IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 96-50958
UNITED STATES OF AMERICA
Plaintiff-Appellee,
versus
TAMMY DENISE MORROW; LARRY WAYNE MEINZER;
ALICE MARIE BARBER, also known as Alice
Marie Turner, also known as Alice Marie
Rogers; SAMANTHA GRAHAM DAVIS, also known
as Sammie Davis, also known as Samantha
L. Davis, also known as Sammie L. Davis;
ARNOLD GENE TROUT, also known as Gene
Trout; MASON LONG; DARRELL PAUL FREEMAN,
also known as Paul Freeman; JAMES MICHAEL
CALDWELL, also known as Mike Caldwell;
PATRICK GENE MALMSTROM, also known as Rick
Malmstrom; BILLY WAYNE COX, JR., also known
as Billy Cox; MAX WAYLAN CAIN, SR.
Defendants-Appellants
Appeals from the United States District Court
for the Western District of Texas
May 25, 1999
Before HIGGINBOTHAM, JONES, and WEINER, Circuit Judges.
PER CURIAM:
Eleven defendants appeal convictions of conspiring and aiding
and abetting bank fraud in the financing of A-1 mobile homes. The
central purpose of the scheme was to obtain bank financing for
customers who had not made adequate cost down payments. We affirm
all the judgments of conviction but vacate the sentence of eight
defendants and remand for resentencing.
I
Count 1 of the indictment charged that from about November 3,
1986 until about February 1, 1990 the defendants conspired to
commit bank fraud in violation of 18 U.S.C. §§ 371 and 1344(2).
The indictment listed 43 overt acts relating to various mobile home
sales transactions by the defendants. These overt acts were also
alleged under Counts 2 through 13 in the indictment as substantive
counts of bank fraud against each of the defendants. Count 14
alleged that Mason Long committed bank fraud in an effort to obtain
financing for the purchase of mobile homes, in violation of 18
U.S.C. §§ 371 and 1344(2). Count 15 alleged that Mason Long, Billy
Cox, and Max Cain participated in the financing bank fraud scheme
in violation of 18 U.S.C. §§ 371 and 1344(2). Count 16 alleged
that Billy Cox and Max Cain defrauded a bank of $15,000 to start a
company called “Slow and Easy,” in violation of 18 U.S.C. §§ 371
and 1344(1).
The defendants were tried together and all were convicted of
one or more counts. We summarize the convictions:
Alice Barber, an A-1 sales representative and manager in
Bryan, Texas, was convicted of conspiracy to commit bank fraud
(Count 1) and aiding and abetting bank fraud (Count 4).
2
Max Cain, the vice-president of Home Savings, Banc Home, and
HSA Mortgage Company, was convicted of bank fraud (Count 1) and two
counts of bank fraud and aiding and abetting bank fraud (Counts 2
and 15).
James Caldwell, an A-1 sales representative in Nacogdoches,
Texas, was convicted of conspiracy to commit bank fraud (Count 1)
and aiding and abetting bank fraud (Count 10).
Billy Cox, owner of A-1 mobile home franchises, was convicted
of bank fraud (Count 1) and two counts of bank fraud and aiding and
abetting bank fraud (Counts 3 and 15).
Sammy Davis, an A-1 sales representative in Bryan, Texas, was
convicted of aiding and abetting bank fraud (Count 7).
David Freeman, an A-1 sales representative in Bryan, Texas,
was convicted of conspiracy to commit bank fraud (Count 1) and
aiding and abetting bank fraud (Count 8).
Mason Long, partner to Billy Cox, was convicted of bank fraud
(Count 1) and two counts of bank fraud and aiding and abetting bank
fraud (Counts 14 and 15).
Pat Malmstrom, an A-1 sales representative in Waco, Texas, was
convicted of conspiracy to commit bank fraud (Count 1) and aiding
and abetting bank fraud (Count 12).
Tammy Morrow, an A-1 sales representative in Nacogdoches,
Texas, was convicted of aiding and abetting bank fraud (Count 11).
Larry Meinzer, an A-1 sales representative in Waco, Texas, was
convicted of aiding and abetting bank fraud (Count 13).
Gene Trout, an A-1 sales representative in Bryan, Texas, was
convicted of conspiracy to commit bank fraud (Count 1) and aiding
and abetting bank fraud (Count 9).
II
Bank fraud under 18 U.S.C. § 1344 requires proof beyond a
reasonable doubt that the defendants knowingly executed or
attempted to execute "a scheme or artifice – (1) to defraud a
financial institution; or (2) to obtain any of the moneys, funds,
3
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." To
establish a conspiracy violation under 18 U.S.C. § 371, the
Government had to prove beyond a reasonable doubt: "(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.
Dupre, 117 F.3d 810, 820 (5th Cir. 1997) (holding evidence of
cooperative effort sufficient to support convictions for conspiracy
to commit bank fraud), cert. denied, --- U.S.---, 118 S. Ct. 857
(1998). A defendant may be convicted for aiding and abetting the
commission of a crime if he was “‘associated with a criminal
venture, participated in the venture, and sought by his action to
make the venture succeed.’” United States v. Parekh, 926 F.2d 402,
406 (5th Cir. 1991) (quoting United States v. Holcomb, 797 F.2d
1320, 1328 (5th Cir. 1986)).
III
The Government urges that it proved that Cox, Long, and Cain
directed a “far reaching scheme to fraudulently obtain the funds of
the Bank.” Billy Cox directed the activities at the various A-1
lots, and Max Cain worked to keep the fraudulent loan practices
hidden. Mason Long delivered the mobile homes and instructed
customers not to tell the bank that their reported down payments
had been inflated. The other defendants, managers and sales
4
representatives from different lots, collected information from
customers with the knowledge that the information would be used to
prepare fraudulent loan packages for the sale of mobile homes.
Defendants Max Cain, James Caldwell, Samantha Davis, David
Freeman, Mason Long, Pat Malmstrom, Tammy Morrow, Larry Meinzer,
and Gene Trout argue insufficiency of the evidence. We apply the
familiar standard, asking whether a "reasonable trier of fact could
have found that the evidence established guilt beyond a reasonable
doubt." United States v. Mergerson, 4 F.3d 337, 341 (5th Cir.
1993). 1
Max Cain argues that there is insufficient evidence to support
his conviction of Count 2; that while he may have violated 18
U.S.C. § 656 (theft, embezzlement, or misapplication by a bank
officer) by selling mobile homes out of trust (pocketing the loan
repayment), there was no evidence that he defrauded the bank or
misrepresented any facts to it. Cain also argues that the evidence
was insufficient to support his conviction to aid and abet bank
fraud in Counts 2 and 15 because the Government did not prove that
he shared any criminal intent with Richard White or Billy Cox,
purchasers of trailers.
The Government produced evidence showing that Cain actively
and knowingly participated in the scheme to defraud the bank by
hiding A-1's fraudulent practices. It urges that Max Cain
instructed Richard White to falsely complete various financing
forms used in sales of mobile homes. The evidence also showed that
5
Cox, Cain, and Long worked together to obtain money to purchase a
set of mobile homes under a floor plan. The request for funds
exceeded the actual cost of the homes. The three split the excess
money. Viewing this evidence in the light most favorable to the
Government, a rational jury could conclude beyond a reasonable
doubt that Max Cain conspired and aided and abetted the commission
of such fraud.
James Caldwell was a sales representative in Nacogdoches from
February 4, 1988 until September 1, 1988. He argues that the
evidence against him was insufficient to support his convictions;
that the Government failed to prove a single conspiracy as alleged
in the indictment, or that he joined any conspiracy.
The Government presented evidence showing that Caldwell
participated in the preparation of false down payments and credit
applications. For instance, Tim Howard, the sales manager at the
lot at which Caldwell worked, testified that Caldwell reported
document falsification to him pertaining to sales Caldwell made
because Howard would handle any calls from the bank regarding the
applications. Janna Kimbrough also testified that Caldwell
participated in the scheme to defraud the bank. Viewing this
evidence in the light most favorable to the Government, a rational
jury could conclude beyond a reasonable doubt that James Caldwell
conspired and aided and abetted the commission of fraud.
Billy Cox contends that the evidence was insufficient to prove
a violation of 18 U.S.C. § 1344(2) in Count 15 pertaining to 16
6
mobile homes purchased from the Stark Brothers under a bank floor
plan, a plan for financing of mobile homes. Cox argues that this
court has held that § 1334(2) requires “a material
misrepresentation to the bank.” United States v. Campbell, 64 F.3d
967, 975 (5th Cir. 1995). He asserts there were no
misrepresentations. He admits funds may have been misapplied
contrary to 18 U.S.C. § 656, or that there was evidence of a scheme
to defraud a financial institution, prohibited by § 1334(1).
The Government accepts Cox’s legal reasoning regarding any
variance between the indictment and the proof at trial. The
indictment alleges that Cox, Cain, and Long lied about the actual
cost of the floor plan in order to split the excess loan proceeds.
The Government’s evidence, however, did not demonstrate that these
defendants lied about the cost of the 16 mobile homes purchased
from Stark Brothers. It does show that the bank loaned $122,899,
which was 60% of the wholesale value, otherwise known as N.A.D.A.
cost of the homes, and not $93,176, the dealer cost amount. Bank
policy required loans be made at the lower of these two amounts.
Specifically, Kenneth Starks of Starks Brothers testified that
he sold 16 mobile homes to A-1 for $93,176, the dealer cost. The
testimony of Shirley Henderson also indicates that the cost of
these homes was $93,176 and that 60% of the N.A.D.A. wholesale
price (approx. $205,000) was $122,899. Henderson explained that it
was the bank’s policy in a floor plan transaction to calculate 60%
of the N.A.D.A. cost and compare that to the dealer cost.
7
According to the bank policy, these homes should have been floor
planned at $93,176, not at $122,899, the higher 60% N.A.D.A. value.
Once Starks was paid the $93,176, the remaining $29,722 was sent to
A-1 Mobile Homes and allegedly split between Max Cain, Billy Cox,
and Mason Long.
We conclude that a reasonable member of the jury could
conclude that Max Cain engaged in fraud in approving the loan at
the higher N.A.D.A. amount in violation of bank policy; that he
made a fraudulent representation to obtain funds from the bank.
See United States v. Briggs, 965 F.2d 10, 11 (5th Cir.
1992)(holding that despite no evidence of overt misrepresentations,
false promises, or false statements to a financial institution, the
defendant’s implicit misrepresentation that she had authority to
transfer money was sufficient to establish misrepresentation
element of § 1344(2)). The evidence was sufficient to support the
convictions of Max Cain, Billy Cox, and Mason Long of bank fraud
under § 1344(2), as alleged in Count 15 of the indictment.
Samantha Davis worked for about four weeks as an A-1 sales
representative at the Bryan, Texas lot. The jury found her guilty
of aiding and abetting bank fraud, Count 7 of the indictment.
While she concedes that a reasonable juror could find a scheme to
commit bank fraud, Davis denies that there is sufficient evidence
of her knowing and intentional participation. She denies
falsifying documents, urging that she was too new and in too low a
8
position in the A-1 hierarchy to direct others to falsify
documents.
Tim Howard, a Government witness, testified that he discussed
the short down payment scheme with Sammie Davis and that she
expressed concern about “getting in trouble” after reading an
article about mobile home salesmen who were arrested in Florida for
making short down payments. Howard also testified that Davis had
previous experience with short down payments from a former job at
another mobile home company. The evidence was also that Alice
Barber, the manager at the Bryan lot, instructed Davis on how to
place false information in the loan documents. Viewing this
evidence in the light most favorable to the Government, a rational
jury could conclude beyond a reasonable doubt that Sammie Davis
aided and abetted commission of such fraud.
David Freeman argues that there is insufficient evidence to
support his convictions for conspiracy to commit bank fraud and
aiding and abetting bank fraud because the Government witnesses
called to testify against him could not identify him as the
salesman involved in their falsified mobile home purchase
transactions. He asserts that the Government failed to show that
he caused any false documents to be submitted to the bank or that
he even knew such things were happening at A-1.
The Government replies that Freeman’s name was listed on the
false documents as a participant. A handwriting expert testified
that Freeman prepared the falsified documents in sales to A-1
9
customers Kearney, Gurka, and Nix. The evidence also showed that
salesmen, including David Freeman, openly discussed the inflated
down payment scheme. This was sufficient.
Mason Long moved for a judgment of acquittal on Counts 1, 14,
and 15, arguing that the evidence was insufficient to support his
convictions. He urges that no evidence linked him to the
falsification of customers’ loan information. Long’s job was to
deliver and set up A-1 mobile homes. He argues that the
government’s evidence was only that he must have known about the
fraud because he was around the office; that he once told another
employee, who took drugs, that customers must be reminded that if
asked, they are to deny any inflated down payment. Specifically,
Long challenges his conviction on Count 14, charging falsifying
information to secure a floor plan loan. In addition, Long claims
the Government provided no evidence that he knew about or
participated in the Starks Brothers transactions with Cox and Cain
or that he knowingly submitted any false statements.
The Government asserts that Long’s overt actions showed that
he knowingly participated in the scheme and that he promoted the
falsification of documents to obtain loan funds. The Government
presented direct evidence that Long instructed customers not to
reveal the inflated down payment information if bank investigators
called them. The Government offered financial statements prepared
by Long to be submitted to the bank for the purpose of obtaining
floor planning finance for A-1. These statements contained large
10
discrepancies between listed assets’ declared values and the actual
value of the properties. The evidence also demonstrated that Long
conspired with Max Cain and Billy Cox and split the proceeds of the
excess loan in the Stark Brothers’ mobile homes transaction.
Viewing this evidence in the light most favorable to the
Government, a rational jury could conclude beyond a reasonable
doubt that Mason Long conspired and aided and abetted the
commission of such fraud.
Pat Malmstrom argues the evidence was insufficient to support
his convictions for conspiracy to commit bank fraud and aiding and
abetting bank fraud. He argues that the Government attempted to
make his conduct appear deceptive, but that there was no
falsification or wrongdoing involved.
The Government maintains that Malmstrom knew about the
fraudulent activities and participated in the scheme to prepare
false documents. The evidence showed Malmstrom discussed the
practice of falsely stating down payments with his manager and
another salesman. There was also evidence that he prepared false
documents about customers’ down payments or income information.
Viewing this evidence in the light most favorable to the
Government, a rational jury could conclude beyond a reasonable
doubt that Pat Malmstrom conspired and aided and abetted the
commission of such fraud.
Larry Meinzer argues the evidence was insufficient to support
his conviction for aiding and abetting. While Meinzer does not
11
dispute that the loan packages connected to the sales he made
contained false documents, Meinzer argues that the evidence did not
show that he was personally involved in the falsified sales. The
Government argues that the evidence supported the jury’s inference
that Meinzer knew the information he submitted would be falsified
considering the overall fraudulent practices at A-1. The evidence
also showed that Meinzer was involved in preparing false documents.
His argument that the bank was never induced to extend funds on the
basis of the documents he prepared, some of which contained false
information, does not vitiate the proof that he purposefully
participated in a criminal venture to obtain funds falsely.
Viewing this evidence in the light most favorable to the
Government, a rational jury could conclude beyond a reasonable
doubt that Larry Meinzer aided and abetted the commission of bank
fraud.
Tammy Morrow argues the evidence was insufficient to support
her conviction for aiding and abetting. She argues that her
acquittal of conspiracy should show that the evidence did not
support a conclusion of aiding and abetting. She asserts there is
no evidence that she acted in any affirmative manner to aid the
venture. The Government contends that the jury could infer that
she knowingly and voluntarily participated in the scheme to defraud
the bank by submitting loan information that she was aware would be
fraudulently altered. The testimony of the Government’s witnesses
against Morrow demonstrated that Morrow knew of the short down
12
payment practice, and that she told her customers to lie to the
bank about the down payment if contacted by the bank. This was
enough.
Gene Trout maintains that there was no evidence to show his
intent to defraud the banks or to participate in a conspiracy to do
so; that the Government’s witness, Janet Dees, testified that she
had no knowledge of whether Trout was ever told about the short
down payment technique. Trout argues that he was so ignorant of
what was happening that A-1 cheated him on his commissions.
According to Trout, because the other Government witnesses never
testified directly that Trout prepared or talked about falsified
documents, or that he knew about the practice of falsifying
documents, the evidence did not prove beyond a reasonable doubt
that he committed or aided and abetted bank fraud or conspiracy to
commit it.
The Government maintains that the evidence showed that false
documents were submitted in connection with Trout’s sale of three
mobile homes. Although Trout was “in and out” of the office during
the closing transactions, the jury could infer that he had full
knowledge that the packages would be submitted to the bank with
fraudulent information. Also, there was testimony by one of
Trout’s customers that Trout told her about the inflated down
payment practice and directed her to submit a falsified gift letter
to secure the financing on their mobile home purchase. This was
enough.
13
IV
1
Defendants Barber, Cain, Cox, Davis, Freeman, Long, Malmstrom,
Meinzer, and Morrow argue that they were improperly joined in the
indictment and that the trial court abused its discretion by
denying their motions for severance. Proper joinder requires that
the offenses charged "must be shown to be part of a single plan or
scheme," and that "[p]roof of such a common scheme is typically
supplied by an overarching conspiracy from which stems each of the
substantive counts." United States v. Faulkner, 17 F.3d 745, 758
(5th Cir. 1994)(quoting United States v. Lane, 735 F.2d 799, 805
(5th Cir. 1984), rev'd in part on other grounds, 474 U.S. 438
(1986)). Each of the counts charged in the indictment here stems
from a common conspiracy to defraud the Home Savings Association
and related bank institutions. Joinder in a single indictment was
proper.
Federal Rule of Criminal Procedure 14 provides that a court
may order a severance "[i]f it appears that a defendant or the
Government is prejudiced by a joinder of offenses or of defendants
in an indictment or information or by such joinder for trial
together." Assuming joinder is proper under Rule 8, denial of a
motion for severance is reviewable only for an abuse of discretion.
See United States v. Bullock, 71 F.3d 171, 174 (5th Cir. 1995). To
demonstrate an abuse of discretion, the defendant “‘bears the
burden of showing specific and compelling prejudice that resulted
14
in an unfair trial,’" and such prejudice must be of a type
“‘against which the trial court was unable to afford protection.’"
Faulkner, 17 F.3d at 759 (quoting United States v. Pofahl, 990 F.2d
1456, 1483 (5th Cir. 1993)).
The defendants’ large broadside is a claim of guilt by
association -- prejudice from a large volume of evidence admitted
without limiting instructions to insulate them from spillover
prejudice. The trial was lengthy, but nothing suggests that the
jury was unable to follow the evidence, distinguish the various
charges, and independently assess each defendant. As much as we
know points in the opposite direction. The jury acquitted Davis,
Morrow, and Meinzer of conspiracy to commit bank fraud, and Cox and
Cain of bank fraud under Count 16. This suggests that the jury
considered separately the evidence as to each defendant and each
count. Further, the court instructed the jury that “[t]he fact
that these defendants are tried together is not and should not be
considered by you as evidence of the guilt of them or any of them.”
The district court also instructed the jury not to consider the
fact that the defendants may have presented evidence, objected, or
cross-examined witnesses together. The district court instructed
the jury that evidence of similar acts by defendants Billy Cox and
Mason Long committed on other occasions should not be considered as
to the other defendants; that evidence that related to Counts 14,
15, and 16 was to be considered only as to those counts; and that
no defendant was on trial for any other act not alleged in the
15
indictment. Similar instructions have been held sufficient to cure
prejudice, and juries are presumed to follow their instructions.
See Zafiro v. United States, 506 U.S. 534, 540-41 (1993).
2
The defendants also argue that the district court abused its
discretion by refusing to sever because Cox admitted the fact of
the scheme but contended that the bank was aware of it -- directly
at odds with their defense that no scheme was to be proved. The
Government sticks with the mantra that the defendants have failed
to articulate specific instances of prejudice and argues that they
are not entitled to severance merely because they would have had a
better chance of acquittal. See id. at 538-39. We have held that
“instructions to consider the evidence as to each defendant
separately and individually and not to consider comments made by
counsel as substantive evidence sufficed ‘to cure any prejudice
caused when co-defendants accuse each other of the crime.’" United
States v. Mann, 161 F.3d 840, 863 (5th Cir. 1998)(quoting United
States v. Stouffer, 986 F.2d 916, 924 (5th Cir. 1993)). The
district court gave appropriate instructions. There is then the
matter of the individual defendant’s arguments that they ought to
have had separate trials.
3
We find Larry Meinzer and Caldwell waived their severance
arguments because they cannot adopt their co-defendants’ arguments
without specifically showing how they were prejudiced. Their
16
contentions would equally fail for want of a showing of specific
prejudice. That is, they waived their contentions, but they were
plainly without merit, so they lost nothing for any inaction or
improper acts of their counsel.
4
Alice Barber, Pat Malmstrom, and Mason Long argue that their
cases should not have been joined; that there was a fatal variance
between the indictment, with its single conspiracy, and the proof
at trial of multiple and independent conspiracies. To prevail on
a material variance claim, these defendants must prove (1) a
variance between the indictment and the proof at trial, and (2)
that the variance affected their substantial rights. See United
States v. Morgan, 117 F.3d 849, 858 (5th Cir.), cert. denied, 118
S. Ct. 454 (1997). Whether the evidence shows one or multiple
conspiracies is a question of fact for the jury. See id. The
principal considerations in counting the number of conspiracies are
(1) the existence of a common goal; (2) the nature of the scheme;
and (3) the overlapping of the participants in the various
dealings. See id. We will “affirm the jury's finding that the
Government proved a single conspiracy unless the evidence and all
reasonable inferences, examined in the light most favorable to the
Government, would preclude reasonable jurors from finding a single
conspiracy beyond a reasonable doubt." Id.
The "common goal" factor used to count conspiracies has been
defined broadly by this court. See United States v. Morris, 46
17
F.3d 410, 415 (5th Cir. 1995)(holding that the common goal of
deriving personal gain from the illicit business of buying and
selling cocaine constituted a single conspiracy). The jury could
reasonably have concluded that the common goal of the charged
conspiracy in this case was to derive personal gain from the sale
of mobile homes through the submission of false loan information.
The nature of the scheme and the overlap of participants also
support a single conspiracy. There was evidence that Billy Cox,
Max Cain, and Mason Long were "key men" who orchestrated the
practice of short down payments and falsifying customer information
to obtain loan funds for the sale of A-1 mobile homes. The
managers and the salesmen at each A-1 lot were the cogs necessary
to spin this wheel. Viewed in the light most favorable to the
verdict, the efforts of all the defendants convicted of conspiracy
were necessary to the overall success of the criminal venture.
Even if we were to conclude that there was a variance, we find
that Alice Barber, Pat Malmstrom, and Mason Long have failed to
show how the alleged variance affected their substantial rights.
We find that the evidence is sufficient to prove each convicted
defendant’s participation in at least one conspiracy, and none has
shown reversible error under joinder and severance principles.
“[W]hen the indictment alleges the conspiracy count as a single
conspiracy, but the government proves multiple conspiracies and a
defendant's involvement in at least one of them, then clearly there
is no variance affecting that defendant's substantial rights."
18
United States v. Davis, 132 F.3d 1092, 1095 (5th Cir. 1998) (citing
Faulkner, 17 F.3d at 762). Finally, as a safeguard against
prejudice, the jurors were cautioned in the instructions from
finding guilt if the proof presented by the Government established
any conspiracy other than that charged in the indictment.
5
Tammy Morrow contends that she was prejudiced by the district
court’s refusal to sever her case because James Caldwell would then
have testified that neither of them knew of any false documentation
scheme for financing A-1 mobile homes. The Government replies that
she did not provide the trial court with any substantive
information about Caldwell’s potential testimony. The Government
also argues that the trial court did not abuse its discretion by
refusing to accept Morrow’s attempt at the close of trial to use
Caldwell’s affidavit. The affidavit stated that Caldwell and
Morrow were unaware of any false documentation scheme at A-1 mobile
homes. We find no abuse of discretion by the district court in
denying Morrow’s motion to sever.
6
Billy Cox argues that the district court abused its discretion
by denying his motion to sever because the Government presented
evidence of witness Robert Harvey’s guilty plea. As Cox concedes,
this issue has been foreclosed by this court’s opinion in United
States v. Manges, 110 F.3d 1162, 1176 (5th Cir. 1997), which held
that the district court did not abuse its discretion by admitting
19
evidence of a co-defendant’s guilty plea which related solely to
the co-defendant’s credibility. Moreover, the district court
instructed the jury that the “fact that an accomplice has entered
a plea of guilty to the offense charged is not evidence in and of
itself of the guilt of any other person.” Id. We find no abuse of
discretion by the district court in denying Cox’s motion to sever.
V
Defendants Barber, Cain, Caldwell, Cox, Davis, Long, and
Malmstrom challenge the district court’s refusal to include their
proffered jury instructions. We review the refusal to provide a
requested instruction for abuse of discretion. See United States
v. Asibor, 109 F.3d 1023, 1034 (5th Cir.), cert. denied, 118 S. Ct.
254 (1997). District courts enjoy substantial latitude in
formulating jury instructions. We reverse only if the requested
jury instruction “(1) was a substantially correct statement of the
law, (2) was not substantially covered in the charge as a whole,
and (3) concerned an important point in the trial, the omission of
which seriously impaired the defendant's ability to present an
effective defense.” Id.
1
Defendants Barber, Cox, and Long contend that the district
court should have given their requested jury instruction regarding
their “good faith” defense. The Government argues that the
district court did not abuse its discretion because it allowed the
20
defendants to argue good faith to the jury and substantially
covered the defense of good faith in the instruction on requisite
knowledge. Defendants, however, maintain that the trial court’s
instruction that the knowledge and complicity of bank officers is
not a defense to the charge of bank fraud undermined their
contentions of good faith.
We are persuaded that the jury charge covered the good faith
defense. The district court instructed the jury that “the
requisite intent to defraud is the defendant acted knowingly and
with specific intent to deceive ordinarily for the purpose of
causing financial loss to another or bringing about some financial
gain to himself.” The district court defined the term "knowingly"
as an “act [ ] done voluntarily and intentionally and not because
of mistake or accident." The district court added that “the
purpose of adding the word ‘knowingly’ is to ensure that no one
will be convicted of an act done because of mistake, or accident,
or other innocent reason.” While the district court did instruct
that “[k]nowledge or complicity of bank officers, even all bank
officers, is not a defense to a charge of bank fraud,” the court
explained:
Still, knowledge or complicity of the officers and board
of directors of a financial institution may be considered
by the jury along with other factors as a part of a
defendant’s defense that he or she had no intent to
defraud a financial institution. Some defendants in this
case have raised such a defense. Some defendants have
not. You must consider each defendant separately and
individually.
21
2
James Caldwell and Billy Cox argue that 18 U.S.C. § 1014
(knowingly making false statements to a federally insured lending
institution) is a lesser included offense of 18 U.S.C. § 1344 (bank
fraud) and that the jury should have been instructed accordingly.
The Government argues that because this court has determined that
§ 1014 and § 1344 each require proof of an additional fact, see
Dupre, 117 F.3d at 818, § 1014 is not a lesser included offense.
We agree. See also 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. Wolfwinkel, 44 F.3d 782, 785 (9th Cir. 1995)(concluding
that bank fraud and misapplication of bank funds do not constitute
the same offense). There was no error.
3
Billy Cox argues that the district court abused its discretion
by refusing to instruct the jury that a mere violation of bank
policy was insufficient to convict him of bank fraud as alleged in
Count 15. The Government argues that the district court’s charge
substantially covered the requested instruction.
The charge directed the jury that it must find all the
elements of bank fraud. The proffered instruction was
substantially covered by the trial court’s charge.
4
22
Pat Malmstrom and Samantha Davis requested that the jury be
instructed that it must unanimously find beyond a reasonable doubt
that the defendants submitted false or fraudulent documentation in
connection with all the loan transactions referred to in each count
in order to convict the defendant of that count. The district
court’s instruction required that the jury unanimously find that
the defendant committed at least one and the same materially false
or fraudulent pretense or representation. The charge explained
that “all of you must agree unanimously that the same false of
fraudulent pretense, representation, or promise alleged in a
particular count was in fact employed by the particular defendant
charged in that count.” We find that the district court’s
instruction was proper because each respective count alleged only
one offense under § 1344(2). This was not a situation where a jury
could find a defendant guilty on a single count under multiple
theories of liability; rather, each respective count alleged only
one offense under 18 U.S.C. § 1344(2). We find no abuse of
discretion by the district court.
5
Pat Malmstrom argues that the district court erred by giving
a Pinkerton instruction. According to Malmstrom, “[t]he evidence
did not support the giving of the Pinkerton charge because of the
scope of the alleged agreement in this case.” The district court
instructed the jury in accordance with § 2.22 of this circuit’s
Pattern Criminal Jury Instructions, Conspirator’s Liability for
23
Substantive Count. Furthermore, we find the district court
properly instructed the jury that someone who jointly undertakes a
criminal activity with others is accountable for their reasonably
foreseeable conduct in furtherance of the joint undertaking.
VI
Defendants Billy Cox, Pat Malmstrom, and Gene Trout assert
that the district court committed clear error by upholding the
Government’s peremptory challenge of juror Joyce Jean Jones, a
black woman. The Government explained that it struck Jones
because she had indicated on a questionnaire reviewed before voir
dire that she never read magazines, books other than the Bible, and
did not watch television. The Government explained that it rated
Jones low before it knew she was black. The district court
accepted the Government’s answer as race-neutral stating that it
was “legitimately appropriate and in good faith.” We give
deference to a district court’s finding and evaluation of
credibility of the Government’s offered reasons for striking a
juror. See Hernandez v. New York, 500 U.S. 352, 364 (1991).
The defendants argue that the Government’s proffered reasons
for striking Jones were pretextual given that other jurors who
preferred religious information were not struck. In addition, Cox
argues that the alleged neutral explanation offered here does not
relate to the case. See Batson v. Kentucky, 476 U.S. 79, 98
(1986)(requiring that the prosecutor articulate a neutral
explanation related to the particular case to be tried). Cox also
24
contends that a Batson challenge cannot be satisfied by a
prosecutor’s denial of discriminatory intention or affirmation of
good faith. See Purkett v. Elem, 514 U.S. 765, 840 (1995). The
contentions are without merit. We find no clear error.
VII
Tammy Morrow argues that the district court erred by denying
her motion to dismiss the indictment because the prosecution for
bank fraud was barred by the statute of limitations. She contends
that, at the time of her indictment, 18 U.S.C. § 3282's five-year
statute of limitations period applied and had expired; that 18
U.S.C. § 3293, enacted August 9, 1989 and providing a ten-year
statute of limitations for prosecutions of violations of § 1344,
cannot be applied under the Ex Post Facto Clause.
Congress provided that “the amendments made to this subsection
(§ 3293) shall apply to an offense committed before the effective
date of this section [August 9, 1989], if the statute of
limitations applicable to that offense under this chapter had not
run as of such date.” 18 U.S.C. § 3292 (noting § 961(l)(3) of Pub.
L. No. 101-73). On August 9, 1989, when § 3293 was enacted, the
initial five-year statute of limitations provided by § 3282 had not
run. The ten-year statute of limitations was properly applied.
We have held that the Ex Post Facto Clause does not preclude
the application of § 3293's ten-year statute of limitations for
violations of § 1344 committed before § 3293's enactment and
prosecuted before the previously applicable limitations period
25
expired. See United States v. Baker, 61 F.3d 317, 326 (5th Cir.
1995); United States v. Bretchel, 997 F.2d 1108, 1112-13 (5th Cir.
1993). While Morrow concedes that her argument is foreclosed by
Bretchel, she contends Bretchel was wrongly decided and that the
revised statute of limitations is in fact violative of the Ex Post
Facto Clause. She maintains that the counts in the indictment
against her should have been dismissed because she was not indicted
within five years of any relevant conduct. We reject Morrow’s
arguments and find that the district court correctly denied her
motion to dismiss on the basis of the statute of limitations.
VIII
Max Cain maintains that the district court erred by admitting
the following evidence: (1) business records lacking a proper
predicate, (2) statements about “feelings and suspicions” lacking
a proper predicate, and (3) statements admitted as co-conspirator
statements but not made to further a conspiracy.
Our standard of review is abuse of discretion, and under Fed.
R. Evid. 103(a), an erroneous evidentiary ruling is reversible
error only if a party’s substantial rights are affected. See
Carroll v. Morgan, 17 F.3d 787, 790 (5th Cir. 1994).
1
Cain argues that approximately 300 documents from Home Savings
were improperly admitted through Wilma York, the records custodian
for First American, the successor of First America. Cain asserts
that York admitted that she had no personal knowledge as to how the
26
record-keeping system worked at Home Savings and thus could not
meet the requirements of Federal Rule of Evidence 803(6).
Rule 803(6) turns on the reliability or trustworthiness of the
records. See United States v. Box, 50 F.3d 345, 356 (5th Cir.
1995). We are persuaded that York’s testimony established that the
documents had sufficient indicia of reliability. The district
court found the records authentic, and York explained how she came
to possess them and how they were maintained. We find no
reversible error in the admission of these records.
Next, Cain contends that the testimony of Government witness
Gwendolyn Williams, who had worked at the Bryan A-1 for two months
in 1987, that she was suspicious that “something was wrong” at the
A-1 lot was inadmissible. She also testified that after being
warned by James Alford about A-1, she left her employment there.
Cain argues that Alford was never mentioned as a co-conspirator so
anything he said was impermissible hearsay.
Cain did not object to Williams’ testimony as improper lay
opinion under Federal Rule of Evidence 702. Cain claims that there
was a “running objection to her testimony,” but the record is
unclear as to the basis of that running objection. Rather, Cain
objected on grounds of relevancy and hearsay, objections overruled
by the district court. Cain’s substantial rights were not
affected.
Cain also argues that the district court improperly admitted
the testimony of Tim Howard, an A-1 salesman from 1987 until 1990.
27
Howard testified that on one occasion the bank discovered three
short down payments in a one week period. Howard also testified
that Cain’s disapproval of short down payments made during a phone
conference with Cox, Howard, and Tim Matthews was “just a show.”
Cain contends that Howard lacked personal knowledge and that his
statements were speculations about A-1 based on a conversation with
Cain in which Cain told him “they were not doing these things.”
The Government argues that Howard’s testimony about Cain’s
telephone conversation being “just a show” was not speculation. It
was based on the fact that Billy Cox told Howard that Cain already
knew about the short “downs” because Cain was aware of the fraud at
A-1. Howard’s testimony was admissible. It was based on personal
knowledge of events and conversations with co-conspirators.
Cain complains that the statements by Tim Howard and Janna
Kimbrough were inadmissible hearsay because they did not fall
within the co-conspirators exception of Federal Rule of Evidence
801(d)(2)(E). Cain challenges Howard’s testimony concerning a
conversation Howard had with Billy Cox in which Cox talked of a
customer who had purchased a mobile home but had no heat. Cox
allegedly said that Max Cain had gotten all the money. Cain argues
that this statement was not made in furtherance of the conspiracy.
There was no objection to this testimony. Absent a timely
objection, we review for plain error. See Marceaux v. Conoco, 124
F.3d 730, 734 (5th Cir. 1997). Reversal for plain error is
appropriate only where the alleged error was obvious, substantial,
28
and, if not corrected, would “‘seriously affect the fairness,
integrity, or public reputation of judicial proceedings.’” Id.
(quoting Highlands Ins. Co. v. Nat’l Union Fire Ins. Co., 27 F.3d
1027, 1032 (5th Cir. 1994)). The district court's admission of Tim
Howard’s testimony was not plain error.
Cain protests the admission of Janna Kimbrough’s testimony.
Before she testified, Cain objected that any statements made by
Howard to Kimbrough had nothing to do with Cain and did not further
the conspiracy. The district court overruled this objection.
Kimbrough then testified to the following: “Tim told me if he would
have a problem on a house that was already delivered and he
absolutely could not get a loan officer to approve, then he told me
that he would call Billy and Billy would call Max and just go over
the loan officer’s head.” The district court properly admitted
this testimony under Federal Rule of Evidence 801(d)(2)(E).
IX
Pat Malmstrom argues the district court abused its discretion
by denying his motion to dismiss. He contends that the indictment
failed to state an offense, was vague, duplicitous, and that
striking language from one of the counts resulted in a constructive
amendment.
1
Malmstrom claims that Count 12 failed to allege false
representations with sufficient specificity to provide him adequate
notice; that the government referred only to general “false
29
information and documents.” Pointing to United States v. Lang, 766
F. Supp. 389, 395-96 (D. Md. 1991), he urges that the indictment
must identify some of the alleged false statements.
The Government responds that the charged crimes were clear.
The Government asserts that Lang, which dealt with a violation of
18 U.S.C. § 1001 (making a false statement), is inapplicable
because the court held failure to set forth the false entries with
particularity did not require dismissal of the indictment. In
addition, the Government claims that Malmstrom cites no authority
for his contention that counts of an indictment for conspiracy and
bank fraud must specify each false document and what portion is
false.
We review the sufficiency of an indictment de novo. See
Asibor, 109 F.3d at 1037. The purpose of the indictment is “to
allege each essential element of the offense charged so as to
enable the accused to prepare his defense and to allow the accused
to invoke the double jeopardy clause in any subsequent proceeding."
United States v. Cluck, 143 F.3d 174, 178 (5th Cir. 1998), cert.
denied, 119 S. Ct. 808 (1999) (quoting United States v. Webb, 747
F.2d 278, 284 (5th Cir. 1984)). The proper test for determining
the validity of the indictment is whether the defendant has been
prejudiced by the alleged deficiency. See United States v. Crow,
164 F.3d 229, 234 (5th Cir. 1999).
The indictment cites § 1344(2) and tracks the statutory
language for bank fraud. It outlines the facts of the offense by
30
describing the kind of false information submitted, the approximate
date, and the A-1 customer involved. We find that the indictment
was not vague and provided adequate notice to Malmstrom of the
charges against him.
2
Malmstrom argues that the indictment was duplicitous.
“‘Duplicity’ is the joining in a single count of two or more
distinct and separate offenses." United States v. Elam, 678 F.2d
1234, 1250 n.27 (5th Cir. 1982). See generally 1 Charles Alan
Wright, Federal Practice and Procedure § 142 (1982). Rule 12(f) of
the Federal Rules of Criminal Procedure requires a party to raise
defenses and objections based on defects in the indictment before
trial or waive them absent good cause shown. Even if Malmstrom did
object, the six overt acts alleged in the indictment arise from the
same offense of bank fraud.
3
Malmstrom argues that the district court erred in allowing the
Government to strike paragraph 3 of Count 12 relating to false
documents for the Michelle Henry purchase. Malmstrom moved to
dismiss Count 12 on the basis that striking paragraph 3 was an
unconstitutional amendment of the indictment and violated his Fifth
Amendment right to be tried on charges returned by the grand jury.
Malmstrom contends that the grand jury might not have indicted him
without the Henry transaction.
31
The Fifth Amendment guarantees that a criminal defendant will
be tried only on charges presented in a grand jury indictment.
"Incident to this constitutional guarantee is the longstanding
principle of our criminal justice system that the charges contained
in an indictment may not be broadened or altered through amendment,
except by the grand jury itself." United States v. Restivo, 8 F.3d
274, 279 (5th Cir. 1993). A constructive amendment occurs "when
the jury is permitted to convict the defendant upon a factual basis
that effectively modifies an essential element of the offense
charged." United States v. Holley, 23 F.3d 902, 912 (5th Cir.
1994). If an instruction constructively amends the indictment, we
must reverse the conviction. See Restivo, 8 F.3d at 279.
The deletion of one of the alleged acts did not modify the
essential elements of the charged offense or broaden the
indictment. There was no evidence presented to the jury about the
Henry transaction, and the indictment was read with any language
related to that transaction eliminated. This “amendment” neither
subjected Malmstrom to trial on charges not made in the indictment
nor effectively changed the factual basis of the indictment.
4
Pat Malmstrom argues that the district court should have
permitted him to call as a witness the deputy district court clerk
to substantiate his allegation that there was a secret agreement
between the Government and one of its witnesses, Scott Brill, to
delay Brill’s sentencing. Brill, an alleged co-conspirator,
32
testified on direct examination that the Government made no
promises to him outside the plea agreement to delay his sentence.
On cross-examination, however, Brill acknowledged that the
Government promised to request the court to delay his sentencing
until after he testified at trial. The Government called Special
Agent Terry Lane who testified no such promises were made to Brill
outside the plea bargain agreement.
Consequently, Malmstrom requested the Deputy District Court
Clerk testify as to the relevant dates that Brill pleaded guilty
and the various orders continuing his sentence. According to
Malmstrom’s appeal brief, the evidence was being offered to
demonstrate Brill’s bias and to impeach Agent Lane’s testimony. A
review of the record, however, shows that Malmstrom argued that he
was not trying to impeach Agent Lane. Malmstrom’s counsel stated:
[T]his doesn’t have anything to do with impeaching Mr.
Lane. This goes to prove that Mr. Brill was promised
that his sentencing was going to be delayed until after
he testified in this trial which goes to his bias in
testifying for the Government. It’s not to impeach
anybody.
The Government objected on grounds that it would be highly
prejudicial and improper collateral impeachment to have the Deputy
District Court Clerk testify. The district court denied
Malmstrom’s request.
Malmstrom argues that the district court’s ruling prevented
him from showing bias by Scott Brill and prevented him from
impeaching Agent Terry Lane. Although "[t]he partiality of a
33
witness is subject to exploration at trial, and is always relevant
as discrediting the witness and affecting the weight of his
testimony," United States v. Landerman, 109 F.3d 1053, 1062 (5th
Cir. 1997) (quoting Davis v. Alaska, 415 U.S. 308, 316 (1974)), it
is well-established that a district court is afforded broad
discretion in determining the probative value of evidence to
determine its admissibility. See id. (citing United States v.
Abel, 469 U.S. 45, 50 (1984)). In this situation, the district
court considered Malmstrom’s allegation that there was a secret
agreement between the Government and Brill, but concluded that the
several continuations of Brill’s sentencing were not part of a
“secret agreement” because on some occasions the delays were
initiated at the direction of the probation officer and through the
court. The district court offered Malmstrom the opportunity to
make his record by questioning the probation officer outside the
presence of the jury, but Malmstrom declined. It was clear from
Brill’s testimony that, at the time of the trial, he had not yet
been sentenced. Given these circumstances, we find no abuse of
discretion by the district court.
X
Defendants Caldwell, Cox, Davis, Freeman, Long, Malmstrom,
Morrow, Meinzer, and Trout argue that the district court erred by
denying their motions for a new trial based on prosecutorial
34
misconduct.1 Our "task in reviewing a claim of prosecutorial
misconduct is to decide whether the misconduct casts serious doubt
upon the correctness of the jury's verdict." United States v.
Kelley, 981 F.2d 1464, 1473 (5th Cir. 1993). We consider the
following: "(1) the magnitude of the statement's prejudice, (2) the
effect of any cautionary instructions given, and (3) the strength
of the evidence of the defendant's guilt." United States v.
Tomblin, 46 F.3d 1369, 1389 (5th Cir. 1995). A defendant must show
that the prosecutor’s statements affected his substantial rights.
See id. The district judge's assessment of the prejudicial effect
carries considerable weight. See United States v. Munoz, 150 F.3d
401, 415 (5th Cir. 1998), cert. denied, ---S. Ct.---, 1999 WL
16207, 67 USLW 3458 (U.S. Jan 19, 1999) (No. 98-7239).
1
The district court was concerned about generalizations made
about A-1 salesmen and their knowledge. It granted defendants’
motion in limine prohibiting the Government from presenting
evidence that implied that “it would be impossible to work for A-1
for a week and not know crimes were being committed.” The
defendants objected approximately 49 times based on alleged
violations of this limine restriction, and the district court
1
Max Cain’s attempt to adopt by reference, pursuant to Fed. R.
App. P. 28(I), the arguments of his co-defendants fails because the
issue of prosecutorial misconduct is fact specific.
35
sustained approximately 23 objections. The defendants argue that
the Government’s repeated violations severely prejudiced them.
On several occasions, the district court noted it did not find
the Government’s comments to be violations of the limine motion.
For example, the district court explained, “I do not accept the
fact that the Government is trying to get away with stuff here,”
and, “My view is that the Government has been scrupulous in its
efforts to abide by my limine motions and my other restrictive
orders,” as well as, “I do not believe the Government’s violation
of limine motions when objections have been sustained have in any
way caused this case to be unfair.” We find no abuse of
discretion.
2
Defendants Davis, Freeman, Long, Malmstrom, and Meinzer also
claim that the Government grossly misstated the evidence during its
rebuttal; that the Government mischaracterized testimony to bolster
its argument that everyone at A-1 knew about the fraud; that they
were unfairly prejudiced by the Government’s conduct.
After reviewing the relevant testimony, we reject the
contention. We do not find that any misstatements were of such a
magnitude as to impact the defendants’ substantial rights or to
undermine the correctness of the jury’s verdict. The district
court here correctly denied the motion for a new trial.
3
36
Gene Trout complains about the prosecutor’s remark during
rebuttal that the jury “should be insulted” by Trout’s counsel’s
reading of an FBI 302 statement which Agent Terry Lane took from
some mobile home consumers. Trout objected but was overruled. The
district court addressed the jury and explained that the “attorneys
have acted properly in this case in their efforts to represent
their clients.” The district court also noted attorneys sometimes
use hyperbole and that the rebuttal remarks by the prosecutor were
argument, not evidence. The district court determined that Trout’s
counsel was not personally attacked and reiterated that Trout’s
counsel “conducted himself properly in all respects.” We find no
basis for reversal for prosecutorial misconduct on this issue.
4
Billy Cox complains that the Government’s argument as a whole
deprived him of a fair and impartial trial. He lists 24 passages
that allegedly demonstrate prejudicial prosecutorial misconduct.
Cox did not object to 14 of the items listed and some of the other
items do not pertain to him. If a defendant fails to object to an
improper argument, we will reverse only for plain error. See
United States v. Livingston, 816 F.2d 184, 195 (5th Cir. 1987). We
find no plain error in any of the passages to which Cox failed to
object. As to the remaining 10 passages, we find no basis for
reversal because of improper prosecutorial remarks. The district
court maintained admirable control over this long, complicated
trial and effectively cured any questionable or improper comments
37
by the prosecutor with an instruction to the jury. We are not
persuaded that the alleged prosecutorial misconduct substantially
affected the defendants’ rights to a fair trial. See United States
v. Diaz-Carreon, 915 F.2d 951, 956 (5th Cir. 1990).
5
During its final argument, the Government made generalized
comments that it was going to talk about “some undisputed points”
and argued those included massive fraud, intent to defraud,
conspiracy, and open discussions about short down payments and
other falsifications. James Caldwell objected, arguing that these
statements by the Government indirectly commented on his failure to
testify by labeling the evidence as undisputed. Caldwell avers
that the Government’s comments were meant to remind the jury that
he had remained silent. He also asserts that the Government’s
comments shifted the burden of proof to him.
We review de novo whether a prosecutor's argument is an
impermissible comment on the defendant's right not to testify. See
United States v. Martinez, 151 F.3d 384, 392 (5th Cir.), cert.
denied, 119 S.Ct. 572 (1998). A prosecutor's remarks constitute
impermissible comment on a defendant's right not to testify if the
prosecutor's manifest intent was to comment on the defendant's
silence or if the character of the remark was such that the jury
would naturally and necessarily construe it as a comment on the
defendant's silence. See id. (citing United States v. Mackay, 33
F.3d 489, 495 (5th Cir. 1994)). Intent is not considered
38
"manifest" if there is an equally plausible explanation of the
prosecutor's remark. See United States v. Johnston, 127 F.3d 380,
396 (5th Cir. 1997), cert. denied, 118 S. Ct. 1174 (1998) (citing
United States v. Collins, 972 F.2d 1385, 1406 (5th Cir. 1992)).
Also, the challenged remarks must be considered in the context of
the case in which they are made. See id. (citing United States v.
Montoya-Ortiz, 7 F.3d 1171, 1179 (5th Cir. 1993)). Reversal is
warranted if the improper comment had "a clear effect on the jury."
United States v. Rocha, 916 F.2d 219, 232 (5th Cir. 1990).
After reviewing the record, we find that none of the
prosecution's comments expressly discussed Caldwell’s failure to
testify. Viewed in context, the prosecution's comments neither
manifest an intent to comment on the defendant's failure to testify
nor would they naturally and necessarily have been interpreted by
the jury as a comment on the defendant's failure to testify. See
Johnston, 127 F.3d at 396. Further, “commenting on the absence of
specific evidence in the record does not constitute a comment on
the defendant's failure to testify when witnesses other than the
defendant could have testified to such information.” Green v.
Johnson, 160 F.3d 1029, 1042 (5th Cir. 1998), cert. denied, 119 S.
Ct. 1107 (1999) (citing Nichols v. Scott, 69 F.3d 1255, 1284 (5th
Cir. 1995); United States v. Fierro, 38 F.3d 761, 772 (5th Cir.
1994)). We hold that the prosecutor’s remarks about the undisputed
evidence were not improper.
XI
39
Defendants Barber, Cain, Caldwell, Cox, Davis, Malmstrom,
Morrow, and Trout challenge the district court’s application of the
Sentencing Guidelines.2 This court reviews a district court's
application of the sentencing guidelines de novo and findings of
fact under a clearly erroneous standard. See United States v.
Lucas, 157 F.3d 998, 1000 (5th Cir. 1998). But cf. United States
v. Koon, 518 U.S. 81, 96-100 (1996) (holding that a district
court's decision to depart from applicable sentencing range under
Sentencing Guidelines should be reviewed for abuse of discretion,
rather than de novo). A defendant’s sentence must be upheld unless
she demonstrates that it was imposed in violation of the law, was
imposed because of an incorrect application of the guidelines, or
is outside the range of applicable guidelines and is unreasonable.
See United States v. Parks, 924 F.2d 68, 71 (5th Cir. 1991); see
also 18 U.S.C.A. § 3742(f).
1
Section 2F1.1 of the Sentencing Guidelines governs sentence
enhancements for offenses involving fraud or deceit. In
determining the loss, the application notes provide:
In fraudulent loan application cases ... the loss is the
actual loss to the victim.... For example, if a
defendant fraudulently obtains a loan by misrepresenting
the value of his assets, the loss is the amount of the
loan not repaid at the time the offense is discovered,
reduced by the amount the lending institution has
2
Defendants Freeman, Meinzer, and Long do not raise any
sentencing issues in their briefs and attempt to adopt, pursuant to
Rule 28(I), the arguments of their co-defendants.
40
recovered (or can expect to recover) from any assets
pledged to secure the loan. However, where the intended
loss is greater than the actual loss, the intended loss
is to be used. U.S.S.G. § 2F1.1, comment. (n.8(b)).
Relying on U.S.S.G. § 2F1.1 and the presentence report, the
district court calculated the loss to the bank as the total loan
amounts that were fraudulently procured at each lot. Various
amounts were attributed to each defendant based on the dates the
individuals started working at A-1 and the loan amount incurred at
a specific lot.
The district court concluded that each applicable loan amount
manifested “intended loss” because the defendants acted with
indifference or reckless disregard by exposing the bank to a loss
of the total loan without considering whether repayment could ever
be made. The district court relied on United States v. Wimbesh,
980 F.2d 312, 316 (5th Cir. 1993), abrogated on other grounds,
Stinson v. United States, 508 U.S. 36, 40 (1993), which held that,
even though the banks did not lose the full value, the face value
of stolen and forged checks was properly used as intended loss
because that was the amount at risk.
Defendants Barber, Cain, Cox, Morrow, and Trout argue that the
district court erred in its calculation of loss under U.S.S.G. §
2F1.1 by using the “intended loss” instead of the “actual loss.”
The district court's calculation of loss under § 2F1.1 is a finding
of fact reviewable only for clear error. See United States v.
Randall, 157 F.3d 328, 330 (5th Cir. 1998) (citing United States v.
41
Tedder, 81 F.3d 549, 550 (5th Cir. 1996)); United States v. Hill,
42 F.3d 914, 919 (5th Cir. 1995)(applying clear error standard of
review to an amount of loss finding and specifically rejecting
defendant’s argument for de novo review based on the legal
significance of the facts). Given this standard of review, the
only question we must address is whether the record supports the
district court's determination that the defendants did in fact
intend to inflict a loss in the total amount of the fraudulently
obtained loans.
While not fully developed, the record strongly indicates that
the “actual loss” to the bank was less than the “intended loss.”
The defendants argue that they did not intend to defraud the bank
of the entire loan amount and that deductions should have been made
to account for the loans the bank had been repaid and the amounts
that could have been recouped in foreclosures or similar remedies.
When reviewing the calculation of an intended loss, we look to
actual, not constructive, intent, and distinguish between cases in
which "the intended loss for stolen or fraudulently obtained
property is the face value of that property" and those in which the
intended loss is zero because "the defendant intends to repay the
loan or replace the property." United States v. Hill, 42 F.3d 914,
919 (1995)(quoting United States v. Henderson, 19 F.3d 917, 928
(5th Cir. 1994)). The case at hand illustrates a situation in
which there is neither evidence of actual intent to cause the loss
of the entire loan nor evidence of an actual intent to repay the
42
loan. Here, the repayment of the loans was in the control not of
the defendants, but of the mobile home consumers. There was no
evidence that the defendants intended to repay the loans if the
mobile home consumers failed to make their payments. The district
court accurately characterized the defendants as “consciously
indifferent or reckless” about the repayment of the loans.
In Tedder, a fraudulent loan application case where there was
no evidence that the defendant had any control over the repayments,
we held that the intended, rather than the actual, amount of loss
was the appropriate measure for sentencing purposes. See Tedder,
81 F.3d at 551 (“[W]here the defendant does not intend to repay,
and the actual loss is less than the intended loss, . . . then the
full intended loss is the appropriate basis for calculation.”).
Likewise, we cannot say that the district court erred by using the
intended, rather than the actual, amount of loss because the
defendants in this case had no control over whether the mobile home
consumers would repay the loans. Further, we find no basis for
finding the district court’s reliance on the presentence report
clearly erroneous.
2
Under the Sentencing Guidelines, the sentencing range for a
particular offense is determined on the basis of all "relevant
conduct" in which the defendant was engaged and not just with
regard to the conduct underlying the offense of conviction. See
U.S.S.G. § 1B1.3. The scope of relevant conduct attributable to a
43
defendant for sentencing purposes is "all reasonably foreseeable
acts and omissions of others in furtherance of ... jointly
undertaken criminal activity." "Jointly undertaken criminal
activity" is defined as "a criminal plan, scheme, endeavor, or
enterprise undertaken by the defendant in concert with others,
whether or not charged as a conspiracy." Id. Each of these
determinations ("reasonable foreseeability," "in furtherance," and
the existence of "jointly undertaken criminal activity") is factual
and therefore is reviewed under the clearly erroneous standard.
See United States v. Hull, 160 F.3d 265, 268-69 (5th Cir. 1998),
cert. denied, 119 S. Ct. 1091 (1999).
Co-conspirator liability under § 1B1.3 does not automatically
arise because of participation in a conspiracy. See id. at 269.
A court must make particularized findings that the elements of
foreseeability and scope of agreement have been met. See id. “The
scope of jointly undertaken criminal activity for which a defendant
is held responsible encompasses ‘the specific conduct and
objectives embraced by the defendant's agreement.’" Id. (citing
U.S.S.G. § 1B1.3(a)(1)(B), comment. (n. 2)). Commentary Note 2
provides:
In order to determine the defendant’s accountability for
the conduct of others..., the court must first determine
the scope of the criminal activity the particular
defendant agreed to jointly undertake.... In determining
the scope of the criminal activity that the particular
defendant agreed to jointly undertake, the court may
consider any explicit agreement or implicit agreement
fairly inferred from the conduct of the defendant and
others. U.S.S.G. § 1B1.3(a)(1)(B), comment. (n. 2).
44
We note that “‘the scope of criminal activity jointly undertaken by
the defendant ... is not necessarily the same as the scope of the
entire conspiracy.’” United States v. Hull, 160 F.3d 265, 270,
cert. denied, 119 S.Ct. 1091 (1999) (quoting U.S.S.G. § 1B1.3,
comment. (n. 2)). Thus, the question we must review is whether the
district court clearly erred in its determination about the
existence of "jointly undertaken criminal activity," the actions
taken in furtherance of it, and whether those actions were
reasonably foreseeable.
The facts of this case show that Max Cain, Billy Cox, and
Mason Long acted as the “key men” in the overall conspiracy to
defraud the bank in order to obtain loans for A-1 mobile homes. We
find that the district court’s determination of relevant conduct as
to these three defendants was not clearly erroneous.
The district court’s assessment of relevant conduct as to the
remaining defendants, however, was clearly erroneous. The
remaining defendants, Alice Barber, James Caldwell, Sammy Davis,
David Freeman, Pat Malmstrom, Tammy Morrow, Larry Meinzer, and Gene
Trout, were employed at an A-1 lot (or lots) for a particular
amount of time. While the indictment alleged the conspiracy ended
on February 1, 1990, the district court attributed losses to these
employee defendants from the day they commenced employment with A-1
until April 3, 1990. We note that each employee defendant appealed
45
the district court’s loss calculations,3 and we conclude that given
the facts of this case, the district court committed clear error by
including losses beyond the employment period of these individual
defendants.
The employee defendants, convicted for fraudulent loan
applications, gathered and submitted the false information as a
function of their jobs at their particular A-1 lots. Thus,
employment was a prerequisite for participation in this conspiracy.
Given these circumstances, we find that the scope of the criminal
activity each employee defendant agreed to jointly undertake could
include only those loans that were processed at the particular lot
(or lots) at which that defendant was employed.
The Sentencing Guidelines offer an analogous illustration:
Defendant O knows about her boyfriend's ongoing
drug-trafficking activity, but agrees to participate on
only one occasion by making a delivery for him at his
request when he was ill. Defendant O is accountable
under subsection (a)(1)(A) for the drug quantity involved
on that one occasion. Defendant O is not accountable for
the other drug sales made by her boyfriend because those
sales were not in furtherance of her jointly undertaken
criminal activity (i.e., the one delivery). U.S.S.G. §
3
Although challenges to the application of the Sentence
Guidelines are generally fact-specific and cannot be adopted by
reference pursuant to Fed. R. App. P. 28(I), we find in this
instance that the challenge to the district court’s loss
calculations are not fact-specific. The challenge raises the
general question of whether to assess the defendants with losses
occurring at time periods other than those during which they were
employed and does not require us to make any fact-specific
inquiries.
46
1B1.3, illus. (5); see also U.S.S.G. § 1B1.3, illus.
(7).4
Like the girlfriend in the illustration, each defendant
engaged in “jointly undertaken criminal activity” consisting only
of those transactions that occurred while the defendant worked for
A-1. Once the employment ended, the criminal activity ceased being
“jointly undertaken.” Just as the girlfriend, who was aware of her
boyfriend’s on-going drug enterprise, was “not accountable” for her
boyfriend’s other drug sales because the other sales were not in
furtherance of her jointly undertaken criminal activity (the one
delivery), on the unique facts before us these particular
defendants ought not have charged to their sentencing account
fraudulent loans “made after leaving the employ of A-1.” They were
sufficiently aware of the ongoing activity to be found guilty of
joining a conspiracy. Their employment was the door to that
participation.
Accordingly, we must vacate the sentences of Alice Barber,
James Caldwell, Sammy Davis, David Freeman, Pat Malmstrom, Tammy
Morrow, Larry Meinzer, and Gene Trout and remand for resentencing
using each defendant’s date of employment as the outside boundary
4
We note that illustrations, like commentary, are generally
binding on the courts. See U.S.S.G. § 1B1.7, comment. (“Portions
of [the Guidelines Manual] not labeled as guidelines or commentary
... are to be construed as commentary and thus have the force of
policy statements."); Stinson v. United States, 508 U.S. 36, 38
(1993) (holding that the "commentary in the Guidelines Manual that
interprets or explains a guideline is authoritative unless it
violates the Constitution or a federal statute, or is inconsistent
with, or a plainly erroneous reading of, that guideline").
47
in which to calculate the losses attributable to each one. That
calculation must keep the inside boundaries in mind. Specifically,
a defendant’s relevant conduct does not include conduct of others
occurring before a defendant joined the criminal venture because it
is not "reasonably foreseeable." U.S.S.G. § 1B1.3(a)(1)(B)
comment. 2; see also United States v. Carreon, 11 F.3d 1225,
1235-38 (5th Cir. 1994). The district court must determine, by a
preponderance of the evidence, the date that each defendant joined
and left the criminal venture. See U.S.S.G. § 6A1.3, comment.
(explaining that due process requires that facts relevant to
sentencing be proved by a preponderance of the evidence). After
determining the proper dates, the district court should again apply
the intended loss findings based on the amount of loans
fraudulently procured at each lot. In other words, the losses
attributed to each defendant will be the total amount of fraudulent
loans procured during the defendant’s applicable dates and at the
particular lot(s) at which the defendant was employed or a lesser
period in which he was employed but had not joined the illegal
activity.
3
James Caldwell argues that the district court attributed
losses to him that occurred before the date of his first alleged
overt act in the conspiracy, which was June 8, 1988. The district
court found him responsible for losses incurred from February 16,
1988 (his employment began on February 4) until the end of the
48
conspiracy. The Government argues that the district court did not
err because Caldwell’s presentence report offered evidence to
support the conclusion that Caldwell was a knowing participant in
the bank fraud scheme throughout his employment.
We have held that a district court can adopt facts contained
in a presentence report without inquiry, if those facts had an
adequate evidentiary basis and the defendant does not present
rebuttal evidence. See United States v. Puig-Infante, 19 F.3d 929,
943 (5th Cir. 1994). The defendant has the burden of showing that
information that the district court relied on in sentencing is
materially untrue. See id. We find that Caldwell has failed to
meet his burden. Moreover, the district court did not clearly err
in its determination that Caldwell joined the conspiracy shortly
after he began working for A-1.
4
Malmstrom’s presentence report contained statements about FBI
records documenting fraudulent activity which the probation officer
researched on microfiche and determined were in fact fraudulent.5
Malmstrom argues that the district court improperly used these
findings, which were not elements of the charged offenses, and
deprived him of the right to confront witnesses and cross-examine
them on these alleged facts. As Malmstrom concedes, the Supreme
5
The prosecution explained to the sentencing court that each
of the loans listed in the probation report was determined to be
fraudulent due to short down payments according to interviews with
other defendants or purchasers.
49
Court has not decided whether the Sixth Amendment Confrontation
Clause applies to sentencing proceedings.
Confrontation rights at sentencing hearing are restricted.
See United States v. Rodriguez, 897 F.2d 1324, 1328 (5th Cir.
1990). In this case, the findings of the presentence report, which
the court adopted, were supported by evidence from the trial and
investigative research by the FBI and the probation office. "If
information is presented to the sentencing judge with which the
defendant would take issue, the defendant bears the burden of
demonstrating that the information cannot be relied upon because it
is materially untrue, inaccurate or unreliable." United States v.
Angulo, 927 F.2d 202, 205 (5th Cir. 1991). Malmstrom failed to
rebut the presentence report with any evidence other than an
argument that all the loans listed were not fraudulent. Objections
in the form of unsworn assertions do not bear sufficient indicia of
reliability to be considered. See United States v. Lghodaro, 967
F.2d 1028, 1030 (5th Cir. 1992). Because any information may be
considered, so long as it has "sufficient indicia of reliability to
support its probable accuracy," and because Malmstrom was given the
opportunity at the sentencing hearing to present evidence to the
contrary, we find that Malmstrom’s confrontation rights were not
abridged. United States v. Marshall, 910 F.2d 1241, 1244 (5th Cir.
1991).
5
50
Pat Malmstrom worked at the Waco A-1 for three months as a
salesman while he was in college. Gene Trout worked at the Bryan
A-1 for three months as a salesman. They argue that the district
court erred by refusing to grant them a two level reduction
pursuant to U.S.S.G. § 3B1.2(b) for being minor participants.
Samantha Davis, who worked only 4 weeks at the Bryan A-1 and was
acquitted of the conspiracy charge, argues that she deserved a four
level reduction as a minimal participant. The Government argues
that the district court did not err in evaluating each of these
defendants’ fraudulent activity as “average” and determining that
these defendants were not less culpable than most of the others.
Section 3B1.2 of the Sentencing Guidelines is designed to
reduce a sentence when the defendant is substantially less culpable
than the average participant in the offense. See United States v.
Edwards, 65 F.3d 430, 434 (5th Cir. 1995). Section 3B1.2 provides:
Based on the defendant's role in the offense, decrease
the offense level as follows:
(a) If the defendant was a minimal participant
in any criminal activity, decrease by 4
levels.
(b) If the defendant was a minor participant
in any criminal activity, decrease by 2
levels.
In cases falling between (a) and (b), decrease by 3
levels.
A judicial fact-finding that a defendant is not a minimal or minor
participant is reviewed under the clearly erroneous standard. See
United States v. Pofahl, 990 F.2d 1456, 1485 (5th Cir. 1993).
51
Given this standard and § 3B1.2's comment that "a downward
adjustment for a minimal participant will be used infrequently,"
U.S.S.G. § 3B1.2, comment. 2, we must affirm the district court’s
determination.
Davis also argues that the district court erred by including
a two level upward adjustment for involvement with more than
minimal planning under U.S.S.G. § 2F1.1(b)(2)(A). The guidelines
define "more than minimal planning" as "more planning than is
typical for commission of the offense in a simple form," or
"[taking] affirmative steps . . . to conceal the offense."
U.S.S.G. § 1B1.1, comment. (n. 1(f)). She claims that the district
court failed to make adequate findings to support this upward
adjustment.
A district court can adopt facts contained in a presentence
report without inquiry, if those facts had an adequate evidentiary
basis and the defendant does not present rebuttal evidence. See
Puig-Infante, 19 F.3d at 943. Here, we find that the presentence
report was sufficiently reliable and Davis failed to present any
rebuttal evidence. Therefore, we review the district court’s
determination of “more than minimal planning” for clear error. See
United States v. Brown, 7 F.3d 1155, 1159 (5th Cir. 1993). We find
none.
6
James Caldwell argues that the district court should not have
included in its calculation of his criminal history category his
52
three uncounseled misdemeanor convictions for DWI and theft
offenses that each resulted in actual imprisonment. He relies on
Nichols v. United States, 511 U.S. 738, 748-49 (1994), which
provides, “[A]n uncounseled misdemeanor conviction, valid under
Scott [v. Illinois],6 because no prison term was imposed, is also
valid when used to enhance punishment at a subsequent conviction .
. . .” Caldwell reasons from Nichols that because he was
imprisoned, his misdemeanor convictions cannot be used to enhance
his punishment. We find Caldwell’s reasoning flawed because the
focus of the Nichols holding is not on whether the defendant was
imprisoned, but on whether the conviction was validly obtained.
See, e.g., United States v. Hoggard, 61 F.3d 540, 543 (7th Cir.
1995).
The Sixth Amendment protects the principle that no
imprisonment may be imposed on the basis of an uncounseled
conviction, unless the defendant waives his right to counsel. The
record demonstrates that Caldwell signed a waiver of counsel for
each of his prior convictions that resulted in jail time.7
Therefore, the three uncounseled convictions were validly obtained.
We find that the district court did not err by including Caldwell’s
6
In Scott, the Supreme Court held that as long as no
imprisonment was actually imposed, a defendant’s Sixth Amendment
right to counsel did not apply. See Scott v. Illinois, 440 U.S.
367, 373-74 (1979).
7
At the sentencing hearing, Caldwell argued that his waivers
were involuntary, but he makes no such argument on appeal.
53
three uncounseled convictions in its calculation of his criminal
history category.
XII
The judgments of conviction are affirmed. The sentences of
Max Cain, Billy Cox, and Mason Long are affirmed. The sentences of
Alice Barber, James Caldwell, Sammy Davis, David Freeman, Pat
Malmstrom, Tammy Morrow, Larry Meinzer, and Gene Trout are vacated,
and the case is remanded to allow the district court to impose new
sentences in accordance with this opinion.
AFFIRMED IN PART and VACATED IN PART.
54