United States v. E Carroll Corr Sys

REVISED, October 29,1999

UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________

No. 98-30411
_____________________

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

CAPTAN JACK WYLY; DOROTHY MORGEL;
EAST CARROLL CORRECTIONAL SYSTEMS, INC.,

Defendants-Appellants.

_____________________

No. 98-30434
_____________________

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

EAST CARROLL CORRECTIONAL SYSTEMS, INC.,

Defendant-Appellant.

_____________________

No. 98-30865
_____________________

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

DALE RINICKER; ET AL.,

Defendants,

CAPTAN JACK WYLY, JR.; KENNETH KNIGHT
KILLEN, JR., on behalf of William Bryant
Killen; JAMES PAUL BROWN, on behalf of
Matthew P. Brown, on behalf of Kathrine J. Brown;
 BAHIA W. BROWN; JACK S. HAMILTON;
BONNIE G. WYLY; WILLIAM N. WYLY; HONDA W. KILLEN,

Appellants.

_________________________________________________________________

Appeals from the United States District Court
for the Western District of Louisiana

__________________________________________________________________
October 13, 1999

Before KING, Chief Judge, and SMITH and BARKSDALE, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

Primarily at issue in these consolidated appeals from criminal

convictions for mail fraud, conspiracy, money laundering, and

forfeiture is whether the Government’s rebuttal closing argument

deprived Captan Jack Wyly, Dorothy Morgel, and East Carroll

Correctional Systems, Inc. (ECCS), of a fair trial. They contest

their convictions and the forfeiture order; in addition, ECCS

contests its $4.8 million fine. And, various ECCS shareholders

contest not being permitted to assert a claim to ECCS’ forfeited

assets. We AFFIRM all but the forfeiture of Morgel’s seized

checking account funds and the ECCS fine.

I.

In 1990, Dale Rinicker, then Sheriff of East Carroll Parish,

Louisiana, asked Wyly, then a 72-year-old Lake Providence attorney,

to finance the construction of a private prison in the parish to

house state prisoners. Under state law, such facilities must be

sponsored by a governmental entity. Because public funding was not

available, an investor was needed.

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 Wyly agreed to construct a prison and lease it to the

Sheriff’s Office. Rinicker testified that Wyly offered him 38%

(later reduced to 30%) of the profits of the corporation (ECCS)

that Wyly planned to form for purchasing and constructing the

facility. Wyly, however, testified that, after construction was

well underway, Rinicker threatened to withdraw his prison

sponsorship unless he received a 38% share; and that he ultimately

agreed to give Rinicker 30%.

In April 1990, Wyly formed ECCS as a subchapter S corporation;

he was president and Morgel, his then 62-year-old legal secretary

(she had worked for Wyly for 35 years), was secretary-treasurer.

Thirty-five of the 100 ECCS shares were issued in Morgel’s name

(representing 5 for her and 30 for Rinicker); the remainder, to

Wyly, members of his family, and Jack Hamilton, who owned land near

the facility and, post-indictment, became ECCS’ president.

Soon after its incorporation, ECCS purchased an abandoned

school building and began renovating it — the East Carroll

Detention Center (ECDC). Financing was through another of Wyly’s

corporations, Desona Dairy-Corbin Planting Company, Inc. (Desona).

On the day of the building purchase, ECCS and the Sheriff’s Office

entered into a lease agreement, pursuant to which the latter agreed

to pay ECCS 25% of the funds it received from the Louisiana

Department of Public Safety and Corrections for housing state

prisoners.

A few months later, August 1990, ECDC began housing prisoners.

Additional buildings were constructed, also financed by loans from

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Desona. Until May 1993, ECCS repaid the construction loans, making

no shareholder distributions except as needed for payment of taxes

under the subchapter S corporate structure; thereafter, shareholder

distributions were made.

The parties went to elaborate lengths to conceal Rinicker’s

interest in, and his distributions from ECCS. From May 1993

through August 1995, ECCS made distributions to Morgel based on a

35% interest in ECCS (her 5% and Rinicker’s 30%).

Although Morgel had a checking account at a bank in Lake

Providence, where she lived, she opened another in May 1993 in Oak

Grove, 15 miles away. She deposited the ECCS distribution checks

in the Oak Grove account, and then wrote checks, generally for less

than $10,000 (to avoid currency transaction reporting

requirements), payable to Glen Jordan, Rinicker’s friend.

These May 1993 through August 1995 payments totaled $286,025.

After August 1995, by six checks totaling $54,116, ECCS paid Jordan

directly (on behalf of Rinicker).

Rinicker and/or Jordan cashed these checks at a bank in

Monroe, Louisiana, where Rinicker’s sister, Myra Jackson, worked.

Rinicker received the proceeds, giving Jordan a small amount from

each check.

When questioned by the Louisiana Office of Legislative Auditor

and the FBI regarding the payments to Jordan, Morgel and Wyly gave

false explanations and incorrect information. Jordan, however,

cooperated with investigators and explained his role in funneling

money to Rinicker.

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 Wyly, Morgel, ECCS, Rinicker, and Jackson (but not Jordan),

were charged with mail fraud, conspiracy to launder money, and

money laundering. The indictment sought forfeiture of: (1) ECDC;

(2) a certificate of deposit purchased by ECCS; (3) all funds in

ECCS’ bank account; (4) all funds in Morgel’s Oak Grove account;

(5) ECCS’ assets and property, including approximately $2.8 million

in rental payments from the Sheriff’s Office; and (6) the

approximate $340,000 paid Rinicker.

Jackson’s charges were dismissed pursuant to a pre-trial

diversion agreement. Rinicker pleaded guilty and testified at

trial for the Government.

A jury convicted Wyly, Morgel, and ECCS on all counts, and

found the charged property to be subject to forfeiture. Departing

downward from the Sentencing Guidelines’ range, the district court

sentenced Wyly to 48 months imprisonment and a $17,500 fine and

Morgel to prison for one year and one day and a $12,500 fine. ECCS

was fined $4.8 million. Moreover, Wyly, Morgel, and ECCS were

ordered to forfeit their interests in the property described in the

forfeiture verdict.

Following entry of an initial forfeiture order, the other ECCS

shareholders (Hamilton and members of Wyly’s family) petitioned for

a hearing on their claims to an interest in ECCS’ assets. The

district court held they lacked standing.

II.

The district court refused the Government’s downward departure

request for Rinicker and sentenced him, inter alia, to 60 months

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imprisonment and a $10,000 fine. His appeal was voluntarily

dismissed. Likewise, the Government voluntarily dismissed its

appeal contesting the departures given Wyly and Morgel.

Wyly, Morgel, and ECCS (Appellants) challenge the admission of

Rinicker’s testimony, the sufficiency of the evidence, certain jury

instructions, the denial of their new trial motions based on

prosecutorial misconduct, and the forfeiture order; in addition,

ECCS challenges its fine. The other ECCS shareholders contest

being denied a hearing.

A.

Circuit precedent forecloses the contention that Rinicker’s

testimony, pursuant to a plea agreement, violated 18 U.S.C. §

201(c)(2) (prohibiting giving, offering, or promising anything of

value to a witness for or because of his testimony). E.g., United

States v. Haese, 162 F.3d 359, 366-68 (5th Cir. 1998), cert.

denied, ___ U.S. ___, 119 S. Ct. 1795 (1999).

B.

The scope of our review of the sufficiency of
the evidence after conviction by a jury is
narrow. We must affirm if a reasonable trier
of fact could have found that the evidence
established guilt beyond a reasonable doubt.
We must consider the evidence in the light
most favorable to the government, including
all reasonable inferences that can be drawn
from the evidence. The evidence need not
exclude every reasonable hypothesis of
innocence or be wholly inconsistent with every
conclusion except that of guilt, and the jury
is free to choose among reasonable
constructions of the evidence.

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United States v. Bermea, 30 F.3d 1539, 1551 (5th Cir. 1994),

(citations omitted), cert. denied, 513 U.S. 1156, and 514 U.S. 1097

(1995).

1.

Bribery under Louisiana law is the offense the mail fraud

scheme was devised to further and conceal; that scheme and bribery

produced the illegal proceeds for laundering and concealment.

Therefore, as the parties acknowledge, bribery is an essential

element for each of the counts in the indictment. The evidence of

bribery is claimed insufficient because Wyly and Rinicker denied

any intent to offer or receive a bribe; that, instead, Rinicker

extorted an ownership interest in ECCS after ECCS was formed; and

that later acts of concealment had a non-criminal purpose because

they were undertaken, not to cover up a bribe, but out of fear of

Rinicker, who wanted his ownership concealed for his own purposes.

Under LA. REV. STAT. 14:118, the elements for public bribery are

“(1) [t]he giving or offer to give of something of apparent present

or prospective value by the Defendant; (2) [t]hat the recipient is

a public officer or public employee ...; and (3) [t]hat the gift or

offer to give is for the purpose of influencing the official duties

of the public officer or employee”. United States v. L’Hoste, 609

F.2d 796, 804-05 (5th Cir.), cert. denied, 449 U.S. 833 (1980).

The bribery evidence is more than sufficient. The Government

presented evidence of an offer by Wyly and acceptance by Rinicker,

an elected official, of a concealed interest in ECCS, for the

purpose of influencing Rinicker in the performance of his official

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duties. Although Rinicker testified that he did not think Wyly

offered him a secret ownership interest in ECCS as a bribe, he also

testified that he believed the arrangement was illegal. The jury

was entitled to reject Wyly and Morgel’s claims that, because they

feared Rinicker, they acted without specific intent, and to find,

instead, that their efforts to conceal Rinicker’s interest and the

payments to him were undertaken with the requisite specific intent.

2.

“To establish a mail fraud violation under 18 U.S.C. § 1341,

the government must demonstrate (1) a scheme to defraud; (2) the

use of mails to execute that scheme; and (3) the defendant’s

specific intent to commit fraud.” United States v. Tencer, 107

F.3d 1120, 1125 (5th Cir.), cert. denied, ___ U.S. ___, 118 S. Ct.

390 (1997).

Appellants were charged with using the mails in furtherance of

a scheme to defraud the parish citizens of the honest and faithful

services of their sheriff, the object of the scheme being to

promote and cover up the bribe. The mailings at issue were for

invoices for housing prisoners from the Sheriff’s Office to the

Department of Corrections (DOC), and checks in payment of them.

Appellants maintain that the charged scheme cannot be

prosecuted under the mail fraud statute because the indictment and

evidence did not narrow the alleged victims to a specified class to

whom Rinicker owed a state-law duty; and that the mailings were not

related to, or in furtherance of, the scheme to conceal the bribery

but were, instead, legitimate payments pursuant to the contract

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between the Sheriff’s Office and DOC. Morgel contends further that

there was insufficient evidence that she knowingly caused the items

to be mailed or that she knew, or should have known, that the

Sheriff’s Office would participate in the mailings.

The indictment charged, and the Government proved, that, in

exchange for authorizing the lease of ECDC by the Sheriff’s Office

from ECCS, Rinicker received a hidden ownership interest in, and a

share of, proceeds from ECCS, in violation of state criminal law.

See United States v. Brumley, 116 F.3d 728 (5th Cir. 1997) (en

banc). The Government proved that the scheme encompassed the

incorporation of ECCS, the purchase and renovation of ECDC, and

housing prisoners at ECDC in exchange for DOC payments. Each

mailing furthered the scheme by generating funds used to bribe

Rinicker.

The Government also proved Morgel’s involvement in all aspects

of the scheme; her knowledge that the DOC funds would be used to

pay ECCS and, after being laundered through her bank account, to

pay bribes to Rinicker; and that the use of the mails was

foreseeable to her. “[W]hen an individual does an act with the

knowledge that the use of the mails will follow in the ordinary

course of business, or when such use can reasonably be foreseen,

even though not actually intended, then he/she causes the mails to

be used”. United States v. Moser, 123 F.3d 813, 822-23 (5th Cir.

1997) (emphasis in original; internal quotation marks and citation

omitted), cert. denied, ___ U.S. ___, 118 S. Ct. 613, 642 (1997),

and 118 S. Ct. 884 (1998); see also United States v. Green, 964

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F.2d 365, 369 (5th Cir. 1992) (defendant need not be involved

directly in mailings; sufficient to show defendant acted with

knowledge that use of mails would follow in ordinary course of

business), cert. denied, 506 U.S. 1055 (1993).

3.

Money laundering was charged under 18 U.S.C. §§ 1956(a)(1) and

1957.

a.

Seven counts charged § 1956(a)(1) violations. They involved

checks drawn on the Sheriff’s Office account and deposited in ECCS’

account, on ECCS’ account and deposited in Morgel’s account, and on

ECCS’ and Morgel’s accounts payable to Jordan (on behalf of

Rinicker) and cashed at a bank in Monroe.

For a conviction under 18 U.S.C. § 1956(a)(1), the Government

must prove that the defendant (1) conducted or attempted to conduct

a financial transaction, (2) which the defendant knew involved the

proceeds of a specified unlawful activity, (3) with the intent

either to promote specified unlawful activity (§ 1956

(a)(1)(A)(i)), United States v. Cavalier, 17 F.3d 90, 92 (5th Cir.

1994), or to conceal or disguise the nature, location, source,

ownership, or control of the proceeds of unlawful activity (§ 1956

(a)(1)(B)), Tencer, 107 F.3d at 1128. See also United States v.

Brown, ___ F.3d ___, ___, 1999 WL 642214, at *5 & n.11 (5th Cir.

1999).

Appellants contend that the Government failed to prove that

the proceeds involved bribery rather than extortion and that they

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acted with the specific intent to engage in the transactions; and

claim that the funds at issue were not criminally derived property,

because the bribery scheme was not consummated until Rinicker

received the funds. They also assert that the proceeds were not

illegal because the Government failed to prove that DOC would not

have agreed to house prisoners at ECDC had it known that the

Sheriff had an interest in the corporation that owned ECDC.

As discussed supra, the jury was entitled to find bribery.

Further, there was ample evidence that Appellants knowingly

conducted financial transactions which involved the proceeds of

mail fraud and/or public bribery, and that they intended to promote

the unlawful activity or to conceal or disguise the nature and

source of the proceeds. The contention that the bribery scheme was

not consummated until Rinicker received the funds is inconsistent

with the Louisiana public bribery statute, which criminalizes the

offer or acceptance of anything of present or prospective value.

b.

The § 1957 count concerns the certificate of deposit (CD)

purchased by ECCS. “To obtain a conviction under § 1957, the

government must prove that the defendant knowingly engaged, or

attempted to engage, in a monetary transaction involving criminally

derived property, in excess of $10,000, derived from specified

criminal activity”. United States v. Leahy, 82 F.3d 624, 635 (5th

Cir. 1996).

We reject the contention that funds paid ECCS for use of ECDC

were legitimate; and that, therefore, funds used by ECCS to

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purchase the CD were not proceeds of unlawful activity. The

payments by the Sheriff’s Office to ECCS were proceeds of the mail

fraud and bribe.

4.

ECCS asserts that, because the jury rejected Wyly’s testimony

that he was extorted by Rinicker, it must have credited Rinicker’s

testimony that the illegal agreement was entered into before ECCS

was formed; and that, therefore, the evidence was insufficient to

find that, in bribing Rinicker, Morgel and Wyly acted with apparent

authority for ECCS prior to its creation.

The evidence was more than sufficient to support the jury’s

conclusion that Wyly and Morgel acted on behalf of ECCS during the

relevant time period.

C.

The jury was charged on the day after closing arguments, in

which Morgel and Wyly focused on their defense that they did not

specifically intend to violate the law; that, instead, Rinicker

extorted them and they, being much older, were afraid of him.

Moreover, Morgel claimed several times that she had not received

any financial benefit from the scheme.

In rebuttal, the Government argued, for the first time, that

Morgel and Wyly could not have been afraid of Rinicker because they

cheated him out of $195,000. The Government had neither questioned

its witnesses, nor cross-examined Morgel, about this purported

theft.

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 For this position, the Government relied on its Ex. 10 (G-10)

and Defense Ex. 44 (D-44). G-10 is a chart entitled “ECCS MONEY

TRAIL”, representing that: DOC paid ECDC $12,093,251; ECDC paid

ECCS 25% of that amount, $2,820,961; of this, ECCS shareholders

other than Morgel received $1,258,704; she received $526,367, of

which she paid Jordan $286,025 (for Rinicker); ECCS paid Jordan

$54,116 (for Rinicker); and Jordan paid Rinicker $340,141 (amount

Jordan received from Morgel and ECCS).

Based on this, the Government argued that $535,129 was

Rinicker’s 30% share of the approximate $1.8 million shareholder

distributions ($526,367 to Morgel and $1,258,704 to others), but

that he received only $340,141. Therefore, according to the

Government, Morgel had stolen $195,380: the difference between the

$535,129 Rinicker should have received (his 30%) and the $340,141

actually received.

Morgel objected at a bench conference, claiming a blatant

mischaracterization of the record, because the evidence showed that

Morgel paid taxes on behalf of Rinicker; and that it was improper

for the Government to hold this argument until rebuttal, when

Morgel could not reply. The objection was overruled, on the basis

that the argument was not evidence.

Continuing its rebuttal, the Government referenced D-44, a

chart entitled “DOROTHY MORGEL, Income Tax Paid 1992-1996", which

presented her wages as $50,246; funds received from ECCS as

$702,837; and paid income tax as $221,859. According to the

Government, D-44 demonstrated that $195,000 was the difference

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between the amount Morgel received from ECCS ($702,837) and the sum

of $221,758 for taxes and $286,025 Morgel paid to Jordan (for

Rinicker), this $195,000 difference being the same as reflected on

G-10; and it again asserted that Morgel had stolen that amount from

Rinicker. Defense counsel did not object.

The Government then argued that Morgel and Wyly could not have

been afraid of Rinicker because they “didn’t have a problem

clipping him out of $195,000 of his share”; that G-10 and D-44 were

“credible, absolutely reliable evidence” that there had not been

any fear; that “there is no honor among thieves, obviously, because

the thieves were stealing from the thief”; and that the claimed

theft was “not a dispute. That’s not a guess. That’s a fact”.

Once again, Wyly and Morgel did not object.

On the morning following closing arguments, in a bench

conference prior to the jury being charged, Appellants moved for a

mistrial. In the alternative, they requested surrebuttal or that

the court instruct the jury to disregard the challenged rebuttal.

The district judge stated that he had been surprised and concerned

on hearing the rebuttal about the $195,000; but that he had also

been surprised when Morgel had argued earlier that she received

nothing. The court concluded that the rebuttal was fair, remarking

that it had struggled with the matter, and had considered, but

decided against, reopening the argument for Morgel and the

Government.

The parties were permitted to state objections on the record.

Morgel asserted that the Government had not presented evidence of

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such claimed theft; that the Government’s calculations did not

account for repayment of ECCS’ debt in 1992 and 1993, and

disregarded the tax consequences of a subchapter S corporation; and

that she was unable to correct the error because it was made in

rebuttal. Wyly pointed out that Rinicker received distributions

for which taxes had already been paid by Morgel; and that the

$195,380 difference was 36% of Rinicker’s 30% share.

The Government responded that it had properly answered

arguments that Rinicker was a thief and that Morgel had received

nothing; that G-10 and D-44 showed $240,000 unaccounted for in

Morgel’s account; and that it did not know the amount of taxes

paid.1

The court denied a mistrial, as well as the requested

instruction to disregard the challenged rebuttal. It found that

the argument was not improper because it was based on exhibits in

evidence and was responsive to Morgel’s received-nothing argument.

However, just before, and during, the charge, the court instructed

that counsels’ arguments were not evidence; that it consists only

of the testimony of witnesses and exhibits; and that the jury was

to decide the case solely on the evidence.

Post-verdict, Appellants moved for a new trial based, inter

alia, on the rebuttal, asserting that the Government knew that

Morgel had paid Rinicker’s tax share from funds deposited in her

account; that D-44 represented funds that were allocated to Morgel

1
As discussed infra, this claimed lack of knowledge is quite
inconsistent with an earlier Government TRO filing, in which the
same Assistant United States Attorney participated.

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for tax purposes, some of which she received in cash and some that

were paid by ECCS to Desona in repayment of construction loans, but

taxable as income to ECCS shareholders; that the interpretation of

D-44 was erroneous because it failed to account for Morgel’s 5%

interest in ECCS, federal and state taxes paid by Morgel on her

salary and other non-ECCS income, and $208,903.27 in loan

repayments; and that it was undisputed that no cash was distributed

prior to 15 May 1993, except for taxes.

Appellants also pointed out that 35% (Morgel and Rinicker’s

combined share) of ECCS’ $596,866.49 total loan payments is

$208,903.27, the amount claimed unaccounted for on D-44. Finally,

they asserted that Agent Rushing’s affidavit, submitted in support

of the Government’s February 1996 TRO motion to prevent the sale of

ECDC, approximately 18 months before trial, see note 1, supra,

accounted for all ECCS distributions; showed that Morgel received

only $526,367 from ECCS; refuted the argument that D-44 reflected

that Morgel actually received $702,837; acknowledged that Rinicker

benefitted in excess of $570,000, because taxes were paid on his

behalf; and confirmed that, except for distributions for taxes, no

shareholder distributions were made until May 1993, after ECCS

repaid its loans. As exhibits, Appellants included ECCS’ loan

payment checks.

The district court denied a new trial, holding that

Appellants’ alternate explanations for the $195,000 (loan

repayments or taxes) undermined their contention that the rebuttal

was false; and that the explanations by Appellants and the

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Government were plausible alternate theories for what happened to

the $195,000. The court noted that the testimony and documents

underlying the new trial motions were in evidence; therefore,

defense counsel had been free to make any arguments based upon that

evidence, and the jury had been able to consider it in assessing

the rebuttal.

“Criminal convictions are not to be lightly overturned on the

basis of a prosecutor’s comments standing alone.” United States v.

Pineda-Ortuno, 952 F.2d 98, 106 (5th Cir.), cert. denied, 504 U.S.

928 (1992). Accordingly, “[a] criminal defendant bears a

substantial burden when attempting to show that prosecutorial

improprieties constitute reversible error”. Bermea, 30 F.3d at

1563. “A conviction should not be set aside if the prosecutor’s

conduct ... did not in fact contribute to the guilty verdict and

was, therefore legally harmless”. United States v. Johnston, 127

F.3d 380, 390 (5th Cir. 1997), cert. denied, ___ U.S. ___, 118 S.

Ct. 1173, 1174, 1577 (1998).

“The standard of review for a denial of a motion for mistrial

is abuse of discretion.” United States v. Bentley-Smith, 2 F.3d

1368, 1378 (5th Cir. 1993).2 “In reviewing a claim of

2
Arguably, in that the only contemporaneous objection to the
rebuttal concerned G-10, the other now objected-to portions of the
rebuttal, including remarks about D-44, should be reviewed only for
plain error. Cf. United States v. Gallardo-Trapero, ___ F.3d ___,
___, 1999 WL 604316, at *12 (reviewing unobjected-to portions of
prosecutor’s closing argument for plain error); United States v.
Causey, ___ F.3d ___, ___, 1999 WL 618124, at *9 (5th Cir.
1999)(same). However, in that the unobjected-to remarks were, in
effect, part and parcel of the objected-to theft claim, we review
under our normal abuse of discretion standard.

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prosecutorial misconduct, [we] first determine[] whether the

prosecutor’s remarks were improper”. United States v. Fields, 72

F.3d 1200, 1207 (5th Cir.), cert. denied, 519 U.S. 807 (1996); see

also United States v. Gallardo-Trapero, ___ F.3d ___, ___, 1999 WL

604316, at *9 (5th Cir. 1999). If they were, we consider “whether

they prejudicially affected the substantive rights of the

defendant”. Fields, 72 F.3d at 1207; United States v. Cooks, 52

F.3d 101, 103 (5th Cir. 1995) (footnotes omitted).

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 The rebuttal is claimed improper because the Government,

knowing that the accusation was false, accused Wyly and Morgel of

uncharged theft, deliberately waiting until they had no opportunity

to respond. The Government counters that it responded fairly to

Wyly and Morgel’s closing arguments, in which they accused Rinicker

of extortion and theft and asserted that their actions were based

on fear, as well as Morgel’s that she did not receive any money

from the scheme. On this record, the better approach is to assume

that the rebuttal was improper, placing prejudice vel non at issue.

Appellants contend that the rebuttal prejudiced their right to

a fair trial because it undermined the heart of their defense —

acting out of fear of Rinicker. The Government responds that, in

the light of the overwhelming evidence of guilt, there was no

prejudice.

For deciding whether prosecutorial misconduct constitutes

reversible error, “[w]e consider three factors: (1) the magnitude

of the prejudicial effect of the prosecutor’s remarks, (2) the

efficacy of any cautionary instruction by the judge, and (3) the

strength of the evidence supporting the conviction”. United States

v. Hernandez-Guevara, 162 F.3d 863, 874 (5th Cir. 1998), cert.

denied, ___ U.S. ___, 119 S. Ct. 1375 (1999).

“The magnitude of the prejudicial effect is tested by looking

at the prosecutor’s remarks in the context of the trial in which

they were made and attempting to elucidate their intended effect.

At the same time, the district court’s on-the-scene assessment of

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the prejudicial effect, if any, is entitled to considerable

weight”. Fields, 72 F.3d at 1207 (emphasis added). This is in

keeping with the earlier discussed rule that, “[f]or prosecutorial

misconduct to warrant a new trial, it must be so pronounced and

persistent that it permeates the entire atmosphere of the trial,

... and casts serious doubt upon the correctness of the jury’s

verdict”. United States v. Wallace, 32 F.3d 921, 926 (5th Cir.

1994) (emphasis added; internal quotation marks and citation

omitted).

The jury had the testimony regarding ECCS’ loan repayments,

the date it began making distributions to shareholders, and

Morgel’s tax payments on behalf of Rinicker. Also in evidence was

Morgel’s Oak Grove check register, showing deposits and payments to

Jordan (for Rinicker), the IRS, and the Louisiana Department of

Revenue. There was also considerable testimony regarding

Rinicker’s violent temper and his threats, not only from Morgel,

Wyly, and other defense witnesses, but also from Government

witnesses, including Rinicker. Under these circumstances, the

jury’s ability to fairly consider and evaluate the evidence was not

hampered unduly by the rebuttal. Restated, the magnitude of the

prejudicial effect is not so great as to compel reversal,

especially in the light of the other two factors to be considered:

efficacy of cautionary instructions and evidence supporting

conviction.

“We presume that the jury follows the instructions of the

trial court unless there is an overwhelming probability that the

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jury will be unable to follow the instruction and there is a strong

probability that the effect [of the prosecutorial misconduct] is

devastating.” United States v. Tomblin, 46 F.3d 1369, 1390 (5th

Cir. 1995) (internal quotation marks and citation omitted). As

noted, the court twice instructed (prior to and during the charge)

that the arguments by counsel were not evidence and that the case

was to be decided solely on the evidence. See Gallardo-Trapero,

___ F.3d at ___, 1999 WL 604316 at *10-11 (“district court helped

to mitigate any prejudicial effect [of Government’s improper

argument] by instructing the jury to base their decision solely

upon the testimony and evidence presented”).

Moreover, the timing of the charge also mitigated any

prejudicial effect. The charge, not closing arguments, immediately

preceded the jury’s deliberations. See FED. R. CRIM. P. 30 (“[t]he

court may instruct the jury before or after the arguments are

completed or at both times”). Further mitigating any prejudicial

effect was the fact that closing arguments were completed late in

the afternoon of 14 October; the jury was not charged, and,

therefore, did not conduct its deliberations, until the next day.

Finally, the evidence of guilt was overwhelming. See

Gallardo-Trapero, ___ F.3d at ___, 1999 WL 604316 at *11

(Government’s improper closing argument did “not outweigh the

strength of the multifaceted evidence and testimony presented

during trial”). For this factor, no more need be said.

In sum, assuming the rebuttal was improper, the requisite

prejudice has not been demonstrated. Restated, the rebuttal did

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not preclude Appellants’ receiving a fair trial.3 There was no

abuse of discretion.

D.

Appellants challenge the jury’s being instructed on the

affirmative defense of duress, and that a scheme to commit public

bribery is a breach of the duty owed by Rinicker to the parish

citizens. And, for the first time on appeal, ECCS challenges the

corporate criminal liability instruction.

“We review an included jury instruction objected to as

inaccurate for abuse of discretion and will reverse only if the

instruction fails correctly to state the law.” United States v.

Hebert, 131 F.3d 514, 521 (5th Cir. 1997), cert. denied, ___ U.S.

___, 118 S. Ct. 1571 (1998). “The trial judge has substantial

latitude in tailoring the instructions so long as they fairly and

adequately cover the issues presented.” Bentley-Smith, 2 F.3d at

1378 (internal quotation marks and citation omitted). “To

determine whether there was error, [we] look[] at the entire charge

in the context of the trial including arguments made to the jury.”

United States v. Willis, 38 F.3d 170, 179 (5th Cir. 1994) (internal

quotation marks and citation omitted), cert. denied, 515 U.S. 1145

(1995). “Reversible error exists when the jury charge, as a whole,

3
Our no-prejudice holding does not lessen our great concern,
notwithstanding the Government’s explanation on appeal, over the
glaring inconsistencies between the Government’s TRO papers and
rebuttal. Those papers seem to account for every penny, including
tax payment distributions and loan repayments, yet the rebuttal
argument took a quite different course, including, as noted,
disavowing knowledge of the amount of taxes paid. That the TRO
papers had been filed 18 months before trial is no excuse for this
claimed lack of knowledge.

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misled the jury as to the elements of the offense.” United States

v. Devoll, 39 F.3d 575, 579 (5th Cir. 1994) (internal quotation

marks and citation omitted), cert. denied, 514 U.S. 1067 (1995).

On the other hand, we review ECCS’ belatedly raised

contention, discussed infra, only for plain error.

1.

Appellants’ theory of defense was that Rinicker extorted money

from them, threatening to close the prison unless paid; and that,

because they feared him, they acted in good faith and without

specific intent. They acknowledge that they presented duress

evidence (threats and intimidation by Rinicker), but maintain that

they did not assert the affirmative defense of duress; and that, by

giving such an instruction, the court undermined their theory of

defense, shifted the burden of proof on intent, and confused the

jury on the application of the good faith and specific intent

instructions.

The Government did not cite, nor could we find, any authority

approving giving an instruction on an affirmative defense, for

which the defendant bears the burden of proof, when that defense

had not been raised. The Government maintains, however, that the

court had discretion to give the instruction, regardless of whether

requested by the defense.

On the other hand, Appellants did not cite, nor could we find,

any authority to support their contention that, in a criminal case,

giving an instruction on a not-asserted affirmative defense is

reversible error. Instead, they rely on the well-settled

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proposition that “[a] judge may not instruct the jury on a charge

that is not supported by evidence”, United States v. Ortega, 859

F.2d 327, 329-30 (5th Cir. 1988), cert. denied, 489 U.S. 1027

(1989); and maintain that the evidence did not support duress.

To raise an issue of duress for the jury a
defendant must present proof of four elements:

(1) that the defendant was under an
unlawful and present, imminent, and
impending threat of such nature as
to induce a well-grounded
apprehension of death or serious
bodily injury;

(2) that defendant had not recklessly or
negligently placed himself in a
situation in which it was probable
that he would be forced to choose
the criminal conduct;

(3) that defendant had no reasonable
legal alternative to violating the
law; a chance both to refuse to do
the criminal act and also to avoid
the threatened harm; and

(4) that a direct causal relationship
may be reasonably anticipated
between the criminal action taken
and the avoidance of the threatened
harm.

United States v. Posada-Rios, 158 F.3d 832, 873 (5th Cir. 1998)

(brackets, internal quotation marks, and citations omitted), cert.

denied, ___ U.S. ___, 119 S. Ct. 1280, 1487, 1792 (1999). Because

“a justification defense such as duress is an affirmative defense,

the burden of proof is on the defendant”. Willis, 38 F.3d at 179.

The evidence did not support a duress defense. For example,

Wyly admitted that there had been an alternative to violating the

law: he could have had a public entity other than the Sheriff’s

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Office sponsor the prison. Accordingly, it was error for the court

to instruct the jury on that defense, especially in view of the

fact that, not only did Appellants not request the instruction,

they objected to it.

Nevertheless, the error is harmless because, viewing the

instructions as a whole, we are convinced that the jury was not

misled or confused. The court instructed on good faith, specific

intent, and the definitions of “knowing” and “willful”; that the

Government had the burden of proving that Appellants did not act in

good faith, but instead acted with the specific intent to violate

the law.

Under the instructions, the jury could find that Appellants

did not act under duress, but still find that the Government failed

to prove that they acted with the requisite specific intent. That

it rejected the good faith defense and found specific intent does

not mean that it was confused or misled by the duress instruction.

Accordingly, that instruction did not affect Appellants’

substantial rights.

2.

The jury was instructed that a scheme to commit public bribery

is a breach of the duty owed by the sheriff to the parish citizens.

Appellants contend that this instruction usurped the jury’s

function to decide whether, notwithstanding the bribes, Rinicker

fulfilled his official duties.

We disagree. The jury still had to determine whether the

elements of public bribery had been proven.

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 3.

As noted, ECCS’ belated challenge to the corporate criminal

liability instructions is reviewed only for plain error, pursuant

to FED. R. CRIM. P. 30 and 52(b). “Under [Rule] 52(b), [we] may

correct forfeited errors only when the appellant shows (1) there is

an error, (2) that is clear or obvious, and (3) that affects his

substantial rights. If these factors are established, the decision

to correct the forfeited error is within the sound discretion of

the court, and the court will not exercise that discretion unless

the error seriously affects the fairness, integrity, or public

reputation of judicial proceedings”. United States v. Waldron, 118

F.3d 369, 371 (5th Cir. 1997) (internal quotation marks and

citation omitted) (emphasis added).

Relying on Standard Oil Co. of Tex. v. United States, 307 F.2d

120, 128 (5th Cir. 1962), ECCS maintains that the challenged

instructions should have required the jury to determine that Wyly

and Morgel were acting with the intent to benefit ECCS. Such an

instruction was unnecessary, because the evidence is overwhelming

that ECCS was the alter-ego for Morgel and Wyly and that they were

the only agents who acted for it.

But, even assuming a clear or obvious error that affected

ECCS’ substantial rights, we decline to exercise our discretion to

correct it, because it does not affect the fairness, integrity, or

public reputation of judicial proceedings. ECCS jointly submitted

the corporate criminal liability instructions.

E.

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 The forfeiture statute for money laundering provides for

forfeiture of property “involved in” the offense or property

“traceable to such property”. See 18 U.S.C. § 982(a)(1) (“The

court, in imposing sentence on a person convicted of an offense in

violation of ... section 1956 ... of this title, shall order that

the person forfeit to the United States any property, real or

personal, involved in such offense, or any property traceable to

such property.”).

1.

Appellants challenge the forfeiture of ECCS’ assets on the

grounds that the only proceeds of bribery and mail fraud available

for laundering were the funds paid to Rinicker; and that forfeiture

is not authorized under a facilitation theory, unless the

facilitation involves intentional commingling of legitimate and

tainted funds as a method for concealing and laundering “dirty”

money, which is not present here. The Government responds that

ECDC is the only asset forfeited under a facilitation theory (this

point is of importance concerning the forfeiture of the funds in

Morgel’s account, part II.E.2. infra), and asserts that property

“involved in” money laundering includes property used “to

facilitate” the offense, as the jury was instructed.

“Facilitation occurs when the property makes the prohibited

conduct less difficult or more or less free from obstruction or

hindrance.” Tencer, 107 F.3d at 1134 (internal quotation marks and

citation omitted). The facilitation theory supports the jury’s

finding that ECDC was forfeitable, because of its substantial nexus

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to the crimes. It, the prison, was the source of the criminal

proceeds and was indispensable to the money laundering conspiracy.

Without the prison, there could have been no bribery, mail fraud,

or money laundering. ECCS’ other forfeited property is forfeitable

as proceeds.

2.

Morgel contends that the Government failed to prove a

connection between the charged illegal activity and funds that

remained in her checking account at the time of seizure, ten months

after her last payment to Jordan (for Rinicker). In closing

argument during the forfeiture phase, Morgel’s counsel stated that

her account had “$5,840.57 of her money in it”; but, at oral

argument on appeal, her counsel stated that, when seized, the

account contained approximately $15,000.

The Government does not respond in its appellate brief to this

contention. In an objection to Morgel’s closing argument, the

Government stated that “the forfeiture theory for [her] account is

that it was used to facilitate funneling of money to Rinicker”.

But, as noted, it now expressly disavows reliance on a facilitation

theory for the forfeiture of any property other than ECDC.

Accordingly, this forfeiture of funds cannot be upheld on the

ground that Morgel’s account was the conduit for laundering the

funds. Instead, the Government had to prove that those funds were

criminal proceeds.

The Government asserted at oral argument on appeal that all

funds in Morgel’s account came from ECCS; but, it seemed to concede

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that, if they did not, they would not be forfeitable. At trial,

the Government presented no evidence regarding either the amount or

source of these funds when seized. Accordingly, the evidence is

insufficient to sustain their forfeiture.

F.

In United States v. Bajakajian, 524 U.S. 321, 118 S. Ct. 2028

(1998), decided after Appellants’ sentencing, the Supreme Court

held that “a punitive forfeiture violates the Excessive Fines

Clause [of the Eighth Amendment] if it is grossly disproportional

to the gravity of a defendant’s offense”. 524 U.S. at ___, 118 S.

Ct. at 2036. The district court’s proportionality determination is

reviewed de novo, but its factual findings “in conducting the

excessiveness inquiry ... must be accepted unless clearly

erroneous”. 524 U.S. at ___, 118 S. Ct. at 2037 & n.10.

ECCS maintains that the forfeiture of more than $4 million in

assets is grossly disproportionate, claiming its involvement in the

scheme is questionable; and noting the charged laundering was for

only approximately $175,000 and Rinicker received only

approximately $340,000; much of its stock is owned by individuals

with no knowledge of, or involvement in, the crime; and it was also

fined $4.8 million.

The district court held that the forfeiture was not

disproportionate because ECCS was convicted of a comprehensive

criminal conspiracy involving bribery of the highest ranking law

enforcement officer in the parish; the scheme continued for more

than six years and involved manipulation of various financial

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accounts and institutions and at least five individuals; the

forfeited property was closely related to the money laundering

offenses; ECCS and ECDC were born out of the scheme to defraud the

citizens of the parish of the honest and faithful services of their

sheriff; the money paid Rinicker flowed through the forfeited bank

accounts; and the CD was purchased with funds derived from the

conspiracy.

The factual findings are not clearly erroneous. Nor did the

court err in concluding that the forfeiture was not grossly

disproportionate.

G.

ECCS contends, for the first time on appeal, that the district

court misapplied the Guidelines in computing the $4.8 million fine;

the Government agrees. It notes, however, that, because all of

ECCS’ assets have been forfeited, it will remit the fine if the

forfeiture order is affirmed.

In other words, the issue will be moot. Because the

forfeiture of ECCS’ assets has been upheld, the Government must

remit the fine.

H.

ECCS shareholders (other than the defendants) petitioned for

a hearing on their claims to an interest in ECCS’ assets, pursuant

to 21 U.S.C. § 853(n). That subsection provides, in pertinent

part, that, following entry of a forfeiture order, “[a]ny person,

other than the defendant, asserting a legal interest in property

which has been ordered forfeited to the United States ... may ...

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petition the court for a hearing to adjudicate the validity of his

alleged interest in the property”. 21 U.S.C. § 853(n)(2).

The district court denied a hearing, holding that the

shareholders lacked standing. “The issue of standing is one of

law, and our review is plenary”. United States v. $38,570 U.S.

Currency, 950 F.2d 1108, 1111 (5th Cir. 1992).

The shareholders bottom standing on their claim to an

equitable interest in the corporate assets, maintaining that the

§ 853(n)(2) phrase, “legal interest”, includes equitable and

beneficial interests. They contend further that the Government

cannot seek to forfeit ECCS unless it also seeks to forfeit their

stock, and that the district court erroneously failed to

differentiate between their claims to “[ECCS] itself, i.e., shares

of stock which they held” and their claims to “specific assets” of

ECCS.

The district court did not order forfeiture of the stock or

the “corporation itself”, only its assets. Under Louisiana law,

“[a] corporation is a separate entity from its shareholders”. Fina

Oil & Chemical Co. v. Amoco Production Co., 673 So. 2d 668, 672

(La. App. 1st Cir.), writ denied, 679 So. 2d 1353 (La. 1996).

Accordingly, “[t]he shareholders’ interest in the corporation does

not equate to ownership by the shareholder of specific corporation

assets”. Id.; see also Succession of Mydland, 653 So. 2d 8, 11

(La. App. 1st Cir. 1995) (“The property of the corporation is not

the property of the individual shareholders”). “A shareholder’s

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ownership interest in the corporation is in the stock issued by the

corporation and not the corporate assets”. Id. (emphasis added).

The shares are not the “corporation itself”, nor are they

ECCS’ assets or property. Because only ECCS’ assets, in which the

shareholders have no interest under Louisiana law, were ordered

forfeited, the no-standing ruling was correct.

III.

For the foregoing reasons, the judgment against Wyly and the

denial of the shareholders’ claim are AFFIRMED. The judgment

against Morgel is AFFIRMED, except for the forfeiture of her seized

account funds, which is REVERSED. And, the judgment against ECCS

is AFFIRMED, except for the $4.8 million fine, which is VACATED.

AFFIRMED IN PART; REVERSED IN PART; VACATED IN PART

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