United States v. Dupre

UNITED STATES COURT OF APPEALS
For the Fifth Circuit
___________________________

No. 95-30275
___________________________

UNITED STATES OF AMERICA,

Plaintiff-Appellee
Cross-Appellant,

VERSUS

ROBERT DUPRE and W. HAROLD SELLERS,

Defendants-Appellants
Cross-Appellees.

___________________________________________________

Appeals from the United States District Court
for the Eastern District of Louisiana
___________________________________________________

July 11, 1997

Before DAVIS and DENNIS, Circuit Judges, and FALLON,1 District
Judge.

W. EUGENE DAVIS, Circuit Judge:

W. Harold Sellers and Robert Dupre appeal their convictions on

multiple counts related to loans received from the Oak Tree Savings

Bank in New Orleans, Louisiana, to finance various real estate

transactions in California. For the reasons that follow, we affirm

their convictions on all counts and remand for fact-finding on two

sentencing issues.

1
District Judge of the Eastern District of Louisiana, sitting
by designation.

1
In 1987, Dupre and Michael Barrack, both California

businessmen, and Sellers, a Houston attorney, founded LaJolla

Pacific Equities, Inc. (LPE), a California real estate operation.

In 1988, LPE purchased four pieces of property from Braewood

Development: Loma Linda, Sunrise Ranch, Lower Etiwanda, and Moreno

Valley. Lomas Financial Corp. (Lomas), Braewood’s parent company,

financed the purchase. The deal included an interest reserve that

allowed LPE to defer interest payments for approximately a year.

In the fall of 1988, as the deadline for the interest reserve

approached, Sellers and Dupre sought refinancing for the Lomas

loans. John Ohanian, an employee of Landmark Land of California,

Inc. (LOCAL), contacted Sellers and Dupre about buying the Moreno

Valley and Sunrise Ranch properties. Sellers and Dupre refused to

sell, but gave LOCAL an option on the two properties in return for

refinancing the Lomas debt. Ohanian and his boss, Ernie Vossler,

worked with LOCAL’s parent company, the Oak Tree Savings Bank

(OTSB), to arrange the refinancing. Vossler recommended to the

OTSB board that the bank provide a $69 million loan to LPE. This

sum included $55.8 million to refinance the Lomas debt on all four

properties, payment for various fees and taxes, and $4.2 million to

allow LPE to purchase another property called Upper Etiwanda.

Sellers and Dupre told OTSB officials that Upper Etiwanda, a

property adjacent to Lower Etiwanda, was priced at $6.2 million,

and they requested $4.2 million to pay off the property. Dupre and

Sellers did not reveal to the bank that Minter Interests, Inc., a

company that Sellers created under an assumed name, already owned

2
Upper Etiwanda. Appellants’ corporation, Minter Interests, had

purchased Upper Etiwanda for roughly $1.6 million; it “sold” the

property to appellants for $6.2 million.

Meanwhile, Sellers, Dupre, and Barrack negotiated a loan

discount from Lomas on their original debt by claiming inability to

pay and threatening to sue for usury. Lomas agreed to a $3 million

reduction on its $55.8 million loan. At the December 21, 1988,

closing, appellants denied to Ohanian that they had received a

discount on the Lomas debt. Shortly after OTSB distributed the full

amount of the loan--$55.8 million--to Lomas, Lomas wired the $3

million loan discount to Sellers. Sellers and Dupre wired proceeds

from both the loan discount and the sale of Upper Etiwanda to

domestic accounts and accounts in the Cayman Islands.

Barrack testified for the government that as Sellers and Dupre

left the OTSB loan closing, Dupre told him he had “taken care of”

Ohanian, the LOCAL representative. Ohanian admitted accepting

$75,000 from Dupre and pleaded guilty to the felony of accepting a

gift to procure a loan, in violation of 18 U.S.C. § 215. Dupre and

Sellers claim that Vossler arranged a “bonus” for Ohanian to be

paid directly by Sellers and Dupre to avoid making other employees

jealous. Vossler denied this in his testimony.

LOCAL purchased both Etiwanda properties in March 1989. OTSB

required that $3.8 million from the sales be placed in a

certificate of deposit (CD) for collateral on the loan for the Loma

Linda property. In 1989, Sellers and Dupre obtained permission

from OTSB to withdraw $1.5 million from the CD to buy four new

3
properties that would serve as collateral for the loan. Dupre and

Sellers, operating under Inland Pacific Real Estate, Inc.,

immediately used some of the funds for overhead and costs. They

never purchased the properties.

The jury convicted Sellers and Dupre on one count of

conspiracy, in violation of 18 U.S.C. § 371 (count 1); two counts

of bank fraud, in violation of 18 U.S.C. § 1344 (counts 2 and 3);

two counts of making false statements to a federally insured bank,

in violation of 18 U.S.C. § 1014 (counts 4 and 6); and eight counts

of money laundering, in violation of 18 U.S.C. § 1957. (counts 7-

15). In a bifurcated proceeding, the jury returned a special

forfeiture verdict of $7,070,463, representing the proceeds of

money laundering, against both Sellers and Dupre. Sellers received

concurrent sentences of 60 months for counts 1 and 2, 76 months for

each of counts 3, 6, and 7-15, and 24 months for count 4, requiring

him to serve a total of 76 months. He was ordered to pay

$2,000,000 in restitution. Dupre received concurrent sentences of

60 months for counts 1 and 2, 70 months for each of counts 3, 6,

and 7-15, and 24 months on count 4, requiring him to serve a total

of 70 months. He was ordered to pay $500,000 in restitution.2

The defendants timely appealed. We consider below appellants’

challenges to their convictions.

II.

Sellers and Dupre first challenge the district court’s

2
Michael Barrack, who was also charged in the indictment,
pleaded guilty to one count charging conspiracy to make false
statements to a federally insured bank.

4
instructions to the jury. Specifically, they argue that the

materiality of their allegedly fraudulent statements was an

essential element of the bank fraud and false statement offenses,

and, therefore, that the district court erred in failing to submit

materiality to the jury. The district court followed the law of

this circuit at the time of trial and decided the issue of

materiality as a matter of law. However, in June 1995, the Supreme

Court overruled the position held by this court and most other

federal circuits and concluded that when materiality is an element

of the charged offense, it presents a mixed issue of law and fact

to be decided by a jury. United States v. Gaudin, 115 S.Ct. 2310,

2314-15 (1995). The appellants argue that the trial court's

failure to submit the question of materiality to the jury violates

their constitutional rights and requires reversal of their

convictions on counts 2, 3, 4, and 6.3

Counts 2 and 3 charge appellants with bank fraud under 18

U.S.C. § 1344. The counts arise from appellants'

misrepresentations about the purchase price of Upper Etiwanda and

the loan discount (count 2) as well as the intended use of $1.5

million in released collateral (count 3). A violation of § 1344 is

established when the government demonstrates that the defendant

knowingly executed or attempted to execute a scheme or artifice (1)

to defraud a financial institution or (2) to obtain any property

3
A panel of this court released Sellers and Dupre pending
appeal after the Supreme Court rendered its decision in Gaudin.

5
owned by, or under the custody or control of, a financial

institution, through false or fraudulent pretenses,

representations, or promises. 18 U.S.C. § 1344. On its face, the

text of the statute does not require that false statements integral

to § 1344 be material.4 Nevertheless, many circuits, including

this one, have required a showing of materiality. See, e.g.,

United States v. Goldsmith, 109 F.3d 714, 715 (11th Cir. 1997);

United States v. Campbell, 64 F.3d 967, 975 (5th Cir. 1995); United

States v. Smith, 46 F.3d 1223, 1236 (1st Cir.), cert. denied, 116

S. Ct. 176 (1995); United States v. Hutchison, 22 F.3d 846, 851

(9th Cir. 1993); United States v. Davis, 989 F.2d 244, 247 (7th

Cir. 1993); United States v. Hollis, 971 F.2d 1441, 1452 (10th Cir.

1992), cert. denied, 507 U.S. 985 (1993); United States v. Sayan,

968 F.2d 55, 61 n.7 (D.C. Cir. 1992); United States v. Goldblatt,

813 F.2d 619, 624 (3d Cir. 1987). A recent Supreme Court decision

casts doubt on this determination. In U.S. v. Wells, 117 S. Ct.

921 (1997), the Court considered whether 18 U.S.C. § 1014--which

prohibits the making of a false statement to a federally insured

bank--contains a materiality requirement when the statute itself

does not mention materiality. It concluded, contrary to most

4
In full, § 1344 provides:
Whoever knowingly executes, or attempts to execute, a scheme
or artifice--
(1) to defraud a financial institution; or
(2) to obtain any of the moneys, funds, credits, assets,
securities, or other property owned by, or under the custody
or control of, a financial institution, by means of false or
fraudulent pretenses, representations, or promises;
shall be fined not more than $1,000,000 or imprisoned not more
than 30 years, or both.
18 U.S.C. § 1344.

6
circuit courts, that materiality was not an element of the offense

under a plain reading of the text and that statutory history

confirmed that reading. Id. at 927-28.

Since Wells, we have not revisited whether materiality is an

element of a § 1344 offense, which, like § 1014, does not contain

an express materiality requirement. However, we conclude that

appellants' convictions will stand even if materiality is an

element of a § 1344 offense and the jury instructions were

erroneous. Therefore, we need not determine here whether our

previous holding that materiality is an essential element of a §

1344 offense survives Wells.

Although appellants objected to the court's treatment of

materiality with respect to the § 1014 false statement counts, they

did not object to the district court's failure to submit

materiality to the jury on the § 1344 bank fraud counts. Sellers’

attorney stated:

As to the false statements on page 23 [the page of the
court’s jury instructions on the § 1014 counts], we
object to the failure to instruct the jury on materiality
. . . . It’s the position of the defendants that the
failure to charge on that issue is vital [to] the
defendants’ right to a jury trial in that element to that
offense.

This makes no reference to counts 2 and 3, the § 1344 counts, and,

in fact, specifically limits the objection to the false statement

counts.5

5
Sellers' attorney did object to the instructions as to the §
1344 counts. However, the objection went to the intent necessary
to support a conviction on those counts and had no relation to the
materiality issue.

7
The only indication that the appellants wanted the court to

send materiality to the jury on the § 1344 counts is their proposed

jury instructions, which read:

In order to find Mr. Sellers and Mr. Dupre guilty of . .
. committing bank fraud . . ., the government must prove
beyond a reasonable doubt that the statements and/or the
false or fraudulent pretenses were material. A statement
is material if it is capable of influencing the decision
of the financial institution. The appropriate question
to ask is, "if the bank had relied on the defendant's
statements, would it have made any difference?["]

However, under Rule 30 of the Federal Rules of Criminal Procedure,

these proposed instructions do not preserve error on appeal, absent

an objection specific to the counts at issue.6 See United States

v. Hoelscher, 914 F.2d 1527, 1534 (8th Cir. 1990), cert. denied,

500 U.S. 943 (1991); United States v. Beverly, 913 F.2d 337, 357

(7th Cir. 1990), cert. denied, 498 U.S. 1052 (1991); United States

v. Friedman, 854 F.2d 535, 555 (2d Cir. 1988), cert. denied. 490

U.S. 1004 (1989); cf. McDaniel v. Anheuser-Busch, Inc., 987 F.2d

298, 306 (5th Cir. 1993) (concluding that, under Fed. R. Civ. P.

51, the civil counterpart to Fed. R. Crim. P. 30, “a pretrial

request for instructions or interrogatories is ordinarily

6
Rule 30 provides:
At the close of the evidence or at such earlier time
during the trial as the court reasonably directs, any party
may file written requests that the court instruct the jury on
the law as set forth in the requests. . . . No party may
assign as error any portion of the charge or omission
therefrom unless that party objects thereto before the jury
retires to consider its verdict, stating distinctly the matter
to which that party objects and the grounds of the objection.
Opportunity shall be given to make the objection out of the
hearing of the jury and, on request of any party, out of the
presence of the jury.
Fed. R. Crim. P. 30 (emphasis added).

8
insufficient to preserve error"). Because appellants failed to

object to the denial of the requested materiality instruction with

regard to the § 1344 counts, we review the Gaudin-error claim for

plain error under Rule 52(b) of the Federal Rules of Criminal

Procedure. Johnson v. United States, 117 S. Ct. 1544, 1548-49

(1997); United States v. Jobe, 101 F.3d 1046, 1061-62 (5th Cir.

1996). In doing so, we are guided by the plain-error analysis

outlined in United States v. Olano, 507 U.S. 725, 730-36 (1993),

and reiterated in the context of Gaudin error in Johnson v. United

States.7 Under the Olano analysis, this court may reverse only if:

(1) there was error (2) that was clear and obvious and (3) that

affected a defendant's substantial rights. United States v.

Calverley, 37 F.3d 160, 162-64 (5th Cir. 1994) (en banc) (citing

Olano, 507 U.S. at 730-36), cert. denied, 115 S. Ct. 1266 (1995).

When these elements of plain error are present, a court may

exercise its discretion to correct the error if it "seriously

affect[s] the fairness, integrity, or public reputation of judicial

proceedings." Id. at 164 (quoting Olano, 507 U.S. at 732).

For our purposes, we assume that under Gaudin, the court's

failure to submit materiality to the jury was error, and,

therefore, the first prong of Olano is met. The second prong--the

plainness of the error--requires greater analysis. The Supreme

7
In Johnson, a defendant convicted of perjury contended that
the court committed reversible error because it failed to submit
materiality--an express element of perjury under 18 U.S.C. § 1623--
to the jury. The court held that the claimed Gaudin error was not
the type of “plain error” that a court may notice under Rule 52(b).
Johnson, 117 S. Ct. at 1547.

9
Court in Johnson resolved confusion among the circuits and, indeed,

within this one,8 when it held that in cases "where the law at the

time of trial was settled and clearly contrary to the law at the

time of appeal--it is enough that an error be 'plain' at the time

of appellate consideration." Johnson, 117 S. Ct. at 1549. Thus,

in reviewing the district court's jury instructions for plain

error, we look to the law--all of the law--as it now exists on

appeal. After Gaudin, we assume that the district court erred in

failing to submit materiality--long considered an element of §

1344--to the jury. However, in light of Wells, the plainness of

that error is suspect. As we noted in Calverley, “‘plain’ errors

are errors which are ‘obvious,’ ‘clear,’ or ‘readily apparent;’

they are errors which are so conspicuous that ‘the trial judge and

prosecutor were derelict in countenancing [them], even absent the

defendant's timely assistance in detecting [them].’” Calverley, 37

F.3d at 163 (citations omitted). Wells' rejection of materiality

as an element of a § 1014 offense casts doubt on this circuit’s

holding that materiality is an element of § 1344 violations and,

therefore, renders the claimed error unclear.

The decisions in Gaudin and Wells have prompted this court and

others to revisit implied materiality requirements in various

statutes. For example, in United States v. Harvard, 103 F.3d 412,

418 (5th Cir. 1997), we concluded that materiality is not an

8
Compare Calverley, 37 F.3d at 162-63 (requiring that plain
error be “‘clear under current law’ at the time of trial”) with
Jobe, 101 F.3d at 1062 (holding that plain error is measured at
time of appeal).

10
element of 18 U.S.C. § 1005. Likewise, the Eleventh Circuit held

that Wells operated to overrule its decisions requiring materiality

for § 1010 violations. United States v. de Castro, 113 F.3d 176

(11th Cir. 1997); see also United States v. Upton, 91 F.3d 677, 685

(5th Cir. 1996) (holding that materiality is not an element of §

287 offense), cert. denied, 117 S. Ct. 1818 (1997). But see United

States v. Shunk, 113 F. 3d 31, 34 (5th Cir. 1997) (declining to re-

examine whether materiality is element of § 1006 offense). As

these cases demonstrate, whether materiality is properly considered

an element of § 1344 after Wells, when it is not expressly required

by statute, is unsettled. Any error committed by the court in

withholding materiality from the jury was therefore not plain or

obvious. Because the court’s error is not obvious after Wells, we

cannot say that the district court committed plain error in failing

to submit materiality to the jury on the § 1344 counts.

Appellants argue next that the district court erred in

failing to submit materiality to the jury on the § 1014 counts.

Counts 4 and 6 charged appellants with making a false statement to

OTSB, a federally insured financial institution, to influence the

actions of the bank. The false statements at issue relate to the

purchase price of Upper Etiwanda (count 4) and the intended use of

$1.5 million in released collateral (count 6). To obtain a

conviction on a § 1014 offense, this circuit has previously

required the government to show that the false statements were

material. See United States v. Thompson, 811 F.2d 841, 844 (5th

11
Cir. 1987). However, as noted, this position has been squarely

rejected by the Supreme Court in Wells, 117 S. Ct. at 926-28.

Because § 1014 does not require that the false statement at issue

be material, the district court did not err in failing to submit

materiality to the jury on these counts.

III.

Appellants next contend that counts 2 and 3, charging bank

fraud, are multiplicious with counts 4 and 6, charging the making

of false statements, and that these duplicitous charges subjected

them to double jeopardy. Count 2 charges bank fraud in connection

with appellants' misrepresentations about the price and ownership

of Upper Etiwanda. Similarly, count 4 charges appellants with

making a false statement for the same misrepresentations. Counts

3 and 6 charge bank fraud and false statements, stemming from

appellants' false representations in connection with the withdrawal

of $1.5 million in released collateral.

We review issues of multiplicity de novo. United States v.

Hord, 6 F.3d 276, 280 (5th Cir. 1993), cert. denied, 511 U.S. 1036

(1994). In cases where a single act supports convictions under

different criminal statutes, double jeopardy concerns are not

implicated when “each provision requires proof of a fact which the

other does not.” United States v. Galvan, 949 F.2d 777, 781-82

(5th Cir. 1991); see Blockburger v. United States, 284 U.S. 299,

304 (1932).

Our decision in United States v. Henderson, 19 F.3d 917 (5th

Cir.), cert. denied, 513 U.S. 827 (1994), is factually

12
indistinguishable from this case and controls our decision here.

In Henderson, the defendant was convicted for multiple counts

related to fraudulent banking activities. Id. at 919. On appeal,

he contended that counts charging bank fraud in violation of §

1344 and making false statements to a federally insured bank in

violation of § 1014 were multiplicious because they involved

identical conduct related to one loan. Id. at 925-26. After

comparing the two provisions, we rejected Henderson’s contention.

Id. at 926.

As we explained in Henderson, bank fraud under § 1344

requires proof of a “scheme or artifice” to defraud or to obtain

property from a federally insured financial institution. Id.; 18

U.S.C. § 1344. “There is no ‘scheme or artifice’ requirement in

section 1014. Further, there is no requirement that the person

charged with bank fraud make a . . . false statement to an insured

bank.” Henderson, 19 F.3d at 926. Because each statute requires

proof of an additional fact, the bank fraud and false statement

counts are not multiplicious. See United States v. Fraza, 106 F.3d

1050, 1053 (1st Cir. 1997) (recognizing that "on the plain language

of these statutes, the requirements of Blockburger are satisfied");

United States v. Wolfswinkel, 44 F.3d 782, 785 (9th Cir. 1995)

(concluding that bank fraud and misapplication of bank funds do not

constitute same offense). But see United States v. Seda, 978 F.2d

779, 782 (2d Cir. 1992) (holding that §§ 1014 and 1344 are

multiplicious when they arise from the same offense). We therefore

reject appellants’ multiplicity and double jeopardy arguments.

13
IV.

Sellers and Dupre raise several objections to the sufficiency

of the evidence supporting their convictions on the counts

discussed below. The evidence is sufficient to support a guilty

verdict if a rational jury could have found the essential elements

of the crime beyond a reasonable doubt. United States v. Salazar,

958 F.2d 1285, 1290-91 (5th Cir.), cert. denied, 506 U.S. 863

(1992).

Counts 2 and 4 charge Sellers and Dupre with bank fraud and

making false statements in connection with their misrepresentations

about the purchase price of Upper Etiwanda. Sellers and Dupre

argue that the evidence is insufficient to establish beyond a

reasonable doubt that they knowingly committed bank fraud and made

false statements in connection with the loan for the property.

The record reveals that appellants’ communications with the

bank about Upper Etiwanda were riddled with misrepresentations.

The government produced evidence that Sellers and Dupre, acting as

Minter Interests, exercised an option to buy Upper Etiwanda from

Etiwanda Highland Property, Ltd., for approximately $1.6 million on

December 14, 1988. Sellers and Dupre submitted an earnest money

contract to the bank showing that Minter Interests was selling

Upper Etiwanda for roughly $6.2 million. The contract was

purportedly signed by Minter’s vice president, a California

attorney named Joe Kennedy. Kennedy testified that he had not seen

or signed the document and that he had nothing to do with Minter

14
Interests. On December 21, a week after Minter Interests purchased

the property, the two appellants borrowed $4.2 million from OTSB to

buy Upper Etiwanda from Minter Interests.9

Sellers and Dupre never disclosed to OTSB their interest in

Minter or the amount actually necessary to buy Upper Etiwanda in an

arms-length transaction. See, e.g., United States v. Trice, 823

F.2d 80, 86 (5th Cir. 1987) (noting that § 1014 may be violated by

“the failure to disclose material information needed to avoid

deception in connection with a loan transaction”). Nor did

appellants use the loan money to buy the property. According to

exhibits and Sellers’ testimony, most of the funds were wired to

domestic accounts and accounts in the Cayman Islands. Based on the

evidence in the record, the jury was entitled to infer that the

true facts underlying appellants’ purchase of the property--

including their interest in Minter and the amount actually

necessary to buy it in an arms-length transaction--were material to

the lender. The record supports the conclusion that appellants

orchestrated a scheme to obtain funds from OTSB, in part, by

knowingly misrepresenting the price of Upper Etiwanda.

Count 2 also charges Sellers and Dupre with bank fraud in

connection with the $3 million discount that LPE negotiated with

Lomas and that appellants concealed from OTSB. Appellants

represented to OTSB that they needed to refinance a $55.8 million

loan from Lomas. However, Lomas officials testified that,

9
Bank officials testified that they believed appellants had
made a $2 million down payment on the property.

15
beginning in the first week of December 1988, appellants sought a

discount on the loan. By mid-December, Lomas had agreed to give

appellants and Barrack a $3 million loan discount, thereby reducing

the total loan amount to $52.8 million. Ohanian testified that he

asked appellants at the OTSB loan closing on December 21, 1988,

whether they had received a discount and Dupre reportedly stated,

“we didn’t get that work[ed] out.” Numerous OTSB officials

testified that they would have reduced the OTSB loan by $3 million

had they known of the discount. Viewing this evidence in the light

most favorable to the government, the jury was entitled to infer

that appellants misrepresented the balance owed on the loan OTSB

agreed to refinance.

Counts 3 and 6 charge Sellers and Dupre with bank fraud and

making false statements in connection with their withdrawal of $1.5

million from the $3.8 million CD pledged as collateral for the OTSB

loan. Appellants obtained permission to withdraw the funds in

August 1989 allegedly to buy additional property. The government

produced correspondence from OTSB to Sellers and Dupre showing that

OTSB agreed to the withdrawal on the condition that Sellers and

Dupre “use the Funds to provide downpayments on . . . parcels of

property in southern California,” advise OTSB of the status of the

proposed purchases, and allow OTSB, by contract, to receive 50% of

subsequent sales of each of the properties to pay the balance of

the loan. OTSB required that LPE’s board of directors authorize

the withdrawal of funds, and LPE provided a corporate resolution

representing that Sellers, Dupre, and Barrack approved the

16
withdrawal. Barrack testified that he did not approve the

withdrawal and, in fact, had no knowledge of the scheme to obtain

funds. The evidence showed that $1.5 million was released to LPE,

and $810,000 was immediately transferred to Inland Pacific, a

corporation owned by Sellers and Dupre that did not involve

Barrack; the funds were spent on Inland Pacific operating costs.

The record shows that no funds were used to purchase property.

Based on this evidence, a reasonable jury was entitled to

conclude that appellants made false representations regarding the

use of the $1.5 million to induce the bank to approve the

withdrawal.

Next, Sellers and Dupre contend that the evidence is

insufficient to support their convictions for conspiracy under

count 1. To establish a conspiracy violation under 18 U.S.C. §

371, the government must establish: (1) an agreement between two or

more people, (2) to commit a crime against the United States, and

(3) an overt act by one of the conspirators to further the

objectives of the conspiracy. United States v. Krenning, 93 F.3d

1257, 1262 (5th Cir. 1996). Count 1 charges conspiracy to commit

the various crimes in counts 2-4 and 6 and conspiracy to unlawfully

give money to an agent of the bank in violation of 18 U.S.C. §

215(a). As outlined above, the evidence demonstrates that Sellers

and Dupre jointly participated in the activities underlying counts

2-4 and 6. This evidence of cooperative effort is sufficient to

support appellants’ convictions for conspiracy to commit bank fraud

17
and make false statements. We turn to the sufficiency of the

evidence to support the conspiracy to give money to an agent of a

bank.

Section 215 (a)(1) provides:

(a) Whoever--
(1) corruptly gives, offers, or promises anything
of value to any person, with intent to influence or
reward an officer, director, employee, agent, or
attorney of a financial institution in connection
with any business or transaction of such
institution;
. . . .
shall be fined...or imprisoned...or both.

18 U.S.C. § 215.

Sellers and Dupre argue that the evidence was insufficient to

demonstrate that John Ohanian, an employee of LOCAL, an OTSB

subsidiary, acted as an agent or employee of OTSB or that Sellers

and Dupre corruptly rewarded him for providing them with a loan.

The government’s evidence showed that Ohanian collected loan

documentation for OTSB, including financial statements and

corporate documents, assisted in negotiations, and was present at

the loan closing. Sellers and Dupre used Ohanian as their contact

with the bank, and Sellers stated in deposition testimony that

Ohanian was an agent of the bank. This evidence demonstrates that

Ohanian acted on the bank’s behalf, under its control, and with its

consent. See Restatement (Second) of Agency § 1. Viewing this

evidence in the light most favorable to the government, a rational

jury could conclude beyond a reasonable doubt that Ohanian was an

agent of OTSB.

The government also produced evidence that Dupre paid Ohanian

18
$75,000 in connection with the refinancing of the Lomas loan by

OTSB. Ohanian testified that he and Dupre met at Dupre’s country

club a day or two after the loan closed and that Dupre gave him a

personal check for $75,000. Barrack testified that Dupre told him

he was “going to take care of” Ohanian by giving him a personal

check that would not appear on LPE books. Ohanian later pleaded

guilty to accepting a bribe under 18 U.S.C. § 215 (a)(2).10 Based

on this evidence, a jury was entitled to conclude that Sellers and

Dupre agreed to reward Ohanian for obtaining the loan in violation

of § 215 (a)(1).

Dupre and Sellers also challenge the sufficiency of the

evidence supporting their conviction on several of the money

laundering counts. They further contend that their convictions on

all of the money laundering counts must be reversed because they

fail to charge an offense.

Counts 7-12 allege that Sellers and Dupre violated 18 U.S.C.

§ 1957 when they transferred $4.2 million obtained from the “sale”

of Upper Etiwanda from Minter Interests to LPE to personal bank

accounts in the Cayman Islands and elsewhere. To support a

10
Under 18 U.S.C. § 215(a)(2):
(a) Whoever--
. . .
(2) as an officer, director, employee, agent, or attorney
of a financial institution, corruptly solicits or demands
for the benefit of any person, or corruptly accepts or
agrees to accept, anything of value from any person,
intending to be influenced or rewarded in connection with
any business or transaction of such institution;
shall be fined . . . or imprisoned . . . or both.

19
conviction under § 1957, the government must prove that the

defendant “knowingly engage[d] or attempt[ed] to engage in a

monetary transaction in criminally derived property that is of a

value greater than $10,000 and is derived from specified unlawful

activity.” 18 U.S.C. § 1957(a). “Criminally derived property” is

“any property constituting, or derived from, proceeds obtained from

a criminal offense.” 18 U.S.C. § 1957(f)(2).

Sellers and Dupre argue, without support, that because the

Upper Etiwanda property had some value, the entire $4.2 million did

not constitute criminally derived property under the money

laundering statute. We disagree. The evidence, outlined above,

was sufficient to support appellants’ convictions for bank fraud

charged in count 2. Based on that evidence, the jury was entitled

to conclude that the proceeds of the loan--$4.2 million--was

derived as a result of appellants’ unlawful scheme to obtain a loan

from OTSB through misrepresentation. Therefore, appellants’

convictions on these counts will stand.

Sellers and Dupre also argue that the district court erred in

refusing to dismiss all of the money laundering counts (counts 7-

15)--involving roughly $7,000,000--on the ground that they failed

to charge an offense under § 1957. In each of the transactions

underlying these counts, portions of proceeds from the $69 million

loan and the loan discount in Sellers’ Century Land Title account

were wired to accounts in the Cayman Islands and to appellants’

domestic accounts. To establish a violation of § 1957, the

government was required to prove that the funds at issue were

20
derived from a criminal offense when the appellants transferred

them. United States v. Leahy, 82 F.3d 624, 635 (5th Cir. 1996).

Appellants argue that, as alleged in the indictment, the underlying

bank fraud counts were not completed until the money was

transferred to the Cayman Island and domestic accounts. Thus,

according to appellants, at the time of the transfer the funds were

not criminally derived--that is, the proceeds of a crime.11 See

United States v. Johnson, 971 F.2d 562, 569 (10th Cir. 1992).

Appellants read the language in count 2 too broadly. The bank

fraud charged in count 2 was complete when Lomas and OTSB, through

Chicago Land Title Company, transferred the funds in question to

Sellers’ account in Houston, Texas. The crime was complete and the

funds became “criminally derived property” when they came under

Sellers’ control. See United States v. Allen, 76 F.3d 1348, 1360

(5th Cir.) (“[T]he funds at issue in each of the transactions

became proceeds at the moment the money left the control of [the

bank] and was deposited into an account of a consultant or

borrower.”), cert. denied, 117 S. Ct. 121 (1996). Therefore,

11
According to count 2, appellants:

did knowingly devise and intend to devise a scheme and
artifice to defraud Oak Tree Savings Bank and obtain money and
funds owned by and in the custody and control of Oak Tree
Savings Bank by means of false and fraudulent pretenses,
representations and promises by applying for and receiving a
loan in the approximate amount of $69,000,000, to be used for
the purposes set forth in the loan documentations submitted to
Oak Tree Savings Bank when in truth and in fact, [appellants]
concealed from Oak Tree Savings Bank that portions of the
proceeds of the $69,000,000 loan would be diverted to their
personal benefit and would not be utilized for the purpose and
in the manner set forth in the loan documentation.

21
counts 7-15, which stemmed from the subsequent wire transfers of

funds to appellants’ accounts in Cayman Islands and throughout the

United States, properly charged money laundering for purposes of §

1957.

In their final sufficiency attack, Sellers and Dupre argue

that the evidence does not establish venue as to all counts because

none of the offenses in the indictment were committed in the

Eastern District of Louisiana.

The government must prove venue by a preponderance of the

evidence. Leahy, 82 F.3d at 632. By statute, venue for continuing

offenses will lie "in any district in which such offense was begun,

continued, or completed." 18 U.S.C. § 3237 (a). Bank fraud, false

statement, and money laundering offenses are “continuing” offenses

for purposes of § 3237. See United States v. Hubbard, 889 F.2d

277, 280 (D.C. Cir. 1989); Leahy, 82 F.3d at 633; United States v.

Beddow, 957 F.2d 1330, 1335 (6th Cir. 1992). Counts 2 and 4 charge

appellants with bank fraud and false statement offenses in

connection with the initial $69 million loan from OTSB, located in

the Eastern District of Louisiana. Counts 3 and 6, also charging

bank fraud and false statement offenses, relate to appellants’

withdrawal of $1.5 million from a CD pledged on the loan. Counts

7-15 charge money laundering using funds derived from the bank

fraud.

Sellers and Dupre argue that venue was improper as to all of

these counts because the government failed to show that they knew

22
OTSB was disbursing proceeds of the $69 million loan. They contend

that they entered into a loan agreement with Oak Tree Mortgage

Corporation (OTMC), an Oklahoma corporation that is not a federally

insured institution and that is authorized to do business in

California. According to appellants, OTMC subsequently assigned

the loan to, and obtained funding from, OTSB, a federally insured

institution.12

Appellants’ contention is belied by the record. Among other

documents, the government produced: (1) a loan application, dated

December 20, 1988, and signed by Sellers, which contained a warning

that “knowingly mak[ing] any false statements” in the application

constituted a § 1014 violation--a warning only required where the

lender is federally insured; (2) a commitment letter dated December

8, 1988, from John Taylor, an OTSB official, on OTSB letterhead,

which identified the lender as OTSB, was signed by Dupre, and

returned to OTSB; (3) a financing statement, dated December 21,

1988, and signed by Sellers, on which OTSB is designated as the

secured party; and (4) a check, dated December 9, 1988, written on

LPE’s account to OTSB for $50,000, the amount stipulated in the

commitment letter. Additionally, both Sellers and Dupre testified

that they had extensive experience with real-estate investment

transactions. Dupre had worked in real-estate acquisitions since

the early 1970s; Sellers had practiced real-estate law for more

than 25 years. See United States v. Allen, 76 F.3d 1348 (5th Cir.

12
OTMC and OTSB are both subsidiaries of Landmark Land Company,
Inc.

23
1996) (holding that evidence showing that defendants were

financially sophisticated and had received documents referring to

bank was sufficient to establish that they knew they were

defrauding bank).

The government’s documentary evidence, when considered in

light of appellants’ business and legal background, is more than

adequate to establish by a preponderance of the evidence that venue

was proper in the Eastern District of Louisiana.

Finally, Sellers and Dupre allege prosecutorial misconduct in

connection with the government’s remarks about a prospective

defense witness.13 Near the end of the trial, appellants planned

to call Kenneth Pickering, a former Louisiana Banking Commissioner,

to testify on banking practices and regulations. They contend that

Pickering would have testified that fees are commonly paid to loan

brokers, such as Ohanian, and that OTMC and OTSB were legally

distinct entities. The government told the district court that

Pickering was under federal investigation in two unrelated matters

and that the information might be relevant for impeachment purposes

on cross-examination. After inquiring in camera as to the

government’s basis for cross-examination, the court, in turn,

informed Pickering that he might face questioning on the issue.

Pickering later declined to testify as a banking expert. Dupre and

13
Appellants also challenge the district court’s admission of
various pieces of evidence; its instructions relating to willful
blindness; and its refusal to depart downward in its sentencing.
After a review of the record, we conclude that these contentions
are meritless and unworthy of greater discussion.

24
Sellers moved for a mistrial on the grounds of prosecutorial

misconduct or, in the alternative, a recess to find a new banking

expert. Their motions were denied.

We review the denial of a motion for mistrial for abuse of

discretion. See United States v. Bentley-Smith, 2 F.3d 1368, 1378

(5th Cir. 1993). Under the Sixth Amendment, a criminal defendant

has the right to present witnesses to establish his defense without

fear of retaliation against the witness by the government. Webb

v. Texas, 409 U.S. 95, 98 (1972). “[S]ubstantial governmental

interference with a defense witness’ choice to testify may violate

the due process rights of the defendant.” United States v.

Whittington, 783 F.2d 1210, 1219 (5th Cir.), cert. denied, 479 U.S.

882 (1986); see, e.g., United States v. Hammond, 598 F.2d 1008,

1012 (5th Cir. 1979) (reversing because FBI agent told defense

witness that he would have “nothing but trouble” in pending state

prosecution if he persisted in testifying); United States v.

Henricksen, 564 F.2d 197, 198 (5th Cir. 1977) (reversing where

government threatened to void plea bargain if potential witness

testified); United States v. Smith, 478 F.2d 976, 979 (D.C. Cir.

1973) (reversing where government threatened to prosecute witness

if he testified in pending trial). However, no due process

violation exists “so long as the investigation of witnesses is not

prompted by the possibility of the witnesses testifying, and so

long as the government does not harass or threaten them.”

Whittington, 783 F.2d at 1219-20; see United States v. Fricke, 684

F.2d 1126, 1130 (5th Cir. 1982) (finding no due process violation

25
when prosecution told witnesses, during trial, that they were

subjects of grand jury investigation), cert. denied, 460 U.S. 1011

(1983).

The record here does not support appellants’ charges of

prosecutorial intimidation. The government’s investigation of

Pickering was completely unrelated to his prospective testimony.

The district court was entitled to conclude that the government

sought neither to threaten or harass and that the prosecutor’s

remarks to the court were made to advise it of potential lines of

cross-examination. The court’s denial of Sellers and Dupre’s

motion for mistrial for purported prosecutorial misconduct was not

an abuse of discretion.

Likewise, the district court did not abuse its discretion in

refusing to grant a continuance. The denial of a defendant’s

motion for continuance will be reversed only when the district

court abused its discretion and the defendant suffered serious

prejudice. United States v. Scott, 48 F.3d 1389, 1393 (5th Cir.),

cert. denied, 116 S. Ct. 264 (1995). To obtain a continuance on

the grounds of unavailability of a witness, the movant must show

(1) that due diligence was exercised to obtain the attendance of

the witness; (2) that the witness would tender substantial

favorable evidence; (3) that a witness was available and willing to

testify; and (4) that the denial of a continuance would materially

prejudice the defendant. Id. at 1394 (upholding denial of

continuance where defendant failed to demonstrate due diligence in

obtaining expert witness or that testimony would be favorable).

26
Here, the court concluded that Pickering’s testimony was cumulative

in light of the testimony of another defense witness, a former OTSB

employee who testified as to the relationship between OTSB and its

subsidiaries. The court’s denial of a continuance, in light of

this finding, was not an abuse of discretion.

VI.

The government cross-appeals the district court's restitution

order and its ruling on a proposed obstruction of justice

enhancement under the sentencing guidelines with regard to Sellers.

The government raised serious questions about whether Sellers had

concealed assets from the district court through a variety of

financial transactions and sought to present evidence to that

effect. The district court refused to consider the evidence,

concluding that:

to attempt to get into an investigation, an analysis of
whether Mr. Sellers has assets that he failed to report
and whether the amount of those assets that he failed to
report would or would not affect a restitution order
would, I feel, unduly complicate and prolong the
sentencing process. For the record, it has been, I
think, seven or eight months since the trial has been
completed and a number of delays in sentencing and we
need to go forward with that.

After noting that the Resolution Trust Corporation could pursue

civil litigation to discover and recover additional funds on behalf

of the bank, the court declined to determine the total amount of

restitution possible and ordered Sellers to pay partial restitution

of $2,000,000.14

14
The outstanding balanced owed to OTSB was approximately $36
million.

27
The district court acted pursuant to the restitution

provisions of the Victim and Witness Protection Act of 1982 (VWPA),

18 U.S.C. §§ 3663-3664. Under § 3663(a), a court may decline to

order restitution "[t]o the extent that the court determines that

the complication and prolongation of the sentencing process

resulting from the fashioning of an order of restitution under this

section outweighs the need to provide restitution to any victims."

18 U.S.C. 3663(a)(1)(B)(ii); see also U.S.S.G. § 5E1.1(b). Yet,

the VWPA also requires a court to consider defendant's ability to

pay. 18 U.S.C. § 3663(a)(1)(B)(i)(II). The government argues that

the restitution order is erroneous because the "complication and

prolongation" exemption provision does not allow a court to avoid

considering a defendant's financial resources; such a reading, it

contends, would privilege sophisticated defendants who are able to

hide their assets from the court.

The language of the exemption provision gives the district

court a certain amount of discretion in determining whether to

consider additional evidence in assessing restitution. However,

thus far, courts have exercised that discretion infrequently and

only when considering difficult issues of causation or speculative

loss. See, e.g., United States v. Fountain, 768 F.2d 790, 802 (7th

Cir. 1985) (“[P]rojecting lost future earnings has no place in

criminal sentencing if the amount or present value of those

earnings is in dispute.”), cert. denied, 475 U.S. 1124 (1986);

United States v. Bengimina, 699 F. Supp. 214, 218-19 (W.D. Mo.

1988) (refusing to allow “excessive satellite litigation” to

28
evaluate worth of bankrupt corporation because of complicated

issues of proof). Legislative history suggests that § 3663(a) is

directed at avoiding the lengthy resolution of those sorts of

questions. See S. Rep. No. 104-132, at 19, reprinted in 1996

U.S.C.C.A.N. 924, 932 (“[I]t is the committee’s intent that highly

complex issues related to the cause or amount of a victim’s loss

not be resolved under the provisions of mandatory restitution.”).

But the language of § 3663(a) does not limit its application only

to those instances involving causation or loss.

We agree that the discretionary language of the statute may

encompass cases where the assessment of full restitution requires

extensive hearings to determine the defendant’s financial resources

and where, as a result, the sentencing process is inordinately

delayed. The record before us does not indicate the level of

complexity involved in such a determination here. Without a more

fully developed record and specific findings on the complexity of

the issues relating to Sellers’ ability to pay, we are unable to

review the district court’s refusal to consider relevant evidence.

For these reasons, we remand for reconsideration of the

government’s request for an evidentiary hearing and for more

specific findings.

The court’s refusal to consider enhancing Sellers’ sentence

for obstruction of justice, on the other hand, directly conflicts

with the dictates of the Sentencing Guidelines. We review a

sentencing court’s factual findings for clear error and its

application of the Sentencing Guidelines de novo. United States v.

29
Dean, 59 F.3d 1479, 1494 (5th Cir. 1995), cert. denied, 116 S. Ct.

794 (1996). Section 3C1.1 of the U.S. Sentencing Guidelines

instructs the court:

If the defendant willfully obstructed or impeded, or attempted
to obstruct or impede, the administration of justice during
the investigation, prosecution, or sentencing of the instance
offense, increase the offense level by 2 levels.

U.S. Sentencing Guidelines Manual § 3C1.1 (1995). One of the

examples of the types of conduct to which the enhancement applies

includes “providing materially false information to a probation

officer in respect to a presentence or other investigation for the

court.” § 3C1.1 comment. (n.3(h)). The commentary defines

“material” information as information “that, if believed, would

tend to influence or affect the issue under determination.” §

3C1.1 comment. (n.5). This court has recognized that “[t]he

application of § 3C1.1 is not discretionary.” See United States v.

Humphrey, 7 F.3d 1186, 1189 (5th Cir. 1993) (remanding for factual

finding on whether defendant had committed perjury).

The district judge refused to consider evidence supporting an

obstruction of justice enhancement. Because she had already

decided not to order full restitution, she concluded that any

evidence that Sellers misrepresented his financial resources would

be immaterial. We disagree. “A statement to a probation officer

concerning one’s financial resources will obviously affect the

officer’s determination of ability to pay.” United States v.

Cusumano, 943 F.2d 305, 316 (3d Cir. 1991), cert. denied, 502 U.S.

1036 (1992). In fact, the probation officer in this case told the

court that, “had I discovered there was additional properties out

30
there I would have changed my Pre-Sentence Report to a two point

enhancement. I also would have made a recommendation for much

higher restitution.” Because we are not persuaded that Sellers’

alleged misrepresentations to the probation officer were

immaterial, we remand for specific factual findings. To resolve

this enhancement issue, the district court need not necessarily

conduct a full-blown evidentiary hearing to fully unravel Sellers’

various financial transactions; rather, it must simply ascertain

whether he misrepresented the nature and extent of his financial

resources to the probation officer such that an enhancement is

warranted.

VII.

In sum, we affirm the convictions of Seller and Dupre on all

counts. As to Dupre, we also affirm his sentence. However, we

vacate Sellers’ sentence and remand for reconsideration of his

restitution order and the government’s proposal to enhance Sellers’

sentence for obstruction of justice.

Accordingly, the judgment of the district court is AFFIRMED in

part, VACATED in part, and REMANDED for further proceedings

consistent with this opinion.

31
DENNIS, Circuit Judge, concurring in part and dissenting in part.

I respectfully concur in the majority opinion in affirming the

convictions, except that I have difficulty with assuming that the

district court committed error in failing to submit the issue of

materiality to the jury in its bank fraud instruction without

correlatively assuming that materiality is an element of the

offense and that the error is now plain. Nevertheless, I concur in

the majority’s result because I do not believe that, under a

complete analysis of the circumstances of the present case, the

error affected the defendants’ substantial rights or seriously

affected the fairness, integrity, or public reputation of the

judicial proceedings.

I respectfully dissent from the majority’s decision to vacate

Sellers’ sentence and remand for reconsideration of the restitution

order. As the majority opinion indicates, 18 U.S.C.

§3663(a)(1)(B)(ii) states that “[t]o the extent that the court

determines that the complication and prolongation of the sentencing

process resulting from the fashioning of an order of restitution

under this section outweighs the need to provide restitution to any

victims, the court may decline to make such an order.” This

provision makes it clear that restitution may be declined to the

extent that the court finds that the difficulties in fashioning an

order outweigh the need for restitution. See U.S.S.G. § 5E1.1(b);

32
U.S. v. Smith, 944 F.2d 618, 622-23 (9th Cir. 1991), cert. denied,

503 U.S. 951 (1992); see also U.S. v. C. R. Bard, Inc., 848 F.Supp.

287, 292 (D. Mass. 1994); William M. Acker, Jr., Making Sense of

Victim Restitution: A Critical Perspective, 6 Fed. Sent. R. 234

(1994). Considering the multiple delays and extended period

covered by the sentencing hearing prior to the government’s proffer

of new evidence and the additional complication and prolongation of

the sentencing process portended thereby, the district court’s

determination that the difficulties entailed in allowing the

opening of new areas of litigation outweighed the need for

additional restitution was reasonable and not an abuse of

discretion.

I qualifiedly concur in the majority’s decision to vacate and

remand with respect to the government’s proposal to enhance

Sellers’ sentence. Like the majority, I have been unable to

determine whether the alleged false statement was material.

Section 3C1.1 of the Guidelines provides that “[i]f the defendant

willfully obstructed or impeded, or attempted to obstruct or

impede, the administration of justice during the investigation,

prosecution, or sentencing of the instant offense, increase the

offense level by 2 levels.” Application Note 3 thereunder, in

pertinent part, provides: “The following is a non-exhaustive list

of examples of the types of conduct to which this enhancement

applies: . . . (h) providing materially false information to a

probation officer in respect to a presentence or other

investigation for the court.” Application Note 5 states:

33
“‘Material’ evidence, fact, statement, or information, as used in

this section, means evidence, fact, statement, or information that,

if believed, would tend to influence or affect the issue under

determination.” The alleged false statement would not have been

material if the only issue before the court for determination that

might have been affected by it was the question of additional

restitution, which the district court had reasonably foreclosed in

order to avoid excessive prolongation and complication of the

sentencing process. United States v. Cusumano, 943 F.2d 305, 316

(3d Cir. 1991), cert. denied, 502 U.S. 1036 (1992), may be

inapposite because the misstatement of ability to pay there tended

to affect the probation officer’s recommendation as to fines, an

issue still under determination. On the other hand, the alleged

false statement in the present case would be material if there were

other issues still under determination that the alleged false

statement, if believed, would tend to affect.