United States v. Hand

UNITED STATES COURT OF APPEALS
Filed 12/15/95
TENTH CIRCUIT

UNITED STATES OF AMERICA, )
)
Plaintiff-Appellee, )
)
v. ) No. 95-8007
) (D.C. No. 94CR-31)
GRADY LEWIS HAND, aka James Grady ) (D. of Wyoming)
Lewis Hands, III, aka James G. )
Hands, III, aka Major General )
James Grady Lewis Hands, III, )
)
Defendant-Appellant. )

ORDER AND JUDGMENT *

Before BALDOCK, McWILLIAMS and REAVLEY, ** Circuit Judges.

Grady Lewis Hand appeals his conviction by a jury of

conspiracy to launder money and the trial court’s order that he

pay $699,760 in restitution. We affirm the judgment of

conviction, vacate the order of restitution and remand the cause
to the district court.

*
This order and judgment is not binding precedent, except
under the doctrines of law of the case, res judicata, and
collateral estoppel. The court generally disfavors the citation
of orders and judgments; nevertheless, an order and judgment may
be cited under the terms and conditions of the court's General
Order filed November 29, 1993. 151 F.R.D. 470.
**
The Honorable Thomas M. Reavley, United States Court of
Appeals, Fifth Circuit, sitting by designation.
 Hand was charged along with Delton Olson 1 and the Cross
brothers - Stewart and Stephen, in a multi-count indictment

alleging wire fraud, mail fraud, and conspiracy to launder money

all stemming from fraud related to a financial investment scheme.

The conspirators operated through two entities - Cross &
Associates and NorthStar Investment Trust. Hand was chairman of

the board of Cross & Associates, a company solely owned by its

president Stewart Cross. Stewart and Hand were initially involved

in “self-liquidating” loans. While the exact nature of these

loans is unclear, Cross & Associates was supposedly to obtain

funds from these financial instruments in excess of 300 million
dollars. These funds would later play an integral part in the

conspirators’ investment scheme.

In March of 1993, Olson and Stephen Cross began marketing a

“roll program” through NorthStar. 2 This program was designed to

provide small investors with the opportunity to invest or
“piggyback” into the larger “roll program” being conducted by

1
Delton Olson has filed a related appeal, Docket No. 95-
8006.
2
After a Securities and Exchange Commission inquiry into
NorthStar’s activities, Olson and Stephen Cross stopped
soliciting investors in NorthStar’s name. The two created a
company called SLM which continued the investment scheme.
Stephen and Olson substituted SLM agreements with the NorthStar
management agreements that had been previously executed with the
investors. The SLM agreements were backdated to coincide with the
creation of the NorthStar “roll program.” The investors were
asked, but most refused, to return the old NorthStar agreements.
The S.E.C. was then informed that no “roll programs” were in
existence.
2
Cross & Associates. 3 The investors were informed that Hand and

Stewart were purchasing prime bank notes in the amount of 100 to

300 million dollars or more. Cross & Associates, through their

trader, would contract to purchase the notes at a discount from

only the world’s largest 100 banks. Cross & Associates would
also contract with an institution in the secondary market to

purchase these notes. This secondary market consisted of pension

funds, insurance companies, and large corporations. The actual

“roll” or “tranche” occurred when Cross & Associates purchased

the note from the bank with cash and then sold the note to the

secondary market. The difference between the purchase and sale
of these instruments were to result in a substantial profit to

Cross & Associates and their investors. The investors were

informed that because of bank and federal regulations the two

parties were not able to deal directly with the other, thus

creating the need for Cross & Associates.
To further insure that investors’ monies were safe, Hand and

Stewart Cross executed an assignment agreement on behalf of Cross

& Associates to the investors, assigning the investors the rights

to the 300 million dollars in “self-liquidating loans.” Olson

assured the investors that their money was “guaranteed.” The

money was to remain in a brokerage account unless it was out on a

3
All that we say about the planned operation of this
investment program is based on what is gleaned from defendants’
claims and not from supporting evidence for those claims.
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“roll.” When the money was out on a “roll” it was guaranteed

through the assignment.

The roll program was non-existent. Investors were paid the

two to four per cent per month return for their investment funds.

The four conspirators looted much of the remaing money. In

October the investment scheme was ended by federal officials.

During the length of the conspiracy, Hand alone received

approximately $449,000 of a total of 3.3 million dollars invested

in NorthStar/SLM. A jury found Hand guilty, and the district
court sentenced him to 97 months imprisonment and three years

supervised release.
I. Sufficiency of the Evidence

Hand challenges the sufficiency of the evidence to support

his conviction. He argues the evidence does not establish that

there was an agreement between the alleged co-conspirators to

launder money or that money laundering occurred. We review the
evidence in the light most favorable to the government to

determine whether any rational trier of fact could find Hand
guilty beyond a reasonable doubt. United States v. Hanson , 41
F.3d 580, 582 (10th Cir. 1994).
Hand was charged with conspiracy to violate 18 U.S.C. §

1956(a)(1)(A)(i) and 1956(a)(1)(B)(i). Those sections provide:

(a)(1) Whoever, knowing that the property involved in a
financial transaction represents the proceeds of some form
of unlawful activity, conducts or attempts to conduct such a
financial transaction which in fact involves the proceeds of
specified unlawful activity--
(A)(i) with the intent to promote the carrying on of
specified unlawful activity; or

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 * * *
(B) knowing that the transaction is designed in whole
or in part--
(i) to conceal or disguise the nature, the
location, the source, the ownership, or the
control of the proceeds of specified unlawful
activity . . .
shall be sentenced to a fine of not more than $500,000 or
twice the value of the property involved in the transaction,
whichever is greater, or imprisonment for not more than
twenty years, or both.

The “specified unlawful activity” alleged in the indictment was

mail or wire fraud in violation of 18 U.S.C. §§ 1341 and 1343.

A. The Conspiracy
The government proceeded under the basic theory that Hand

and others conspired to violate § 1956(a)(1)(A)(i) or (B)(i). 18
U.S.C. § 1956(h). To prove a conspiracy, the government must

prove: (1) the existence of an agreement; (2) to break the law;

(3) an overt act; (4) in furtherance of the conspiracy’s object;

and (5) that a defendant willfully entered the conspiracy.

Hanson, 41 F.3d at 582; 18 U.S.C. § 371. “While all five of
these elements must be present, the essence of any conspiracy is

‘the agreement or confederation to commit a crime.’” Id. (quoting

United States v. Bayer , 331 U.S. 532, 542, 67 S.Ct. 1394, 1399,

91 L.Ed. 1654 (1947)). In the present case there is no direct
evidence of an agreement among all the parties; however, the

surrounding circumstances are sufficient for a rational jury to

conclude that Hand was a member of the conspiracy. Hand’s

representations to the investors, his role in duping them and

appropriating large amounts of their money, and documents

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recovered from Hand during the government’s investigation of the

conspirators’ illegal actions all support the jury’s conclusions.

Several of the investors believed that Hand’s participation

in the program was vital to its existence. This was due, in

part, to Hand’s representations to co-conspirators and others

about his “high-placed” government contacts. Hand represented

that he was a major general in United States Military

Intelligence, 4 and that he was handling large sums of monies for
the Central Intelligence Agency for covert operations. As a
result of these contacts and his position, Hand was supposed to

be knowledgeable about international finance and be able to
consummate large financial transactions.

On April 19, 1993, Olson, the Cross brothers, and several

investors of NorthStar met in Atlanta. The investors were

informed that Hand was unable to attend in person but would

participate via the telephone. During the phone conversation,
Hand relayed that Cross & Associates was conducting significant

“rolls” at that time. He also answered investor questions

concerning the ongoing roll programs and the documentation of

those programs. Hand responded that documentation would be

4
In support of this, Hand produced his military
“commission.” Numerous individuals testified that the document
was not real, and that generals were not covertly commissioned in
this manner. Retired General Colin Powell, former Chairman of
the Joint Chief of Staffs testified, through a videotaped
deposition, that he did not know Hand and that generals were not
commissioned in such a manner. In fact the stamp on the so-
called “commission” was from the War Department, the predecessor
to the Department of Defense.
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provided; however, because of the secret nature of the

transactions the documents could not be released until after the

transactions were complete. Hand informed the investors that

“[he] believe[d] we can structure [the roll program] as nearly

risk-free as anything can be structured.” Hand even discussed

the decrease of credibility in some “roll programs” because of

the apparently fraudulent actions of other individuals.

In June of 1993, Hand instructed Stewart Cross to summarize

Hand’s resume and provide it to Olson for the investors. Hand
also assisted Stewart in producing materials for an investor

meeting in Bellevue, Washington. These materials included Hand’s
“government” documents and his military “commission.” The

investors at that meeting were provided with a letter signed by

Hand apologizing for his absence. (The letter was prepared at

Hand’s request by Stewart.) The letter also informed the

investors that in the next two weeks 10 billion dollars would be
transferred to Cross & Associates for Stewart’s management. When

Stewart returned to Atlanta, Hand requested that the letter be
destroyed.

Hand also participated in critical aspects of the operation

of Cross & Associates. Hand signed the initial letters of

authorization for the transfer of the first $300,000 from the
investors’ account into various other accounts. 5 This $300,000

5
Hand also argues in his brief that there is
insufficient evidence to demonstrate that wire or mail fraud
occurred. But as can be seen from these facts, Hand signed
several letters of authorization in his capacity as chairman of
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was termed a “loan” from the investors’ account by Hand and the

Cross brothers. However, the management agreements only

permitted investor funds to be used for “rolls” or the money was

to remain in the brokerage account. Hand also signed the

assignment agreement between Cross & Associates and NorthStar.

This assignment agreement was a crucial part of the guarantee

offered to investors. This and Hand’s other representations to

investors were a critical part of NorthStar/SLM’s success in

raising the 3.3 million dollars.
Finally, the evidence also indicates that Hand was aware

that the money he was receiving from Cross & Associates was
investor money. In December of 1993, investigators from the

states of Georgia and Wyoming, the Internal Revenue Service, and

the United States Post Office interviewed Hand at his motel room

in Atlanta. One of the documents presented to the investigators

at that time by Hand was an investor list of the SLM program and
how much each investor was owed. A copy of the assignment

agreement was also recovered, as was a file entitled “Stephen T.
Cross/Del Olson problem.” This file contained various documents

the board of Cross & Associates which authorized the wire
transfer of monies from the investor brokerage accounts to other
accounts. These transactions were termed “loans” by the co-
conspirators, but a reasonable juror could have rejected this
explanation.
One investor who knew Hand testified that he invested in
NorthStar/SLM because Hand was running the larger “roll program.”
That investor had turned down other opportunities to invest in
similar programs because he was not comfortable with the traders.
The investor further testified that all four conspirators,
including Hand, represented to him that these trades were
actually occurring.
8
relating to SLM, Cross & Associates, NorthStar, and the grand

jury investigations in Wyoming of NorthStar/SLM. This evidence

supports the jury’s conclusion that Hand was an active member of

the conspiracy, and that there was an agreement beween Hand and

the others to obtain investor funds through the false

representations of the conspirators.

B. Money Laundering

Hand also asserts that there is no evidence that money

laundering occurred, that is, that he did not commit any
transaction with the proceeds from the mail or wire fraud to

either promote the carrying on of the mail or wire fraud or to
conceal or disguise “the nature, the location, the source, the

ownership, or the control of the proceeds” of the mail or wire

fraud. See 18 U.S.C. §§ 1956(a)(1)(A)(I) (use of money for
promotion of scheme) and 1956(a)(1)(B)(I) (commission of

transactions to conceal proceeds of scheme). The evidence was
sufficient under either theory.

Investor proceeds were used by Cross & Associates to create
the “aura of legitimacy” and bolster the credibility of the

principals with the investors. United States v. Johnson , 971 F.2d

562, 566 (10th Cir. 1992). The Cross & Associates offices were

in the Atlanta Financial Center. Both Hand and Stewart Cross

negotiated a new company lease after investor funds began to

arrive. Hand also assisted in selecting new furniture for the

company. Several investors testified that they were impressed

with the Cross & Associates offices during the April meeting.

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The company also spent other funds for Hand’s business expenses,

like his mobile phone, to further facilitate his pretended

financial dealings in the international community. The evidence

supports a jury conclusion that Hand was aware of and authorized

the expenditure of investor funds through Cross & Associates to

continue to promote the non-existent “roll program.”

Even more compelling is the alternative ground of

concealment which was presented to the jury. Several

transactions evidenced Hand’s motive to conceal his appropriation
of funds from the financial scheme. The most glaring example

concerns the Cross & Associates’ financial statement. Stewart
instructed the accountant (per Hand’s instructions) to show

Hand’s receipt of investor funds as a short term investment. The

Cross & Associates balance statement listed $494,071.71 which had

been paid to Hand as a short term investment in “PFA INTL.” The

importance of creating a legitimate purpose for these funds was
demonstrated by Hand’s own representations to the investors in

April. At that meeting, Hand specifically outlined how the
investors’ money was secure because the money was either being

used for a “roll” (at which time the assignment covered the

monies) or it was in the brokerage account. Listing the money as

a short term investment in “PFRA INTL” gave the appearance that

this money was out on a “roll.” However, the $494,071.71 was not

an investment of any kind, but rather business and personal
expenses of Hand.

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 To further legitimize the use of investor funds, Hand also

executed several loan agreements between himself (personally or

through his corporation) and Cross & Associates. These loans

were structured to appear to give Cross & Associates a tremendous

payout in a relatively short time period. This evidence could

support a juror’s conclusion that Hand and the conspirators’

actions were designed to conceal the nature of their illicit

gains through the mail and wire fraud.

II. Testimony of “General” Ferrara
Hand argues the trial court erred in failing to compel

Ferrara to testify or in failing to require Ferrara to invoke the
Fifth Amendment before the jury. Ferrara was allegedly one of

Hand’s high placed government contacts who was a liaison between

the Mexican and American governments. Hand delivered a total of

$215,000 in cash to Ferrara in three separate installments at the

Orlando airport during the summer of 1993. During Hand’s trial,
Ferrara was awaiting trial for alleged wire fraud and securities

violations not related to the instant offense. After examining
Ferrara and his attorney, the district court declared Ferrara

unavailable for purposes of Fed. R. Evid. 804.

Ferrara was clearly entitled to invoke the Fifth Amendment

privilege of self-incrimination. Any admission concerning the

receipt of funds by Ferrara from Hand because of Ferrara’s

fraudulent representations could have constituted a federal or
state crime. The privilege is to be liberally construed in favor

of a witness. Hoffman v. United States , 341 U.S. 479, 486, 71

11
S.Ct. 814, 818, 95 L.Ed. 1118 (1951); United States v. Hart , 729
F.2d 662, 670 (10th Cir. 1984), cert. denied, 469 U.S. 1161, 105

S.Ct. 914, 83 L.Ed.2d 927 (1985). Additionally, a defendant has

no right to force a witness to invoke the privilege in front of a

jury. Hart, 729 F.2d at 670. Therefore, the district court did

not err in refusing to compel Ferrara to testify or to force

Ferrara to invoke his privilege in the presence of the jury.

III. Restitution

Finally, Hand asserts the trial court erred in ordering Him
to pay $699,760 in restitution. The government agrees. The

parties note that Hand presently is in debt for 5.77 million
dollars, has little if any assets, and has a negative monthly

cash flow of $3,854. The evidence is equally unclear whether

Hand has the earning potential to pay restitution in the future.

See United States v. Kunzman , 54 F.3d 1522, 1532 (10th Cir. 1995)
(lack of financial resources is not a bar to a restitution order
if the evidence indicates the defendant has some assets or the

earning potential to pay the amount ordered). Therefore, on this
record the district court abused its discretion in determining

the amount of the restitution ordered.

The judgment of conviction is AFFIRMED, the order of

resitution is VACATED, and the cause is REMANDED to the district

court.

12
Entered for the Court

Thomas M. Reavley
Circuit Judge

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