United States v. Loe

Revised May 4, 2001
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 99-40454
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
CORNELIUS DEWITTE LOE, JR., also known as C.D. LOE;
BABO BEAZLEY LOE; LOE'S HIGHPORT, INC.,
Defendants - Appellants.
Consolidated with
Case No. 99-40495
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
LOE'S HIGHPORT, INC.; BABO BEAZLEY LOE,
Defendants - Appellants.
Consolidated with
Case No. 99-41470
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
BABO BEAZLEY LOE; LOE'S HIGHPORT, INC.,
Defendants - Appellants.
Consolidated with
Case No. 00-40690
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
versus
LOE'S HIGHPORT, INC.; BABO BEAZLEY LOE,
Defendants - Appellants.
Appeals from the United States District Court
for the Eastern District of Texas
April 17, 2001
Before HIGGINBOTHAM and DeMOSS, Circuit Judges, and FISH,* District
Judge.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
Appellants seek reversal of their convictions for conspiracy,
wire fraud, mail fraud, tax fraud, and money laundering. They
further challenge the sentence imposed by the district court. We
are unpersuaded by the majority of their numerous assertions of
error. However, as the evidence was insufficient to support a
conviction on three of the money laundering charges, we affirm in
part, reverse in part, and remand for resentencing.
I
Loe's Highport, Inc. operated Loe's Highport Marina, reputedly
the largest inland marina in the world. Situated on Lake Texoma,
the marina contains hundreds of boat slips, facilities for the sale
of boats, a disco, a corporate office, and other facilities.
Appellants Cornelius and Babo Loe ran the marina, which was located
*
District Judge of the Northern District of Texas, sitting by designation.
2
on property leased from the U.S. Corps of Engineers. Under the
lease, the Corps was to receive a percentage of marina revenues.
In 1990, the lake experienced the greatest flood in its
history. Appellants submitted millions of dollars in claims to
their insurers, Lexington Insurance Company and Chubb Insurance
Company. In the wake of damage caused by a tornado in 1994,
Appellants submitted additional claims to Continental Insurance
Corporation.
In 1995, a disgruntled customer of LHI contacted the Federal
Bureau of Investigations, claiming to be the victim of fraud.
Further investigation by the FBI indicated that Appellants were
underreporting boat sales to the Internal Revenue Service and the
Corps. The FBI obtained a search warrant and seized thousands of
documents from the marina.
On September 11, 1997, a grand jury sitting in the Eastern
District of Texas indicted Appellants and three other individuals1
on various conspiracy, tax fraud, wire fraud, mail fraud, and money
laundering charges. A 1998 superseding indictment charged
Appellants on thirty-one counts.2 The Government alleged that
Appellants failed to report millions in boat sales to the IRS and
the Corps. Appellants were also accused of having defrauded their
1
Andrew Scott Howard and Roger Foltz were acquitted. Henry Blume Loe was
granted a mistrial; he was convicted in a subsequent trial.
2
The various counts of the indictment did not uniformly encompass every
defendant. In addition to the thirty-one substantive counts, the superseding
indictment contained a forfeiture provision.
3
insurers, who collectively suffered millions of dollars in damage
due to Appellants' submission of altered or fabricated invoices for
losses and mitigation costs. The indictment alleged that Appellants
conspired to undertake these unlawful activities, and that they
used the proceeds of the fraud to acquire various forms of
property, including a house in Florida.
The district court severed the counts and held two trials.
Appellants were each convicted on some counts and acquitted on
others. The district court sentenced Cornelius and Babo Loe to jail
and required the Loes and LHI to pay large fines and restitution
damages.
II. CORNELIUS LOE
A
Cornelius Loe argues that his conspiracy conviction should be
reversed, asserting that his prosecution was barred by the statute
of limitations. The government alleged only one act in furtherance
of the conspiracy that fell within the five-year statute of
limitations.3 Cornelius Loe argues that the overt act alleged in
the indictment could not support a conviction.
The indictment alleged that the defendants conspired to
commit the following acts: "To devise and intend to devise a scheme
and artifice to defraud insurance companies and to obtain money and
3
See 18 U.S.C.A. § 3282 (2000) (articulating a five-year limitations
period).
4
property by means of false and fraudulent pretenses and promises
and [to do so in violation of 18 U.S.C.A. § 1341 (mail fraud) and
in violation of 18 U.S.C.A. § 1343 (wire fraud)]." Given the
statute of limitations, the Government had to prove an act in
furtherance of the conspiracy after September 11, 1992. The
indictment alleged: "On or about December, 1992, BABO BEAZLEY LOE,
C.D. LOE, JR. and LOE's HIGHPORT, INC. effected a settlement of the
lawsuit and received a portion of the fraudulently obtained
insurance proceeds."
These allegations arose out of the following circumstances: In
July 1991, the Loes' insurer, Lexington, interpleaded $638,388.34
in state court to determine the portion of proceeds due to the Loes
and one of their tenants, David Hull. Hull apparently had refused
to endorse Lexington insurance checks that he received, checks made
out jointly to him and the Loes.4 According to the Government, the
vast majority of the interpleaded funds resulted from the insurance
fraud undertaken by the Loes. On March 27, 1991, the state court
ordered that $624,867.795 be paid to the Loes and that $15,520.55
be retained in the court registry. The court's calculation was
incorrect, as these amounts sum to $640,388.34. The investment firm
4
Hull had been the lessee of a restaurant located on the marina. Cornelius
Loe allegedly attempted to enlist Hull in the conspiracy. In the wake of Hull's
refusal to participate, the Loes ejected him from the premises and indicated that
the restaurant would not be reopened. Litigation ensued.
5
Each of these sums was paid with interest; the amounts shown reflect only
principal.
5
handling the proceeds consequently paid the Loes only $622,867.79.
By subsequent order, the court awarded Hull $13,520.55, leaving
$2,000 in the account. All of these events occurred before
September 11, 1992.
Meanwhile, the Loes sued Hull over a debt. In November or
December, 1992, Hull's attorney and the Loes' attorney negotiated
a possible settlement of litigation between the two parties. Hull's
attorney proposed a disposition of the funds remaining in the
registry account from this and earlier interpleader actions.
Following this conversation, Hull's attorney asked the court to
disburse $17,500 from an earlier interpleader to the Loes, plus the
$2,000 remaining by mistake, and to disburse the remainder to Hull.
The motion explained that the $17,500 was actually owed to Hull,
but should be given to the Loes to settle the debt litigation. The
court entered an order of disbursement on February 10, 1993.6
Based on these facts, Cornelius Loe contends, first, that the
$2,000 payment was merely the "result" of the conspiracy, and not
its object. He argues that the object of the conspiracy was
defrauding the insurance company. As the fraud was completed
outside the limitations period, Cornelius argues that the
6
The motion made clear that LHI was entitled to the $2,000 as a result of
the prior mistaken order. The court's subsequent order of disbursement
specifically included a $2,000 disbursement to Babo Loe as trustee of LHI.
6
Government can not demonstrate the commission of an overt act in
furtherance of the conspiratorial agreement.7
We are unpersuaded by Loe's argument. Receipt of the money was
an object, and not merely a collateral result, of the conspiracy.
The indictment so alleged, and a rational trier of fact could have
arrived at this conclusion.
Our holding in United States v. Girard8 is instructive. In
Girard, we reversed the dismissal of an indictment, which the
district court had found barred by the statute of limitations. The
defendant in that case had allegedly conspired to defraud the
government by rigging contract bids. Only the final payment was
within the statute of limitations; the bid rigging had occurred
long before.9 We held that the receipt of the money was properly
alleged as an object of the conspiracy, which did not end until the
last payment was made. Girard's overt act was the acceptance and
retention of the payment.10 We made the common sense observation
that the object of the conspiracy was not the making of rigged bids
itself, but the subsequent receipt of the proceeds.11 Similarly,
7
See Grunewald v. United States, 353 U.S. 391, 396-97 (1957).
8
744 F.2d 1170 (5th Cir. 1984).
9
Girard, 744 F.2d at 1171.
10
Id. at 1173.
11
Id. at 1172. The cases cited by Cornelius Loe are consistent with this
reasoning, yet are factually distinguishable. In United States v. Colon-Munoz,
192 F.3d 210, 227-29 (1st Cir. 1999), the court held that obtaining specified
property was the object of the conspiracy. Following the purchase of the
property, a conspirator made payments on a loan financing the purchase. The court
7
receipt of the $2,000 in this case constituted an overt act falling
within the limitations period.
Cornelius Loe also contends that actions taken by Hull's
attorney are not actions taken by conspirators and therefore cannot
be actions taken in furtherance of a conspiracy.12 This argument
fails, first, because receipt of the money by the Loes was an overt
act within the scope of the conspiracy. Moreover, a rational jury
could conclude that the Loes, as parties to the settlement
agreement with Hull, took some overt action in connection with the
terms of the agreement.
Third, Cornelius Loe argues that, even if the $2,000 payment
made in February 1993 was an act in furtherance of the conspiracy,
the indictment failed to allege this act. Loe notes that the
indictment only alleged the 1992 settlement. In assessing whether
a conspiracy conviction under 18 U.S.C. § 371 withstands a statute
of limitations challenge, this Court has held that the overt acts
alleged in the indictment and proved at trial mark the duration of
correctly concluded that these later actions were not undertaken in furtherance
of the conspiracy. See id. In United States v. Davis, 533 F.2d 921, 926 (5th Cir.
1976), we found that acts taken after false statements were made to the
government were not part of a conspiracy. We emphasized that defendants were
charged with conspiring to violate 18 U.S.C. § 1001, noting that the object of
this offense was the making of false statements itself. We contrasted that
offense with conspiracy to defraud the government. See id. at 927-28. As the
conspiracy at issue in this case involves wire and mail fraud, it is
distinguishable from Davis.
12
See United States v. Manges, 110 F.3d 1162, 1170 (5th Cir. 1997) (holding
that, where a conspirator did not mail the letter implicated in mail fraud, the
mailing by another person was insufficient to support conviction).
8
the conspiracy.13 Proof of an unalleged act can not surmount the
statute of limitations bar.
Loe's argument fails, however, because the motion to disburse
the $2,000 was itself part of the settlement, which was negotiated
in November or December 1992. The indictment indicated that
Appellants had "effected a settlement" and "received a portion of
the fraudulently obtained insurance proceeds." The broad language
of the indictment was sufficient to encompass the Loes' receipt of
the $2,000.
Finally, Cornelius Loe contends that the $2,000 is "interest"
from the interpled funds and consequently not the insurer's money.
This argument is creative advocacy, but wrong. The $2,000
unquestionably represented the remainder of the principal
originally registered with the court.14
B
Cornelius Loe further contends that the district court failed
to properly instruct the jury regarding the statute of limitations
in its aiding and abetting instruction for the conspiracy count.
Count 17 of the indictment charged Appellants with (1) conspiring
13
See Davis, 533 F.2d at 929.
14
Babo Loe adopts Cornelius Loe's arguments. For the reasons given above,
they also fail. Indeed, Babo Loe's case is much weaker, as the $2,000 check was
issued in her name.
9
to violate the mail and wire fraud statutes, and (2) aiding and
abetting this conspiracy, violating 18 U.S.C. § 2. As we understand
his argument, Cornelius Loe asserts that it is unclear from the
verdict whether the jury convicted him of aiding and abetting or
for his role as a member of the conspiracy itself. He argues that
the actus reus of aiding and abetting must itself occur within the
limitations period. Where the aidor-abettor's acts fall outside
this period, it is irrelevant that the overt acts taken by the
conspirators were not time-barred. According to Cornelius Loe, the
jury should have been informed of this distinction.
We doubt the validity of Loe's proposition. An aidor-abettor
is guilty in a derivative sense; his guilt is contingent on the
acts of another.15 Courts have recognized this relationship by
holding that aiding and abetting is governed by the statute of
limitations applicable to the predicate offense.16 One could
reasonably conclude that, as long as the acts of the conspirator
were not time-barred, it is of no moment that the aidor-abettor's
conduct fell outside the limitations period. We need not decide
this, however, as Cornelius Loe was a party to the Hull litigation.
A rational jury could have found that any acts of aiding and
15
See 18 U.S.C.A. § 2 (2000); United States v. Campbell, 426 F.2d 547, 553
(2d Cir. 1970) ("18 U.S.C. § 2 does not define a crime; rather it makes
punishable as a principal one who aids or abets the commission of a substantive
crime.").
16
See United States v. Musacchia, 900 F.2d 493, 499 (2d Cir. 1990), vacated
on other grounds, 955 F.2d 3 (2d Cir. 1991); Campbell, 426 F.2d at 553; United
States v. Gressett, 773 F. Supp. 270, 281 (D. Kan. 1991).
10
abetting committed by Cornelius Loe fell within the five-year
limitations period.
Even if we were to accept Cornelius Loe's argument, however,
the jury instructions sufficiently informed the jury that the
conspiracy limitations period applied to the aiding and abetting
offense. The court admonished the jury to consider the
"instructions as a whole" and to consider the aiding and abetting
instructions "together" with the conspiracy instructions. We do not
find that the court abused its discretion in incorporating the
statute of limitations by reference.17
C
Cornelius Loe also challenges the sufficiency of the evidence
supporting his conviction under Count 17. The applicable standard
of review requires us to determine whether a reasonable trier of
fact could have found that the evidence established guilt beyond a
reasonable doubt.18 The voluminous evidence in the record affirms
that Loe's challenge is meritless. We decline Loe's invitation to
re-weigh the credibility of the witnesses.19
17
See United States v. Pennington, 20 F.3d 593, 600 (5th Cir. 1994)
(reviewing a court's refusal to submit a proposed jury instruction for abuse of
discretion).
18
See United States v. Mergerson, 4 F.3d 337, 341 (5th Cir. 1993).
19
See United States v. Bailey, 444 U.S. 394, 414-15 (1980) (stating that
it is for the jury, and not the court, to determine the credibility of
witnesses).
11
D
Loe challenges the jury instructions for the conspiracy, mail
fraud, and wire fraud counts based on the court's failure to define
"materiality." Materiality is an element of the offenses of mail
and wire fraud, and must be included in the jury charge.20 In this
case, the court instructed the jury that the fraud must be
"material;" the only alleged error is its failure to define the
term.21
We review a trial court's refusal to include a requested jury
instruction for abuse of discretion, according the trial court
"substantial latitude in formulating the charge."22 We find
reversible error only where the requested instruction is
substantially correct; the actual charge given the jury did not
substantially cover the content of the proposed instruction; and
where the omission of the proposed instruction would "seriously
impair the defendant's ability to present a defense."23
20
See Neder v. United States, 527 U.S. 1, 25 (1999); United States v.
Pettigrew, 77 F.3d 1500, 1510-11 (5th Cir. 1996).
21
The court instructed the jury in the following manner:
For purposes of both the mail and wire fraud statutes, a "scheme to
defraud" includes any scheme to deprive another of money or property by
means of false or fraudulent pretenses, representations, or promises. A
representation may be "false" when it constitutes a half truth, or
effectively conceals a material fact, provided it is made with intent to
defraud.
22
Pettigrew, 77 F.3d at 1510.
23
Id.
12
The court only deviated from the instruction proposed by
Appellants in refusing to define "material."24 We have held that
failure to charge materiality to the jury requires reversal,
without considering whether the error was harmless.25 However, we
have not found that failure to define materiality compels the same
response. This is not a case where the actual instructions failed
to "substantially cover the content of the proposed instruction."26
Given the evidence presented at trial, which demonstrated that
Appellants' fraud increased the insurers' payments by millions of
dollars, the court's failure to define "material" was nothing more
than harmless error.27
III. BABO LOE
A
Babo Loe contends that she can not be convicted of conspiracy
on counts 1, 17, and 18, which alleged conspiracy to defraud the
government and conspiracy to commit mail and wire fraud. She
24
The proposed mail fraud instruction included the following definition of
"materiality": "A statement is material if it has a natural tendency to
influence, or is capable of influencing a decision by the party to whom the
representation is made." In contrast, the proposed wire fraud instruction did not
include a definition of materiality.
25
Pettigrew, 77 F.3d at 1511.
26
Id. at 1510.
27
See United States v. Davis, 226 F.3d 346, 358-59 (5th Cir. 2000)
(upholding a jury instruction that failed to define "materiality"). Babo Loe
adopts Cornelius Loe's argument regarding the jury instructions. The preceding
analysis applies equally to her case.
13
argues, first, that being convicted of conspiring with LHI, which
she owned, is equivalent to being convicted of conspiring with
herself. Second, she notes that, with the exception of Cornelius
Loe, the other alleged co-conspirators were acquitted. She argues
that she can not be convicted of conspiracy if the other co-
conspirators were acquitted. Similarly, Babo Loe asserts that, if
the evidence was insufficient to support Cornelius Loe's conviction
under count 17, her conviction under that count also can not stand.
Her argument is without foundation. This Court has repeatedly
held that the acquittal of all other co-conspirators does not bar
conviction for conspiracy.28 We therefore need not address Babo
Loe's assertion that she can not be convicted of conspiring with
LHI.29
B
Babo Loe also contends that the district court erred in
denying her motion to suppress evidence seized pursuant to the
search of the marina. As we understand her argument, she asserts
that all of the evidence should be suppressed because of defects in
the warrant and its execution. She contends that the warrant was
28
See United States v. Zuniga-Salinas, 952 F.2d 876, 877-78 (5th Cir. 1992)
(en banc); United States v. Bermea, 30 F.3d 1539, 1554 (5th Cir. 1994).
29
As noted above, the evidence was sufficient to support Cornelius Loe's
conspiracy conviction under count 17. Moreover, counts 1 and 18 involved
acquitted conspirators other than LHI. Babo Loe's arguments regarding LHI are
consequently irrelevant.
14
overbroad and that the FBI exceeded the scope of the warrant in
conducting its search.
The affidavit upon which the warrant was based provided
evidence that the Loes (1) had underreported boat sales revenue to
the Corps; (2) had underreported boat sales revenue to the IRS; (3)
had not paid state sales tax on cash cover charges obtained from
bars and restaurants located on the marina; and (4) did not report
the cash sale of various boats, in violation of the Bank Secrecy
Act.30 The warrant authorized the search of the following areas: two
offices on level one of the corporate office building; all of level
two; the storage area of level three; a tan mobile home designated,
"Loe's Highport Yacht Sales"; and the safes and vaults of the
Pompano's Club and Clipper Bar. An attachment to the search warrant
listed approximately fifty-four categories of items to be seized.
The warrant did not authorize a search of the Loe's residence,
which was located on the third floor of the corporate office
building.
In reviewing the district court's ruling on a motion to
suppress evidence, we review factual findings for clear error.31 We
review de novo the court's legal conclusions regarding the
constitutionality of law enforcement action, sufficiency of the
30
See 31 U.S.C.A. §§ 5312(a)(2)(T), 5313 (2000).
31
See Davis, 226 F.3d at 350.
15
warrant, and the reasonableness of an officer's reliance on a
warrant.32
We address a Fourth Amendment challenge to a seizure conducted
pursuant to a search warrant by asking, first, whether the seizure
falls within the good-faith exception to the exclusionary rule.33
Under the good-faith exception, where a warrant was based on an
affidavit which was insufficient to establish probable cause, the
evidence obtained is still admissible if law enforcement officials
acted in "objectively reasonable good-faith reliance upon a search
warrant."34 If the good-faith exception applies, we need not examine
whether the warrant was supported by probable cause.35
When officers execute a warrant in a manner that offends the
Fourth Amendment, however, there is no "objectively reasonable
good-faith reliance." Evidence which falls outside the scope of the
warrant normally must be suppressed.36 However, two exceptions
apply. First, items of an "incriminatory character" which are found
in the course of a legal search, yet which were not described in
the search warrant, may be seized. Second, officers may seize
32
See id.
33
See United States v. Davis, 226 F.3d 346, 350 (5th Cir. 2000); see also
United States v. Leon, 468 U.S. 897 (1984).
34
Davis, 226 F.3d at 351 (quoting United States v. Shugart, 117 F.3d 838,
843 (5th Cir. 1997)).
35
Davis, 226 F.3d at 351.
36
See Horton v. California, 496 U.S. 128, 140 (1990).
16
property which is not described in the warrant if the property
exhibits a "sufficient nexus" to the crime under investigation.37
The Fourth Amendment does not countenance, however, a "general,
exploratory search through personal belongings."38
Although the bulk of her arguments address the sufficiency of
the warrant itself, Babo Loe contends that the fourteen-hour search
of the marina exceeded the scope of the warrant. Agents seized
several hundred boxes of documents, of which 130 boxes were
subsequently returned as irrelevant to the Government's
investigation. Babo Loe fails to cite specific pieces of evidence
that were seized outside the scope of the warrant. While Babo Loe
argued to the district court that a variety of broad categories of
evidence were seized outside the scope of the warrant,39 her brief
does not indicate whether she is reiterating those arguments on
appeal. On appeal, she refers only to the seizure of estate
37
See Creamer v. Porter, 754 F.2d 1311, 1318 (5th Cir. 1985).
38
Id.
39
The district court examined the following categories of evidence which
Babo Loe objected to as falling outside the scope of the warrant: (1) various
date books, organizers, calendars, attendance lists, and Rolodexes; (2) entirely
personal notes and files; (3) litigation and other legal files, including files
relating to the Hull litigation; (4) state and federal labor law files; (5) trust
and estate planning files; (6) gift and estate tax files; (7) files on property
damage; (8) medical and health insurance files; (9) life insurance files; (10)
automobile insurance files; (11) other insurance files unrelated to property
insurance; (12) maps and floor plans; and (13) an audiotape. The district court
found that, while some of the preceding categories of items appeared to fall
outside the warrant's scope and did not demonstrate a sufficient nexus to the
crimes investigated, the officers did not act in "blatant disregard of the search
warrant."
17
planning files, the Loes' personal files, whole computers and
computer files, and litigation files.
Although we are troubled by the scope of the search conducted,
we are unprepared to say that the items seized should be suppressed
on the basis that they exceeded the terms of the warrant. The
warrant specifically authorized the seizure of computers and
computer files. Although the warrant did not refer to estate
planning files, it authorized, for example, the seizure of files
relating to any and all wire transfers and information relating to
stock/brokerage accounts. Without specifics, we are unable to
evaluate the merits of Babo Loe's contention that "personal files"
were seized. Finally, while the warrant did not expressly authorize
the seizure of litigation files, certain non-privileged documents
contained within those files may have fallen within the scope of
the warrant. Again, without specifics, we are unable to conclude
that any given file was seized improperly.
Babo Loe also complains of the extensive search of the Loe
residence. The warrant authorized a search of the third-floor
storage area. Because the elevator was either locked or inoperable,
agents could only access the storage area through the Loes'
residence, which was also on the third floor. Despite the warrant's
failure to authorize a search of the residence, the Government
18
argues that a "protective sweep" was necessary.40 The FBI knew prior
to the search that the Loes were registered gun owners, and a
search of their persons did not reveal firearms. Although examining
drawers and closets may or may not have been quick and limited—and
therefore within the scope of a protective sweep41—we need not
address this issue. No items from the residence were seized, nor
was anything from the residence used as evidence at trial.
Babo Loe further argues that the warrant itself was overbroad
because it authorized the seizure of many categories of documents
unrelated to the crimes described in the affidavit. The good-faith
exception articulated above does not apply where there is a
discrepancy between the assertions in the affidavit and the scope
of the warrant sufficient to make reliance on the warrant
unreasonable.42
While the wisdom of including such a broad array of documents
in the warrant is questionable, we are unprepared to find the
40
A protective sweep is justified when the searching officer reasonably
believed "that the area swept harbored an individual posing a danger to the
officer or others." Maryland v. Buie, 494 U.S. 325, 327 (1990).
41
See id. ("A 'protective sweep' is a quick and limited search of premises
. . . narrowly confined to a cursory visual inspection of those places in which
a person might be hiding."). But see United States v. Hernandez, 941 F.2d 133,
135-38 (2d Cir. 1991) (extending the proper scope of a protective sweep to a
search for weapons that the arrestee could easily reach).
42
See United States v. Davis, 226 F.3d 346, 352 (5th Cir. 2000); United
States v. Cherna, 184 F.3d 403, 409-10 (5th Cir. 1999). Babo Loe does not invoke
the other bases for not applying the good-faith exception. See Cherna, 184 F.3d
at 407-08. Given the specificity of the warrant, which lists fifty-four
categories of evidence, we find that the warrant did not violate the
particularity requirement of the Fourth Amendment. See United States v.
Kimbrough, 69 F.3d 723, 727 (5th Cir. 1995).
19
officers' reliance on the warrant unreasonable. The district court
found that documents such as real estate and insurance files were
logical indicators of LHI's gross fixed assets. We agree. A
company's gross fixed assets may indicate a failure to report
income to the IRS and Corps, as well as Appellants' knowledge of
the unreported income. The twenty-two-page affidavit provided ample
indication of the Loes' failure to report income to the IRS and
Corps. Although the warrant authorized seizure of a vast array of
documents, the crimes alleged in the affidavit could reasonably be
viewed as requiring a search of this magnitude. The fifty-year
history of the marina and the scope of the operations under
investigation lend additional support to the breadth of the search
warrant. Moreover, the warrant expressly limited the search to a
portion of the marina's business premises, and nothing was seized
from the Loes' residence.43 The Loes point to the FBI's prompt
return of the 130 boxes of irrelevant documents as evidence of the
warrant's overbreadth. However, this is merely proof that the
proper breadth of a warrant is always clearer after the fact.
We find only that the agents' reliance on the warrant was not
objectively unreasonable and did not indicate bad faith.44
43
The search in this case is therefore distinguishable from the "all
records" search discussed in United States v. Humphrey, 104 F.3d 65 (5th Cir.
1997). In Humphrey, we recognized that the Fourth Amendment requires "closer
scrutiny of an all records search of a residence," noting that a search of this
nature would only be upheld in "extreme cases." See id. at 69 & n.2.
44
Cornelius Loe adopts Babo Loe's Fourth Amendment arguments. For the
reasons given above, these arguments also fail as applied to Cornelius Loe.
20
C
Babo Loe argues that the district court improperly applied the
Sentencing Guidelines in determining her sentence for money
laundering. She contends that fraud was the "essence" of her
offense. Accordingly, Babo Loe argues that she should have been
sentenced under the fraud guidelines, not the money laundering
guidelines.
This Court reviews a court's legal interpretations of the
Guidelines de novo.45 A sentencing court's refusal to depart from
the applicable guideline is unreviewable, however, unless the court
mistakenly believed that it lacked the authority to grant such a
departure.46 The district court here was aware of its power to grant
a downward departure.
Babo Loe attempts to escape this limitation on our power to
review sentencing decisions. She asserts that a court's application
of a guideline range is a purely legal interpretation, meriting de
novo review. We find no error in the sentencing court's decision to
apply section 2S.1 of the Guidelines to Babo Loe's violation of 18
U.S.C. § 1957. Appendix A of the Guidelines indicates that
guideline section 2S1.2 corresponds with violations of 18 U.S.C. §
45
See United States v. Barbontin, 907 F.2d 1494, 1497 (5th Cir. 1990).
46
See United States v. Powers, 168 F.3d 741, 753 (5th Cir. 1999).
21
1957.47 We would not hesitate to apply de novo review and correct
a court's misapprehension of this elementary component of the
sentencing architecture constructed by the Guidelines. However,
where a court finds that the facts in a section 1957 case are
sufficiently atypical as to warrant the application of a lower
guideline range, its decision constitutes a downward departure.48
The court in such an instance does not misinterpret the Guidelines
by failing to apply section 2S1.2; it exercises its discretion
under the facts of that case.49 The sentencing court's refusal to
apply a different set of guidelines in this case therefore
constitutes a refusal to grant a downward departure—a decision
which this Court may not review.
D
Babo Loe also challenges her money laundering conviction on
count 25, arguing that the evidence was insufficient to support the
verdict. We review the evidence to determine whether a reasonable
trier of fact could have found that the evidence established guilt
47
See U.S.S.G. App. A. (2000); U.S.S.G. § 1B1.2(a); U.S.S.G. § 2S1.2, cmt.
48
See United States v. Dadi, 235 F.3d 945, 954-55 (5th Cir. 2000); United
States v. Hemmingson, 157 F.3d 347, 360-63 (5th Cir. 1998). Our Court therefore
differs from those circuits which view the initial choice of which guideline to
apply as a question of law subject to de novo review. See United States v. Smith,
186 F.3d 290, 297 (3d Cir. 1999).
49
See 18 U.S.C.A. § 3553(b) (2000) (requiring a court to follow the
applicable guideline unless it finds that "there exists an aggravating or
mitigating circumstance . . . not adequately taken into consideration by the
Sentencing Commission").
22
beyond a reasonable doubt.50 Babo Loe notes that she spent some of
the fraudulently obtained money years after having received it. She
contends that the passage of time negates the inference that she
knew that she was spending "dirty" funds. This argument is
meritless. A rational jury could find that she possessed such
knowledge at the time of the transaction. Babo Loe asks this Court
to effectively re-weigh the evidence. We refrain from taking such
a step and reject her sufficiency challenge.51
E
Babo Loe argues that the forfeiture of the Florida property
should be reversed on three grounds: the indictment did not allege
the extent of her interest in the property; the forfeiture was not
incorporated in the judgment; and the forfeiture is
disproportionate to the offense. We reject each of these
contentions.
First, the indictment was sufficient. Rule 7(c)(2) of the
Federal Rules of Criminal Procedure states: "No judgment of
forfeiture may be entered in a criminal proceeding unless the
indictment or information shall allege the extent of the interest
or property subject to forfeiture." As this Court has noted, "[t]he
purpose of the notice of forfeiture in the indictment is to inform
50
See United States v. Mergerson, 4 F.3d 337, 341 (5th Cir. 1993).
51
See United States v. Bailey, 444 U.S. 394, 414 (1980).
23
the defendant that the government seeks forfeiture as a remedy."52
An indictment is sufficiently specific if it "puts the defendant on
notice that the government seeks forfeiture and identifies the
assets with sufficient specificity to permit the defendant to
marshal evidence in their defense."53 Babo Loe asserts that the
indictment was insufficient because it failed to specify the
interest in the property that was subject to forfeiture, which the
court later determined to be 52.6 percent. Rule 7(c)(2) does not
require the level of detail sought by Babo Loe. She had ample
notice that the Florida property itself was subject to forfeiture.
Her defense could not have been jeopardized by the Government's
failure to more precisely delineate the scope of the forfeiture.54
Second, the forfeiture was incorporated in the judgment. Rule
32(d)(2) of the Federal Rules of Criminal Procedure provides: "At
sentencing, a final order of forfeiture shall be made part of the
sentence and included in the judgment." In this case, Judge Brown
indicated orally at the sentencing hearing that the Florida
property would be forfeited. Moreover, the court issued a written
preliminary order of forfeiture on March 31, 1999. However, the
judgments of conviction did not refer to the March 31st order or
discuss forfeiture. Upon the Government's motion, the court entered
52
United States v. Puma, 937 F.2d 151, 156 (5th Cir. 1991) (quoting United
States v. Cauble, 706 F.2d 1322, 1347 (5th Cir. 1983)).
53
Puma, 937 F.2d at 156.
54
See id. at 156-57.
24
a nunc pro tunc amendment to the written order describing the
forfeited property.55 We find nothing objectionable about this
procedure. Moreover, in the event of a conflict between an oral
judgment and a written order, the oral ruling prevails.56 The
court's oral pronouncement on forfeiture, which it issued at the
sentencing hearing, consequently remains effective in the face of
a contrary written judgment.
Finally, the forfeiture is not excessive. The court ordered
Babo Loe to forfeit only so much of the property as was purchased
with illegally obtained funds—money that she had no right to in the
first place.57 We therefore find no disproportionality, let alone
the "gross disproportionality" required by United States v.
Bajakajian.58
F
Babo Loe argues that the Government failed to adduce evidence
sufficient to support venue for count 19, mail fraud. As a
"continuing offense," mail fraud may be prosecuted in "any district
55
See Fed. R. Crim. Proc. 36 (2000).
56
See United States v. McDowell, 109 F.3d 214, 217 (5th Cir. 1997); United
States v. Shaw, 920 F.2d 1225, 1231 (5th Cir. 1991).
57
See United States v. Tilley, 18 F.3d 295, 300 (5th Cir. 1994).
58
524 U.S. 321, 334 (1998). Cornelius Loe adopts Babo Loe's arguments
regarding the forfeiture. For the reasons given above, they fail as applied to
his case.
25
in which such offense was begun, continued, or completed."59
Although the government must prove venue by the preponderance of
the evidence, circumstantial evidence alone is sufficient to
establish venue.60 On appeal, we view the evidence in the light most
favorable to the Government, drawing all reasonable inferences in
favor of the verdict.61
Babo Loe's contention is meritless. The evidence supports a
finding that on three occasions she mailed numerous documents from
locations in the Eastern District of Texas in furtherance of the
fraudulent conspiracy. Babo Loe contends that, if the three
mailings described above support her conviction on mail fraud, that
count 19 suffered from duplicity. "An indictment may be duplicitous
if it joins in a single Count two or more distinct offenses."62
However, count 19 only alleges a single act of mail fraud. Babo Loe
also does not claim prejudice as a result of duplicity in count
19.63
Her argument is more appropriately considered as a claimed
variance. Variance results when "the charging terms of the
indictment remain unaltered, but the evidence at trial proves facts
59
18 U.S.C.A. § 3237(a) (2000).
60
See United States v. White, 611 F.2d 531, 534-35 (1980).
61
Id. at 535.
62
See United States v. Sharpe, 193 F.3d 852, 870 (5th Cir. 1999).
63
See United States v. Drury, 687 F.2d 63, 66 (5th Cir. 1983) (finding
that, even if an indictment was duplicitous, there was no prejudice).
26
other than those alleged in the indictment."64 The dates of the
three mailings differ slightly from the date presented in the
indictment. Moreover, three acts of mail fraud were proven at
trial, whereas the indictment only charged one act. We are
unconvinced that this variance affected Appellant's "substantial
rights."65 Babo Loe does not allege prejudice and we do not discern
the potential for such prejudice on the facts of this case.
G
Babo Loe further contends that the cumulative effect of
numerous evidentiary errors committed by the district court
violated her rights under the Confrontation Clause.66 We review
evidentiary rulings for an abuse of discretion.67 Although Babo Loe
provides numerous cites to the record, she fails to indicate how a
specific cited decision by the court was erroneous. More
fundamentally, she concedes that none of these decisions
constituted an abuse of discretion. She argues that the cumulative
effect of these "errors" was prejudicial to her Sixth Amendment
rights.
64
Sharpe, 193 F.3d at 866 (quotations omitted).
65
See Fed. R. Crim. Proc. 52(a) (2000); Sharpe, 193 F.3d at 866; United
States v. Faulkner, 17 F.3d 745, 760 (5th Cir. 1994); United States v. Winship,
724 F.2d 1116, 1122 (5th Cir. 1984).
66
U.S. Const. amend. VI.
67
See United States v. Pace, 10 F.3d 1106, 1113-14 (5th Cir. 1993).
27
We fail to see how the whole can be greater than the sum of
its parts. There can be no error if the district court acted within
its discretion. As the cumulative effect of such valid
discretionary decisions cannot violate the Sixth Amendment, Babo
Loe's argument fails.68
H
Babo Loe contends that the district court denied her right to
compulsory process by quashing the subpoena duces tecum she had
issued to the Corps. Under Rule 17(c) of the Federal Rules of
Criminal Procedure, a district court has discretion to "quash or
modify the subpoena if compliance would be unreasonable or
oppressive."69 On appeal, Babo Loe must show that (1) the subpoenaed
document is relevant, (2) it is admissible, and (3) that it has
been requested with adequate specificity.70 We review the grant of
a motion to quash for abuse of discretion.71
68
Babo Loe's reliance on United States v. Riddle, 103 F.3d 423, 434-35 (5th
Cir. 1997), is misplaced. In that case, we held that the cumulative effect of
actual errors—i.e., rulings in which the district court abused its
discretion—prejudiced the defendant. We recognize that evidentiary rulings must
be viewed in context. A decision to exclude evidence may, in light of prior
evidentiary rulings, constitute an abuse of discretion where that same decision
would not be erroneous if considered in isolation. Our holding today does not
deny the path-dependent nature of individual evidentiary rulings. In this case,
Babo Loe fails to contend or prove that a specific decision was itself erroneous
in light of prior rulings. We hold that the cumulative effect of a series of
valid discretionary judgments can not deny defendant's rights under the
Confrontation Clause.
69
Fed. R. Crim. Proc. 17(c) (2000).
70
See United States v. Arditti, 955 F.2d 331, 345 (5th Cir. 1992).
71
See id.
28
The district court quashed the subpoena on the basis that it
lacked the requisite specificity. Babo Loe does not challenge the
court's finding. Instead, she argues that the court should have
modified, rather than quashed, the subpoena. This was not an abuse
of discretion.72
IV. LOE'S HIGHPORT, INC.
A
LHI argues that the money laundering convictions for counts
22-24 must be reversed. LHI contends, first, that the evidence can
not establish that at least $10,000 of the "traced" money was
fraudulently obtained "dirty money."73 LHI also argues that the
district court's jury instructions were erroneous. The court told
the jury that "you may find, but are not required to find, that in
a [transaction from a commingled fund], as the language of Section
1957 permits, that the transacted funds, at least up to the full
amount originally derived from the crime, were the proceeds of the
criminal activity or derived from that activity."
As this Court has noted, money is fungible.74 The commingling
of assets has placed courts in the difficult position of separating
"clean" from "dirty" funds. Although any accounting method employed
72
We note that Babo Loe never filed a request for a modified subpoena.
73
See 18 U.S.C.A. § 1957 (2000).
74
See United States v. Davis, 226 F.3d 346, 357 (5th Cir. 2000).
29
to this end inevitably exhibits certain "arbitrary"
characteristics,75 a rule of decision is necessary. In United States
v. Davis,76 we stated the following rule for section 1957 cases
involving commingled accounts: "[W]hen the aggregate amount
withdrawn from an account containing commingled funds exceeds the
clean funds, individual withdrawals may be said to be of tainted
money, even if a particular withdrawal was less than the amount of
clean money in the account."77 Davis also implies the converse—that
where an account contains clean funds sufficient to cover a
withdrawal, the Government can not prove beyond a reasonable doubt
that the withdrawal contained dirty money.78
In this case, counts 22-24 were based on transactions
originating in a $776,742 transfer from an account containing
$2,205,000 paid by Lexington to the Loes. Of the $2,205,000, only
$470,790.22 was fraudulently obtained. Since there was enough clean
75
See United States v. Moore, 27 F.3d 969, 976-77 (4th Cir. 1994).
76
226 F.3d 346 (5th Cir. 2000).
77
Davis, 226 F.3d at 357; see also United States v. Rutgard, 116 F.3d 1270,
1291-92 (9th Cir. 1997) (holding that money from a commingled account is presumed
to be clean). But cf. United States v. Tencer, 107 F.3d 1120, 1131 (5th Cir.
1997) (holding that, for a conviction under section 1956, "it is sufficient if
the government proves at least part of the money represents [proceeds of mail
fraud]"). We note that the Fourth and Third Circuits employ a presumption
contrary to that which we applied in Davis. See United States v. Sokolow, 91 F.3d
396, 409 (3d Cir. 1996) (articulating presumption that money from commingled
account is dirty); Moore, 27 F.3d at 976-77 (same). The presumption employed in
Sokolow and Moore may be constitutionally infirm. Cf. Sandstrom v. Montana, 442
U.S. 510 (1979) (holding that jury instructions creating a conclusive presumption
against the defendant as to an element of a crime violates the Fourteenth
Amendment).
78
Cf. United States v. Poole, 557 F.2d 531, 535-36 (5th Cir. 1977).
30
money in the account to cover the $776,742 transfer, the rule of
Davis mandates reversal of counts 22-24. No reasonable juror could
conclude that these money laundering convictions were warranted
beyond a reasonable doubt.79 Moreover, the jury instructions were
also plainly inconsistent with Davis. As Babo Loe adopts LHI's
arguments with respect to counts 22-24,80 her convictions under
these counts must also be reversed.81
79
See United States v. Giraldi, 86 F.3d 1368, 1371 (5th Cir. 1996).
80
Neither party appeals its money laundering convictions under counts 25,
29, 30, and 31. As discussed in a preceding section of this opinion, Babo Loe's
sufficiency of the evidence challenge to count 25 is without merit. She did not
adopt LHI's arguments for purposes of count 25. However, we note that application
of the Davis rule would not change the outcome of her conviction on this count.
81
There is much to be said in favor of a "proportionality" rule. Under such
a rule, courts would treat any withdrawal from an account as containing
proportional fractions of clean and dirty money. Applying the facts of the
instant case, "dirty" funds ($470,790.22) comprised approximately 21 per cent of
the total amount in the account ($2,205,00). Applying this same proportion to the
withdrawal in question ($776,742), $165,842.42 of the funds withdrawn would be"
dirty." As this amount exceeds the $10,000 threshold articulated in section 1957,
LHI's conviction would be justified.
A proportionality rule would avoid some of the oddities associated with the
Davis approach. Under Davis, if aggregate withdrawals are less than the amount
of clean funds in the account, the statute is not violated. However, once
withdrawals exceed the clean funds in the account, all subsequent transactions
(including the transaction by which the defendant exceeds the clean-funds
threshold) are transformed into "dirty" transfers warranting conviction. A
proportionality rule avoids this somewhat mechanistic result.
Moreover, a proportionality rule is more sensitive to the fungible nature
of money. Whereas the Davis rule engages in a presumption that clean money is
spent before dirty money, a proportionality rule recognizes that a withdrawal
mirrors the sources of the money in the account. If the account is the product
of clean and dirty money, a withdrawal should reflect this arrangement in equal
proportions.
Finally, this rule would be more faithful to the plain language of the
statute. The Davis rule allows a court to look at the total number of withdrawals
from an account, aggregating a series of transactions. See United States v.
Davis, 226 F.3d 346, 357 (5th Cir. 2000); see also United States v. Heath, 970
F.2d 1397, 1404 (5th Cir. 1992). However, section 1957 imposes liability on a
transaction-by-transaction basis. See 18 U.S.C.A. § 1957 ("Whoever . . .
knowingly engages . . . in a monetary transaction in [dirty money] of a value
greater than $10,000 . . . shall be punished."). A proportionality rule would
avoid the aggregation mechanism condoned in Davis and more accurately reflect the
31
B
LHI also argues that the indictments for money laundering were
defective because they failed to list a "specified unlawful
activity" that was the source of the laundered money. Section 1957
requires that the defendant (1) knowingly (2) use "criminally
derived property of a value greater than $10,000" (3) in a monetary
transaction, and (4) that the property must be "derived from
specified unlawful activity."82
Each of the money laundering counts referred to one of the
counts alleging conspiracy to commit mail and wire fraud. The
conspiracy counts listed several alleged acts of mail and wire
fraud. LHI notes that the money laundering counts of the indictment
did not specify which act of mail or wire fraud was the source of
the funds. Consequently, LHI argues that the indictment allowed for
a non-unanimous jury verdict regarding which act of fraud was the
source of the money.
This argument misinterprets the term, "specified unlawful
activity." This term does not imply that the indictment must list
a specific unlawful act that is the source of the money. Instead,
the statute proposes "specified unlawful activity" as a term of
language and purpose of the statute. However, as the Davis rule is binding on
this panel, see Broussard v. Southern Pac. Transp. Co., 665 F.2d 1387, 1389 (5th
Cir. 1982) (en banc), we must apply it to the case at bar, leaving change to a
case appropriately before the en banc court.
82
18 U.S.C.A. § 1957 (2000).
32
art.83 A specified unlawful activity is one of a set of federal
crimes listed in 18 U.S.C.A. § 1956(c)(7). Section 1957 merely
requires money to be derived from a particular set of federal
crimes. It does not require the indictment to specify which
unlawful activity generated the funds in question. In any case, we
note that the money laundering counts of the indictment included
allegations sufficient to (1) enumerate each element of the
offense; (2) provide Appellants with notice of the precise
transactions for which they were being prosecuted; and (3) prevent
future prosecutions for the same offense.84 Thus, the indictment was
sufficient.
Nor is jury unanimity regarding the specified unlawful
activity required. Our holding in United States v. Short85 affirms
this conclusion. In Short, we upheld the conviction of a defendant
as a "supervisor" of a continuing criminal enterprise.86 We found
that the jury need not unanimously agree on the identities of the
five subordinates required to make the defendant a supervisor.87
Short indicates that contextual, predicate information need not be
as precisely proven as the defendant's acts. In this case, LHI was
83
See 18 U.S.C.A. § 1957(f)(3) (2000).
84
See United States v. Flores, 63 F.3d 1342, 1360-61 (5th Cir. 1995).
85
181 F.3d 620 (5th Cir. 1999).
86
See 21 U.S.C.A. § 848 (2000); Short, 181 F.3d at 623-24.
87
See Short, 181 F.3d at 623-24.
33
indicted for the commission of a single act, engaging in a monetary
transaction. This act was clearly identified to the jury.88
C
LHI further argues that the district court erred in excluding
the testimony of an expert witness during the trial of counts 7-10.
These counts accused LHI of having made false statements on a tax
return, in violation of 26 U.S.C. § 7206(1). The defense expert
would have testified that LHI overpaid, rather than underpaid, its
taxes. LHI contends that the district court abused its discretion
and deprived LHI of its Sixth Amendment right to call witnesses in
its favor.
The district court offered three reasons for excluding the
testimony. First, the court found that the evidence was irrelevant.
Second, the court expressed serious doubts as to whether tax
liability could be accurately calculated given the poor condition
of LHI's books. Finally, the court found that the defense provided
the Government with inadequate notice that Appellants intended to
offer the expert's testimony.
88
LHI's reliance on United States v. Gipson, 553 F.2d 453 (5th Cir. 1977),
is misplaced. In that case, we held that jury instructions that did not require
unanimity regarding the defendant's actus reus violated his Sixth Amendment
rights. See id. at 458-59. The jurors in Gipson could have disagreed as to
whether the defendant "received" or "sold" stolen property. Consequently, the
verdict could not be deemed unanimous. See id. at 458. In contrast, the conduct
of the defendant in the instant case was identified to the jury.
34
LHI challenges each of the preceding bases for the court's
decision. LHI contends that evidence of tax liability is relevant
to its motive to make a false statement.89 LHI argues that proof of
motive tends to prove knowledge and intent. Therefore, if LHI had
overpaid its taxes, it is less likely that it would have intended
to make the false statement.
Although we recognize the intuitive appeal of this syllogism,
we are unpersuaded by LHI's reasoning. This Court has specifically
held that evidence of tax liability is irrelevant in false
statement cases.90 Although reliance on a qualified tax preparer is
an affirmative defense in such cases,91 LHI does not contend that
the expert's testimony would have established reliance.
Even if we found this testimony to be logically relevant to
LHI's intent, a court could reasonably find that other factors
outweighed its probative value. The court could have determined
that evidence of tax liability would confuse the jury, misleading
it into believing that tax liability is an element of the offense.
Moreover, the court could have found that such proof would waste
time on collateral issues.92 Nothing prevented Appellants or their
89
Violation of 26 U.S.C. § 7206(1) requires the Government to prove, inter
alia, that a defendant willfully made and subscribed to false tax returns and
that it did not believe the returns to be true as to every material matter. See
United States v. Wilson, 887 F.2d 69, 72 (5th Cir. 1989).
90
See United States v. Johnson, 558 F.2d 744, 745 (5th Cir. 1977).
91
See Wilson, 887 F.3d at 73.
92
See Fed. R. Evid. 403 (2000); Johnson, 558 F.2d at 747.
35
tax preparers from testifying that they were unaware of their tax
liability or that they did not intend to make a false statement. We
find that the court did not abuse its discretion in excluding the
testimony.93 We therefore need not address the adequacy of the
court's additional reasons for excluding the testimony.94
D
LHI further contends that the district court erred in
computing restitution for the fraudulent invoices submitted to the
insurers. The district court ordered restitution of the entire
value of the invoices with no reduction to reflect the actual costs
that LHI incurred in mitigating losses. It is undisputed that LHI
expended substantial sums in mitigating damage from the 1990 flood.
On the basis of evidence submitted to the district court, LHI
contends that court abused its discretion in failing to offset
LHI's expenses from the restitution amount.95
LHI's argument is meritless. The court found that neither the
fraudulent invoices nor other evidence credibly reflected the
actual expenses incurred by LHI. LHI was unable to provide reliable
evidence supporting its claims. Although a defendant in LHI's
93
See United States v. Willis, 38 F.3d 170, 174 (5th Cir. 1994) (stating
that a court's decision to exclude expert testimony is reviewed for abuse of
discretion).
94
Babo Loe adopts the preceding argument, which fails for the reasons given
above.
95
See United States v. Chaney, 964 F.2d 437, 451-52 (5th Cir. 1992)
(articulating an abuse-of-discretion standard for restitution calculations).
36
position would normally be entitled to a reduction in the
restitution award,96 the absence of credible evidence to support a
claim of mitigation loss would preclude such an offset. We find
that the court's decision did not constitute an abuse of
discretion.97
V. CONCLUSION
We AFFIRM the conviction of Appellants as to all counts except
counts 22-24. As the evidence was insufficient to support a
verdict, we REVERSE the convictions of Babo Loe and LHI on counts
22-24 and REMAND to the district court for resentencing.
96
See U.S.S.G. § 2F1.1, cmt. note 8 (2000).
97
Cornelius Loe adopts the preceding argument. For the reasons articulated
above, this argument fails as applied to his case.
37
DeMOSS, Circuit Judge, dissenting:
With all due respect, I cannot join in the generalizations and
circuitous reasoning by which the majority concludes that the
conduct charged in Count 17 of the indictment was not barred by the
five-year statute of limitations. Count 17 of the indictment
charged a conspiracy (in violation of § 371) “to defraud insurance
companies and to obtain money and property by means of false and
fraudulent pretenses and promises by use of facilities of the U.S.
mail (in violation of § 1341) and by use of transmissions in
interstate commerce by means of wire communications (in violation
of § 1343).
The elements of the offense prohibited by § 371 are (1) the
making of an agreement by two or more persons to violate a criminal
statute of the United States, and (2) the doing by one or more such
persons of any act to effect the object of such conspiracy, i.e.,
the violation agreed upon. In this case, Count 17 charges a
conspiracy to violate § 1341 (mail fraud) and § 1343 (wire fraud).
The elements of the offense of mail fraud are (1) the devising of
a scheme to defraud or for obtaining money or property by means of
false or fraudulent pretenses, representations, or promises, and
(2) placing any matter or thing in the U.S. mails for the purpose
of executing such scheme. The elements of wire fraud are (1)
38
devising a scheme to defraud or for obtaining money or property by
means of false or fraudulent pretenses, representations, or
promises, and (2) transmitting by means of wire, radio, or
television communication in interstate or foreign commerce any
writing, sign, signal, picture, or sound for the purpose of
executing such scheme.
In the indictment in this case, Count 17 contains a separate
section headed “THE SCHEME TO DEFRAUD.” That portion of Count 17
states that the defendants “would submit or cause to be submitted,
false and fraudulent claims to the insurance companies covering the
losses caused by the 1990 flood in order to inflate the loss to the
marina and the restaurants.” This portion of Count 17 goes on to
indicate that the false and fraudulent claims “would be false and
fraudulent in one or more of the following ways” and there follows
six separate subparagraphs specifically describing various
fictitious claims, duplicate invoices, invoices for losses which
had not actually occurred, invoices which were altered to increase
the amount of expenditure made, fictitious corporations that were
formed to be third-party contractors, and false claims for business
interruption loss which understated the amount of income to the
marina.
There then follows another subpart of Count 17 headed “MANNER
AND MEANS” which alleges the manner and means by which the scheme
to defraud would be accomplished as follows:
39
-39-
1)The defendants
would systematically inflate casualty and business
interruption losses to the property and businesses
of LOE’S HIGHPORT, INC.
2)The defendants
would submit, or cause to be submitted, via the
United States Postal Service or by means of
interstate wire communications, false claims to the
insurance companies covering such losses for
payment.
I think it is critically important to note that in the
subparts of Count 17 of the indictment, headed “THE CONSPIRACY”,
“THE SCHEME TO DEFRAUD”, and the “MANNER AND MEANS”, there is
absolutely no mention whatsoever of any controversy between the
defendants and David Hull, who leased a portion of the marina
premises for operating a waterfront restaurant. Likewise, there is
no mention of any kind of any controversy with David Hull regarding
distribution of insurance proceeds in connection with the 1990
flood damage.
Count 17 further alleged in 22 separate subparagraphs overt
acts which the defendants committed on specific days and in
specific manner. The first 20 of these subparagraphs allege overt
acts which expressly include references to use of facilities of the
U.S. Postal Service or interstate wire communications. The first
20 of these overt acts allege conduct occurring on dates that were
more than five years prior to the filing of the initial indictment
in this case. The overt act in paragraph 21 is alleged to have
occurred on November 26, 1990, which is more than five years prior
40
-40-
to the filing of the original indictment in this case on September
21, 1997; and this subparagraph contains absolutely no allegation
of any kind relating to the use of facilities of the U.S. Post
Office or any interstate wire transmission facility. The conduct
described in subparagraph 21 is the filing of a lawsuit against
David Hull, individually, and in his capacity as Waterfront
Restaurant. David Hull is not a named co-conspirator in the
indictment nor is he named as an unindicted co-conspirator.
The last overt act alleged in Count 17 reads as follows:
22)On or about
December, 1992, BABO BEAZLEY LOE, C.D. LOE, JR. and
LOE’S HIGHPORT, INC. effected a settlement of the
lawsuit and received a portion of the fraudulently
obtained insurance proceeds.
While the date of December 1992 would be within five years of the
filing of the initial indictment, there is absolutely nothing in
this subparagraph 22 which specifies the use of any U.S. Post
Office facility nor any interstate wire transmission facility.
Neither § 1341 nor § 1343 makes a crime out of merely fraudulent
misrepresentations or false promises; rather, each of these
statutory provisions makes a crime out of (1) use of the U.S. mails
(§ 1341) or (2) transmission of a matter by interstate wire
communications for the purpose of “executing” some fraudulent
scheme. I find very convincing the arguments advanced by
defendant, C. D. Loe, Jr., (and adopted by Babo Beazley Loe and
Loe’s Highport, Inc.) that no such conduct on the part of any of
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the defendants was alleged in subparagraphs 21 and 22 of Count 17,
and there is no testimony in this record that any such conduct did
occur. The language in paragraph 22 of Count 17 that the
defendants “effected a settlement of the lawsuit” refers to the
lawsuit described in paragraph 21, which was filed on November 26,
1990. In this lawsuit, the Loes sought recovery of money loaned to
David Hull. There is no factual allegation and no factual proof
that the settlement of that lawsuit was the result of anything sent
by the U.S. mail nor any matter transmitted by wire communication.
There is no factual allegation nor any factual proof that the
settlement of such lawsuit was the result of any conduct that was
false, fraudulent, or misleading. There is no factual allegation
and no factual proof that the insurance company that was the victim
of the scheme to defraud alleged in subparagraphs one through 20 of
Count 17 even knew of such settlement, much less that it was
motivated to take any action based thereon. To the contrary, the
record evidence in this case is clear and unequivocal that the
insurance company had paid all sums of money which it intended to
pay on the “fraudulent” claims submitted by the Loes for the 1990
flood damage by July 11, 1991, some 14 months prior to September
12, 1992, the date upon which the five-year statute of limitations
cut off would be applicable. In my view, when the insurance
company deposits into the registry of the court a sum of money
which it considers to be full and final payment for all of the
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costs and losses sustained in the 1990 flood damage at the Loes’
marina, the fraud and misrepresentations would be complete
regardless of whether the Loes ever withdrew the money from the
registry of the court or not. Surely, actual receipt by a
defendant of the cash proceeds of his fraudulent conduct cannot be
an essential element of the offense; and “constructive receipt” by
the defendants of the cash proceeds by the placing of the funds in
the registry of the court as occurred in this case should start the
running of the statute of limitations. All of the funds paid by
the insurance company on the basis of fraudulent loss claims were
deposited into the registry of the state court (a total of close to
$2 million), and all but $2,000 of that sum was withdrawn by the
defendants more than five years prior to the filing of the first
indictment in this case. While it is true that the $2,000 was
disbursed from the registry of the court within five years prior to
the filing of the first indictment, I think even the majority would
agree with me that the facts clearly indicate that the defendants
had absolutely nothing to do with the delay in disbursement. That
delay was the result of (1) errors and omissions on the part of the
state district court in framing the disbursal order, (2)
unauthorized decisions by the investment company holding the funds
to give greater weight to the state judge’s language as to the
amount to be retained rather than the amount to be paid to the
defendants, and (3) a failure on the part of counsel for the
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defendants to promptly call for a correction of this mathematical
error.
With surprising candor, the government recognizes that the
only way it can avoid application of the five-year statute of
limitations to Count 17 is to persuade the Court that the conduct
described in overt act 22 (i) constitutes an act by one or more of
the defendants and (ii) constitutes an act “to effect the object of
the conspiracy” alleged in Count 17. In my view, the conduct in
overt act 22 was neither.
The case law precedents which should guide our determination
are for the most part well established. In Grunewald v. United
States, 353 U.S. 391 (1957), the Supreme Court clearly held that in
order for the government to sustain a conviction for conspiracy
against a statute of limitations defense, the government must prove
that the conspiracy was still in existence as of the limitations
bar date and that at least one overt act by a defendant was
performed after that date. Likewise, the Supreme Court has clearly
stated that when doubt exists about the statute of limitations in
a criminal case, the limitations period should be construed in
favor of the defendant. See United States v. Habig, 390 U.S. 222,
226-27 (1968). This rule of construction in favor of the defendant
has been recently recognized by our Circuit in United States v.
Meador, 138 F.3d 986 (5th Cir. 1998). The question of whether a
prosecution is barred by the statutes of limitations is a question
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of law, subject to plenary review on appeal in this Circuit.
United States v. Manges, 110 F.3d 1162, 1169 (5th Cir. 1997). In
Manges, our Court stated:
Shanklin claims that
he was prosecuted in violation of the applicable
five-year statute of limitations. See 18 U.S.C. §
3282. With respect to the conspiracy count only,
we agree. Our review is plenary.
Id. at 1169 (emphasis added). The Supreme Court has also clearly
held that “statutes of limitations normally begin to run when the
crime is complete.” Pendergast v. United States, 317 U.S. 412, 418
(1943). And the text of the five-year statute (18 U.S.C. § 3282)
expressly states that the five-year limit applies “except as
otherwise expressly provided by law.” In light of these
principles, the Supreme Court has held that “the doctrine of
continuing offenses should be applied in only limited
circumstances” and should not be reached unless the explicit
language of the substantive criminal statute compels such a
conclusion.” Toussie v. United States, 397 U.S. 112, 114 (1970).
Finally, in United States v. Marion, 404 U.S. 307, 322 (1971), the
Supreme Court stated that statutes of limitations,
represent legislative assessments of relative
interests of the State and the defendant in
administering and receiving justice; they “are made
for the repose of society and the protection of
those who may (during the limitation) ... have lost
their means of defense.” These statutes provide
predictability by specifying a limit beyond which
there is an irrebuttable presumption that a
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defendant’s right to a fair trial would be
prejudiced.
Id. (citation omitted).
In addition to the foregoing Supreme Court authority, we have
clear holdings by panels of this Circuit to guide us in this case.
In the early case of United States v. Davis, 533 F.2d 921 (5th Cir.
1976), our Court wrestled with a controversy very similar to the
one in this case. In Davis, the indictment charged conspiracy to
violate 18 U.S.C. § 1006 by agreeing to make false, fictitious, and
fraudulent statements and representations to the Department of
Labor Manpower Administration, an agency of the United States
Government. Only two of the eight overt acts set forth in the
indictment were alleged as occurring within the five-year period of
the statute of limitations. The defendant in Davis asserted that
the two overt acts which happened within the five-year limitations
period did not constitute acts in furtherance of the conspiracy
alleged and our Court agreed. Relying on most of the Supreme Court
law referred to earlier, our Court concluded that the prosecution
of Davis was barred by the statute of limitations and granted a
judgment of acquittal.
Similarly, in United States v. Manges, supra, a panel of our
Court addressed specifically the circumstances of a charge of
conspiracy to violate the mail fraud statute against a defendant’s
contention that it was barred by the five-year statute of
limitations. In reversing the conviction of the defendant on this
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conspiracy count, our Court pointed out that the conspiracy statute
(18 U.S.C. § 371) “explicitly provides that for the crime of
conspiracy to be complete, one or more of the conspirators must
have performed an act to bring about the object of the conspiracy.
This language cannot be stretched to include the posting of a
letter by a non-conspirator.”
In my view, our Circuit holdings in Davis and Manges, provide
much clearer and better instruction as to the disposition of this
case now before us than does our holding in United States v.
Girard, 744 F.2d 1170 (5th Cir. 1984), which is the centerpiece and
corner-stone of the government’s theory in this case. In Girard,
the grand jury indicted the defendants for conspiring to defraud
the United States in violation of 18 U.S.C. § 371. The indictment
alleged that the scope of the conspiracy encompassed three
purposes: (1) to secure the contract for Girard Plumbing; (2) to
obtain Housing Authority funds under the contract; and (3) to
conceal the fraudulent nature of the bidding from the appropriate
authorities. The government asserted that the last payment due
under the contract occurred on a date inside the five-year statute
of limitations. In light of this payment, our Court concluded that
the conspiracy continued until this last payment was received and
that the acceptance of the last payment under the contract
satisfied the requirement that an overt act in furtherance of the
conspiracy occurred within the proscribed time frame.
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I note that the majority does not say that they are bound by
the prior decision in Girard, but merely categorize that decision
as “instructive.” I have no quarrel with our Court’s holding in
Girard based on the express circumstances described therein, but I
disagree wholeheartedly with the majority’s conclusion that it
provides even “instructive” help in deciding the issue here in Loe.
The distinctions between Girard and Loe are fundamental and
significant. In Girard, the charge was conspiracy to defraud the
United States directly under § 371; in Loe, the charge was
conspiracy to commit mail fraud and wire fraud against a private
insurance company. In Girard, there were express allegations of
three purposes for the conspiracy which included receipt of the
funds to be paid by the United States Government under the contract
with Girard which was fraudulently secured; and such allegations
tied in neatly with the fact of final payment by the United States
Government to Girard on the contract within the five-year statute
of limitations. I challenge my colleagues in the majority to find
similar express allegations in the language of Count 17 of the
indictment of this case. As I have described previously, in Count
17 there is nothing in the subparts thereof describing The
Conspiracy, The Scheme to Defraud, and The Manner and Means which
can be connected with or anticipates in any way the allegations in
subpart 22 of the overt acts. Finally, in Girard, it is clear that
the final payment on the contract came from the United States
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Government agency that was the victim of the fraudulent bidding
scheme. In contrast, here, it is clear even from the majority’s
opinion that the insurance company that was the target and victim
of the alleged mail and wire frauds deposited a final payment into
the registry of the court in the sum of $638,388.34 in July of
1991, some 14 months outside of the five-year limitations period,
which started on September 11, 1992. And in March 1992, some six
months outside of the limitations period, the state district court
ordered that $624,867.79 be paid to the Loes, which was their true
and rightful share of the insurance proceeds deposited into the
registry of the court. The $2,000 which was ultimately distributed
to Babo Loe as Trustee for Loe’s Highport in January or February
1993, was a part of the sum previously ordered to be distributed in
March 1992 by the district court. There is, therefore, no
allegation in Count 17 and no proof thereof cited by the government
that would indicate any payment by the insurance company that was
the victim of the alleged frauds to the defendants during the five-
year period of limitations.
For all of the foregoing reasons, I respectfully dissent from
the portion of the majority opinion that affirms the convictions
and sentences of the defendants relating to Count 17. In my view,
Count 17 was clearly barred by the statute of limitations, and the
convictions and sentences of defendants based on Count 17 should be
vacated and set aside. For two of the defendants, Babo Loe and
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Loe’s Highport, Inc., vacation of these convictions and sentences
would not produce any significant reduction in the sentences that
they received under other convictions from this indictment.
However, as to defendant, C. D. Loe, Jr., whose only conviction was
under Count 17, vacation of the conviction and sentence on Count 17
would relieve him of being a convicted felon and the burden of
having to respond in fines and restitution obligations after his
release from prison.
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