Case: 10-10416 Document: 00511904589 Page: 1 Date Filed: 06/29/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
June 29, 2012
No. 10-10416
Lyle W. Cayce
Clerk
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
JEFFREY CHARLES BRUTEYN,
Defendant-Appellant.
Appeals from the United States District Court
for the Northern District of Texas
Before SMITH, GARZA, and SOUTHWICK, Circuit Judges.
JERRY E. SMITH, Circuit Judge:
Jeffrey Bruteyn sold investors secured debt obligations (“SDOs”) based on
the loans his company made to used-car purchasers. He misrepresented his cre-
dentials and insurance coverage on the investments and marketed his invest-
ment offerings as though they were as safe as FDIC-backed certificates of
deposit. At trial, Bruteyn represented himself but was chastised by the court
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No. 10-10416
several times for making factual assertions in examining witnesses without tak-
ing the stand himself.
Bruteyn was convicted. On appeal, he challenges (1) the admission of a
civil order at trial; (2) the legal theory supporting his conviction; (3) the district
court’s management of his pro se representation; (4) the sufficiency of the evi-
dence; and (5) the sentence. Finding no error, we affirm the conviction and
sentence.
I.
Bruteyn managed AmeriFirst Funding, Inc. (“AmeriFirst”), a Dallas-area
corporation that financed used-car purchases. To raise capital, AmeriFirst sold
SDOs based on its loans to car buyers.
To sell SDOs, Bruteyn produced promotional materials that understated
investor risk and overstated insurance coverage. He used a network of brokers
to lure investors with the false promise that the SDOs were as safe as FDIC-
insured certificates of deposit. He falsely told investors that he had an M.B.A.
from the Wharton School of Business and a J.D. from Baylor Law School and
that his family owned Hess Corporation and would cover investor losses. He also
failed to disclose to investors his expulsion from the National Association of
Securities Dealers (“NASD”).
The Securities and Exchange Commission (“SEC”) instituted an emergency
enforcement action against AmeriFirst and obtained a temporary restraining
order (“TRO”) freezing its assets. Of the $58.7 million invested in AmeriFirst,
only $34.1 million had been returned to investors at the time of sentencing.
Bruteyn was indicted for securities fraud and represented himself at trial.
A jury convicted him on all nine counts, and the district court sentenced him to
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twenty-five years in prison, three years’ supervised release, and almost $7.3 mil-
lion in restitution.
II.
Bruteyn challenges the admission of the TRO at trial. Because he did not
object at trial, we review for plain error. Bruteyn must show that “(1) there was
error, (2) the error was plain, (3) the error affected his substantial rights, and
(4) the error seriously affected the fairness, integrity or public reputation of judi-
cial proceedings.” United States v. Rodriguez-Parra, 581 F.3d 227, 229 (5th Cir.
2009) (citation omitted).
The government introduced the TRO into evidence to help the jury under-
stand the role of AmeriFirst’s receiver and the process by which the court froze
the company’s assets. The TRO was signed by a federal district judge, finding
good cause to believe that Bruteyn was violating securities laws and misusing
investors’ funds.
Bruteyn argues that the government prejudiced his case by presenting the
jury with prior judicial findings implying that he indeed had violated the law.
But he blunted any prejudice when he introduced a letter from the court-
appointed receiver, explaining that the judge “entered orders freezing assets”
after “considering evidence presented by the SEC.” That admission made the
TRO merely cumulative. Even if assumed to be error, the TRO’s admission did
not “seriously affect[] the fairness, integrity or public reputation of judicial pro-
ceedings” when it merely underscored a fact Bruteyn himself presented.
III.
Bruteyn alleges that the district court allowed the jury to convict him on
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an invalid alternative theory. There are two ways to prove the harmlessness of
alternative-theory error. United States v. Skilling, 638 F.3d 480, 482 (5th Cir.
2011), cert. denied, 132 S. Ct. 1905 (2012). According to Neder v. United States,
527 U.S. 1 (1999), “a reviewing court, in typical appellate-court fashion, asks
whether the record contains evidence that could rationally lead to [an acquittal]
with respect to the [valid theory of guilt].” Skilling, 638 F.3d at 482 (alteration
in original; internal quotation marks omitted). Under a separate, but still valid,
line of cases, “an alternative-theory error is harmless if the jury, in convicting
on an invalid theory of guilt, necessarily found facts establishing guilt on a valid
theory.” Id.
At trial, the government dropped any charges alleging that Bruteyn had
aided or abetted the securities fraud of others. Bruteyn now urges that in aban-
doning its aiding-and-abetting theory, the government similarly abandoned any
argument that he indirectly caused the mail to be used in furtherance of his own
frauds. The argument is creative but unsupported by any legal authority. The
district court made no alternative-theory error.
IV.
Bruteyn challenges the district court’s comments on his failure to testify
arising from the court’s management of his pro se representation. As a general
matter, “judges are to be permitted wide discretion in exercising their power to
control federal trials.” In re Perry, 345 F.3d 303, 309-10 (5th Cir. 2003) (internal
quotation marks omitted). Assuming Bruteyn adequately objected to the court’s
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comments on his failure to testify,1 the standard of review is still a “high thresh-
old.” United States v. McMillan, 600 F.3d 434, 452 (5th Cir. 2010). “Reversal is
not warranted unless the improper comment had a clear effect on the jury.” Id.
On multiple occasions, the district court, in managing the scope of cross-
examination, commented on Bruteyn’s right to testify. For example, outside the
presence of the jury, the court reminded Bruteyn, “you need to be very careful
with suggesting things in questions or comments that you can’t prove independ-
ently of your own testimony.” Later, in the presence of the jury, the court
informed Bruteyn,
I’m going to tell you one more time. You may not state facts. If the
facts are established by other documents or other testimony, you
may refer to it. You have the right to testify in the case if you wish.
You also have a constitutional right not to do so. Unless you do so,
you may not state facts to the jury in your questioning of the
witnesses.
This court has found no error in a very similar case, in which “the record
clearly reflect[ed] that appellant, on at least two occasions, was warned of his
making unsworn statements in the presence of the jury and the trial judge
admonished him” in similar language. United States v. Lepiscopo, 429 F.2d 258,
260 (5th Cir. 1970). The district court’s admonishments here, as in Lepiscopo,
“did not constitute a comment on defendant’s failure to testify but rather
reflected his right to take the stand and testify under oath if he so desired.” Id.
1
Bruteyn does not point to any specific objections to the court’s commentary on his
right to testify, but the back-and-forth between him and the court on this issue may constitute
an adequate objection. Because we find no error, we need not decide whether Bruteyn prop-
erly objected.
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V.
Bruteyn complains of the district court’s restrictions on his questions to
witnesses, also arising from the court’s management of his pro se representation.
We review alleged violations of the Confrontation Clause of the Sixth Amend-
ment de novo, applying a harmless-error analysis. United States v. Diaz, 637
F.3d 592, 597 (5th Cir.), cert. denied, 132 S. Ct. 270 (2011).
The district court admonished Bruteyn for asserting facts through his
questions to witnesses, warning him,
[W]hat you cannot do is what you are attempting to do, which is to
have your cake and eat it too. That is, not to testify, but make state-
ments to the jury through your questions. That you may not do.
That is to take advantage in a materially unfair way of your rights
under the Fifth Amendment, and I will not permit it. I have not
permitted it. I will not permit it. It is because you are in that situ-
ation that you may not use your questions as a substitute for testi-
mony. So in that regard you, representing yourself, are different
from what a lawyer could do under the circumstances. You may not
do everything that a lawyer could do. There are certain things that
you are saying that you cannot say, because you are also the defen-
dant, and are relying on your rights under the Fifth Amendment.
Bruteyn bases his argument on the court’s general limitations on his question-
ing, summarized above, not on any particular line of questioning or issue that
he was not allowed to develop. His largely conclusional arguments give us no
Sixth Amendment reason to second-guess the district court’s management of his
pro se representation.
VI.
Bruteyn questions the sufficiency of the evidence. Viewing “all evidence
and all reasonable inferences drawn from it in the light most favorable to the
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government,” we review whether “a reasonable trier of fact could have found that
the evidence established guilt beyond a reasonable doubt.” United States v.
Fambro, 526 F.3d 836, 839 (5th Cir. 2008).
A securities dealer may not “make any untrue statement of a material fact
or . . . omit to state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they were made, not mis-
leading.” 17 C.F.R. § 240.10b-5. “[A]n omission is material if there is a substan-
tial likelihood that the disclosure of the omitted fact would have been viewed by
the reasonable investor as having significantly altered the total mix of informa-
tion made available.” Trust Co. of La. v. N.N.P. Inc., 104 F.3d 1478, 1490 (5th
Cir. 1997) (internal quotation marks omitted).
Bruteyn challenges evidence of his failure to disclose his NASD disciplin-
ary history as not material and thus insufficient to support his conviction. But
“[b]ecause materiality is a mixed question of law and fact, it is usually left for
the jury.” United States v. Peterson, 101 F.3d 375, 380 (5th Cir. 1996). Because
Bruteyn gives no reason to disturb the verdict, we will not do so.2
Bruteyn also raises a knottier issue, namely, the extent to which one can
wilfully omit a material fact where there is no certainty ex ante about what con-
stitutes a material fact. But even if he was not subjectively aware that his
NASD history was material, Bruteyn does not dispute knowledge of his duty not
materially to mislead AmeriFirst’s investors, e.g., by his assertions about where
2
Bruteyn’s NASD violation history includes the association’s conclusions that he “exe-
cuted unauthorized transactions, failed to follow customer instructions, guaranteed securities
account of customer against loss, and made misrepresentations to a public customer.” Given
that that history parallels the allegations in this case, it is likely that investors receiving the
information “would have viewed it as significantly altering the mix of information available.”
Peterson, 101 F.3d at 380.
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he attended school and the nature of insurance for the SDOs.3
VII.
A.
Bruteyn raises multiple challenges to his sentence. This court reviews “a
sentence to ‘ensure that the district court committed no procedural error . . .’ and
to ‘consider the substantive reasonableness of the sentence under an abuse-of-
discretion standard.’” United States v. Pizzolato, 655 F.3d 403, 409 (5th Cir.
2011) (quoting Gall v. United States, 552 U.S. 38, 51 (2007)). We review the dis-
trict court’s application of the sentencing guidelines de novo and its factual find-
ings for clear error. United States v. Delgado-Martinez, 564 F.3d 750, 751 (5th
Cir. 2009).
B.
Not all facts supporting Bruteyn’s sentence were submitted to the jury, he
complains, similarly urging that the additional investors included in his presen-
tence report (but not his indictment) were the tail wagging the dog in terms of
his exposure at sentencing. But “the sentencing court is entitled to find by a
preponderance of the evidence all facts relevant to the determination of a sen-
tence below the statutory maximum.” United States v. Hernandez, 633 F.3d 370,
374 (5th Cir.), cert. denied, 131 S. Ct. 3306 (2011). That rule precludes a “wag-
ging the dog” challenge to sentencing. See United States v. Scroggins, 485 F.3d
3
Cf. United States v. Tarallo, 380 F.3d 1174, 1188 (9th Cir. 2004) (“‘[W]illfully’ as it is
used in [a related securities statute] means intentionally undertaking an act that one knows
to be wrongful; ‘willfully’ in this context does not require that the actor know specifically that
the conduct was unlawful.”).
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824, 834 (5th Cir. 2007).
Bruteyn also argues that because there is no reliable measure of actual or
intended losses, his offense level should have been based only on his alleged
gain.4 In reviewing the loss-calculation method, this court must determine
“whether the sentencing court applied an acceptable method of calculating the
amount of loss, which must bear a reasonable relation to the actual harm of the
offense.” United States v. Jones, 475 F.3d 701, 705 (5th Cir. 2007).
Bruteyn’s argument relies on the legitimacy of AmeriFirst, the underlying
business, and the difficulty that legitimacy creates in calculating loss. If the
district court had relied on intended loss, that argument may have been persua-
sive. That court, however, relied on actual loss, calculated by arithmetic that
Bruteyn does not dispute. He was convicted of materially misrepresenting the
risk inherent in the investments he marketed, and it was reasonably foreseeable
that actual losses would result from the risks he concealed. Thus, his loss-
calculation challenge fails.
Bruteyn’s offense level under the guidelines was increased four levels by
the application of an enhancement for “a violation of securities law” where “the
defendant was . . . a registered broker or dealer.” U.S.S.G. § 2B1.1(b)(18)(A)(ii)
(2011). The guideline’s accompanying comment defines “registered broker or
dealer” as “a broker or dealer registered or required to register.” § 2B1.1 cmt.
4
Section 2B1.1(b)(1) of the 2011 United States Sentencing Guidelines Manual is a table
of values under which the court calculates how much to increase the offense level based on the
amount of loss. Comment 3 directs the court how to determine loss, noting that “[s]ubject to
the exclusions [for interest and costs], loss is the greater of actual loss or intended loss.”
§ 2B1.1 cmt. n.3(A). In the same comment, actual loss is defined as “the reasonably foreseea-
ble pecuniary harm that resulted from the offense.” § 2B1.1 cmt. n.3(A)(i). It continues: “The
court shall use the gain that resulted from the offense as an alternative measure of loss only
if there is a loss but it reasonably cannot be determined.” § 2B1.1 cmt. n.3(B).
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n.14(A) (2011) (incorporating 15 U.S.C. § 78c(a)(48)). In arguing reasonable reli-
ance on prior legal advice, Bruteyn does not dispute that he now understands he
was required to register. His sole alternative argumentSSthat the registration
enhancement is invalid for lack of a scienter requirementSSis foreclosed by
precedent.5
Bruteyn’s final sentencing challenge highlights the disparity between his
sentence and those of other defendants involved in the same scheme. Although
the sentence must indeed “avoid unwarranted sentence disparities among defen-
dants with similar records who have been found guilty of similar conduct,”
18 U.S.C. § 3553(a)(6), Bruteyn never attempts to classify his conduct as similar
to other defendants’, preferring instead to emphasize that he went to trial
instead of accepting a plea bargain.
At sentencing, the government explained why Bruteyn was not similarly
situated, but he does not address that issue in either brief filed here. The dis-
trict court considered Bruteyn’s argument and the government’s explanation for
the disparity and concluded that the sentence comported with the requirements
of 18 U.S.C. § 3553. Bruteyn gives us no reason to disagree with the district
court.
The conviction and sentence are AFFIRMED.
5
See United States v. Singleton, 946 F.2d 23, 25 (5th Cir. 1991) (“The guidelines draft-
ers have been explicit when they wished to import” a mens rea requirement.); see also United
States v. Vargas-Duran, 356 F.3d 598, 611 (5th Cir. 2004) (en banc) (Garza, J., dissenting) (col-
lecting cases in support of the proposition that this court “has refused to read a mens rea
requirement into a sentencing guideline absent explicit direction to do so”).
10