United States v. Lee Farkas

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 11-4714

UNITED STATES OF AMERICA,

Plaintiff - Appellee,

v.

LEE BENTLEY FARKAS,

Defendant - Appellant.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Leonie M. Brinkema,
District Judge. (1:10−cr−00200−LMB−1)

Argued: May 16, 2012 Decided: June 20, 2012

Before MOTZ, DAVIS, and WYNN, Circuit Judges.

Affirmed by unpublished opinion. Judge Davis wrote the opinion,
in which Judge Motz and Judge Wynn joined.

ARGUED: David M. Coorssen, DAVID M. COORSSEN, ATTORNEY AT LAW,
Louisville, Kentucky, for Appellant. Kirby Ann Heller, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.
ON BRIEF: Stuart A. Scherer, Louisville, Kentucky, for
Appellant. Neil H. MacBride, United States Attorney, Charles F.
Connolly, Paul J. Nathanson, Assistant United States Attorneys,
OFFICE OF THE UNITED STATES ATTORNEY, Alexandria, Virginia;
Lanny A. Breuer, Assistant Attorney General, John D. Buretta,
Acting Assistant Attorney General, Patrick F. Stokes, Deputy
Chief, Robert A. Zink, Trial Attorney, UNITED STATES DEPARTMENT
OF JUSTICE, Washington, D.C., for Appellee.

Unpublished opinions are not binding precedent in this circuit.

2
DAVIS, Circuit Judge:

Appellant Lee Bentley Farkas challenges his convictions for

bank, wire and securities fraud, and conspiracy to commit the

same, arising from a multibillion dollar scheme to hide the

financial difficulties of Taylor, Bean, & Whitaker Mortgage

Corp. (“TBW”) during his tenure as chairman and principal owner

of TBW. Farkas contends that the district court violated his

Sixth Amendment rights in four distinct ways: (1) denying his

motion to transfer venue; (2) denying his fourth motion for a

continuance; (3) appointing counsel to represent him; and (4)

limiting his right to cross-examine a Government witness. In

addition, Farkas contends that the district court violated his

Fifth Amendment rights when it (1) declined to give an

instruction defining “beyond a reasonable doubt” and (2)

instructed the jury that its “sole interest is to seek the truth

from the evidence,” J.A. 2042. Finally, apart from the challenge

to his convictions, Farkas contends that the district court

committed clear error in adjudicating the Government’s motion

for an order of forfeiture. Having carefully considered Farkas’s

contentions in light of the record presented to us, we discern

no reversible error. Accordingly, for the reasons that follow,

we affirm the judgment.

3
 I.

A.

The Government presented evidence at trial that amply

justified the jury in finding the following facts. Farkas and

his co-conspirators engaged in a multi-stage fraud scheme

between 2002 and 2009, while Farkas was chairman and principal

owner of TBW, a mortgage lending company based in Ocala, Florida

and with offices in seven states. TBW originated and serviced

residential mortgage loans and sold them, either individually,

pooled, or as part of a mortgage-backed security, to third-party

investors and commercial financial institutions in the secondary

mortgage market. To fund the loans it originated, TBW relied on

advances from various warehouse banks and purchase facilities,

which were to be repaid from the proceeds of TBW’s sales to

investors. TBW received short-term, secured funding from

Colonial Bank, a subsidiary of Alabama-based Colonial BancGroup,

and in particular Colonial Bank’s Mortgage Warehouse Lending

Division (“MWLD”).

Between 2002 and 2003, Farkas and his co-conspirators

engaged in a scheme to disguise overdrafts of TBW’s master

advance account held at Colonial Bank by “sweeping” funds from

TBW’s investor funding account, which was also held at Colonial

Bank and represented proceeds from sales of loans to investors

in the secondary market, into and out of the master advance

4
account. As a result of this sweeping scheme, Colonial Bank’s

daily reports did not show the overdrafts. Farkas’s co-

conspirators included Ray Bowman, president of TBW, Cathie

Kissick, head of the MWLD at Colonial Bank, and Teresa Kelly, a

MWLD operations supervisor.

As the deficit in TBW’s assets with Colonial Bank grew to

well over $100 million, Farkas and his co-conspirators initiated

more sophisticated schemes, including “Plan B.” Under Plan B,

they caused TBW to sell sham mortgage loans and pools of loans

to Colonial Bank. These loans and pools of loans either did not

exist or had already been sold to investors; accordingly, they

were worthless or had significantly impaired value. Colonial

Bank held approximately $250 million in Plan B individual loans

on its books by mid-2005, and by August 2009, Colonial Bank held

approximately $500 million in Plan B pools of loans. As a

result, Colonial BancGroup significantly overstated the value of

its assets in its quarterly and annual reports to the United

States Securities and Exchange Commission.

Relatedly, in furtherance of the scheme, Farkas created

Ocala Funding, a subsidiary of TBW that issued commercial paper

to investors in return for cash, which in turn was used to fund

mortgage loans at TBW. Farkas and his co-conspirators overstated

by hundreds of millions of dollars the actual value of the

collateral backing the commercial paper and underreported Ocala

5
Funding’s liabilities, ultimately resulting in a shortfall of

more than $1.5 billion. In the final stage of the scheme, Farkas

and his co-conspirators attempted to fraudulently obtain $553

million for Colonial BancGroup, Colonial Bank’s holding company,

from the Troubled Asset Relief Program, a program that Congress

created to rescue distressed financial institutions.

B.

On June 10, 2010, a grand jury in the Eastern District of

Virginia returned a sixteen-count indictment against Farkas

including, among other charges, bank and wire fraud in violation

of 18 U.S.C. §§ 1344 and 1343, respectively, and conspiracy to

commit bank and wire fraud in violation of 18 U.S.C. § 1349. The

indictment included a forfeiture provision and provided notice

that, if necessary, the Government would seek forfeiture of

substitute assets pursuant to 21 U.S.C. § 853(p). The following

day, the district court entered a restraining order enjoining

the sale or transfer of Farkas’s assets pursuant to 21 U.S.C.

§ 853(e)(1)(A).

At his arraignment on July 2, 2010, Farkas appeared with

Gerald H. Houlihan, Esq., a Florida-based attorney, and Jeffrey

Harris, Esq., his would-be local counsel, neither of whom had

entered an appearance or been retained. Houlihan explained that,

as Farkas’s assets had been frozen and coverage under the TBW

Directors & Officers insurance policy (“D&O policy”) was in

6
dispute, Farkas hoped to negotiate a carve-out from seized

assets for attorneys’ fees. The district court allowed Houlihan

and Harris to enter a limited appearance, arraigned Farkas,

accepted his Speedy Trial Act waiver, and set a trial date of

November 1, 2010. In mid-July, Houlihan and Harris notified the

court that a bankruptcy hearing concerning the D&O policy was

scheduled for July 16, 2010, and that negotiations with the

Government regarding the possibility of a carve-out from assets

frozen under the restraining order were also ongoing. When

Farkas had not resolved his representation issues as of August

10, 2010, the district court appointed William B. Cummings, Esq.

to represent him under the Criminal Justice Act, 18 U.S.C. §

3006(A). Farkas objected to the appointment of counsel. The

court responded that its appointment of counsel did not

foreclose Farkas from retaining counsel, but that “at this point

we have to get this case moving.” J.A. 84.

On August 26, 2010, Farkas moved to transfer venue to the

Middle District of Florida pursuant to Federal Rule of Criminal

Procedure 21(b). The Government opposed the motion and the

district court denied Farkas’s request orally and by written

opinion. Farkas also moved for a continuance on four separate

occasions. The court granted Farkas’s first and second motions,

7
which were unopposed by the Government, but denied his third and

fourth requests. 1

Following a nine-day jury trial, Farkas was found guilty on

fourteen counts, including conspiracy to commit bank fraud, wire

fraud, and securities fraud, in violation of 18 U.S.C. § 1349

(Count 1); six counts of bank fraud, in violation of 18 U.S.C.

§§ 1344 and 2 (Counts 2-7); four counts of wire fraud, in

violation of 18 U.S.C. §§ 1343 and 2 (Counts 8-11); and three

counts of securities fraud, in violation of 18 U.S.C. §§ 1348

and 2 (Counts 14-16). 2 The district court sentenced Farkas to 30

years of imprisonment, to be followed by three years of

supervised release. Following sentencing, the court granted the

Government’s preliminary motion for forfeiture and ordered

Farkas to forfeit $38,541,209, representing the value of

property constituting or derived from proceeds he obtained

directly or indirectly as a result of his offenses of

conviction. The court also held Farkas jointly and severally

liable for restitution payments totaling $3,507,743,557. We have

jurisdiction over Farkas’s timely appeal under 28 U.S.C. § 1291.

1
Farkas’s third motion for a continuance was styled as a
motion to amend the district court’s order granting his second
motion for a continuance.
2
Counts 12 and 13, which both charged wire fraud, were
dismissed on the Government’s motion during trial.

8
 II.

We begin by addressing Farkas’s Sixth Amendment arguments.

The Sixth Amendment provides in part that “[i]n all criminal

prosecutions, the accused shall enjoy the right . . . to be

confronted with the witnesses against him . . . and to have the

Assistance of Counsel for his defence.” U.S. Const. amend. VI.

Farkas argues that the district court violated his right to

assistance of counsel when it denied his motion for a transfer

of venue, denied his fourth motion for a continuance, and

appointed counsel over his objection while negotiations bearing

on his ability to afford retained counsel were ongoing. Farkas

also argues that the district court violated his right to

confrontation when it limited his cross-examination of a

Government witness. We reject these contentions for the

following reasons.

A.

Farkas argues that the district court abused its discretion

in denying his motion to transfer venue to the Middle District

of Florida. Federal Rule of Criminal Procedure 21(b) provides

that the court may transfer a proceeding, upon the defendant’s

motion, to another district, “for the convenience of the parties

and witnesses and in the interest of justice.” This court

reviews a district court’s denial of a motion to transfer venue

for abuse of discretion. United States v. Heaps, 39 F.3d 479,

9
482 (4th Cir. 1994), abrogated on other grounds, United States

v. Cabrales, 524 U.S. 1 (1998).

In deciding a Rule 21(b) motion to transfer venue, a

district court should consider the factors enunciated in Platt

v. Minnesota Mining & Mfg. Co., 376 U.S. 240 (1964), namely, the

(1) location of the defendant; (2) location of witnesses; (3)

location of events likely to be in issue; (4) location of

documents and records; (5) disruption of the defendant’s

business; (6) expense to the parties; (7) location of counsel;

(8) relative accessibility of place of trial; (9) docket

conditions in each district; and (10) any other specific element

which might affect the transfer. Platt, 376 U.S. at 243-44; see

also Heaps, 39 F.3d at 483 (upholding use of Platt factors). No

one of these factors is dispositive, and “[i]t remains for the

court to try to strike a balance and determine which factors are

of greatest importance.” United States v. Stephenson, 895 F.2d

867, 875 (2d Cir. 1990).

Having carefully examined the record, we conclude that the

district court did not abuse its discretion in allowing this

case to proceed in the Eastern District of Virginia. The

district court properly considered each of the Platt factors,

determined that only the first of the ten non-dispositive

factors (location of defendant) weighed in favor of transfer,

and accordingly denied the motion. For the reasons stated by the

10
district court in its thorough written opinion, we find that it

did not abuse its discretion in applying the Platt factors in

the instant case. See United States v. Farkas, No. 1:10cr200

(LMB), 2010 U.S. Dist. LEXIS 100916 (E.D. Va. Sept. 10, 2010).

In addition, we note Farkas’s concession that “[t]he trial court

undertook a thorough analysis of each of the Platt factors.”

Appellant’s Br. at 15.

B.

Farkas also argues that the district court violated his

Sixth Amendment right to assistance of counsel when it denied

his fourth motion for a continuance. The denial of a continuance

contravenes a defendant’s Sixth Amendment right to counsel only

when there has been “an unreasoning and arbitrary insistence

upon expeditiousness in the face of a justifiable request for

delay.” Morris v. Slappy, 461 U.S. 1, 11-12 (1983) (internal

quotation marks omitted) (citing Ungar v. Sarafite, 376 U.S.

575, 589 (1964)). To prevail on this issue, Farkas is obliged to

show, first, that the district court abused its discretion in

refusing to continue the trial, and second, that the ruling

“specifically prejudiced” his case. United States v. Hedgepeth,

418 F.3d 411, 423 (4th Cir. 2005) (citations omitted). Farkas

has failed to make these showings here.

The district court granted Farkas’s initial motion for a

continuance filed on August 31, 2010 (continuing the trial from

11
November 1, 2010 to February 22, 2011), as well as his second

motion filed on December 6, 2010 (continuing the trial to April

4, 2011), each of which was unopposed. At the hearing on

Farkas’s second motion for a continuance, the court cautioned

the parties that it would grant no additional continuances.

Nevertheless, Farkas moved to amend the court’s order later the

same day on the basis that the new trial date conflicted with

defense counsel’s law school teaching schedule. The court denied

the motion. Several months later, on March 30, 2011, Farkas

filed a fourth motion for a continuance requesting a trial date

on or after May 30, 2011. He cited the need to review new

discovery that had been added to the electronic database created

by the Government, as well as “the ongoing invocation of

privilege by a number of legal and accounting firms,” which he

argued prevented the disclosure of potentially exculpatory

materials. J.A. 258. The court held a motions hearing, addressed

Farkas’s discovery production and privilege arguments, and

denied the motion in open court. On appeal, Farkas asserts that

the “monumental discovery production justified the defense’s

requests for continuances,” Appellant’s Br. at 18, but does not

reprise his privilege argument. 3

3
Notably, at the motions hearing Farkas backed away from
his discovery production argument and instead emphasized his
privilege argument. Defense counsel stated:
(Continued)
12
 “There are no mechanical tests for deciding when a denial

of a continuance is so arbitrary as to violate due process.”

Ungar, 376 U.S. at 589. Instead, “[t]he answer must be found in

the circumstances present in every case, particularly in the

reasons presented to the trial judge at the time the request is

denied.” Id. In declining to grant a fourth continuance on the

basis of the scale of discovery in this case, the district court

emphasized that the Government had provided considerable

assistance to defense counsel in reviewing documentary discovery

production, including instituting an open file policy and

holding regular meetings. The court further noted that the case

had been continued twice, at least three attorneys represented

Farkas, and the Government had provided access to Jencks

[M]y concern is that the emphasis – and we may have
put too much on it – with regard to the discovery was
really not the focus of our motion. There’s no
question that the government has been very cooperative
with us and has provided documents. We’ve had weekly
telephone calls. Our concern has to do with the
exercise of privilege by virtue of the TBW and the
Colonial Bank both auditors and lawyers refusing to
talk to us and providing only limited documents and
continuing to assert privilege.

J.A. 291. Defense counsel later reiterated that “our concern is
more with privilege than with documents.” J.A. 293.

We need not address whether Farkas has waived his discovery
production argument, however, as we find that the district court
did not abuse its discretion in denying the motion for a
continuance.

13
material even earlier than the court’s discovery order required.

Given its thorough explanation of its reasons for refusing to

further delay the trial after having already granted two

continuances, the court’s denial of Farkas’s fourth motion for a

continuance cannot be described as “unreasoning and arbitrary.”

Thus, we find that the denial of a continuance here did not so

clearly violate fundamental fairness as to compel a conclusion

that it constituted an abuse of discretion. Nor has Farkas

plausibly identified any specific prejudice stemming from the

district court’s denial of a further continuance. Thus, Farkas

is not entitled to relief on this ground.

C.

Farkas next contends that the district court violated his

Sixth Amendment right to counsel when it appointed counsel to

represent him despite his ongoing negotiations as to his ability

to retain private counsel. We have recognized that “[a]n

essential element of the Sixth Amendment’s protection of right

to counsel is that a defendant must be afforded a reasonable

opportunity to secure counsel of his own choosing.” United

States v. Gallop, 838 F.2d 105, 107-08 (4th Cir. 1988)

(citations omitted). We have also noted, however, that “the

right to counsel of a defendant’s choosing is not absolute . . .

. Such right must not obstruct orderly judicial procedure and

deprive courts of the exercise of their inherent power to

14
control the administration of justice.” Id. (citations omitted).

Like Farkas’s other Sixth Amendment claims, we review the

district court’s decision to appoint counsel for abuse of

discretion.

While Farkas acknowledges that “[a] trial court maintains

‘wide latitude in balancing the right to counsel of choice

against the needs of fairness . . . and against the demands of

its calendar,’” Appellant’s Br. at 23 (citing United States v.

Gonzalez-Lopez, 548 U.S. 140, 152 (2006)), he argues that, in

this case, “[f]undamental fairness and [his] Sixth Amendment

right to counsel of his choice far outweighed the trial court’s

insistence on moving the case along at the pace it did,” id. at

25. We disagree. As the Government notes, Farkas apparently

contends that the district court should have held the criminal

proceedings in abeyance until the bankruptcy court and the TBW

insurance company determined whether the D&O policy would be

available for Farkas’s use. In declining to take this course of

action, the district court appropriately weighed speedy trial

concerns in the context of the uncertain circumstances

surrounding Farkas’s ability to retain preferred counsel, and

further indicated that appointment of counsel would not impede

Farkas’s retention of counsel of his choosing if and when funds

became available for his defense. Indeed, as Farkas

acknowledges, he was represented by retained counsel as of

15
December 2010, almost a full year prior to commencement of his

trial. As the Supreme Court has noted, the Sixth Amendment does

not provide an absolute right, but instead guarantees a

defendant a “fair opportunity” to secure counsel of his own

choice to represent him at trial on criminal charges. See Powell

v. Alabama, 287 U.S. 45, 53 (1932). It is clear on the record

before us that Farkas was not denied a fair opportunity to

secure counsel of his choice as a result of the district court’s

appointment of counsel. Thus, we find that the district court

did not abuse its discretion.

D.

Farkas’s final Sixth Amendment claim is that the district

court infringed his right to confront witnesses against him when

it limited his cross-examination of Neil Luria, managing

director of Navigant Consulting, Inc. (“Navigant”) and chief

restructuring officer for TBW during bankruptcy. Luria’s

testimony on direct examination primarily concerned his analysis

of the TBW bankruptcy estate. On cross-examination, Farkas

sought to question Luria regarding fees Navigant received for

managing the estate. The Government raised a relevance

objection, which the district court sustained. While we

typically review a district court’s limitations on a defendant’s

cross-examination of a prosecution witness for abuse of

discretion, United States v. Smith, 451 F.3d 209, 220 (4th Cir.

16
2006), where the defendant raises an alleged constitutional

violation for the first time on appeal, as in this case, we

apply plain error review. See Fed. R. Crim. P. 52(b); United

States v. Hughes, 401 F.3d 540, 547 (4th Cir. 2005) (citations

omitted).

“In reviewing for plain error, our initial inquiry is

whether an error occurred.” Hughes, 401 F.3d at 547 (citing

United States v. Hastings, 134 F.3d 235, 239 (4th Cir. 1998)).

“Next, the error must be plain.” Id. (citing Hastings, 134 F.3d

at 239). “Third, [Farkas] must establish that the error affected

his substantial rights, i.e., that it was prejudicial.” Id. at

548 (citing Hastings, 134 F.3d at 240). Fourth, we must

determine whether our failure to reverse the judgment of the

district court would amount to a miscarriage of justice. Id. at

555 (citing Hastings, 134 F.3d at 244). Farkas concedes that

“[t]he third and fourth Hughes prongs, requiring a showing of

prejudice and a miscarriage of justice, are virtually impossible

to establish on the record, especially given trial counsel’s

failure to further develop this issue.” Appellant’s Br. at 35.

Farkas urges us to overlook this fatal shortcoming, but we find

that it forecloses his Sixth Amendment argument.

We further note that, irrespective of Farkas’s concession

that he is unable to establish prejudice or a miscarriage of

justice, he has failed to demonstrate that the district court

17
erred in the first instance. Although “cross-examination is an

important element of the right of confrontation,” United States

v. McMillon, 14 F.3d 948, 956 (4th Cir. 1994) (citing Smith v.

Illinois, 390 U.S. 129 (1968)), “the trial court is vested with

broad discretion to control the mode of interrogation and

presentation of evidence to insure that witnesses are treated

fairly and the search for truth is not impaired by presentation

of extraneous, prejudicial or confusing material,” United States

v. Gravely, 840 F.2d 1156, 1163 (4th Cir. 1988) (citing Fed. R.

Evid. 611)). “Under Federal Rule of Evidence 611(b), ‘cross-

examination should be limited to the subject matter of the

direct examination and matters affecting the credibility of the

witness.’” McMillon, 14 F.3d at 956.

Farkas argues that the line of questioning at issue was

relevant to Luria’s credibility because he sought to demonstrate

that Luria and Navigant had a pecuniary interest in the outcome

of the trial. The record does not support this characterization

of the questioning, however, and suggests instead that Farkas

sought to show that Luria’s salary and other administrative

costs connected to the bankruptcy reduced the amount of TBW

assets available to pay its creditors. The district court stated

in sustaining the Government’s relevance objection that “it is

completely irrelevant to this case as to whether there’s a $50

billion hole or a $5 billion hole. It could be relevant to the

18
forfeiture issue, which is for down the road, but I don’t want

to waste the jury’s time . . . . It’s a fraud case, and quite

frankly, you can have fraud without a big loss.” J.A. 1693-95.

Defense counsel responded, “Yes ma’am. I was just concerned

about the prejudice with those big numbers.” J.A. 1695. Farkas

made no attempt to proffer that he sought to show bias; on the

contrary, he suggested that the large disparity between TBW’s

assets and its liabilities to creditors in bankruptcy was

prejudicial. The district court found that it was not. We

decline on appeal to find error based on Farkas’s post hoc

recasting of the evidentiary basis for his cross-examination of

Luria with respect to fees Navigant received for managing the

TBW bankruptcy estate. Thus, we find that the district court did

not err in limiting Farkas’s cross-examination of Luria.

III.

Farkas next advances two intertwined Fifth Amendment due

process claims. He argues that the district court erred when it

declined to give a jury instruction defining “beyond a

reasonable doubt,” but instructed the jury that its “sole

interest is to seek the truth.” Appellant’s Br. at 26 (citing

J.A. 2042). We review a district court’s refusal to give a

specific jury instruction for abuse of discretion. United States

v. Herder, 594 F.3d 352, 359 (4th Cir.), cert. denied, 130 S.

19
Ct. 3440 (2010). “We review the accuracy and adequacy of jury

instructions de novo,” United States v. McIver, 470 F.3d 550,

557-58 (4th Cir. 2006) (citing United States v. Scott, 424 F.3d

431, 434 (4th Cir. 2005)), and will not reverse a conviction so

long as “the instructions, taken as a whole, adequately state

the controlling law,” id. (citing United States v. Wills, 346

F.3d 476, 492 (4th Cir. 2003)). For the reasons that follow, we

find that the jury instructions in this case were proper in all

respects.

Farkas requested a jury instruction defining “beyond a

reasonable doubt” as “proof of such a convincing character that

a reasonable person would not hesitate to rely and act upon it

in the most important of his or her own affairs.” J.A. 1859-60.

The court included an instruction stating that “the burden of

proving guilt beyond a reasonable doubt is always with the

government,” J.A. 2002, but declined to adopt Farkas’s proposed

definition of “beyond a reasonable doubt.” Farkas objected at

the charging conference to the court’s refusal to give this

particular instruction. As Farkas concedes on appeal, however,

this court has repeatedly held that a trial court is not

required to define “beyond a reasonable doubt” for the jury.

See, e.g., United States v. Walton, 207 F.3d 694, 698 (4th Cir.

2000) (en banc) (“[A]lthough the district court may define

reasonable doubt to a jury . . . the district court is not

20
required to do so.”); United States v. Hornsby, 666 F.3d 296

(4th Cir. 2012) (“Not requiring such an instruction is based on

this Circuit’s belief that attempting to explain the words

‘beyond a reasonable doubt’ is more dangerous than leaving a

jury to wrestle with only the words themselves.”). Thus, the

district court did not abuse its discretion in declining to give

Farkas’s requested jury instruction.

Farkas also argues that the district court erred in

instructing the jury that, as part of its duty to deliberate,

the jury’s “sole interest is to seek the truth” (hereafter the

“seek-the-truth instruction”). 4 Farkas objected to the seek-the-

truth instruction at the charging conference and renewed his

objection at trial. On appeal, he argues that the seek-the-truth

instruction, in combination with the court’s refusal to define

“beyond a reasonable doubt,” improperly diluted the Government’s

burden of proof.

Farkas relies on United States v. Gonzalez-Balderas, 11

F.3d 1218 (5th Cir. 1994), in which the Fifth Circuit considered

a jury instruction similar to the seek-the-truth instruction and

4
In the portion of the jury charge describing the duty to
deliberate, the district court instructed the jury to
“[r]emember at all times that you are not partisans. You are
judges — judges of the facts of this case. Your sole interest is
to seek the truth from the evidence received during the trial.”
J.A. 2042. Notably, Farkas initially requested the seek-the-
truth instruction, but later withdrew his request.

21
opined that “[a]s an abstract concept, ‘seeking the truth’

suggests determining whose version of events is more likely

true, the government’s or the defendant’s, and thereby intimates

a preponderance of the evidence standard.” Id. at 1223. The

court opined that “[s]uch an instruction would be error if used

in the explanation of proof beyond a reasonable doubt,” but held

that the instruction in that case was not erroneous because the

trial court had defined reasonable doubt. Id. The court reasoned

that “[t]here is no reasonable likelihood that the jury inferred

that the single reference at the end of the charge to ‘seeking

the truth,’ rendered as it was in the context of an admonition

‘not to give up your honest beliefs,’ modified the reasonable

doubt burden of proof.” Id.

As in Gonzalez-Balderas, the seek-the-truth instruction at

issue here was presented at the end of the jury charge in the

context of the court’s explanation of the jury’s duty to

deliberate. In addition to instructing the jury on the

Government’s burden to prove its case beyond a reasonable doubt,

the district court referred to the reasonable doubt standard on

at least twenty-six separate occasions in the jury instructions.

“To determine whether jury instructions require reversal . . .

we assess the instructions as a whole and view them in context.”

United States v. Hsu, 364 F.3d 192, 204 (4th Cir. 2004). In

light of the district court’s emphasis on the reasonable doubt

22
standard in the jury instructions taken as a whole, we cannot

conclude that the single seek-the-truth reference, which the

court made in the course of admonishing individual jurors not to

surrender their honest convictions, diluted the Government’s

burden, or otherwise amounted to error.

IV.

Apart from the above challenges to his convictions, Farkas

asserts that factual error infects the district court’s

forfeiture order. Specifically, he argues that the district

court clearly erred in finding that “TBW would have failed ‘but

for’ the [fraud] schemes,” thereby rendering certain funds

identified by the Government as forfeitable indirect proceeds of

his crimes. Appellant’s Br. at 37. Whether TBW would have been

insolvent but for the fraud schemes is a question of fact. We

review a district court’s findings of fact as to forfeitability

for clear error. Herder, 594 F.3d at 363-64.

Farkas is subject to mandatory forfeiture due to his

convictions for bank and wire fraud under 18 U.S.C. §§ 1344 and

1343, and for conspiracy to commit these offenses. Federal Rule

of Criminal Procedure 32.2(b)(1) provides for entry of a

preliminary order of forfeiture upon the return of a guilty

verdict if the Government proves the requisite nexus between the

identified funds and the offenses of conviction by a

23
preponderance of the evidence. See Libretti v. United States,

516 U.S. 29 (1995); United States v. Cherry, 330 F.3d 658, 669-

70 (4th Cir. 2003). Following the jury’s guilty verdict in this

case, the Government filed a preliminary motion for forfeiture

and forfeiture of substitute assets pursuant to 18 U.S.C. §§

982(a)(2) and 981(a)(1)(C). Section 982(a)(2) requires the

forfeiture of “any property constituting, or derived from,

proceeds the person obtained directly or indirectly, as the

result of” certain enumerated offenses, including bank and wire

fraud affecting a financial institution, and conspiracy to

commit these offenses. Section 981(a)(1)(C) authorizes the civil

forfeiture of “[a]ny property, real or personal, which

constitutes or is derived from proceeds traceable to” certain

enumerated offenses, such as bank and wire fraud. 5

The district court held a hearing, granted the Government’s

motion in open court and issued an Order requiring Farkas “to

forfeit a money judgment in the amount of $38,541,209.69 as the

value of the property constituting or derived from proceeds he

obtained directly or indirectly as a result of his fraudulent

activities.” United States v. Farkas, No. 1:10cr200 (LMB), 2011

5
The provisions of § 981(a)(1)(C) are applicable to this
case pursuant to 28 U.S.C. § 2461(c), which allows criminal
forfeiture where civil forfeiture is authorized.

24
U.S. Dist. LEXIS 124001, at *1 (E.D. Va. Oct. 26, 2011)

(citation and internal quotation marks omitted).

In a written opinion explaining its order, the district

court identified four sources of forfeitable funds: (1)

$15,000,000 paid to TBW for an amount due on Farkas’s

shareholder account; (2) $8,394,459.67 paid to or for the

benefit of Farkas from his shareholder account; (3) $7,330,500

in fraudulent loans originated through TBW (referred to by the

Government and the district court as “Lee loans”); and (4)

$11,474,637.80 transferred from TBW for the benefit of Farkas’s

general partnership, 3201 Partnership. Id. at *5-6. The court

then considered whether the Government had established the

requisite nexus between each category of funds and the offenses

of conviction. Id. at *6-19. The court first determined that the

$15 million applied to Farkas’s due-from-shareholder account and

the $7,330,500 in “Lee loans” were forfeitable as direct

proceeds of Farkas’s scheme. Id. at *14-15. Farkas does not

challenge the forfeitability of these funds on appeal.

The court then considered whether the Government had

established the requisite nexus with respect to the funds in the

due-from-shareholder and due-from-3201 Partnership accounts. Id.

at *5-6. Given the Government’s theory that these funds

constitute proceeds of Farkas’s crimes, the district court

applied the “but for” nexus test first articulated by the

25
Seventh Circuit in United States v. Horak, 833 F.2d 1235, 1242-

43 (7th Cir. 1987), and since applied by a number of other

courts, see United States v. DeFries, 129 F.3d 1293, 1313 (D.C.

Cir. 1997); United States v. Nicolo, 597 F. Supp. 2d 342, 346

(W.D.N.Y. 2009), aff’d, 421 F. App’x 57 (2d Cir. 2011); United

States v. Ivanchukov, 405 F. Supp. 2d 708, 712 (E.D. Va. 2005);

United States v. Benyo, 384 F. Supp. 2d 909, 914 (E.D. Va.

2005). Pursuant to this test, funds are considered proceeds and

therefore deemed forfeitable if “a person would not have [the

funds] but for the criminal offense.” Nicolo, 597 F. Supp. 2d at

346 (emphasis added) (citation and internal quotation marks

omitted).

Applying the “but for” nexus test, the district court held

that “[t]he nexus requirement is satisfied by tracing [Farkas’s]

fraud to the continued viability of TBW to [his] access to the

funds sought to be forfeited, demonstrating he obtained such

funds indirectly as a result of his crime.” Farkas, 2011 U.S.

Dist. LEXIS 124001, at *18-19. The court reasoned that “the

funds defendant obtained from TBW through the due-from-

shareholder and due-from-3201 Partnership accounts would not

have been available to him but for his fraud, because TBW would

not have remained in business in the absence of the bank and

wire fraud scheme.” Id. at *17. The court similarly stated, “TBW

was only able to continue its business activities due to the

26
ongoing fraud.” Id. Farkas challenges only this finding of fact

on appeal, which we review for clear error. See Herder, 594 F.3d

at 363-64.

Having reviewed the record, we conclude that the district

court did not clearly err in finding that TBW remained solvent

from 2002 to 2009 only as a result of Farkas’s fraudulent

conduct. The district court reasoned that “[t]he evidence

produced at trial amply demonstrates that TBW was only able to

continue its business activities due to the ongoing fraud.”

Farkas, 2011 U.S. Dist. LEXIS 124001, at *17 (citing J.A. 2093-

95) (summarizing trial evidence, including testimony of Ray

Bowman, Cathie Kissick, Teresa Kelly, and Desiree Brown, as well

as summary charts admitted at trial through witness Ray

Peroutka). The court’s reliance on the trial record is proper

under Federal Rule of Criminal Procedure 32.2(b)(1)(B), which

provides that a sentencing court may base its forfeiture

determination “on evidence already in the record, including any

written plea agreement, and on any additional evidence or

information submitted by the parties and accepted by the court

as relevant and reliable.”

Farkas argues that “[the] evidence cited by the trial court

and the government was directly controverted not only by other

trial testimony, but by the averments in the Indictment, and the

actual financial documentary evidence at trial – as admitted by

27
the government.” Appellant’s Br. at 37 (footnotes omitted). The

Government correctly responds that the indictment is not

evidence, reviews trial testimony supporting the court’s finding

that TBW would have been insolvent but for the schemes, and

refutes Farkas’s claims that this evidence was controverted by

testimony and financial documents. Having reviewed the record,

including the testimony referenced by the district court, we

conclude that the district court did not clearly err in finding

that TBW would have been insolvent during the fraud period “but

for” Farkas’s fraud schemes. Therefore, we affirm the district

court’s order of forfeiture.

V.

For the reasons set forth, the judgment is

AFFIRMED.

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