United States v. Loe

UNITED STATES COURT OF APPEALS
For the Fifth Circuit

No. 99-41372

UNITED STATES OF AMERICA,

Plaintiff-Appellant,

VERSUS

HENRY BLUME LOE,

Defendant-Appellee.

No. 99-41506

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

VERSUS

HENRY BLUME LOE,

Defendant-Appellant.

Appeals from the United States District Court
for the Eastern District of Texas

August 15, 2001
Before REAVLEY, SMITH, and DeMOSS, Circuit Judges.
DeMOSS, Circuit Judge:

In April 1998, a multi-count, superseding indictment was

returned against several individuals including Defendant Henry

Blume Loe (“Blume Loe”). Among the various counts charged against

Blume Loe were those for conspiracy to defraud the United States,

submitting false statements, and tax fraud. After several weeks of

trial, a jury convicted Blume Loe of all ten counts that were

charged against him, but the district court ultimately granted a

judgment of acquittal with respect to five of the counts.

On appeal, the government seeks a reversal of the district

court’s judgment of acquittal. Blume Loe cross-appeals, hoping to

reverse his remaining convictions and sentences. For the following

reasons, we affirm the convictions and sentences assessed against

Blume Loe, but reverse the district court’s judgment of acquittal.

I. BACKGROUND

In 1946, the Loe family started Loe’s Highport, Inc. (“LHI”),

a marina located on Lake Texoma on property leased from the United

States Army Corps of Engineers (“COE”). At the times pertinent to

these appeals, Cornelius Dewitte Loe, Jr. (“C.D. Loe”), and Babo

Beazley Loe (“Babo Loe”) operated LHI. Of their three sons, only

Blume Loe worked at the marina. Neither Cornelius Dewitte Loe,

III, nor William Loe played a significant role in the marina’s

operations, and neither was charged with any criminal activity in

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the indictment.

In 1996, the Federal Bureau of Investigation executed a search

warrant on the marina facilities of LHI, which later culminated in

the multi-count indictment against Blume Loe, C.D. Loe, Babo Loe,

and others. Not all of the counts were pressed against all of the

defendants. Thereafter, the district court partially granted a

motion to sever, and a trial on some of the counts against some of

the defendants occurred. That first trial pertained to Counts 17,

22-25, and 29-31 of the multi-count indictment and did not involve

Blume Loe. The second trial concerned the remaining counts and

included Blume Loe as a defendant. Approximately five weeks into

the second trial, however, one of Blume Loe’s attorneys became ill

and was unable to proceed. As a result, the district court severed

Blume Loe’s case and continued the trial with the remaining

defendants.

When the government finally proceeded with the third trial

against Blume Loe, he faced ten criminal counts, generally grouped

into three categories. First, Counts 1-5 charged Blume Loe with

conspiracy to defraud the COE and related substantive acts of

submitting false statements. Under the lease agreement with the

COE, LHI owed rent based upon a percentage of the gross receipts of

its business. LHI reported the rent to be paid on a COE form

called the “Graduated Rent System Rental Computation Form.” Count

1 alleged that Blume Loe entered into a conspiracy to defraud the

COE by submitting false rental numbers, and Counts 2-5 complained

3
of individual substantive acts of submitting false statements.

Second, Counts 12-15 charged Blume Loe with making false statements

on his personal income tax returns for the 1992-95 tax years. The

government maintained that in the returns for those years, Blume

Loe underreported his income and did not include as compensation

thousands of dollars that he received from an off-the-books account

of LHI. Third, Count 16 charged Blume Loe with failing to file a

Form 8300, a document required to be filed with the Internal

Revenue Service whenever a person receives $10,000 or more in cash

or cash equivalents in a business transaction. Specifically, the

government alleged that Blume Loe sold a boat to Gene DeBullet in

or around November 1994 for $21,000 in cash and that Blume Loe

failed to file a Form 8300 reporting that transaction.

The jury convicted Blume Loe on all counts, but the district

court granted a judgment of acquittal with respect to Counts 1-5.1

In general, the district court held that there was no evidence that

Blume Loe had anything to do with completing or filing the rental

reports with the COE or in supervising those persons who did. The

government filed this appeal to seek review of that judgment.

Blume Loe cross-appeals, maintaining that: 1) there was

insufficient evidence to support his convictions for the other five

counts; 2) the district court erred in calculating his sentence; 3)

1
Blume Loe moved for a judgment of acquittal on all counts after
the close of the government’s case in chief. The district court
took the matter under advisement and filed an order three months
after trial had ended.

4
the district court made improper evidentiary rulings; and 4) the

district court should have granted his motion for a mistrial based

on prejudicial communications between the jurors and others.

II. DISCUSSION

A. Counts 1-5

The government maintains that the district court erred in

granting Blume Loe’s motion, pursuant to Rule 29, for a judgment of

acquittal on Counts 1-5. When reviewing such a decision, we give

no deference to the district court’s ruling. United States v.

Baytank (Houston), Inc., 934 F.2d 599, 616 (5th Cir. 1991).

Instead, we review de novo a district court’s grant of a judgment

of acquittal, applying the same standard as the district court.

United States v. Sanchez, 961 F.2d 1169, 1179 (5th Cir. 1992).

That standard asks whether a reasonable jury could conclude that

the relevant evidence, direct or circumstantial, established all of

the essential elements of the crime beyond a reasonable doubt when

viewed in the light most favorable to the verdict. See United

States v. Scott, 159 F.3d 916, 920 (5th Cir. 1998). The standard

does not require that the evidence exclude every reasonable

hypothesis of innocence or be wholly inconsistent with every

conclusion except that of guilt, provided a reasonable trier of

fact could find that the evidence establishes guilt beyond a

reasonable doubt. Baytank, 934 F.2d at 616. “‘A jury is free to

5
choose among reasonable constructions of the evidence.’” Id.

(quoting United States v. Bell, 678 F.2d 547, 549 (5th Cir. Unit B

1982) (en banc)). And it retains the sole authority to weigh any

conflicting evidence and to evaluate the credibility of the

witnesses. United States v. Millsaps, 157 F.2d 989, 994 (5th Cir.

1998).

As previously noted, Count 1 alleged that Blume Loe, his

mother Babo Loe, and others entered into a conspiracy to defraud

the COE by submitting false rental numbers, in violation of 18

U.S.C. § 371, and Counts 2-5 complained of individual substantive

acts of submitting false statements, in violation of 18 U.S.C. §

1001.2 The crux of those five charges pertained to the conspiracy

charge as the individual substantive act counts were predicated on

Pinkerton v. United States, 328 U.S. 640 (1946).3 To establish a

violation of 18 U.S.C. § 371, the government must establish beyond

a reasonable doubt: 1) that two or more people agreed to pursue an

2
The indictment also referred to the aiding and abetting statute,
18 U.S.C. § 2.
3
“In Pinkerton, the Supreme Court held that ‘a party to a
conspiracy may be held responsible for a substantive offense
committed by a coconspirator in furtherance of a conspiracy, even
if that party does not participate in or have any knowledge of the
substantive offense.’” United States v. Gobert, 139 F.3d 436, 439
n.22 (5th Cir. 1998) (quoting United States v. Jensen, 41 F.3d 946,
955-56 (5th Cir. 1994)). Blume Loe’s liability for the substantive
offenses appears to be based on his coconspirators’ actions, which
were apparently clear violations of 18 U.S.C. § 1001. Blume Loe
does not challenge the government’s reliance on Pinkerton for
Counts 2-5.

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unlawful objective; 2) that the defendant voluntarily agreed to

join the conspiracy; and 3) that one or more members of the

conspiracy committed an overt act in furtherance of the conspiracy.

United States v. Dien Duc Huynh, 246 F.3d 734, 745 (5th Cir. 2001).

Here, the district court generally observed that “[t]here is

no evidence that Henry Blume Loe had anything to do with completing

or filing the rental reports with the Corps of Engineers or

supervised those persons who did.” It further recited the

substance of various aspects of the government’s evidence: 1)

testimony and written job descriptions indicating that Blume Loe

had an important role and major duties at LHI; 2) testimony stating

that Blume Loe was brought in to run the business; 3) testimony

observing Blume Loe’s attendance in Babo Loe’s office discussing

marina business; 4) and testimony from Marie Ward, a coconspirator

of Babo Loe’s, that Blume Loe returned from a meeting with the COE

and stated certain possibly incriminating statements. Despite the

standard of review afforded motions for judgments of acquittal, the

district court found the evidence insufficient. Ultimately, the

district court seemed persuaded by the fact that there was no

direct evidence of Blume Loe’s participation in accounting

functions and by the fact that, regardless of any title held by

Blume Loe, the bulk of the evidence showed that Babo Loe ran the

marina.

Babo Loe’s management of LHI, however, does not mean that

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Blume Loe did not or could not have entered into a conspiracy as to

the underreporting of boat sales. Admittedly, none of the evidence

presented to the jury directly linked Blume Loe with the COE

reports. The government’s case clearly rested on circumstantial

evidence. We, however, do not differentiate between direct and

circumstantial evidence when reviewing a grant of a judgment of

acquittal. See Scott, 159 F.3d at 920. The key issue then is

whether the circumstantial evidence established all of the

essential elements of the crime beyond a reasonable doubt, and we

must draw all reasonable inferences from that evidence in favor of

the verdict.

Doing so, we find that the evidence cited by the district

court, and the evidence it did not mention, sufficient to convict

Blume Loe of a § 371 violation. A reasonable inference from the

testimony about Blume Loe being the “heir apparent” of the marina

business and from the job descriptions and other evidence

indicating Blume Loe’s level of responsibility at the marina is

that he knew about the underreporting of boat sales.4 It is not

unreasonable to infer that a son presumed to be the next head of

the corporation would probably know what is going on with the

affairs of that business, especially in light of his frequent

4
One of the descriptions denoted his responsibilities as
including 1) the supervision of employees in all departments, 2)
the review of weekly payroll and sales reports, and 3) the review
of monthly corporate financial statements.

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meetings with the parent that supposedly ran the business.

Furthermore, the jury could have reasonably concluded that Babo Loe

would not have sent Blume Loe to meet with the COE, where the

parties talked about matters such as future development and the new

lease format, unless he had some knowledge regarding the reporting

of boat sales. And most importantly, a reasonable inference from

Ward’s testimony about the statements made by Blume Loe after he

returned from meeting with the COE is that he knew about LHI’s

underreporting. Ward testified on direct testimony that after

returning from the COE meeting in Tulsa, Blume Loe said that “the

Corps told him that everyone kept two sets of books.” On cross,

she responded positively to defense counsel’s question as to

whether Blume Loe told her that the COE stated that LHI was due a

refund because LHI had been overpaying for brokerage boats and that

he wanted her to go back and try to calculate the refund. Later on

re-direct, Ward elaborated, stating that she told Blume Loe that

she did not have time and that the recalculation “wouldn’t offset

the other changes [LHI] had already made.” By “other changes,”

Ward meant prior underreporting by LHI. The jury could have

reasonably inferred that Ward’s statement that any new calculations

would not offset the previous other changes reflected a common

knowledge and tacit agreement by the parties involved in the

underreporting. There is no evidence showing that Ward had to

define “other changes” to Blume Loe or that Blume Loe responded in

any fashion demonstrating innocence. Rather, the evidence in the

9
record seems to suggest that Blume Loe accepted, without challenge,

Ward’s comments. Thus, even the evidence recited by the district

court could reasonably create the inference in the minds of the

jurors that Blume Loe knew of and was involved in the reporting of

the COE forms.

What is also equally damning of Blume Loe is the evidence that

the district court failed to discuss in its order. Besides failing

to note that Blume Loe sought the COE meeting, where the parties

discussed future development and the new lease format, the district

court did not evaluate in its order Blume Loe’s control and access

over the bank account where LHI kept the proceeds of the boat sales

that were not reported to the COE, and which he definitely utilized

for personal purposes. With respect to that latter fact, a jury

could have reasonably inferred that a person utilizing thousands of

dollars from a bank account would have had some knowledge of how

that money got there and had some direction in the money’s

procurement.

We recognize that some of the circumstantial evidence in

isolation can be read to suggest a possibility other than guilt.

But when viewed in the light most favorable to the verdict, neither

the total composition of that evidence nor certain items, such as

Blume Loe’s control over the off-the-books bank account and his

statements to Ward after the COE meeting, seem to suggest an

equally viable theory of innocence. So long as a reasonable trier

of fact could find that the evidence established guilt beyond a

10
reasonable doubt, the evidence need not exclude every reasonable

hypothesis of innocence or be wholly inconsistent with every

conclusion except that of guilt. Baytank, 934 F.2d at 616. That

is the case here, and the jury was free to choose among the

reasonable constructions of the evidence: one of which was

consistent with Blume Loe’s guilt. Id. Therefore, we reverse the

district court’s grant of a judgment of acquittal; we direct that

the district court reinstate the jury’s guilty verdict on Counts 1-

5; and we remand for sentencing proceedings consistent with these

determinations.

B. Counts 12-15

On his cross-appeal, Blume Loe questions the sufficiency of

the evidence with respect to his convictions for Counts 12-15.

Those counts charged Blume Loe with making false statements on his

personal income tax returns for the 1992-95 tax years, in violation

of 26 U.S.C. § 7206(1).5 During each of those years, besides his

normal salary compensation, Blume Loe received approximately

$90,000, which he used to pay the premiums on a life insurance

policy on Babo Loe. He also received various smaller amounts,

which were not utilized for the life insurance premiums. The

5
To establish a violation of § 7206(1), the government must show
that 1) the accused willfully made and subscribed to a tax return,
2) the return contained a written declaration that it was made
under penalties of perjury, and 3) the accused did not believe that
the return was true as to every material matter. United States v.
Mann, 161 F.3d 840, 848 (5th Cir. 1998).

11
monies given to Blume Loe came from the off-the-books account, into

which LHI diverted sales income that it did not report to the COE.

Blume Loe’s tax returns did not include the extra monies as income.

According to Blume Loe, the government did not establish a

violation of § 7206(1) because it failed to prove 1) that the extra

monies constituted compensation or taxable income and 2) that he

knew that the income was taxable income.

We need not expend too much energy on Blume Loe’s arguments as

they are unavailing. The government introduced substantial

evidence reflecting Blume Loe’s guilt. First, Babo Loe maintained

“commission files” that indicated that much of the additional

monies received by Blume Loe were commission payments, i.e.,

taxable income. Second, several government exhibits showed that

Blume Loe claimed a salary in excess of $100,000 a year, far more

than the $52,000 that he noted on his income tax returns. Third,

after the government began its investigation of LHI and the Loes,

Blume Loe’s 1996 W-2 form suddenly complied with the greater income

figures, reporting that he made in excess of $100,000. Fourth,

Blume Loe left a job making more than $100,000 a year to come work

at LHI. The jury could have reasonably inferred that Loe would not

have taken a 50% pay cut unless other remuneration would be

provided. Fifth, the jury could have reasonably concluded that

based on the fact that Blume Loe oversaw the sales department and

reviewed the salesmen’s commissions and the fact that he himself

was eligible for those commissions, Blume Loe knew that he would

12
receive more than the reported $52,000 salary. Finally, the jury

could have reasonably inferred from LHI’s and the Loes’

underreporting of boat sales that LHI would need a way to dispose

of some of the extra funds and that under-the-table money to Blume

Loe would be a good candidate for such funds. In light of all the

proffered evidence, we believe that sufficient evidence existed for

the convictions on Counts 12-15.

C. Count 16

Blume Loe also appeals his conviction on Count 16, which

charged Blume Loe with failing to file a Form 8300, a document

required to be filed with the Internal Revenue Service whenever a

person receives $10,000 or more in cash or cash equivalents in a

business transaction, in violation of 26 U.S.C. §§ 6050I(a) and

7203. Specifically, the government alleged that Blume Loe sold a

boat to Gene DeBullet in or around November 1994 for $21,000 in

cash and that Blume Loe failed to file a Form 8300 reporting that

cash transaction. In his brief, Blume Loe generally contends that

the evidence was insufficient because he was not present during the

actual cash transaction nor directed anyone not to file the form.

Instead, he maintains that he told Ward to write out a receipt for

DeBullet.

13
 Having reviewed the considerable evidence proffered by the

government, however, we find Blume Loe’s argument meritless.

Although he initially contends, and points to evidence, that he was

not the one who received the cash from DeBullet for the boat sale,

other testimony contradicts that view. We must defer to the jury’s

assessment of credibility and accept its apparent belief that Blume

Loe obtained the cash from DeBullet and then gave it to Ward. The

evidence clearly established that before the DeBullet sale, Blume

Loe knew about the reporting requirement, that he had personally

made boat sales exceeding $10,000 in cash, and that he had

attempted to divert those funds so as to escape the reporting

requirement. Furthermore, the evidence revealed that Blume Loe

lied to the IRS about not having done cash sales greater than

$10,000, that he refused to turn over records to the IRS, and that

neither he nor LHI had ever filed a Form 8300 on sales exceeding

$10,000. Thus, at the time of the DeBullet sale, the evidence

suggested that the jury could reasonably infer that Blume Loe had

the intent and knowledge to do the crime.

Of course, Blume Loe insists that he bears no responsibility

because he instructed Ward to document the transaction and because

he never told her not to do the Form 8300. But asking Ward to

document the sale does not mean that he wanted her to do the form.

Instead, the record indicates that LHI’s routine was not to file

the Form 8300; hence, a reasonable inference could have been that

Blume Loe was relying upon Ward to do the regular thing and not

14
file it. In any case, evidence showed that Blume Loe was the

person responsible for filing the Form 8300, and he cannot escape

blame for failing to do that act. Accordingly, we reject his

sufficiency of the evidence challenge as to Count 16.

D. Evidentiary Rulings

Besides his sufficiency of the evidence claims, Blume Loe

argues that the district court committed an “identifiable pattern

of consistently erroneous evidentiary rulings that disregarded the

evidentiary requirements and resulted in cumulative error that was

harmful in nature.” He charges that the district court “repeatedly

allowed summary witnesses with no personal knowledge whatsoever of

the events at issue to testify as to documents about which they had

no personal knowledge.” In addition, Blume Loe contends that the

district court admitted documents that were never properly

authenticated and that were never shown to be admissible business

records.

We review a district court’s evidentiary rulings for abuse of

discretion. United States v. Wilson, 249 F.3d 366, 374-75 (5th

Cir. 2001). After reviewing Blume Loe’s specific allegations, the

district court’s rulings, and the applicable law, we find no such

abuse. Accordingly, the district court’s evidentiary rulings are

affirmed.

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E. Alleged Sentencing Errors

Blume Loe also avers that the district court erred in its

calculation. With respect to that claim, he points to several

purported mistakes. First, Blume Loe maintains that the money he

received and then used to pay the life insurance premiums each

year should not have been included in the tax loss calculation for

1993-95. Second, he argues that the district court erred in

evaluating LHI’s purchase of a home in 1990 on his behalf as

relevant conduct and in including the “tax due” on that house in

the tax loss calculation. Third, Blume Loe believes that the

district court’s decision to include the value of the home as

taxable income for the tax loss calculation violated the holding of

Apprendi v. New Jersey, 120 S. Ct. 2348 (2000).6 Fourth, Blume Loe

challenges the district court’s inclusion in its tax loss

calculation $34,314.92 that Babo Loe’s notes indicate were paid

“tax-free” to Blume Loe. He states that the evidence is unclear as

to whether he received the money and that Babo Loe’s intent was to

give the funds tax-free. Finally, Blume Loe contends that the

district court wrongly utilized a 34% corporate tax rate in

calculating the tax loss, rather than the applicable 28% rate.

We review the district court's interpretation and application

of the sentencing guidelines de novo. United States v. Hill, 42

6
Apprendi held that any fact, other than a prior conviction, that
increases the penalty for a crime beyond the prescribed statutory
maximum must be submitted to a jury. 120 S. Ct. at 2363-64.

16
F.3d 914, 916 (5th Cir. 1995). On the other hand, factual findings

of the district court, such as what constitutes relevant conduct,

must be supported by a preponderance of the evidence and are

reviewed for clear error. United States v. Nevels, 160 F.3d 226,

229 (5th Cir. 1998). An amount of loss finding is also reviewed

for clear error. Hill, 42 F.3d at 919.

Upon reviewing Blume Loe’s arguments, the record, and the

applicable law, we find his points of error unavailing. With

respect to his first point, it resembles his sufficiency of the

evidence claims against Counts 12-15. We previously found the

evidence sufficient for Counts 12-15; and here, despite the

different standard, we find no clear error in the district court’s

assessment to include the $90,000 per year payments in the tax loss

calculation. Likewise, we do not believe that the district court

clearly erred in including the home and its value. The evidence

revealed that Blume Loe “took” a substantial pay cut to come to

LHI, and the district court could have reasonably inferred that the

house was intended to be additional compensation. That finding is

buttressed by the fact that Blume Loe’s compensation suddenly

jumped after the government began its investigation of LHI and the

Loes. The district court could reasonably infer from that sudden

jump that Blume Loe’s actual compensation in the earlier years

included the value of the home and that he was merely not reporting

it. Additionally, including the home’s value as relevant conduct

17
did not amount to an Apprendi violation. Contrary to Blume Loe’s

assertion, the district court’s consideration of the home’s value

did not result in a sentence in excess of the statutory maximum.

Blume Loe received a sentence well within the three-year statutory

maximum for a violation of § 7206(1). As for Blume Loe’s

contention that the district court should not have included the

$34,314.92 that Babo Loe purportedly gave tax-free, we again

conclude that the district court did not clearly err. That sum was

part of the amount that formed the basis of Count 14, and the

government meticulously traced the checks and the funds that

comprised virtually all of the contested amount to LHI corporate

funds. Finally, we see no support for Blume Loe’s argument that

the district court applied an incorrect tax rate. The revised

presentence report reflects application of a 28%, not 34%, tax

rate. In light of the preceding, we conclude that Blume Loe’s

contentions with respect to his sentence are without merit.

F. Mistrial

The final item in Blume Loe’s cross-appeal relates to the

district court’s denial of his motion for a mistrial based on

allegations of juror misconduct. We review such denials for abuse

of discretion. United States v. Denman, 100 F.3d 399, 405 (5th

Cir. 1996).

Here, two allegedly improper contacts with the jury occurred.

In the first incident, one of the bailiffs essentially told the

18
jurors that the present case had been previously tried with other

defendants, that the case had to be severed because of health

problems associated with one of the defense counsel, that the

district court believed that the case should be decided within

three weeks, and that the trial could last much longer if it did

not end in three weeks. Upon learning of the possible length of

the trial, the jurors all groaned. In the second incident, a juror

ran into one of the government’s witnesses during lunch. That

witness told the juror that he was testifying for the second time

due to the prior trial being called off because of a defense

counsel’s heart attack. When the district court became aware of

the two incidents, it conducted interviews with each juror. The

district court found no prejudice and continued with the trial,

although it did remove the offending bailiff.

Blume Loe contends that through the contacts, inadmissible

information reached the jury, abridging his Sixth Amendment right

to confront the evidence against him and resulting in convictions

based in part on guilt by association. We disagree. None of the

communications arising from the contacts were material or

prejudicial. They did not inform the jurors about the outcome of

the prior trial nor did they cast any aspersions on Blume Loe or

the other defendants in the prior trial. Furthermore, the

communications did not concern any facts that would necessarily

have been a focus of cross-examination by the defendant.

Consequently, we conclude that the district court did not abuse its

19
discretion in denying Blume Loe’s motion for a mistrial based on

allegations of juror misconduct.

III. CONCLUSION

For the foregoing reasons, we affirm the convictions for

Counts 12-15 and for Count 16; we reverse the grant of a judgment

of acquittal on Counts 1-5; we direct that the district court

reinstate the jury verdict of guilty on Counts 1-5; and we remand

the case for resentencing consistent with this opinion.

20