a scheme (1) to defraud Mississippi
taxpayers and officials and Magnolia Venture’s board by means of
22
false or fraudulent representations to obtain money, and (2) to
deprive Magnolia Venture of its right to honest services. This
initial paragraph largely tracks the language of §§ 1341 and
1346. The subsequent paragraphs describe specific acts alleged
to be “part of the scheme and artifice to defraud.” More
specifically, these paragraphs set out (1) the misrepresentations
(both affirmative and by omission) allegedly made by Caldwell,
(2) the monetary transactions (including specific amounts) and
agreements that he allegedly effected through the use of his
authority as CEO of Magnolia Venture and as sole owner of CSG,
and (3) the dates on which these acts allegedly took place.
We are unpersuaded by Caldwell’s conclusory assertion that
the indictment was rendered constitutionally insufficient by its
failure to “match” each alleged act with either the scheme to
defraud the Mississippi taxpayers and officials and Magnolia
Venture’s board by false or fraudulent representations to obtain
money or the scheme to deprive Magnolia Venture of its right to
honest services. The considerable level of detail used in the
indictment to describe the various acts constituting the scheme
on which the government based the mail fraud counts provided
Caldwell with adequate notice of the facts and circumstances on
which the mail fraud charges were based and precluded the risk of
prosecution for the same offenses in the future.10
10
Caldwell also contends that the indictment’s allegation
of several “unmatched” acts in the mail fraud counts made it
23
Similarly, because the indictment contains detailed
allegations of the acts underlying the charges, Caldwell was
adequately apprised of how the government understood the mailings
to further the scheme. Two of the mail fraud counts on which
Caldwell was convicted are based on letters to two members of
Magnolia Venture’s board notifying them of the special board
meeting that Caldwell called to present his employment contract
and the CSG contract to the board for approval. The allegations
regarding Caldwell’s misrepresentations at this special board
meeting are sufficient to provide Caldwell with notice of how
these mailings furthered the alleged scheme. The third count of
mail fraud is based on Caldwell’s letter to Liza Looser urging
her to grant him a bonus of $75,000 for his performance as CEO.
The indictment specifically referenced this letter, noting that
therein Caldwell touted his success in securing a $5,000,000
investment. In addition, the indictment detailed Caldwell’s
dealings with Billy Clements that resulted in this investment.
Thus, Caldwell was also fairly informed of the connection between
this third mailing and the alleged scheme.
2. The money laundering charge
“impossible for the jury to apply the acts to the schemes” and
thus presented the risk of a non-unanimous jury verdict. The
unanimity issue is not presented in this case because the verdict
form required the jury to make separate findings on the two
purposes of the alleged scheme and on the individual acts that
supported each purpose, and the district court made clear in its
instructions to the jury that unanimity was required for any
positive finding.
24
Caldwell contends that the money laundering charge is
insufficient because it (1) fails to name the financial
institution through which he allegedly laundered the $225,000,
and (2) fails to provide adequate factual specificity regarding
the mail fraud from which the money was allegedly derived. Both
of these arguments allege inadequate factual detail regarding
elements of the offense —— namely, the “monetary transaction”
element and the “specified unlawful activity” element. In
assessing whether an indictment contains adequate factual
information regarding the elements of a charged offense, this
court has explained that although an indictment “must allege that
the defendant committed each of the essential elements of the
crime charged so as to enable the accused to prepare his defense
and to invoke the double jeopardy clause in any subsequent
prosecution for the same offense,” “[i]t is not necessary for an
indictment to go further and to allege in detail the factual
proof that will be relied upon to support the charges.” United
States v. Crippen, 579 F.2d 340, 342 (5th Cir. 1978); see also
United States v. Williams, 679 F.2d 504, 508 (5th Cir. 1982)
(stating that Federal Rule of Criminal Procedure 7(c) “does not
mean that the indictment must set forth facts and evidentiary
details necessary to establish each of the elements of the
charged offense”).
In evaluating whether the “monetary transaction” element of
a money laundering offense has been alleged with sufficient
25
factual specificity, it is important to bear in mind that “[t]he
core of money laundering, which distinguishes one such offense
from another, is the laundering transaction itself.” United
States v. Smith, 44 F.3d 1259, 1265 (4th Cir. 1995). Caldwell
maintains that United States v. Pettigrew, 77 F.3d 1500 (5th Cir.
1996), requires that the financial institution through which
money is allegedly laundered be named in the indictment.
However, as the government points out, the Pettigrew court did
not hold that an indictment must include the name of the
financial institution in charging a § 1957 offense, but rather
noted in dicta that the district court constructively amended the
indictment by naming in the jury instructions a bank other than
the two banks named in the indictment. See 77 F.3d at 1513 n.11.
The money laundering count in Caldwell’s indictment, which
closely tracks § 1957, includes the date of the offense and the
amount of money. In these circumstances, the absence of the name
of the financial institution does not render the charge
constitutionally insufficient. The specification of both the
date of the offense and the amount of money is sufficiently
precise to (1) provide Caldwell with adequate notice of the
“monetary transaction” on which the government based the money
laundering charge and (2) preclude the possibility of Caldwell’s
being charged in the future with money laundering for the same
transaction.
26
Caldwell also argues that the indictment’s allegation that
the “unlawful activity” was “mail fraud in violation of Section
1341, Title 18, United States Code” was not sufficient to give
him adequate notice of the factual basis for this element of a
money laundering offense. In support of this argument, he relies
on United States v. Knowles, 29 F.3d 947 (5th Cir. 1994). In
Knowles, this court reaffirmed the rule that “an allegation made
in one count of an indictment may be incorporated by reference in
another count of the indictment” only if “expressly done.” Id.
at 952. According to Caldwell, because the money laundering
count does not expressly incorporate any of the mail fraud
counts, the factual allegations in those counts may not be
considered in assessing the sufficiency of the money laundering
count. Without these factual allegations, he argues, the mere
reference to the offense of mail fraud in the money laundering
count insufficiently alleges the “unlawful activity” element.
Although this court has not yet addressed the precise
incorporation issue that Caldwell raises, the Fourth Circuit has
assessed the sufficiency of an indictment’s allegation of
“unlawful activity” in a context quite similar to the instant
case. In United States v. Smith, 44 F.3d 1259 (4th Cir. 1995),
the defendant challenged the sufficiency of the charge that he
“caus[ed] $374,578.00 to be transferred and deposited to the
Grimm-Gray Trust account at the Sun Bank, Ft. Lauderdale,
Florida, which funds were the proceeds of a wire fraud, in
27
violation of 18 U.S.C. § 1343.” Id. at 1264 (emphasis added).
Reasoning that “the requirement that the funds be illegally
derived is not the distinguishing aspect and therefore does not
lie at the core of the offense,” the Fourth Circuit concluded
that “details about the nature of the unlawful activity
underlying the character of the proceeds need not be alleged.”
Id. at 1265. The Fourth Circuit further explained that “the term
‘specified unlawful activity’ is a defined term referring to a
list of offenses which qualify as unlawful activity for purposes
of stating a money laundering offense.” Id. Thus, because wire
fraud in violation of § 1343 “is included as a ‘specified
unlawful activity’ for purposes of money laundering,” the Fourth
Circuit held that “[n]othing more need be alleged” than that the
laundered money was the proceeds of wire fraud in violation of
§ 1343. Id.
We agree with the Fourth Circuit’s analysis of the
“specified unlawful activity” element in Smith. Accordingly, we
conclude that the statement in Caldwell’s indictment indicating
that the $225,000 was derived from mail fraud in violation of
§ 1341 sufficiently alleges the “unlawful activity” element of
money laundering.
B. Challenges to the Sufficiency of the Evidence
Caldwell contends that there was insufficient evidence to
support (1) the “scheme” element for all three mail fraud counts
28
of which he was convicted and (2) the “mailing” element for two
of those counts. In reviewing a challenge to the sufficiency of
the evidence, we ask whether “a rational trier of fact could have
found the essential elements of the crime beyond a reasonable
doubt.” United States v. Powers, 168 F.3d 741, 746 (5th Cir.
1999). We consider the evidence in the light most favorable to
the jury’s verdict. Richards, 204 F.3d at 206. As “[t]he jury
is free to choose among reasonable constructions of the
evidence,” id., this court does not assess the weight of the
evidence or the credibility of the witnesses, Powers, 168 F.3d at
746.
1. The evidence of a scheme
In Caldwell’s case, the government advanced two theories of
a “scheme.” First, the government alleged that Caldwell created
a scheme to defraud Mississippi taxpayers and officials and the
board of Magnolia Venture of money by “enrich[ing] himself
through financial transactions made possible by unlawful
misrepresentations and deceits rather than for the statutory
purposes of providing venture capital financing.” Second, the
government alleged that Caldwell created a scheme to deprive the
board of Magnolia Venture “of its intangible right of honest
services [by] breaching the fiduciary duty owed to [Magnolia
Venture] as the corporation’s Chairman of the Board and Chief
Executive Officer.” On the verdict form provided by the district
29
court, the jury indicated its finding that the government had
proven both of these theories beyond a reasonable doubt. As to
each theory, the jury further specified the manners in which it
found that Caldwell knowingly created the scheme.
The jury found that Caldwell created a scheme against
Mississippi taxpayers and officials and Magnolia Venture’s board
to obtain money by false or fraudulent representations in the
following ways:
(1) “by unlawful representations concealing from the
[board] an agreement in a limited partnership with an
investor, Billy Clements, where [CSG], owned by
[Caldwell], received a commission of $250,000.00,”
(2) “by lying to the President of [CSG] that a
$225,000.00 check made payable to [Caldwell] had been
spent for the expenses of [CSG],”
(3) “by soliciting and receiving without knowledge of
the [board] a total of $38,730.56 from a local
securities broker,”
(4) “by paying to himself a total of $44,302.50
representing 10% of the profits of the General
Partner’s distribution from [Magnolia Venture],” and
(5) “by authorizing payment out of [Magnolia Venture]
funds a total of $14,000.00 to be paid to [CSG] for a
secretary never hired.”
Caldwell contends that neither the conduct specifically
found by the jury nor any of the other conduct supported by the
evidence establishes a scheme to obtain money by means of false
or fraudulent representations. At most, Caldwell contends, this
conduct is evidence of ethical improprieties or “other offenses.”
30
As this court has recognized, for purposes of the federal
fraud statutes, “[t]he term ‘scheme to defraud’ is not readily
defined, but it includes any false or fraudulent pretenses or
representations intended to deceive others in order to obtain
something of value, such as money.” United States v. Saks, 964
F.2d 1514, 1518 (5th Cir. 1992) (internal citation omitted).
Additionally, the false or fraudulent representations must be
material. Neder v. United States, 527 U.S. 1, 25 (1999). In the
instant case, the government presented sufficient evidence for a
reasonable juror to have found beyond a reasonable doubt that
Caldwell knowingly created such a “scheme to defraud.”
Based on evidence such as board members’ testimony and the
“Brief on Specifics of Contracts” (distributed by Caldwell at the
special board meeting), the jury was entitled to infer that
Caldwell (through CSG) obtained the $250,000 commission on
Clements’s investment, the $38,730.56 in split commissions from
Pat Gilliand, and the $14,000 for the non-existent secretary, by
means of the false, material representations that he made to the
board in urging it to approve CSG’s contract. Specifically,
Caldwell falsely represented that he owned only 50% of CSG, that
the DECD “approved” of his relationship with CSG, and that CSG
31
was the only firm in Mississippi licensed to perform the
necessary investment work for Magnolia Venture.11
Further, Caldwell’s receipt of the $14,000 directly resulted
from his unquestionably false and material representation that
CSG had expended that amount to employ a secretary. Caldwell
argues that he was unaware that the “secretary” for which he
billed Magnolia Venture did not exist. However, there is ample
evidence supporting the jury’s contrary finding. In particular,
a rational juror could have concluded that Caldwell knew that CSG
never employed a secretary based on the evidence that Caldwell
worked in CSG’s office on a regular basis during the four-month
period over which he billed Magnolia Venture for secretarial
services and that CSG had only one employee (thus the absence of
a secretary was likely apparent).
11
Conceding that the representation that he owned 50% of
CSG was false, Caldwell maintains that this representation
nevertheless may not be deemed part of a mail fraud “scheme”
because the representation is not material. According to
Caldwell, it is the fact of his ownership interest in CSG that is
material —— not the extent of that interest. We disagree. A
rational juror could have concluded otherwise, particularly in
light of the evidence indicating that Caldwell also falsely
represented that Lee Gilliand, who was not a member of Magnolia
Venture’s board, was the co-owner of CSG (in which case
Caldwell’s purported 50% interest would not have been a majority
interest) and was the principal decisionmaker for the company.
Moreover, Caldwell made other false and material representations
to the board that by themselves support the jury’s finding that
he devised a scheme to obtain money by false or fraudulent
representations.
32
Similarly, although Caldwell points out that CSG’s contract
with Magnolia Venture entitled CSG to a 5% commission on every
$5,000,000 investment, a reasonable juror could have assigned
this provision little weight in considering CSG’s receipt of the
$250,000 commission on the Billy Clements investment in light of
the evidence presented at trial indicating: (1) that Caldwell did
not inform the board that he agreed to permit Clements to
withdraw part of his investment after CSG received the
commission, thereby causing the investment to drop below the
$5,000,000 threshold required under the contract for CSG to
receive a commission, (2) that Caldwell solicited a $75,000 bonus
as Magnolia Venture’s CEO, in part because he successfully
secured the $5,000,000 investment, (3) that Caldwell insisted
that Lee Gilliand was responsible for the investment when the
board questioned Caldwell about the commission, (4) that Caldwell
entered “confidential” as the payee of the $250,000 check issued
to CSG in Magnolia Venture’s check register, and (5) that
Caldwell told Lee Gilliand that the $225,000 of the commission
(which Caldwell deposited in his personal account) had been spent
on CSG’s expenses.12
12
Regarding his receipt of the $44,302.50, Caldwell points
out that he directed Crawford to include 10% of the general
partner’s share of Magnolia Venture’s profits in Caldwell’s
paycheck each month and, thus, that this profit distribution was
documented information available to the board. However, access
to, or even actual knowledge of, the information at issue does
not preclude a finding of a scheme to defraud by false or
fraudulent representations. It is well-established that
33
We thus conclude that the government presented sufficient
evidence for a rational juror to find beyond a reasonable doubt
that Caldwell devised a scheme to obtain money by false, material
representations. Accordingly, it is unnecessary for us to
address the sufficiency of the evidence for the government’s
alternate theory that Caldwell’s scheme also aimed to deprive of
the right to honest services. See Powers, 168 F.3d at 753-54.13
“reliance is not an element of mail fraud.” Akin v. Q-L
Investments, Inc., 959 F.2d 521, 533 (5th Cir. 1992); see also
Neder, 527 U.S. at 24-25 (“The common-law requirement[] of
‘justifiable reliance’ . . . plainly ha[s] no place in the
federal fraud statutes.”). Moreover, in the instant case, the
two board members on the compensation committee testified that
they were not aware of Caldwell’s receipt of a percentage of
profits on the Fund’s money.
Caldwell further contends that he believed in good faith
that he was entitled to a percentage of Magnolia Venture’s
profits under his employment contract. There was sufficient
evidence for a rational juror to conclude otherwise. Liza
Looser, who was present at the meeting during which the board
confronted Caldwell about the internal audit committee’s
findings, testified that when questioned regarding his taking of
a percentage of the profits each month, Caldwell did not explain
why he believed he had been authorized to do so, but rather
responded that “[i]t was a stupid move” and that he “shouldn’t
have done it.” Additionally, the testimony of several of the
government’s witnesses indicated that it was readily apparent
that Caldwell was not entitled to any profits under his contract
or otherwise.
13
For this reason, we also need not address Caldwell’s
further argument that there was insufficient evidence to support
the “deprivation of honest services” theory of a scheme to
defraud because “the government failed to show any tangible harm,
economic or otherwise.” In any event, this court has made clear
in cases involving the “deprivation of honest services” theory
that “[a]lthough the Government must prove that some actual harm
was contemplated by the defendant, it is well-established that a
scheme which operates to deprive citizens of ‘intangible rights
or interests’ is a scheme to defraud under section 1341.” Curry,
681 F.2d at 410-11 (emphasis added) (internal citation omitted);
34
2. The mailings underlying two of the mail fraud counts
Caldwell challenges the two mail fraud counts based on his
letters notifying board members about the special board meeting
that Caldwell called for the purpose of submitting his employment
contract and the CSG consulting contract for the board’s
approval. Relying on Parr v. United States, 363 U.S. 370 (1960),
and Curry, Caldwell contends that his convictions on the two
counts must be reversed because these two mailings were required
by Magnolia Venture’s bylaws and were not shown to be false. In
Parr, the Supreme Court held that members of a school board could
not be held liable for mail fraud based on mailings that were
required under state law unless the mailings were false or
fraudulent. See 363 U.S. at 391-92. Applying the Parr holding
in Curry, this court held that the defendant could not be
convicted of mail fraud based on affidavits that he mailed
pursuant to Louisiana’s statute governing campaign-finance
disclosure unless the government proved that the affidavits were
false and that the defendant either intended to defraud the state
agency to which they were mailed or mailed them “in a deliberate
see also Brumley, 116 F.3d at 735 (upholding the defendant’s
conviction for “deprivation of honest services” mail fraud where
the government had stipulated that it would not try to prove that
the defendant had caused others a monetary loss, but rather had
taken the position that “the quid pro quo was intangible, such as
favoritism or other types of intangible matters”) (alterations
omitted).
35
attempt to prevent discovery of his scheme to defraud.” 681 F.2d
at 412.
Pointing out that Parr and Curry both involved mailings
required under state law, the government argues that extending
Parr to “all matters which are required by the bylaws of a
corporation” would create an “exception that would swallow up
most of the mail fraud statute’s reach,” because “[v]irtually all
economic activity can be traced back to a bylaw requirement of
some business.” We agree that permitting the applicability of
the mail fraud statute to depend on corporate-created rules is
neither required under Parr nor desirable. Furthermore, even
assuming the mailings notifying the board members of the special
meeting were required under law as contemplated by the Parr
Court, the Parr exception is nevertheless inapplicable because
these mailings would not have been made but for Caldwell’s
alleged scheme to defraud. In Schmuck v. United States, 489 U.S.
705 (1989), the Supreme Court recognized this limitation on the
Parr rule:
Whereas the mailings of the tax documents in Parr were
the direct product of the school district’s state
constitutional duty to levy taxes and would have been
made regardless of the defendants’ fraudulent scheme, the
mailings in the present case, though in compliance with
Wisconsin’s car-registration procedure, were derivative
of Schmuck’s scheme to sell “doctored” cars and would not
have occurred but for that scheme.
36
Schmuck, 489 U.S. at 713 n.7 (internal citation omitted); see
also United States v. Krenning, 93 F.3d 1257, 1264 (5th Cir.
1996) (finding that the “innocent mailings” exception of Parr did
not apply because “[e]ven assuming there existed a statute
requiring Sovereign Insurance to mail the policies and related
documents to the insureds[,] . . . [t]he continuing need to mail
policies out to new customers was . . . entirely derivative of
the Defendants’ decision to fraudulently operate an insolvent
insurance company”); United States v. Bright, 588 F.2d 504, 509-
10 (5th Cir. 1979) (“Under state law, the mailings in Parr would
have occurred irrespective of the defendants’ embezzlement . . .
Here, by contrast, . . . [i]f [the defendants] had not decided to
defraud the estate of their late cousin, they would not have had
to comply with the state law requiring them to file the
creditors’ notice.”).
Caldwell called the special meeting that was the subject of
the two challenged mailings for the specific purpose of securing
the board’s approval of his employment contract and of CSG’s
consulting contract, both of which were essential to the success
of Caldwell’s alleged scheme. Unlike the situation in Parr,
Caldwell’s mailings notifying the board members of the special
meeting would not have been necessary absent the fraudulent
37
scheme and, accordingly, are proper bases of the mail fraud
counts.14
Caldwell also attacks his convictions with several claims of
error in the district court’s evidentiary rulings and jury
charge. Many of these claims are essentially reassertions of his
challenges to the sufficiency of the evidence supporting the
“scheme” element of mail fraud (or are more appropriately framed
as such) and thus have been addressed above. As to Caldwell’s
other challenges to the district court’s evidentiary rulings and
jury charge, we find no reversible error.
III. SENTENCING CHALLENGES
Caldwell raises three challenges to his sentence on appeal.
Specifically, he contends that the district court (1) improperly
calculated the “loss” attributable to him for purposes of
determining his sentence for mail fraud under the Sentencing
Guidelines, (2) erroneously determined that the state of
Mississippi was entitled to restitution as a victim of Caldwell’s
scheme, and (3) improperly formulated the restitution payment
schedule.
14
As Caldwell’s claim that there is insufficient evidence
supporting his money laundering conviction is derivative of his
claim that there is insufficient evidence supporting his mail
fraud convictions (mail fraud being the “unlawful activity”
alleged in the money laundering count), we also reject Caldwell’s
sufficiency-of-the-evidence challenge to his money laundering
conviction.
38
A. Calculation of “Loss” under the Sentencing Guidelines
Caldwell was sentenced under the 1998 edition of the
Sentencing Guidelines. In that edition, the guideline applicable
to mail fraud convictions increases the base offense level from
zero to eighteen levels depending on the amount of “loss” that
the sentencing court attributes to the defendant. See U.S.
SENTENCING GUIDELINES MANUAL § 2F1.1(b)(1), app. A (1998). Caldwell
argues that the district court’s calculation of loss is erroneous
for two reasons: (1) the court based its calculation on
Caldwell’s gain without making a threshold determination that
there was an actual loss, and (2) the calculation does not
account for the services rendered by Caldwell. In support of
these arguments, Caldwell relies on revisions of the definition
of “loss” in the guideline’s commentary made in Amendment 617,
which became effective on November 1, 2001 (after Caldwell was
sentenced). See U.S. SENTENCING GUIDELINES MANUAL app. C, supp. at
185 (1998-2001). Specifically, Caldwell points to the new
provisions in the commentary (1) that “[t]he court shall use the
gain that resulted from the offense as an alternative measure of
loss only if there is a loss but it reasonably cannot be
determined,” U.S. SENTENCING GUIDELINES MANUAL § 2B1.1 cmt. n.2(B),
and (2) that “[l]oss shall be reduced by . . . the services
rendered, by the defendant or other persons acting jointly with
39
the defendant, to the victim before the offense was detected,”
id. § 2B1.1 cmt. n.2(E)(i).
A district court’s calculation of loss attributable to a
defendant’s scheme to defraud is a factual finding that this
court reviews for clear error. United States v. Sidhu, 130 F.3d
644, 654 (5th Cir. 1997). Particular provisions of Amendment 617
apply retroactively to Caldwell’s case only if they are intended
merely to “clarify,” rather than to substantively change, the
guidelines or their commentary. United States v. Davidson, 283
F.3d 681, 684 (5th Cir. 2002). We need not make this
retroactivity determination, however, because the district
court’s loss calculation is consistent with Amendment 617.
The district court calculated the loss attributable to
Caldwell ($1,377,830.52) by adding the amounts paid by Magnolia
Venture (1) to CSG ($1,170,779.39), (2) to Caldwell for one of
his annual bonuses ($75,000), (3) to American Telesys
($75,483.89),15 (4) to Caldwell in monthly distributions from
Magnolia Venture’s profits ($44,302.50), and (5) to a country
club for Caldwell’s membership fees and purchases ($12,264.74).
Initially, Caldwell’s argument that this calculation was based on
gain is incorrect. The district court’s comments at the
15
In arriving at this figure, the district court accounted
for the fact that Caldwell owned 72.9% of American Telesys:
$75,485.89 is 72.9% of the total amount paid by Magnolia Venture
to American Telesys.
40
sentencing hearing, as well as the amounts themselves, make clear
that the district court sought to determine the total amount that
Magnolia Venture actually lost as a result of Caldwell’s scheme
by focusing on the amounts that Magnolia Venture paid to Caldwell
and his companies. Because the court calculated loss in this
manner, Caldwell did in fact gain a substantial portion of the
total “loss.” However, the court adopted this approach (from
Caldwell’s presentence report) in order to determine the portion
of the total loss incurred by Magnolia Venture that could fairly
be attributed to Caldwell, not in order to account for Caldwell’s
gain.16
We also reject Caldwell’s contention that the district
court’s loss calculation does not account for services rendered.
As the government points out, by excluding certain amounts that
the presentence report counted as losses —— including Caldwell’s
salary, health and life insurance, and travel and entertainment
expenses —— the district court sufficiently accounted for any
services that Caldwell provided to the victims of his fraudulent
scheme. Moreover, even assuming that the district court had not
accounted for services rendered, the commentary to Amendment 617
indicates that the provision regarding deduction of value for
services rendered is a substantive change rather than a
16
Thus, the district court did not, for example, attempt
to determine how much Caldwell actually gained of the total
amounts paid to CSG and American Telesys.
41
clarification and, thus, may not be retroactively applied to
Caldwell’s sentence.17 Accordingly, the district court did not
clearly err in determining the loss attributable to Caldwell for
sentencing purposes.
B. Restitution: Proper “Victim” and Payment Schedule
The district court ordered Caldwell to “pay restitution in
the amount of $1,377,830.52” to the treasurer of Mississippi
“during incarceration, with any remaining balance to be paid in
thirty-two equal monthly installments during supervised release,
beginning the first full month of supervision.” Caldwell
challenges the district court’s restitution order on two grounds:
(1) there was no evidence that the state of Mississippi is a
“victim” entitled to restitution under the applicable law, and
17
In particular, the commentary states that this provision
“codifies the ‘net loss’ approach that has developed in the case
law, with some modifications,” and that “[t]his crediting
approach is adopted because the seriousness of the offense and
the culpability of a defendant is better determined by using a
net approach.” U.S. SENTENCING GUIDELINES MANUAL app. C, supp. at 188
(1998-2001) (emphasis added). We have found that such language
indicates an intention to effect a substantive change with the
amendment. Cf. Davidson, 283 F.3d at 684 (concluding that the
“substantive nature of this amendment provision is evident” in
light of commentary stating that the Sentencing Commission had
“adopted” an approach from caselaw); United States v. McIntosh,
280 F.3d 479, 485 (5th Cir. 2002) (concluding that “the
substantive intent is reflected in th[e] commentary, which states
in part [that] ‘[t]he amendment responds in several ways to
concerns that the penalty structure existing prior to this
amendment for such offenses did not reflect adequately the
culpability of the defendant or the seriousness of the money
laundering conduct’”) (quoting U.S. SENTENCING GUIDELINES MANUAL app.
C, supp. at 233-34 (1998-2001)).
42
(2) the financial information that Caldwell submitted to the
court indicates that he does not have the ability to make the
payments as required by the schedule imposed by the district
court.
“Once we have determined that an award of restitution is
permitted by the appropriate law, we review the propriety of a
particular award for an abuse of discretion.” United States v.
Hughey, 147 F.3d 423, 436 (5th Cir. 1998). In the instant case,
the district court imposed restitution under the Victim and
Witness Protection Act, 18 U.S.C. § 3663 et seq. (2000) (the
“VWPA”), which provides for mandatory restitution to victims of
certain offenses, including mail fraud. Id. § 3663A(a)(1),
(c)(1)(A)(ii). As Caldwell’s claim that Mississippi is not a
“victim” under the VWPA challenges the legality of the district
court’s restitution order, we address this claim first, and our
review is de novo. See United States v. Mancillas, 172 F.3d 341,
342 (5th Cir. 1999).
The VWPA defines a “victim” as “a person directly and
proximately harmed as a result of the commission of an offense
for which restitution may be ordered including, in the case of an
offense that involves as an element a scheme . . ., any person
directly harmed by the defendant’s criminal conduct in the course
of the scheme.” 18 U.S.C. § 3663A(a)(2). Thus, the VWPA’s
definition of “victim” serves to “restrict[] the award of
43
restitution to the limits of the offense.” Mancillas, 172 F.3d
at 343 (internal quotations and citation omitted). In Caldwell’s
case, there is ample evidence in the record supporting the
district court’s determination that Mississippi was directly and
proximately harmed by the commission of Caldwell’s offenses.
Caldwell’s contention that Mississippi is not a victim of
his offenses appears to be based on the assumption that his
actions as CEO and chairman of the board of Magnolia Venture
could have directly and proximately harmed only Magnolia Venture,
which according to Caldwell is a private, and not a state,
entity. We find this notion implausible. It is undisputed that
Magnolia Venture was created by state statute and funded by state
bonds. The bond director for the Mississippi State Treasury
testified at Caldwell’s trial that the interest on the “Magnolia
Venture” bonds is paid out of the state treasury’s general fund,
which consists of tax revenues. Similarly, the district court
noted at Caldwell’s sentencing that the state treasurer had sent
letters to the court “express[ing] his outrage on behalf of the
[state]” and informing the court that when the bonds mature, “the
state will have paid over $14,000,000 in interest.”18
Furthermore, Magnolia Venture was created, and the money
from the bond issue provided to Magnolia Venture, for the
18
The bond director testified that the total amount of
interest that the state is obligated to pay over the fifteen-year
life of the Magnolia Venture bonds is $14,346,667.50.
44
statutory purposes of, inter alia, “creating new jobs for
Mississippi” and “enhancing tax revenue for the state.” MISS.
CODE ANN. § 57-77-3 (1996). As we concluded above, the jury’s
finding that Caldwell schemed against Mississippi officials and
taxpayers to obtain money is sufficiently supported by evidence
indicating that Caldwell fraudulently diverted Magnolia Venture’s
money to himself and his companies instead of expending it in
accordance with these statutory purposes. Accordingly, we find
it clear that the district court’s designation of Mississippi as
a victim of Caldwell’s offenses is proper under the VWPA.
Caldwell also challenges the district court’s restitution
order on the ground that the payment schedule is improper.
Pointing out that his adjusted gross income was $43,692 in 1997
and $72,072 in 1998, Caldwell argues that he does not have the
ability to comply with the payment schedule. We review the
propriety of the district court’s restitution payment schedule
for abuse of discretion. See Hughey, 147 F.3d at 436. The VWPA
instructs sentencing courts to “order restitution to each victim
in the full amount of each victim’s losses as determined by the
court and without consideration of the economic circumstances of
the defendant.” 18 U.S.C. § 3664(f)(1)(A). The court must take
the defendant’s financial situation into account, however, in
determining “the manner in which, and the schedule according to
which, the restitution is to be paid.” Id. § 3664(f)(2). The
45
VWPA sets forth the following mandatory factors to be considered
in determining a restitution payment schedule:
(A) the financial resources and other assets of the
defendant, including whether any of these assets are
jointly controlled;
(B) projected earnings and other income of the defendant;
and
(C) any financial obligations of the defendant; including
obligations to dependents.
18 U.S.C. § 3664(f)(2).
We will reverse a district court’s restitution payment
schedule “only if the defendant demonstrates that it is probable
that the district court failed to consider one of the mandatory
factors and the failure to consider that factor influenced the
court.” United States v. Schinnell, 80 F.3d 1064, 1070 (5th Cir.
1996). We find that Caldwell has not met this burden. The
district court relied on the financial information in Caldwell’s
presentence report, including that “the majority of the
defendant’s assets are jointly owned with his wife,” that he “has
been the sole financial provider [for his wife and two children]
in recent years,” and that “[d]espite considerable income from
1994 through 1996, the defendant and his wife appear to have
accumulated a fairly substantial amount of personal debt and have
little equity in their home.” The payment schedule, although
stringent, does not indicate a probability that the district
court failed to consider these aspects of Caldwell’s financial
46
situation. The schedule does not require any specific amounts to
be paid while Caldwell is incarcerated, but only that “the
balance” be paid in thirty-two equal monthly installments after
he is released. Further, the district court specified that
interest would not accrue on Caldwell’s restitution obligation.
According to the presentence report, after Magnolia
Venture’s board terminated him, Caldwell obtained employment at a
computer resale company where he earned a salary of $97,000 in
1997. It is thus reasonable to assume that he will have a
significant earning potential after his release from prison.
While meeting the payment schedule may require considerable
frugality on Caldwell’s part, the schedule is not an abuse of the
district court’s discretion in light of Caldwell’s financial
circumstances. Further, as the government points out, if
Caldwell finds himself unable to make payments under the schedule
at some point in the future, the district court may adjust the
schedule “as the interests of justice require.” 18 U.S.C.
§ 3664(k). We thus affirm the district court’s restitution
order.19
19
Caldwell also makes a conclusory claim that this court
should review “statements of witnesses in F.B.I. 302s” for
exculpatory material because the district court overruled his
request for production of these statements after reviewing the
documents in camera. Because Caldwell fails to provide any
supporting analysis for this claim, we consider it abandoned as
inadequately briefed. See, e.g., Edmond v. Collins, 8 F.3d 290,
292 n.5 (5th Cir. 1993) (“On appeal, we do not review issues not
briefed.”).
47
IV. CONCLUSION
For the foregoing reasons, we AFFIRM Caldwell’s convictions
for mail fraud and money laundering and his sentence.
48