United States v. West

UNITED STATES COURT OF APPEALS
FIFTH CIRCUIT
_______________
No. 93-4935
_______________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
BRUCE R. WEST, SR.,
Defendant-Appellant.
__________________________________________________
Appeals from the United States District Court
for the Eastern District of Texas
__________________________________________________
(May 31, 1994)
Before WISDOM, BARKSDALE, and EMILIO M. GARZA, Circuit Judges.
EMILIO M. GARZA, Circuit Judge:
Defendant Bruce West, Sr. was tried before a jury and
convicted of ten counts of bankruptcy fraud, in violation of 18
U.S.C. § 152 (1988), eleven counts of money laundering, in
violation of 18 U.S.C. § 1956, and one count of conspiring to
commit bankruptcy fraud, in violation of 18 U.S.C. § 371. West
now appeals his conviction, contending both that the indictment
did not properly charge violations of the bankruptcy fraud and
money laundering statutes and that the district court's admission
of and refusal to admit certain evidence deprived him of a fair
trial. We affirm.
I
Bruce West, Sr., a Texas real estate developer, experienced
serious financial problems as a result of the decline in the
Texas economy during the mid- to late 1980s. West eventually
filed a petition in bankruptcy on April 2, 1990. This criminal
case emanates from West's bankruptcy filing, with many of the
charges contained in the indictment based on three transactions
that West participated in shortly before filing his bankruptcy
petition.
A
In April 1989, West sold his homestead ("Dondi Farms") to
Earlene Jett, as trustee for her son, Scott Mays. West received
$75,000 in cash and a note signed by Jett in the amount of
$277,500 ("the Jett note"). As part of the transaction, West
leased, and held an option to purchase, a lakehouse owned by
Jett. The Jett note was payable in quarterly installments of
$8900; under the terms of the sale contract, however, West
allowed Jett to deduct from the note payments the monies due Jett
as a result of the lakehouse lease. West received ten payments
on the Jett note, all of which are the basis of money laundering
charges.1
1
Jett wrote checks for three payments that were payable
to West; West deposited these checks into an account held by
Exalter, Inc. ("Exalter"), a Texas corporation formed by West and
owned by West's three children. West deposited a fourth check
into an account held by Sandra Malmay, his then-girlfriend;
Malmay subsequently transferred the proceeds of that check into
Exalter's account. West also deposited three checks, made
-2-
In June 1990, West arranged for a third party to purchase
Jett's lakehouse for an amount slightly exceeding its existing
mortgage. After the sale had closed, Jett paid the
excess))$2,613))to West, who subsequently gave the money to Betty
Ruben and Jo Ann Johnson as compensation for finding the buyer.
Jett also received a refund on her insurance escrow account,
which she paid to West and he then paid to Johnson. West's
involvement with the sale of the lakehouse and its proceeds forms
the basis for a single count of bankruptcy fraud.
B
The second transaction at issue involved the 1989 purchase
of two notes executed by West and held by the Federal Deposit
Insurance Corporation ("FDIC"). In 1984, West purchased a
building in Addison, Texas ("the Broadway building") for
$650,000, financing $350,000 of the purchase price with a loan
from Parkway Bank & Trust ("Parkway"). A deed of trust for the
building secured West's promissory note. In 1988, Parkway
failed, the FDIC was appointed as receiver, and West defaulted on
the loan.2 The FDIC, through bank liquidation specialist
Lawrence Greer, began negotiating with West to work out or
liquidate the loans for the sum of $150,000. West informed Greer
payable to Exalter, directly into Exalter's account. West
deposited the final three checks, which were made payable to him,
into Malmay's account; the proceeds from these checks apparently
were not transferred to Exalter's account.
2
West also defaulted on a second loan secured by three
relatively worthless over-the-counter stocks.
-3-
that although he did not have the funds to make payment on the
Parkway notes, he had "arranged for and [had] an agreement from a
company to make it possible to purchase the notes for $150,000."
After receiving assurances from West that the transaction between
West and North Star Funding ("North Star")))the corporation that
had agreed to purchase the Parkway notes))occurred at "arms-
length," the FDIC agreed to sell the notes to North Star.
Unbeknownst to the FDIC, however, North Star had agreed to act as
a nominee, or "straw," purchaser on West's behalf.3 Thus, West
supplied the $150,000 needed to purchase the notes and later
arranged for North Star to foreclose on the notes and sell the
Broadway building to Exalter, his children's corporation.4
C
The third transaction at issue involves Exalter's purchase
and subsequent sale to West of a house in Frisco, Texas ("the
Frisco house"). In June 1989, Richard McCally sold the Frisco
house and an adjacent vacant lot to Exalter in exchange for
3
Although West's brief on appeal suggested that he was
not challenging any of the factual findings made by the jury,
West does argue that the FDIC knew of and encouraged his use of a
straw purchaser. Indeed, at oral argument West's counsel
asserted that two FDIC witnesses))Greer and Walter Keller, who
dealt with West after Greer left the agency))committed perjury by
denying they knew that West was the actual purchaser of the
notes.
4
West obtained the $150,000 when Jack Franks))a West
business associate))repaid a loan made by West, which was secured
by a lien on real estate that Franks owned. West previously had
reported to the FDIC that the value of his lien was "materially
affect[ed]" because prior, senior liens on the real estate were
"in default and posted for foreclosure."
-4-
$125,000 in cash and the Broadway Building, which McCally valued
at $545,000.5 West subsequently purchased the Frisco house, and
used it as his homestead, from Exalter for $622,500, which
included $312,524 in cash, a personal note in the amount of
$277,500, which was secured by the Jett note, and a promissory
note in the amount of $32,746, which was secured by a first lien
deed of trust on the property. The cash portion of the purchase
price consisted of "loans" previously made by West to Exalter.
West's transfer of a security interest in the Jett note to
Exalter forms the basis of a single bankruptcy fraud count.
D
West's failure to report his interest in two bank accounts
forms the basis for two additional counts of bankruptcy fraud))
Counts 24(a) and 26. In April 1989, Jack Franks wired $219,930
to Commonwealth National Bank in West's name. Because West did
not have an account at Commonwealth, a bank employee opened an
account in West's name into which the funds could be deposited.
In May, West ordered the bank to close the account and disburse
the funds as follows: a $150,000 cashier's check payable to the
FDIC listing North Star Funding as the remittitur, which West
subsequently presented to the FDIC in exchange for the Parkway
5
McCally testified that, until the date of closing, he
believed West to be the purchaser. West concedes that he
conducted the negotiations resulting in Exalter's purchase of the
Frisco house.
-5-
notes; $50,000 deposited into a new account in Exalter's name;6
and the balance of $19,930 in cashier's checks payable to West.
Count 26 charged West with fraudulently transferring and
concealing funds in a second Commonwealth account, which was
opened by Sandra Malmay, West's then-girlfriend, in September
1989. Malmay testified that West directed her to open the
account in her name because he was afraid that any accounts held
in his name would be garnished. Malmay further stated that
checks drawn on the account "mostly" benefitted West and were
paid with funds deposited by West. Moreover, West deposited
several payments made pursuant to the Jett note into the account,
the proceeds of which then were transferred to Exalter.
Count 31 charged West with money laundering. The
transactions underlying this count involved two automobiles))a
1962 Mazda coupe and a 1935 Austin. West failed to list the
Mazda on the appropriate bankruptcy schedules and erroneously
indicated that he held only a one-half interest in the Austin.
However, West subsequently conveyed the cars to Great Cars, Inc.
("Great Cars") in exchange for a dune buggy and $5,750 cash,
which was deposited into the Malmay account.
6
This deposit forms the basis for one count of
bankruptcy fraud))Count 7.
-6-
II
-7-
West was convicted of several counts of bankruptcy fraud, in
violation of 18 U.S.C. § 152.7 Three of these counts charged
West with fraudulently transferring funds to Exalter during
February and March 1989. West contends that transfers, which
occurred more than one year prior to the filing of his bankruptcy
petition, cannot provide the basis for a § 152 prosecution
because the transfers were "outside the jurisdiction of the
Bankruptcy Code." As support for his construction of § 152, West
points to 11 U.S.C. § 548(a), which allows a bankruptcy trustee
"to avoid any transfer of an interest of the debtor in property
. . . that was made . . . on or within one year before the date
of the filing of the petition." West submits that because the
trustee lacked jurisdiction over the transferred funds, the
government may not prosecute him for bankruptcy fraud.8
We disagree with West's interpretation of § 152. The plain
language of § 152 certainly cannot be read to impose the
7
The relevant portion of this statute provides that
"[w]hoever . . . in contemplation of a case under title 11 by or
against him . . . , or with intent to defeat the provisions of
title 11, knowingly and fraudulently transfers or conceals any of
his property" shall be guilty of bankruptcy fraud. 18 U.S.C.
§ 152 ¶ 7.
8
With regard to this argument, West does not challenge
the sufficiency of the evidence as to the mens rea requirements
found in paragraph 7 of § 152)) i.e., whether he transferred or
concealed property (1) knowingly, (2) fraudulently, and (3) in
contemplation of a case under title 11 or with intent to defeat
the provisions of title 11. Instead, West argues only that the
government is precluded from prosecuting him for transfers
occurring more than one year prior to the date he filed his
bankruptcy petition.
-8-
requirement suggested by West. See United States v. Moody, 923
F.2d 341, 347 (5th Cir. 1991) (noting that "words in a statute
are to be given their plain and ordinary meaning"). Moreover, in
light of the explicit intent requirements found in § 152, we will
not transplant from the Bankruptcy Code the additional
requirement that a fraudulent transfer, to be prosecutable as
bankruptcy fraud, must be made within one year prior to the
defendant's filing of his bankruptcy petition. A defendant may
knowingly and fraudulently transfer property in contemplation of
or with the intent to defeat the provisions of Title 11 without
necessarily transferring the property within one year before
filing a bankruptcy petition. Cf. Ralph C. McCullough, II,
Bankruptcy Fraud: Crime Without Punishment, 96 Com. L. J. 257,
268 (1991) ("Theoretically, bankruptcy fraud could occur in
contemplation of an apparently inevitable bankruptcy which the
debtor later managed to escape."). Indeed, a knowledgeable
defendant bent on pursuing a fraudulent course of action would
effect a fraudulent transfer outside the one year period within
which the bankruptcy trustee could rescind it. See United States
v. Dandy, 998 F.2d 1344, 1348 (6th Cir. 1993) (defendant
convicted of bankruptcy fraud when he exercised power over the
bankrupt corporation "for exactly one year and one day in order
to prevent [the bankrupt] from declaring bankruptcy during the
one-year period within which [the defendant's diversion of
assets] could be rescinded as an avoidable transfer under
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bankruptcy law"); Stegeman v. United States, 425 F.2d 984, 986
(9th Cir. 1970) (§ 152 "``attempts to cover all the possible
methods by which a bankrupt . . . may attempt to defeat the
Bankruptcy Act through an effort to keep assets from being
equitably distributed among creditors.'") (citation omitted).
Consequently, we hold that the government may prosecute
individuals under 18 U.S.C. § 152 for transfers of property
occurring more than one year prior to the filing of a petition in
bankruptcy if such transfers are made knowingly, fraudulently,
and in contemplation of a case under title 11 or with intent to
defeat the provisions of title 11.9 Cf. United States v. Grant,
971 F.2d 799, 805 (1st Cir. 1992) (refusing to apply the
"relation back" doctrine developed under the Bankruptcy Act in a
criminal bankruptcy fraud case because the doctrine was not
"designed to insulate bankruptcy fraud, either in the bankruptcy
proceeding itself or in any related criminal proceeding").10
9
Notwithstanding West's contentions to the contrary,
that fraudulent transfers are made in contemplation of title 11
or with the intent to defeat the provisions of title 11))a
question that must be resolved by the jury))provides federal
courts with jurisdiction.
10
West alludes to, but does not directly assert, the
argument that his discharge in bankruptcy, entered in a
bankruptcy proceeding to which an agency of the United States was
a claimant, precluded a criminal prosecution for bankruptcy
fraud. To the extent West does assert this argument, however, we
reject it. See United States v. Tatum, 943 F.2d 370, 382 (4th
Cir. 1991) (holding that a discharge in bankruptcy does not
preclude a subsequent criminal prosecution for bankruptcy fraud).
-10-
III
West next challenges the sufficiency of Counts IX through
XVIII and Count XXXI of the indictment, arguing that the
government failed to adequately allege the elements of the
charged offenses)) money laundering, in violation of 18 U.S.C. §
1956.11 "Whether an indictment sufficiently alleges the elements
of an offense is a question of law to be reviewed de novo."
United States v. Shelton, 937 F.2d 140, 142 (5th Cir.), cert.
denied, ___ U.S. ___, 112 S. Ct. 607, 116 L. Ed. 2d 630 (1991).
To obtain a conviction for money laundering, the government must
prove "[t]hat the defendant 1) conducted or attempted to conduct
a financial transaction, 2) which the defendant knew involved the
proceeds of unlawful activity, 3) with the intent [either] to
promote or further unlawful activity" or to conceal or disguise
the nature, location, source, ownership, or control of the
proceeds of unlawful activity. United States v. Ramirez, 954
11
West's reply brief characterizes his argument as a
challenge to the sufficiency of the evidence or as a claim of
"plain error" under Fed. R. Crim. P. 52(b). We, however, believe
that West's argument properly should be viewed as a challenge to
the sufficiency of the indictment. See United States v.
Cavalier, 17 F.3d 90, 92 (5th Cir. 1994) (rejecting a similar
argument made as a challenge to the sufficiency of the
indictment); United States v. Johnson, 971 F.2d 562, 567 (10th
Cir. 1992) ("Although appellant's argument is characterized as a
challenge to the sufficiency of the evidence, it raises a
question concerning the proper scope of § 1957 and it requires us
to interpret the language of the statute."); United States v.
Jackson, 935 F.2d 832, 839-40 (7th Cir. 1991) (noting that
although the defendant styled a similar argument "in terms of the
sufficiency of the evidence, we believe that it involves a
preliminary question of statutory construction.").
-11-
F.2d 1035, 1049 (5th Cir.), cert. denied, ___ U.S. ___, 112 S.
Ct. 3010, 120 L. Ed. 2d 884 (1992); see 18 U.S.C.
§ 1956(a)(1)(A)(i) & (B)(i). The government submits that West
violated the money laundering statute by accepting and depositing
payments received pursuant to the Jett note and his sale of the
two automobiles to Great Cars, Inc., acts that constitute
bankruptcy fraud.12
West contends that the crime of money laundering "must
always have at its core [the] act of taking ``dirty money' and
making it ``clean.'" In contrast, West submits that "[t]he act at
the core of this case . . . was the taking of ``clean money' and
making it dirty.'" In other words, West contends the monies he
received from Jett and Great Cars were not proceeds of some
unlawful activity, but instead constituted the proceeds of lawful
activities))namely, Jett's purchase of Dondi Farms and Great
Cars' purchase of the two automobiles. We disagree. The mere
fact that Jett and Great Cars were innocent third parties))i.e.,
they did not conspire with West to commit bankruptcy fraud))does
not preclude West's conviction for money laundering. Instead,
the checks that Jett and Great Cars gave to West involved the
proceeds of unlawful activity))West's attempts to fraudulently
conceal assets, in contemplation of a case under title 11 or with
intent to defeat the provisions of title 11. Had West not
12
Bankruptcy fraud is a specified unlawful act under the
money laundering statute. See 18 U.S.C. § 1956(c)(7)(D).
-12-
undertaken such a course of action, he would not have received
any funds from Jett or Great Cars. Consequently, the checks at
issue resulted from West's concealment of assets and, therefore,
constituted the proceeds of West's bankruptcy fraud.13 See
Cavalier, 17 F.3d at 92-93. Accordingly, we conclude that West
was properly charged with and convicted of money laundering.14
IV
West also challenges several evidentiary rulings made by the
district court. We review the district court's determinations as
to the admissibility of evidence using the abuse of discretion
standard. See United States v. McAfee, 8 F.3d 1010, 1017 (5th
Cir. 1993) (exclusion of evidence); United States v. Loney, 959
F.2d 1332, 1340 (5th Cir. 1992) (admission of evidence).
13
In his reply brief, West alludes to the argument that
because the bankruptcy fraud offenses underlying several of the
money laundering counts were completed when West transferred the
security interest in the Jett note to Exalter, subsequent
deposits of payments made on the note could not constitute money
laundering. However, we rejected this very view in Cavalier.
See 17 F.3d at 93 ("According to Cavalier, one cannot promote a
completed unlawful activity for the purposes of
§ 1956(a)(1)(A)(i). We disagree.") (footnote omitted); see also
United States v. Paramo, 998 F.2d 1212, 1218 (3d Cir. 1993)
(same), cert. denied, ___ U.S. ___, 114 S. Ct. 1076, ___ L. Ed.
2d ___ (1994).
14
Our conclusion is supported by United States v. Levine,
970 F.2d 681, 686 (10th Cir. 1992). In Levine, the defendants
engaged in a scheme to hide the existence of four tax refund
checks to which their creditors or the bankruptcy estate was
entitled. The court held that the refund checks, which were
issued by innocent third parties))the Federal government and the
state of Colorado)) "came from an unlawful source as they
emanated from a bankruptcy fraud." Id. Consequently, the court
upheld the defendants' money laundering convictions.
-13-
A
West first contends that the district court erred in refusing
to allow him to introduce evidence that "it was a routine practice
of the FDIC to sell notes held by a failed institution at a
discount, and that the FDIC frequently allowed parties to purchase
their own discounted note through third parties who were . . .
``straw purchasers.'" West argues that such evidence was both
relevant to the issue whether the FDIC knew that West was using
North Star as a straw purchaser in the Parkway notes transaction
and admissible as a "routine practice" of the FDIC.15
Rule 406 provides that "[e]vidence of the habit of a person or
of the routine practice of an organization . . . is relevant to
prove that the conduct of the person or organization on a
particular occasion was in conformity with the habit or routine
practice."16 Fed. R. Evid. 406. Although "[t]here is no precise
15
West has not alleged that he established, by proffer or
otherwise, that non-FDIC employees Jack Franks, Doug Pennington,
Nathan Reeder, or Philip Palmer ever had dealings with the FDIC
during which they became familiar with the FDIC's routine
practices. See Fed. R. Evid. 602 ("A witness may not testify to
a matter unless evidence is introduced sufficient to support a
finding that the witness has personal knowledge of the matter.");
Fed. R. Evid. 701 (limiting lay witnesses to giving opinions
based upon first-hand knowledge or observation). Consequently,
the district court did not abuse its discretion in excluding
testimony from those individuals regarding the FDIC's routine
practices.
16
"Rule 406, on its face, applies in only two instances:
(1) to show that an individual acted in conformity with his or
her habit, and (2) to show that an organization acted in
conformity with its routine practice." United States v. Rangel-
Arreola, 991 F.2d 1519, 1523 (10th Cir. 1993). Here, the first
application is not relevant as the proffered evidence involves
-14-
formula for determining when a practice becomes so consistent as to
rise to the level of routine," "adequacy of sampling and uniformity
of response are controlling considerations." G.M. Brod & Co. v.
U.S. Home Corp., 759 F.2d 1526, 1533 (11th Cir. 1985) (internal
quotations omitted); see also Reyes v. Missouri Pacific R.R., 589
F.2d 791, 795 (5th Cir. 1979).
After reviewing the record, we conclude that the evidence
offered by West to prove the FDIC's routine practice, when
considered in light of the FDIC's dealings with literally thousands
of debtors during the mid- to late 1980s, "falls far short of the
adequacy of sampling and uniformity of response which are the
controlling considerations governing admissibility."17 G.M. Brod,
759 F.2d at 1533. In fact, West has not attempted to make a
comparison of the number of transactions in which the FDIC
allegedly allowed straw purchasers with the number in which the
FDIC did not. See Simplex, Inc. v. Diversified Energy Sys., Inc.,
neither Greer's nor Keller's habitual conduct. Thus, to utilize
Rule 406, West must demonstrate that the excluded testimony would
have related the routine practice of the FDIC.
17
Additionally, to the extent West asserts that the
district court erred in not allowing him to introduce evidence
regarding the FDIC's policies, we disagree. Rule 406 is concerned
not with an organization's policy, but with specific instances of
conduct. Thus, Rule 406 does not require the district court to
admit evidence pertaining to alleged policies followed by the
FDIC. West does not argue that the policy evidence is admissible
under some other rule, and we therefore do not reach this issue.
See, however, 23 Charles A. Wright & Kenneth W. Graham, Federal
Practice & Procedure § 5274, at 47 & n.35 (1980), where they
distinguish evidence admissible under Rule 406 from evidence
inadmissible under that Rule but admissible under another Rule,
such as Rule 401.
-15-
847 F.2d 1290, 1294 (7th Cir. 1988) (noting the "the Rule 406
inquiry also necessitates some comparison of the number of
instances in which any such conduct occurs with the number in which
no such conduct took place") (internal quotation omitted).
Finally, we note that both FDIC officials involved in the
negotiations with West testified that they did not direct West to
utilize a straw purchaser.18 See United States v. Newman, 982 F.2d
665, 669 (1st Cir. 1992) ("[W]e are aware of no case, and the
appellant cites none, in which the routine practice of an
organization, without more, has been considered probative of the
conduct of a particular individual within the organization.").
Consequently, the district court did not abuse its discretion in
finding Rule 406 inapplicable to the evidence presented by West.19
18
West asserted at oral argument that the FDIC officials
"lied."
19
Our conclusion is supported by the policies underlying
Rule 406:
The need for [routine practice] evidence rises out of
the fact that in a large organization it is unlikely
that any individual will remember one of a large number
of repeated transactions, and even if he does, the cost
of finding that person and producing him in court is
disproportionate to the value of his testimony. . . .
[T]he conduct to be defined as ``routine practice' for
purposes of Rule 406 should be of such a nature that it
is unlikely that the individual instance can be
recalled or the person who performed it can be located.
23 Wright & Graham, Federal Practice & Procedure § 5274, at 45-
46. Here, as previously noted, the FDIC officials with whom West
dealt testified at trial that they did not direct West to utilize
a straw purchaser.
-16-
B
West next contends that the district court erred in allowing
the government to impeach Jack Franks, a prosecution witness, by
means of Franks' prior convictions for mail fraud and two other
felonies. Fed. R. Evid. 607 provides that "[t]he credibility of a
witness may be attacked by any party, including the party calling
the witness."20 However, the government may not introduce evidence
of prior conviction "``under the guise of impeachment for the
primary purpose of placing before the jury substantive evidence
which is not otherwise admissible.'" United States v. Hogan, 763
F.2d 697, 702 (5th Cir. 1985) (quoting United States v. Miller, 664
F.2d 94, 97 (5th Cir. 1981), cert. denied, 459 U.S. 854, 103 S. Ct.
121, 74 L. Ed. 2d 106 (1982)). West argues that the government
introduced evidence at trial regarding Franks' prior convictions
for just such a prohibited purpose))namely, to prove West's guilt
by his association with Franks.
West contends that the sole purpose behind Rule 607 is to
allow the government to "pull the sting" of impeachment))i.e., to
allow the government on direct examination to elicit the fact of
conviction so as to prevent the defendant from exposing the
conviction during cross-examination, thereby giving the jury the
impression that the government was concealing a relevant fact about
20
Fed. R. Evid. 609 provides that the credibility of a
witness other than the accused may be attacked using evidence
that the witness has been convicted of a crime punishable by
imprisonment in excess of one year.
-17-
its witness. West submits that the government's intent to use
Franks' convictions as substantive evidence of West's guilt is
clear because West "guaranteed" that he would not impeach Franks
using Franks' three prior felony convictions. Over West's
objections and in spite of West's "guarantee," however, the
district court ruled that the government could introduce evidence
of the prior convictions during direct examination.21
After reviewing the record, we conclude that the government's
primary purpose in calling Franks was not to establish West's guilt
by his association with Franks. Indeed, West admits that Franks'
testimony "played a critical role in several facets of the case."
21
The government argued at trial that the fact of
conviction was admissible because "[i]t is appropriate . . . for
the jury to look at all factors which bear on a witness'
credibility, and . . . prior felony convictions have a tendency
and reason to affect the issue of credibility." West argues that
the government's reason for questioning Franks about his prior
convictions is mere subterfuge. We, however, have approved the
very course of action taken by the government. See United States
v. Woolridge, 572 F.2d 1027, 1029 (5th Cir. 1978) ("The
Government's questioning of its own witness concerning prior
felony convictions was admissible to enable the jury to evaluate
the witness' testimony."); see also United States v. Bileck, 776
F.2d 195, 198 (7th Cir. 1985) ("The candor of the prosecutor in
eliciting the fact that a witness has a felony conviction is to
let the jury know precisely the kind of witness he is relying on.
Such a technique is proper and often used."); United States v.
Bad Cob, 560 F.2d 877, 883 (8th Cir. 1977) (noting that the
introduction on direct examination of a witness's prior
convictions "serves a twofold purpose: (a) to bring out the
witness' ``real character,' the whole person, particularly his
credibility, and (b) to draw the teeth out of the adversary's
probable use of the same evidence on cross-examination"); People
v. Minsky, 124 N.E. 126, 127 (N.Y. 1919) (noting that "when a
disreputable witness is called and frankly presented to the jury
as such, the party calling him represents him for the occasion
and the purposes of the trial as worthy of belief").
-18-
Moreover, the government neither emphasized nor urged the jury to
consider Franks' convictions as evidence of West's guilt. Cf.
United States v. Hernandez, 921 F.2d 1569, 1582-83 (11th Cir. 1991)
(despite the absence of a cautionary instruction, the district
court did not abuse its discretion in allowing the government to
introduce a codefendant's guilty plea when the government did not
emphasize it or urge the jury to consider it); United States v.
Gorny, 732 F.2d 597, 604 (7th Cir. 1984) (government's impeaching
its own witness was not reversible error where it did not call the
witness "merely for the purpose of introducing irrelevant evidence
or of establishing the defendant's guilt by association with the
witness"). Finally, the district court instructed the jury that it
was to consider the evidence of Franks' prior convictions "solely
in judging the credibility of the witness" and not to consider the
evidence "for any purpose in judging the innocence or guilt of"
West. See Zafiro v. United States, ___ U.S. ___, 113 S. Ct. 933,
939, 122 L. Ed. 2d 317 (1993) (noting that juries are presumed to
follow their instructions). Accordingly, the district court did
not abuse its discretion in allowing the government during direct
examination to inquire about Franks' prior convictions.
C
Prior to trial, West moved in limine for an order directing
the government to refrain from offering evidence pertaining to
(1) West's fluctuating, and generally declining, net worth,
(2) West's purchase and use of cashier's checks during December
-19-
1987 and January 1988, (3) West's participation in cash
transactions involving amounts of $9,500 during December 1987,
January, May and June 1988, and February 1989, and (4) West's
rental or use of one or more safe deposit boxes. The district
court refused to consider the issue until the government sought to
offer the evidence at trial. When the government did offer the
evidence, West argued that the court should exclude it as evidence
offered by the government merely to prove that he was a person of
bad character.22 Alternatively, West contended that the probative
value of the evidence was substantially outweighed by the danger of
unfair prejudice.23 The district court overruled West's objections.
On appeal, West offers the same arguments to convince us that the
district court erred in admitting the challenged evidence.24 The
22
Fed. R. Evid. 404(b) prohibits the government from
introducing such evidence to demonstrate the defendant's bad
character:
Evidence of other crimes, wrongs or acts is not
admissible to prove the character of a person in order
to show action in conformity therewith. It may,
however, be admissible for other purposes, such as
proof of motive, opportunity, intent, preparation,
plan, knowledge, identity, or absence of mistake or
accident.
23
See Fed. R. Evid. 403 ("Although relevant, evidence may
be excluded if its probative value is substantially outweighed by
the danger of unfair prejudice . . . .").
24
We note that West's failure to specifically identify
those portions of the record relevant to his claim of error
borders on waiving any claim of error. See Fed. R. App. P.
28(a)(4) (noting that the argument section of the appellant's
brief "shall contain the contentions of the appellant with
respect to the issues presented, and reasons therefor, with
citations to the . . . parts of the record relied on") (emphasis
-20-
government, on the other hand, contends that the challenged
evidence is relevant both to West's intent))i.e., whether he acted
in contemplation of bankruptcy or with the intent to defeat the
provisions of title 11))and to plan))his scheme to deter and prevent
creditors from tracing funds to which he had access.
When extrinsic offense evidence is offered, Rule 404(b) calls
for a two-step approach. First, evidence of prior extrinsic acts
must be "relevant to an issue other than the defendant's
character." United States v. Beechum, 582 F.2d 898, 911 (5th Cir.
1978) (en banc), cert. denied, 440 U.S. 920, 99 S. Ct. 1244, 59 L.
Ed. 2d 472 (1979). Evidence is relevant when it has "any tendency
to make the existence of any fact that is of consequence to the
determination of the action more or less probable than it would be
without the evidence." Fed. R. Evid. 401. "Second, the evidence
must possess probative value that is not substantially outweighed
by its undue prejudice and must meet the other requirements of Rule
403." Beechum, 582 F.2d at 911.
added). Instead of adhering to the commands of Rule 28, West
merely alleges that the Rule 404(b) evidence at issue was "quite
significant: see Volume 13, pp. 1351-1388, and virtually all of
Vols. 14, 15, and Vol. 16; Government Exhibits 269-363."
Although West contends that "it is difficult if not impossible to
simply extract those segments of the transcript where the
evidence is addressed," we have reviewed the cited portions of
the record and have found that much))if not most))of the
testimony simply did not pertain to any challenged evidence.
Moreover, three of the 82 exhibits cited by West are directly
relevant to Count 4 of the indictment, and West failed to object
at trial to 11 additional exhibits when they were offered by the
government. We trust that in the future, counsel will
specifically identify those portions of the record relevant to
the contentions made in the briefs.
-21-
1
Evidence of prior extrinsic acts is admissible to prove "plan"
where the existence of a plan is relevant to some ultimate issue in
the case. United States v. Krezdorn, 639 F.2d 1327, 1331 (5th Cir.
1981). For example,
evidence of an extrinsic offense may be admissible when
it logically raises an inference that the defendant was
engaged in a larger, more comprehensive plan. The
existence of a plan then tends to prove that the
defendant committed the charged crime, since commission
of that crime would lead to the completion of the overall
plan. This use of extrinsic evidence to establish the
existence of a plan is allowed by Rule 404(b) because,
[it] involves no inference as to the
defendant's character; instead his conduct is
said to be caused by his conscious commitment
to a course of conduct of which the charged
crime is only a part. The other crime is
admitted to show this larger goal rather than
to show defendant's propensity to commit
crimes.
Id. (quoting 22 Wright & Graham, Federal Practice & Procedure
§ 5244, at 500 (1978) (footnotes omitted)).
Evidence of prior extrinsic acts also is allowed by Rule
404(b) to establish that the defendant acted with the requisite
criminal intent. See United States v. Goodstein, 883 F.2d 1362,
1370 (7th Cir. 1989) ("Fraudulent intent may be proved by
circumstantial evidence."). "Persons whose intention is to shield
their assets from creditor attack [using the bankruptcy laws] while
continuing to derive the equitable benefit of [their] assets rarely
announce their purpose. Instead, if their intention is to be
known, it must be gleaned from inferences drawn from a course of
-22-
conduct." In re May, 12 B.R. 618, 627 (N.D. Fla. 1980).
Consequently, to prove intent, the government may introduce
evidence relevant to establishing that a defendant engaged in a
course of conduct designed to defraud his creditors or the
bankruptcy trustee.
We conclude that the district court did not err in finding
that the evidence offered by the government was relevant to whether
West acted with the requisite intent or whether he acted pursuant
to a plan to defeat the rights of his creditors. For example, the
financial statements prepared on West's behalf indicate that West's
net worth fell dramatically after 1985. Because the deterioration
of West's financial situation bears strongly on both his incentive
and need to seek bankruptcy protection, such evidence is relevant
not only to West's motive for hiding assets from creditors, but
also indicated that it was very probable that he knew that he was
going to file a petition in bankruptcy long before March 1990.25
See 18 U.S.C. § 152 ¶ 7 (noting that the transfer or concealment of
property must occur "in contemplation of a case under title 11" or
"with intent to defeat the provisions of title 11" to constitute
bankruptcy fraud); see also United States v. Lerch, 996 F.2d 158,
162 (7th Cir. 1993) (admission of tax court and bankruptcy court
opinions from prior proceedings was proper under Rule 404(b)
because they demonstrated the defendant's "motive for hiding
25
West testified that he did not decide to file his
bankruptcy petition until late March 1990.
-23-
assets"). Moreover, the financial statements generally were
consistent with West's testimony that his net worth reached its
peak of between seventeen and nineteen million dollars in 1985 and
declined precipitously thereafter.26 Finally, we note that the
district court gave the appropriate limiting instruction.27
Consequently, the district court correctly found that the financial
statements were relevant to the issue of intent. See United States
v. Haymes, 610 F.2d 309, 311-12 (5th Cir. 1980) (in bankruptcy
fraud case, testimony given by the defendant's secretary that he
was concerned about his company's "grave financial condition and
the likelihood it would fall into bankruptcy" was relevant to
intent; when determining when the defendant began acting with the
26
In fact, West testified that by 1988, his net worth was
"pretty well destroyed" and he practiced "survival techniques" in
an effort to keep his business enterprises alive.
27
The district court cautioned:
You must not consider [the testimony regarding West's
financial statements and the financial statements
themselves] in deciding if the Defendant Bruce West,
Sr. committed the acts charged in the Indictment.
However, you may consider this evidence for other
limited purposes. If you find beyond a reasonable
doubt from the other evidence in this case that the
Defendant did commit the acts charged in the
Indictment, then you may consider evidence of these
Financial Statements to determine whether the Defendant
had the state of mind or intent necessary to commit the
crime charged in the Indictment or whether the
Defendant committed the acts for which he is on trial
in this case by accident or mistake.
13 Rawle at 1380.
-24-
requisite intent, "[a] jury must be allowed to put two and two
together").
The evidence regarding West's purchase and use of cashier's
checks during December 1987 and January 1988 also was relevant to
the issue whether West acted with the requisite intent. Miriam
Lewis, West's secretary, testified as to why West directed her to
cash various checks and obtain cashier's checks:
We had conversations about certain checking accounts that
had been attached over periods of time. [West stated,]
"If the money wasn't in a checking account, it couldn't
be attached."
Moreover, the pattern of check use is similar and relatively close
in time to the transactions undergirding the instant case, and the
district court cautioned the jury not to use the evidence
improperly.28 See Lerch, 996 F.2d at 162 (admission of tax court
28
The district court instructed the jury as follows:
I want to instruct you that you may not consider [the
testimony regarding West's use of cashier's checks and
the checks themselves] in deciding if the Defendant
Bruce R. West, Sr. committed the acts charged in the
Indictment. However, you may consider this evidence
for other very limited purposes.
If you find beyond a reasonable doubt from other
evidence in this case that the Defendant did commit the
acts charged in the Indictment, then you may consider
evidence of the checks that have just been admitted
into evidence for other very limited purposes, to which
you may consider to determine whether the Defendant had
the state of mind, and I'm talking about the Defendant
Bruce R. West, Sr., had the state of mind or intent
necessary to commit the crime charged in the Indictment
or whether the Defendant acted according to a plan or
in preparation for commission of a crime.
14 Rawle at 1432.
-25-
and bankruptcy court opinions from prior proceedings proper under
Rule 404(b) because the "events underlying both opinions are . . .
similar and close in time to the instant case").
The government next introduced evidence pertaining to West's
participation during December 1987, January, May and June 1988, and
February 1989 in cash transactions involving amounts of $9,500.
Lewis testified that starting in 1987, the amount of cash West
obtained from various accounts that he had access to increased
dramatically.29 Prior to 1987, Lewis would cash checks only for
travel expenses and petty cash. After a conversation with West
during which they discussed the federal law requiring banks to
report certain cash transactions to the Internal Revenue Service,30
however, West directed Lewis to cash several checks in amounts of
$9,500, thereby avoiding the reporting requirements. Thus, this
evidence is relevant to whether West acted with the intent to
defeat the provisions of the Bankruptcy Code and whether he acted
pursuant to a plan to defeat the rights of his creditors.
Consequently, the evidence was admissible under Rule 404(b).31
29
Lewis also related that West began talking to her about
declaring bankruptcy in early 1987 and that those conversations
occurred with increasing frequency between that time and 1990.
30
See 31 U.S.C. § 5313(a) (requiring financial
institutions involved in a cash transaction exceeding $10,000 to
file a report with the Secretary of the Treasury).
31
We note that the district court again cautioned the
jury as to the appropriate use of this evidence:
Ladies and Gentlemen of the jury, any testimony with
regard to obtaining cashier's checks for $9500 and any
-26-
Finally, we conclude that the district court did not err in
admitting the evidence regarding West's rental or use of various
safety deposit boxes. Lewis testified that during or after March
1989, as part of the duties relating to her employment with West,
she went with West's daughter to First City Bank, where the
daughter removed cash from a safety deposit box. Lewis and the
daughter then proceeded to "several different banks and got
cashier's checks." Lewis mailed the cashier's checks to Jack
Franks, one of West's business associates. This evidence was
relevant to the issue of intent because it indicated the existence
a plan to hide West's assets and avoid attachment of his bank
accounts, thereby defrauding his creditors.
2
West next contends that even if the challenged evidence was
relevant under Rule 404(b), the district court should have excluded
the evidence pursuant to Rule 403 because its probative value was
such checks admitted into evidence and testimony
regarding them is not to be considered by you in
deciding if the Defendant committed the acts charged in
the Indictment. However, you may consider this
evidence for other very limited purposes.
If you find beyond a reasonable doubt from other
evidence in this case that the Defendant Bruce West,
Sr. did commit the acts charged in the Indictment, then
you may consider evidence of the checks obtained in the
amount of $9500 and testimony regarding them for other
very limited purposes. You may consider them to
determine whether the Defendant had the state of mind
or intent necessary to commit the crime charged in the
Indictment or whether the Defendant acted according to
a plan or in preparation for commission of a crime.
14 Rawle at 1440.
-27-
substantially outweighed by the danger of unfair prejudice. We
must determine "whether the danger of undue prejudice outweighs the
probative value of the evidence in view of the availability of
other means of proof and other facts appropriate for making
decisions of this kind under Rule 403." Fed. R. Evid. 404(b)
advisory committee's note. "The exclusion of evidence under Rule
403," however, "should occur only sparingly." United States v.
Pace, 10 F.3d 1106, 1115 (5th Cir. 1993); see also United States
v. McRae, 593 F.2d 700, 707 (5th Cir.) (noting that Rule 403's
"major function is limited to excluding matter of scant or
cumulative probative force, dragged in by the heels for the sake of
its prejudicial effect"), cert. denied, 444 U.S. 862, 100 S. Ct.
128, 62 L. Ed. 2d 83 (1979).
At trial, the only real issue in dispute involved West's
intent))i.e., whether he acted in contemplation of declaring
bankruptcy or with intent to defeat the Bankruptcy Code. Direct
means of proof tending to make the existence of criminal intent on
West's part more probable than it otherwise would be is generally
unavailable in bankruptcy fraud prosecutions. See In re May, 12
B.R. at 627. Consequently, Rule 404(b) evidence indicating that
West acted with the requisite intent was extremely important to the
government's case. Furthermore, the prior acts occurred relatively
close in time to the conduct charged in the indictment, thereby
increasing the probative value of the 404(b) evidence. See United
States v. Rubio-Gonzalez, 674 F.2d 1067, 1075 (5th Cir. 1982)
-28-
(upholding trial court's decision pursuant to Rule 404(b) to admit
evidence of 10-year-old acts). Finally, the district court
properly instructed the jury on four occasions as to the
limitations on consideration of the extrinsic offense evidence.32
See United States v. Elwood, 999 F.2d 814, 817 (5th Cir. 1993) (no
Rule 403 breach where the trial court instructed the jury on three
occasions of the limitations in the consideration of extrinsic
offense evidence). Consequently, we conclude that the district
32
In addition to the instructions given when the district
court admitted the challenged evidence, see notes 27, 28, and 31
supra, the court gave the following instruction immediately
before deliberations began:
During the course of the trial, testimony or evidence
was presented to you concerning alleged acts committed
by the Defendant Bruce R. West, Sr. in addition to what
has been alleged in the Indictment . . . . Such acts
do not constitute any offense charged in the Indictment
in this case, but it would, at most, constitute
evidence of acts other than those alleged in the
Indictment.
You must not consider any of this evidence in
deciding if the Defendant Bruce R. West, Sr. committed
the acts charged in the Indictment. . . . However, you
may consider this evidence for other, very limited,
purposes.
If you find beyond a reasonable doubt from other
evidence in this case that the Defendant Bruce R. West,
Sr. did commit the acts charged in the indictment, then
you may consider evidence of the other acts allegedly
committed on other occasions to determine:
One, whether the Defendant Bruce R. West, Sr. had
the state of mind or intent necessary to commit the
crime charged in the Indictment;
Two, whether the Defendant Bruce R. West, Sr. had
the motive or the opportunity to commit the acts
charged in the Indictment, or;
Three, whether the Defendant committed the acts
for which he is on trial by accident or mistake.
26 Rawle at 3219-20.
-29-
court did not breach Rule 403 by admitting the Rule 404(b)
evidence.
D
West's final assertion is that his trial was rendered
fundamentally unfair because the district court refused to allow
two bankruptcy experts))Philip Palmer and William H. Brister))to
testify regarding the relationship between the Texas Homestead Act33
and federal bankruptcy law. West contends that such testimony
would have demonstrated that he at all times acted in good faith,
and thus was relevant to the issue of his intent.34 Here, West's
good faith defense was centered upon his asserted reliance on the
advice of his bankruptcy counsel))Philip Palmer))and his
accountant))Nathan Reeder. Although both Palmer and Reeder
testified they advised West to structure the Dondi Farms, Broadway
building, and Frisco house transactions as he did and that the
transactions were lawful, West contends that the district court
erred in not allowing him to demonstrate "that it was reasonable to
33
Section 41.001 of the Texas Property Code provides that
a homestead is "exempt from seizure for the claims of creditors."
Tex. Prop. Code Ann. § 41.001 (Vernon Supp. 1994).
34
At trial, the government had the burden of proving that
West "knowingly and fraudulently [transferred] or [concealed] any
of his property" "in contemplation of a case under Title 11 . . .
or with intent to defeat the provisions of Title 11." 18 U.S.C.
§ 152 ¶ 7. Thus, if West acted in good faith, he could not have
acted with the fraudulent intent necessary to support a
conviction for bankruptcy fraud. See United States v. Zehrbach,
___ F.3d ___, 1994 WL 96690, *4 (3d Cir. Mar. 28, 1994); see also
McCullough, Bankruptcy Fraud, 26 Com. L.J. at 267 ("The role of
advisors, such as attorneys, may affect a finding of intent.").
-30-
follow [the advice supplied by Palmer and Reeder]))a showing that
of necessity would include some explanation of . . . what a Texas
homestead exemption was, and how one could lawfully preserve it,
under bankruptcy law."35
Under Fed R. Evid. 702, "[i]f scientific, technical, or other
specialized knowledge will assist the trier of fact to understand
the evidence or to determine a fact in issue, a witness qualified
as an expert by knowledge, skill, experience, training, or
education may testify thereto in the form of an opinion or
otherwise." Here, the critical issue at trial was whether West
acted in good faith and relied upon the advice of counsel. Thus,
the district court correctly allowed West to testify that he at all
times relied in good faith upon the advice of experts and both
Palmer and Reeder to testify that they advised West to structure
the transactions as he did.36 Cf. Miller v. United States, 120 F.2d
35
West informed the district court that Brister and
Palmer
would . . . have been able to testify to the Texas
Homestead Law concerning the use of proceeds from the
sale of a homestead for a six-month period, the
reinvestment of those proceeds in a new homestead, and
the exempt nature of the note payments [as] such
proceeds.
25 Rawle at 3131.
36
The district court, in fact, comprehensively explained
to the jury West's advice of counsel defense:
The defense in this case contends that the actions of
Bruce R. West, Sr. concerning the acquisition of the
Parkway Notes from the FDIC, the foreclosure of the
-31-
Broadway Building, Exalter's involvement in the
exchange of the Broadway Building for the Frisco House,
the subsequent transfer of the Frisco House to West,
Sr. and the associated transfer of funds by West, Sr.,
did not constitute a fraud on West, Sr.'s creditors,
the trustee in bankruptcy, or any other person, and
that such transactions were structured based on advice
from his attorney and accountant.
. . . .
If, before taking the actions charged in the
Indictment, Bruce West, Sr., while acting in good faith
and for the purpose of securing advice on the
lawfulness of his possible future conduct, sought and
obtained the advice of an attorney or accountant whom
he considered to be competent, and made a full
disclosure of all important and material facts of which
he had knowledge or had the means of knowing, and acted
in accordance with the advice his attorney or
accountant gave following this full report or
disclosure, then the Defendant would not be willfully
or deliberately doing a wrong in performing or omitting
some act the law forbids or requires.
However, reliance upon the advice of an attorney
or an accountant is not an absolute defense to the
crimes charged in the Indictment. Rather, it is a
circumstance which you should consider in determining
whether a Defendant was acting in good faith or without
fraudulent intent. No one can willfully and knowingly
violate the law and excuse himself by simply claiming
that he followed the advice of an attorney or
accountant. Rather, for advice of an attorney or
accountant to be considered as a circumstance that
disproves fraudulent intent, the evidence must show
that the advice was given after a Defendant made a full
and accurate report or disclosure to his attorney or
accountant of all the important and material facts of
which the Defendant Bruce R. West, Sr. had knowledge or
had the means of knowing. The evidence must also show
that the Defendant acted in accordance with the advice
that his attorney or accountant gave following this
full report or disclosure.
Whether Defendant Bruce West, Sr. acted in good
faith for the purpose of truly seeking guidance as to
questions about which he was in doubt, and whether he
made a full and complete report or disclosure to his
attorney or accountant, and whether he acted in
accordance with the advice received, are all questions
for the jury to determine.
-32-
968, 970 (10th Cir. 1941) (stating that the defendant may buttress
his testimony of lack of intent "with testimony of relevant
circumstances, including conversations had with third persons or
statements made by them, tending to support his statement that he
had no intent to defraud"). Moreover, the district court further
allowed Palmer to testify that: (1) West made full disclosure
regarding the transactions; (2) he advised West that the Frisco
house transaction "was a legal and proper transaction"; (3) the
Frisco house transaction caused no harm to West's creditors;
(4) the Jett note was exempt from the claims of creditors; (5) the
Jett note retained its exempt status after the Frisco house
transaction because it was "used in the acquisition of the new
homestead which is what [the homestead] exemption is all about";
and (6) he advised West that West was free to use payments made
both pursuant to the Jett note and after West had sought bankruptcy
protection because such payments were exempt. Consequently, West's
defense))that he in good faith relied on the advice of counsel))was
squarely placed before the jury.37 Because the typical juror is
26 Rawle at 3251-53. On appeal, West does not independently
challenge the jury instructions, but instead contends that the
district court's refusal to allow expert testimony, in light of
the jury instructions, rendered his trial fundamentally unfair.
To the extent West intended to challenge the sufficiency of the
jury instructions, he has failed to brief the issue and,
therefore, has waived it. See Edmond v. Collins, 8 F.3d 290, 292
n.5 (5th Cir. 1993).
37
Indeed, the issue of intent was squarely placed before
the jury in light of West's explicit testimony that he never
acted with the intent to defraud his creditors, the bankruptcy
trustee, or anyone else.
-33-
qualified to determine intelligently and to the best degree
possible both the reasonableness of a client relying upon the
advice of an attorney and accountant retained to render such advice
and whether the client did so in good faith after making full
disclosure, expert testimony as to the legal basis underlying the
advice))i.e., the reasonableness of their interpretation of the
provisions of the Texas Homestead Act))would not have assisted the
jury. See Fed. R. Evid. 702 advisory committee's note (noting that
the test "for determining when experts may be used" is "the common
sense inquiry whether the untrained layman would be qualified to
determine intelligently and to the best possible degree the
particular issue without enlightenment from those having a
specialized understanding of the subject") (internal quotation
omitted). Accordingly, the district court did not abuse its
discretion in refusing to admit expert testimony regarding the
Texas Homestead Act.
West nonetheless contends that precedent required the district
court to admit the experts' testimony. West primarily relies upon
United States v. Garber, 607 F.2d 92, 97-100 (5th Cir. 1979) (en
banc), where we held that because the taxability of the unreported
income at issue was uncertain as a matter of law, the trial court
erred in excluding the testimony of an expert about the unresolved
nature of the law.38 We find Garber inapposite given the
38
Garber was one of only two or three persons in the
world whose blood was known to contain a certain valuable
antibody. She thus was able to generate substantial income by
-34-
substantial differences between the facts of that case and the case
sub judice.39 For example, the trial court in Garber refused to
allow the defendant to present any testimony suggesting that the
law supported her actions. Id. at 99 ("By disallowing [the
expert's testimony] that a recognized theory of tax law supports
Garber's feelings, the court deprived the defendant of evidence
showing her state of mind to be reasonable."). Here, however, the
district court allowed West to testify both that he consulted with
Reeder and Palmer before structuring the Dondi Farms, Broadway
selling her blood plasma. Because Garber failed to report this
income, the government prosecuted her for the willful evasion of
income taxes. At trial, the government conceded that the
taxability of income generated by selling blood plasma was an
issue of first impression. Thus, Garber sought to introduce the
testimony of a certified public accountant that a recognized
theory of tax law supported Garber's belief that such income was
not taxable. Considering the question of taxability to be one of
law, the trial court refused to allow the proffered testimony and
instructed the jury that the income Garber received from the sale
of her blood was taxable. Garber, 607 F.2d at 94-96. We
reversed Garber's conviction, holding that the expert's testimony
was relevant to the issue of Garber's intent:
The tax treatment of earnings from the sale of blood
plasma or other parts of the human body is an
unchartered area in tax law. The parties in this case
presented divergent opinions as to the ultimate
taxability by analogy to two legitimate theories in tax
law. The trial court should not have withheld this
fact, and its powerful impact on the issue of Garber's
willfulness, from the jury.
Id. at 99.
39
In prior cases, we have "limited Garber to its bizarre
facts))where the level of uncertainty [of the applicable law]
approached legal vagueness." United States v. Daly, 756 F.2d
1076, 1083 (5th Cir. 1985) (citing United States v. Burton, 737
F.2d 439, 443-44 (5th Cir. 1984)).
-35-
Building, and Frisco house transactions and that he followed their
advice. Additionally, the district court allowed both Palmer and
Reeder to testify that they advised West to structure the
transactions as he did and that the transactions were perfectly
legal. Thus, West's reliance upon Garber is misplaced.40 Moreover,
West has not argued on appeal that the relevant law was unsettled,
that he or his advisors subjectively saw any such uncertainty, or
that his advisors explained the Texas Homestead Act to him in
anything other than very general terms. See United States v.
40
West's reliance upon Cheek v. United States, ___ U.S.
___, 111 S. Ct. 604, 112 L. Ed. 2d 617 (1991), United States v.
Onumonu, 967 F.2d 782 (2d Cir. 1992), and United States v.
Lankford, 955 F.2d 1545 (11th Cir. 1992), is similarly misplaced.
Cheek, which merely held that the jury in a criminal tax fraud
case must be allowed to consider the defendant's subjective
understanding of the legality or illegality of his acts, 111 S.
Ct. at 609-11, does not provide West with any support because the
district court allowed the jury to consider West's subjective
intent. Lankford held that the trial court erred in totally
excluding expert testimony relevant to the defendant's intent to
commit tax fraud. 955 F.2d at 1551 & n.14 (expert testimony as
to whether a campaign contribution should be classified as a gift
or as income, an issue about which most jurors "simply lack the
specialized knowledge, background, and experience needed to
assess the reasonableness of the" defendant's gift/income
characterization). In Onumonu, the defendant, an alimentary-
canal drug smuggler on trial for importing heroin, testified that
he thought he was smuggling diamonds, not heroin. The trial
court excluded expert testimony offered by the defendant
regarding the feasibility and profitability of smuggling diamonds
in the alimentary canal. The Second Circuit held that the trial
court erred in excluding such testimony because it was relevant
to the defendant's intent and the average juror knows very little
"about the feasibility of internally smuggling diamonds by
swallowing [diamond-filled] condoms." 967 F.2d at 788. We find
the latter cases distinguishable from the case at bar, where West
testified as to both his subjective intent and his reliance upon
the advice of his retained experts and West's attorney and
accountant each testified regarding the advice they gave West.
-36-
Harris, 942 F.2d 1125, 1132 n.6 (7th Cir. 1991) (noting that where
the defendant or his tax advisors may have subjectively, but
wrongly, seen an ambiguity, the defendant may present evidence to
the jury demonstrating the basis of the erroneous, good faith
belief). The typical juror is perfectly capable of determining,
based on the evidence presented, whether West acted in good faith,
disclosed all the relevant facts, and then acted in reliance upon
the advice obtained. Consequently, we must reject West's
contention that the district court erred in excluding the proposed
testimony regarding the provisions of the Texas Homestead Act. Cf.
United States v. Burton, 737 F.2d 439, 444 (5th Cir. 1984) (noting
that the trial court "ordinarily will be the sole source of the
law").
V
For the foregoing reasons, we AFFIRM the judgment of the
district court.
-37-