Revised January 7, 1999
UNITED STATES COURT OF APPEALS For the Fifth Circuit
No. 96-20873
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
VERSUS
WILLIE BURNS; MARTANETTE ALEXANDER; GREGORY EUGENE AUGUST; EARLINE MONTGOMERY,
Defendants-Appellants.
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______________________________
No. 97-20288 ______________________________
GREGORY EUGENE AUGUST,
Defendant-Appellant. Appeals from the United States District Court for the Southern District of Texas December 9, 1998
Before KING, EMILIO M. GARZA, and DeMOSS, Circuit Judges. DeMOSS, Circuit Judge:
In this appeal we are asked to review the convictions of four
appellants who were found guilty of defrauding the Resolution Trust
Company (“RTC”) and the Federal Deposit Insurance Company (“FDIC”).
Two of those appellants also ask us to review the propriety of
their sentences. For the following reasons we affirm the
appellants’ convictions and sentences.
I.
Appellant Gregory August (“August”) was the owner and chief
executive officer of the August Group Incorporated (“TAGI”), a
privately held property-management company based in Texas.
Appellant Earline Montgomery (“Montgomery”) was TAGI’s acting vice-
president and secretary. Appellant Martanette Alexander
(“Alexander”) was August’s former girlfriend, but was not formally
employed by TAGI. Appellant Willie Burns (“Burns”) was a friend of
August and, like Alexander, not formally employed by TAGI. Ephraim
Tennie ("Tennie"), a government witness who testified for the
government at the appellants’ trial, worked for TAGI as a
maintenance coordinator.
In 1991 and 1992, TAGI entered four separate contracts to
2 manage various properties that were in receivership of the RTC.
TAGI entered those agreements with companies that were under
contract with the RTC under “Standard Asset Management and
Disposition Agreements” (“SAMDA”). Those companies, which we will
refer to as SAMDA contractors, were engaged by the RTC to perform
asset management and disposition services in connection with
various loan assets, real estate assets, and other assets held by
the RTC. In general, a SAMDA contractor’s duties were to restore,
maintain, market, and sell the RTC properties in accordance with
federal policies and procedures. The SAMDA contractors also were
authorized to select and hire property management companies, like
TAGI, to carry out day-to-day management functions. The property
management companies, in turn, were authorized to subcontract with
other vendors to provide basic services for the properties;
security, trash removal, lawn maintenance, and so on. The
subcontractors’ invoices were submitted for payment to the property
management companies, or to the SAMDA contractors, depending on the
particular arrangement in place. The SAMDA contractors paid the
property-management fees, expenses, and reimbursables with money
funded by the RTC.
TAGI entered four contracts with the following SAMDA
contractors to manage the following RTC properties: (1) Benjamin
Franklin Federal Savings Association (“BFFSA”) to manage the Green
Oaks Apartments in Laporte, Texas; (2) the J.E. Robert Company
(“JER”) to manage the Richwood Place Apartments in Houston, Texas;
3 (3) ONTRA, Inc. (“ONTRA”) to manage roughly 500 properties in Texas
and Oklahoma; and (4) National Loan/CRT Joint Venture (“NL/CRT”) to
manage the Spring Cypress Shopping Center in Houston, Texas. In
accordance with the terms of those contracts, TAGI was barred from
hiring related companies to perform services at the properties
without acquiring RTC approval.1 Additionally, TAGI was limited to
the monetary compensation specifically provided under the
contracts; it was forbidden from realizing additional outside
profits from its management of the properties.
TAGI entered into a similar management contract with the FDIC
in 1992.2 Under that agreement, TAGI promised to provide property
management services for Cavender’s Boot City (“Cavender’s”) in
Houston, Texas, which was in receivership of the FDIC. That
contract, like TAGI’s property management contracts for the RTC
properties, contained a conflict of interest provision that
prohibited TAGI from transacting business with a related company.
Over the next several years TAGI hired more than a dozen
subcontractors to perform various functions at its contracted
1 There is no uniform provision or definition in the four contracts relating to this requirement; each expresses the prohibition differently. A common theme in the four contracts, however, is that TAGI was precluded from hiring a company with which TAGI would have a conflict of interest. In this appeal the appellants do not dispute whether TAGI violated this prohibition. Accordingly, for purposes of this appeal we assume that TAGI in fact violated those conflict of interest provisions. 2 Unlike the contracts relating to the RTC properties, TAGI’s contract with the FDIC did not involve a SAMDA contractor. It was entered directly with the FDIC.
4 properties. Unbeknownst to the RTC, FDIC, and SAMDA contractors,
however, many of those companies were affiliated with August and
TAGI. For example, Guardco Security Company (“Guardco”), Evergreen
Lawn Care, and Alexander Plumbing Company, were started by
Alexander, who filed assumed name certificates and opened new bank
accounts for the three companies. CQ&S Enterprise Company (“CQ&S”)
operated with a bank account that August had opened with TAGI’s
address and an assumed name certificate filed years earlier by
Charles Newton, August’s deceased lodge brother. Capital City
Contractors (“Capital Contractors”), Capital City Management
(“Capital Management”), and Pro-Lawn Service (“Pro-Lawn”), operated
under assumed name certificates filed by Nathaniel Gordon
("Gordon"), a TAGI employee who also assisted in the management of
those companies.
The appellants never advised the RTC, FDIC, or SAMDA
contractors that TAGI had hired related companies to perform
services on the contracted properties. When federal authorities
finally grew suspicious, and searched TAGI’s offices in May 1993,
they found blank invoices of various TAGI-affiliated companies,
checkbooks of these companies, and blank insurance certificates.
The next day, August, Montgomery, Burns, Tennie, and Gordon met at
Club Reflections, a bar owned by August, where they sorted through
a box of incriminating documents that had escaped detection. They
then burned those documents in an alley outside the club.
On November 2, 1994, the appellants were charged in a multi-
5 count indictment charging them with conspiracy to defraud the
United States in violation of 18 U.S.C. § 371, in combination with
other fraud-related offenses. The appellants were then jointly
tried to a jury on November 17, 1995. Over the course of that
trial, which lasted for nearly three months, the government came
forward with a mountain of evidence demonstrating that for roughly
two and a half years the appellants conspired to bilk the
government. False invoices were generated for work that was never
done. Valid invoices from legitimate vendors were altered,
falsified, and inflated to show greater amounts of monies owed.
False bids were submitted to boost claimed reimbursables.
Evidence also showed that the appellants took active measures
to conceal their fraud. August, for example, terminated the
services of "Guardco, Inc." a properly licensed company that had
been providing security services for the Green Oaks Apartments, and
surreptitiously replaced it with the Guardco that Alexander had
created. Montgomery instructed Tennie on numerous occasions to
generate fake invoices and alter valid ones. Alexander, who was
employed at an unrelated bank, assisted in hiding August’s
involvement by filing assumed name certificates, and establishing
bank accounts, for several of the related companies. Burns, on
August’s instructions, would negotiate and sign contracts as the
sole proprietor of CQ&S, even though August was the actual owner.
On February 16, 1996, a jury convicted August of one count of
conspiracy (Count 1), four counts of illegal participation (Counts
6 2 - 5), 18 U.S.C. § 1006(2); seven counts of making false claims to
the RTC (Counts 6 - 11 & 13), 18 U.S.C. § 287; four counts of
making false statements to FDIC (Counts 14 - 17), 18 U.S.C. § 1007;
and one count of money laundering (Count 20), 18 U.S.C.
§ 1956(a)(1)(B)(i). August subsequently was sentenced to 96 months
imprisonment.
Montgomery was found guilty of one count of conspiracy (Count
1), four counts of illegal participation (Counts 2 - 5), 18 U.S.C.
§ 1006(2); seven counts of making false claims to the RTC (Counts
6 - 11 & 13), 18 U.S.C. § 287; and four counts of making false
statements to FDIC (Counts 14 - 17). She received a sentence of 37
months imprisonment.
Alexander was convicted of one count of conspiracy (Count 1),
and two counts of illegal participation (Counts 2, 3 & 5), 18
U.S.C. § 1006(2). The court sentenced Alexander to 15 months
Burns was found guilty on one count of conspiracy (Count 1),
and one count of illegal participation (Count 4), 18 U.S.C.
§ 1006(2). He was ordered to serve a 24-month term of imprison-
ment. Each of the appellants now appeal their respective
convictions. Montgomery and Burns also challenge their sentences.
II.
On appeal August challenges the sufficiency of the evidence
supporting his convictions under Count 20 for money laundering, 18
7 U.S.C. § 1956(a)(1)(B)(i), and aiding and abetting in the
commission of that crime, 18 U.S.C. § 2. He does not dispute the
evidentiary basis for any of his other convictions. August moved
for judgment of acquittal at the close of the government’s case,
and at the end of trial, thus preserving his sufficiency claim for
appellate review. United States v. Pankhurst, 118 F.3d 345, 351
(5th Cir.), cert. denied, 118 S. Ct. 630 (1997). The district
court denied those motions.
We review de novo a district court’s denial of a motion for
judgment of acquittal. United States v. Myers, 104 F.3d 76, 78
(5th Cir.), cert. denied, 117 S. Ct. 1709 (1997). In evaluating
the sufficiency of the evidence we must affirm the verdict “if a
reasonable trier of fact could conclude from the evidence that the
elements of the offense were established beyond a reasonable doubt,
viewing the evidence in the light most favorable to the verdict and
drawing all reasonable inferences from the evidence to support the
verdict.” Id.
To prove the offense of money laundering under 18 U.S.C.
§ 1956(a)(1)(B)(i), the government must prove that the defendant:
(1) conducted or attempted to conduct a financial transaction, (2)
which the defendant knew involved the proceeds of unlawful
activity, and (3) which the defendant knew was designed to conceal
or disguise the nature, location, source, ownership, or control of
the proceeds of the unlawful activity. 18 U.S.C. § 1956(a)(1)
8 (B)(i); United States v. West, 22 F.3d 586, 590-91 (5th Cir.),
cert. denied, 513 U.S. 1020 (1994).
In this case, August’s money laundering conviction was based
on the following series of financial transactions. JER, a SAMDA
contractor for the RTC, issued a $56,250 check to CQ&S, a
subcontractor who was ostensibly hired by TAGI to perform repair
work at the Richwood Place Apartments. When JER issued the check
to CQ&S it was unaware that the company was in fact controlled and
operated by August. That fact was kept hidden from JER through the
efforts of Burns who, on August’s instructions, went to the offices
of JER and posed as CQ&S’s president.
After Burns personally accepted the check from JER, he
deposited it in CQ&S’s bank account. August, the only signer on
the CQ&S account, then wrote a check drawn on the account for
$25,000, which he deposited in TAGI’s bank account.3 The
government alleged at trial that August structured those
transactions in an effort to conceal the fact that he was illegally
participating in the financial dealings between JER and CQ&S.
In challenging the evidentiary basis of his money laundering
conviction, August does not dispute the first two elements of the
offense. He concentrates instead on the third required element of
3 The parties do not dispute that the $25,000 that was transferred from the CQ&S bank account to the TAGI account was a portion of the $56,250 in proceeds paid by JER to CQ&S for the repair work.
9 money laundering, the design requirement. August contends that a
reasonable jury could not conclude that the $25,000 check-transfer
was designed to conceal the fraudulent nature of those funds
because his name and address were plainly listed on both the CQ&S
account and the TAGI account, making his identity readily apparent.
We are unpersuaded.
In arguing that the design requirement is missing in this
case, August focuses exclusively on the $25,000 transfer, to the
complete exclusion of the events that preceded that transaction.
He is assuming, we think, that those events are not relevant in
determining whether he intended to conceal the illegal proceeds.
That assumption is mistaken.
Many financial transactions have the effect of concealing
illegal proceeds by converting them into a more legitimate form,
and by adding one more degree of separation between the illegal
proceeds and the original unlawful activity. See United States v.
Willey, 57 F.3d 1374, 1384 (5th Cir.) (observing that the design
requirement distinguishes the crime of money laundering from the
innocent act of mere money spending), cert. denied, 516 U.S. 1029
(1995). For that reason this Court has explained that “merely
engaging in a transaction with money whose nature has been
concealed through other means is not itself a crime.” United
States v. Garcia-Emanuel, 14 F.3d 1469, 1474 (5th Cir. 1994).
“[T]he government must prove that the specific transactions in
10 question were designed, at least in part, to launder money, not
that the transaction involved money that was previously laundered
through other means.” Id.
It must be remembered, however, that in examining whether a
specific transaction was designed to launder money, we are not
required to view that transaction in total isolation. To the
contrary, we have expressly observed that:
[I]n order to establish the design element of money laundering, it is not necessary to prove with regard to any single transaction that . . . the particular transaction charged is itself highly unusual . . . . That is, it is not necessary that a transaction be examined wholly in isolation if the evidence tends to show that it is part of a larger scheme that is designed to conceal illegal proceeds.
Willey, 57 F.3d at 1387.
Contrary to August’s suggestion, a particular transaction must
be viewed in context when determining whether it was designed to
conceal. As a result, “a design to conceal on a particular
transaction may be imputed to a subsequent transaction” if the
subsequent transaction, while innocent on its face, is part of a
larger money laundering scheme. Id. at 1386; see also Garcia-
Emanuel, 14 F.3d at 1478 (also acknowledging that design to conceal
may be imputed from one transaction to another). Evidence that may
be considered when determining whether a transaction was designed
to conceal includes:
statements by a defendant probative of intent to conceal; unusual secrecy surrounding the
11 transaction; structuring the transaction in a way to avoid attention; depositing illegal profits in the bank account of a legitimate business; highly irregular features of the transaction; using third parties to conceal the real owner; a series of unusual financial moves cumulating [sic] in the transaction; or expert testimony on practices of criminals.
Garcia-Emanuel, 14 F.3d at 1475-76 (emphasis on evidence present in
this case).
In this case, the record reflects that August was expressly
forbidden from hiring related companies where there was a potential
conflict of interest. Nonetheless, August opened the CQ&S bank
account at issue here, named himself as the sole signatory, and
proceed to have repair work done at the Richwood Place Apartments
in the name of CQ&S. To conceal his identity from JER, and to
begin the process of laundering the $56,000 in illegal proceeds,
August instructed Burns to represent himself to JER as the sole
proprietor of CQ&S. Accordingly, Burns, and not August, appeared
at the offices of JER, acted as the president of CQ&S, and accepted
the $56,250 check. Those transactions, which undeniably give rise
to an inference of intent to conceal, put the $25,000 check-
transfer in proper perspective.
After the illegal proceeds were safely deposited in CQ&S’s
account, one final step remained in the money laundering scheme.
August needed to convert those proceeds into a more legitimate form
-- from money belonging to CQ&S, to money which was under the
control of TAGI. That was accomplished through the $25,000 check-
12 transfer.
It is true that the $25,000 check-transfer, when viewed in
isolation, appears to be nothing more than an ordinary transaction
between two bank accounts, conducted in plain view. However, when
we look beyond the face of that transaction, and look at the
transactions which immediately preceded it, we find strong and
compelling evidence that the $25,000 transfer was not an innocent
transaction. The record gives rise to a strong inference that the
$25,000 transfer was the final step of a larger money laundering
scheme willfully designed to give August access to the illegal
proceeds. We conclude that there is sufficient evidence of a
design to conceal. August’s money laundering conviction must
stand.
III.
Montgomery appeals all of her convictions on sufficiency of
the evidence grounds. She properly preserved that claim for
appellate review by moving for judgment of acquittal at the close
of the government’s case, and at the end of trial. The district
court denied those motions. We review each of Montgomery’s
convictions in turn.
Montgomery was convicted of conspiracy under count one. To
establish a conspiracy in violation of 18 U.S.C. § 371, the
government must prove beyond a reasonable doubt: (1) an agreement
between two or more people, (2) to commit a crime against the
13 United States, and (3) an overt act by one of the conspirators to
further the objectives of the conspiracy. 18 U.S.C. § 371; United
States v. Dupre, 117 F.3d 810, 820 (5th Cir. 1997), cert. denied,
118 S. Ct. 857 (1998). The government is not required to rely on
direct evidence of a conspiracy, as each element may be proven by
circumstantial evidence. United States v. Casilla, 20 F.3d 600,
603 (5th Cir.), cert. denied, 513 U.S. 892 (1994). Moreover, the
agreement need not be an express or formal agreement; a tacit
understanding is sufficient. United States v. Hopkins, 916 F.2d
207, 212 (5th Cir. 1990).
Here, Montgomery contends that there is insufficient evidence
to support her conspiracy conviction because the government failed
to prove that she knowingly participated in the conspiracy. Her
argument is unconvincing. At trial, there was abundant evidence
that Montgomery falsified invoices, time sheets, and insurance
certificates. There also was evidence that Montgomery ordered
Tennie to do the same. The record sufficiently supports the
finding that Montgomery knowingly participated in the alleged
conspiracy.
Montgomery also was convicted on four counts of illegal
participation with the RTC, in violation of 18 U.S.C. § 1006, with
accompanying convictions for aiding and abetting in the commission
of those crimes, in violation of 18 U.S.C. § 2. Those counts were
based on various specified transactions involving JER and BFFSA.
14 To prove illegal participation under § 1006, the government must
demonstrate: (1) the defendant's connection with a protected
institution as specified in the statute; (2) direct or indirect
receipt of some benefit from the transaction in question; and (3)
intent to defraud. 18 U.S.C. § 1006; United States v. Brechtel,
997 F.2d 1108, 1115 (5th Cir.), cert. denied, 510 U.S. 1013 (1993).
We have observed that § 1006 is “a typical conflict of interests
prohibition.” Brechtel, 997 F.2d at 1116. “[A] fiduciary who
benefits or causes loss to [a protected institution] by knowingly
subordinating the institution's interests to his own in a
transaction for which he has responsibility acts with the ‘intent
to defraud’ required by § 1006.” Id.
In this case, Montgomery claims that her illegal participation
convictions cannot stand because there is no evidence that she
intended to defraud the RTC. Montgomery also argues that there is
insufficient evidence that she profited from her business
associations with JER, BFFSA, and the RTC. We have reviewed the
record and find no merit to her arguments.
Montgomery was also convicted on six counts of submitting
false claims to the RTC through ONTRA, a SAMDA contractor, in
violation of 18 U.S.C. § 287, with accompanying convictions for
aiding and abetting in the commission of these crimes in violation
of 18 U.S.C. § 2. In order to sustain a conviction under § 287,
the government must prove: (1) that the defendant presented a
15 false or fraudulent claim against the United States; (2) that the
claim was presented to an agency of the United States; and (3) that
the defendant knew that the claim was false or fraudulent. 18
U.S.C. § 287; United States v. Okoronkwo, 46 F.3d 426, 430-31 (5th
Cir.), cert. denied, 516 U.S. 833 (1995).
On appeal, Montgomery argues that there is insufficient
evidence that she knew the claims were false, or that she knowingly
participated in the fraudulent scheme. Her argument fails. There
is sufficient evidence in the record demonstrating that Montgomery
possessed the requisite criminal intent.
Finally, Montgomery was convicted on four counts of making a
false statement to the FDIC, in violation of 18 U.S.C. § 1007, with
accompanying convictions for aiding and abetting in the commission
of these crimes in violation of 18 U.S.C. § 2. The false
statements alleged in the four counts involve false, or grossly
inflated, invoices and checks that were submitted to the FDIC in
connection with repair work and maintenance performed at
Cavender’s. To establish guilt under 18 U.S.C. § 1007, the
government must prove: (1) the defendant made a false statement;
(2) the defendant knew the statement was false; and (3) the
statement was made for the purpose of influencing, in any way, the
FDIC's actions. 18 U.S.C. § 1007; see United States v. Taliaferro,
979 F.2d 1399, 1405 (10th Cir. 1992) (listing roughly the same
elements).
16 Here, Montgomery asserts that there is a lack of evidence that
she knew the specified invoices and checks were false. Montgomery
admits that there is evidence that she instructed Tennie and others
to generate those documents, but contends that there is no evidence
that she was aware of their contents. Her argument is
unpersuasive. There is evidence that Montgomery was aware of the
true costs associated with maintaining Cavender’s, but nonetheless
instructed Tennie to generate false bids and invoices. Moreover,
there is evidence that Montgomery personally disbursed the
incorrect payments that she received. There is sufficient evidence
supporting her convictions for making false statements to the FDIC
in violation of 18 U.S.C. § 1007.
IV.
August contends that the government violated Brady v.
Maryland, 373 U.S. 83 (1963), by failing to disclose various pieces
of exculpatory evidence at trial. Montgomery and Alexander have
adopted this argument pursuant to Rule 28(i) of the Federal Rules
of Appellate Procedure. See Fed. R. App. P. 28(i) (providing that
in cases involving more than one appellant, any appellant may adopt
by reference any part of the briefs of another). This Court’s
review of Brady claims is de novo. See United States v. Green, 46
F.3d 461, 464 (5th Cir.), cert. denied, 515 U.S. 1167 (1995).
To establish a Brady claim, an appellant must demonstrate:
17 (1) that evidence was suppressed, (2) that the evidence was
favorable to the accused, and (3) that the evidence was material.
United States v. Ellender, 947 F.2d 748, 756 (5th Cir. 1991). As
to the third element, "the evidence is material only if there is a
reasonable probability that, had the evidence been disclosed to the
defense, the result of the proceeding would have been different.
A ‘reasonable probability’ is a probability sufficient to undermine
confidence in the outcome." United States v. Bagley, 473 U.S. 667,
682 (1985); United States v. Garcia, 917 F.2d 1370, 1375 (5th Cir.
1990).
Here, August contends that the government violated Brady by
allegedly engaging in a wide-ranging pattern of evidentiary abuses
at trial. The first claimed incident is the government’s alleged
failure to produce a case agent’s audit showing that ONTRA owed
TAGI $34,408 in back management fees. August contends that the
agent’s audit was critical to his defense because it substantiated
his claim that ONTRA did not pay him in a timely manner, forcing
him to move money between accounts, and causing him to submit
duplicate and erroneous invoices. August’s argument is without
merit. At trial, there was overwhelming evidence that August
intentionally falsified and inflated invoices in a deliberate
scheme to defraud the government. In finding August guilty of
conspiracy, illegal participation, and the other related crimes,
the jury implicitly rejected the thrust of his defense, that every
18 incident of fraudulent billing was the innocent byproduct of
untimely reimbursements.
Furthermore, August admits on appeal that “[o]n cross-
examination, one government witness stated that ONTRA still owed
TAGI approximately $187,000.” (Emphasis added.) Thus, it is
clear that the case agent’s audit showing $34,408 in back
management fees was not only cumulative in nature, but it also
would have had the effect of weakening August’s defense by
indicating a lesser amount of back management fees. August cannot
make out a Brady claim on this basis.
August also contends that a Brady violation occurred because
the government initially failed to produce the criminal histories
of its witnesses.4 August places particular emphasis on the
government’s alleged failure to disclose that Victor Ihezukwu, a
government witness who was a former security guard for Guardco, was
a Nigerian national who was possibly residing in the United States
illegally. This argument is without merit. August objected to the
government’s failure to produce the criminal histories of its
witnesses at trial. In response, the government provided the
criminal histories of all its witnesses before they testified.
With this information, defense counsel cross-examined some
4 Burns raises this same issue on appeal. His argument fails for the reasons as discussed.
19 witnesses and declined to cross-examine others. Accordingly, this
Brady claim fails.
August next argues that the government violated Brady when it
initially produced only two pages of a seven-page document that
contained a favorable review of TAGI’s management of the Green Oaks
Apartments. This claim is without merit because the other five
pages were eventually produced by the government, and the entire
document was introduced as evidence with a curative instruction
from the court.
Finally, August calls our attention to the government’s
failure to produce a federal agent’s report stating that Tennie had
told the agent that Gordon, a co-defendant and employee of TAGI,
was not present at Club Reflections on the Saturday night following
the search of TAGI’s offices. This statement conflicted with the
trial testimony of Mitch Robinson, a defendant turned government’s
witness, that Gordon was at Club Reflections that Saturday night
assisting the other defendants in burning incriminating documents.
August’s argument fails because this one statement, as it
specifically relates to the four appellants in this case, is not
sufficient “to put the whole case in such a different light as to
undermine confidence in the jury verdict." Kyles v. Whitley, 514
U.S. 419, 435 (1995).
V.
20 Alexander and Burns contend that the district court erred by
admitting the trial testimony of two investigating agents -- Murphy
and Lynch -- regarding statements Alexander and Burns made to the
agents during non-custodial interviews. They also contend that,
once the district court decided to admit the testimony, it erred by
refusing to grant their motions for a severance. Severance and
evidentiary rulings are reviewed for abuse of discretion. United
States v. Mulderig, 120 F.3d 534 (5th Cir. 1997).
In 1993, agent Murphy questioned Alexander in a non-custodial
interview. In that conversation Alexander told the agent that she
was in charge of Guardco’s paperwork, which entailed writing checks
and submitting invoices. Alexander, however, also told agent
Murphy that Guardco was managed by August and TAGI. She advised
the agent that TAGI furnished the information necessary to prepare
Guardco’s invoices; that Guardco’s checking account belonged to
August; that August used Guardco’s checking account; and that she
supplied August with blank, signed Guardco checks.
In 1993, agent Lynch spoke with Burns in a non-custodial
interview. During that conversation, Burns told agent Lynch that
he delivered a CQ&S bid to JER, and signed various documents while
he was there. However, like Alexander, Burns advised the agent
that TAGI and August were managing the operation; TAGI had prepared
the documents; and August had instructed Burns to sign and deliver
them.
21 On December 6, 1995, while the trial was proceeding, the
government advised the parties that it intended to introduce
Alexander’s and Burns’ statements through the testimony of the
interviewing agents. August objected. He claimed that, because
neither Alexander nor Burns were taking the stand, the express
mention of his name in the agents’ testimony would deny him his
Sixth Amendment right to confrontation under Bruton v. United
States, 391 U.S. 123 (1968). In that case, the Supreme Court held
that when the prosecution seeks to admit the statement of a non-
testifying defendant, and portions of the statement incriminate a
co-defendant, those portions must be omitted to protect the
co-defendant's Sixth Amendment right of confrontation. Bruton, 391
U.S. at 126. The district court in this case was persuaded by
August’s argument, and ordered that the agents’ proffered
testimonies be redacted to omit all incriminating references to
August and the other codefendants. Alexander and Burns objected.
They argued, and continue to argue on appeal, that the
district court erred in admitting the agents’ testimonies in
redacted form. Alexander and Burns allege that the redacted
versions fail to include statements in which they advise the agents
that they were working under the orders of TAGI and August.
Alexander and Burns argue that with those exculpatory statements
missing, the jury was left with the false impression that they had
acted alone. Alexander and Burns allege that the redactions, while
22 effective at protecting their codefendants’ Sixth Amendment rights
under Bruton, violated their own Fifth Amendment rights to a fair
trial. Alexander and Burns also complain they were denied their
right to confrontation under Sixth Amendment because the district
court would not allow cross-examination in areas that had been
redacted.
Although speaking in general terms of the Fifth and Sixth
Amendments, Alexander and Burns have implicitly recognized that
strict compliance with Bruton may at times violate the evidentiary
rule of completeness. Under that long-standing rule, "the
opponent, against whom a part of an utterance has been put in, may
in his turn complement it by putting in the remainder, in order to
secure for the tribunal a complete understanding of the total tenor
and effect of the utterance." 7 J. Wigmore, Evidence in Trials at
Common Law § 2113, p. 653 (J. Chadbourn rev. 1978); see also Beech
Aircraft Corp. v. Rainey, 488 U.S. 153, 171 (1988) (quoting this
passage while discussing the rule of completeness). In addition to
ensuring that a court has an accurate representation of a
declarant’s statement, the rule guards against “the danger that an
out-of-context statement may create such prejudice that it is
impossible to repair by a subsequent presentation of additional
material.” Beech Aircraft Corp., 488 U.S. at 172 n.14. Rule 106
of the Federal Rules of Evidence, which partially codifies the rule
of completeness, provides:
23 When a writing or recorded statement or part thereof is introduced by a party, an adverse party may require the introduction at that time of any other part or any other writing or recorded statement which ought in fairness to be considered contemporaneously with it.
Fed. R. Evid. 106.
When it appears that the literal compliance with Bruton may
abridge the rule of completeness, a district court must decide
whether a severance is necessary. That determination, which is
within the sound discretion of the district court, Zafiro v. United
States, 506 U.S. 534, 538-39 (1993), must be based on whether the
admission of the edited statement would distort the meaning of the
original in a way that gives rise to “a serious risk that a joint
trial would compromise a specific trial right of one of the
defendants, or prevent the jury from making a reliable judgment
about guilt or innocence.” Id. at 539.
In this appeal, Alexander and Burns describe several instances
where the agents’ testimonies fail to recount statements in which
Alexander and Burns expressly implicate August. They contend that
the omitted testimony is exculpatory in nature because it supports
their defense at trial that they were merely acting on August’s
orders and did not possess the necessary criminal intent. Having
carefully reviewed the agents’ testimony, and the challenged
omissions, we find no reversible error.
We do not quarrel with the claim that many of the omitted
statements expressly implicate August in the alleged wrongdoing.
24 But very few of those statements are exculpatory, in the true sense
of the word, as to Alexander and Burns specifically. There is an
important distinction, we think, between statements that implicate
others in shared wrongdoing, and statements that free one from
blame. In this case, most of the omitted statements portray August
as the head of the conspiracy, but do nothing to lessen the guilt
of Alexander and Burns.
The few omitted statements that are exculpatory in nature are
harmless in light of the record as a whole. The basic theory of
Alexander’s and Burns’ defense was that they were minor
participants who were simply following August’s orders. What
Alexander and Burns fail to consider in pressing that theory,
however, is that "following orders" can only be a defense when a
person had no idea that his conduct is criminal. Here, there is an
abundance of evidence that Alexander and Burns knew their conduct
was illegal. Thus, the fact that it was authorized and
orchestrated by August cannot insulate them from criminal
liability. See McNamara v. Johnston, 522 F.2d 1157, 1165 (7th Cir.
1975) (“it is well established that an agent cannot be insulated
from criminal liability by the fact that his principal authorized
his conduct”), cert. denied, 425 U.S. 911 (1976). The omission of
any exculpatory statements was harmless error.
VI.
25 At sentencing the district court enhanced Montgomery’s offense
level by two levels for obstruction of justice under § 3C1.1 of the
Sentencing Guidelines. See U.S.S.G. § 3C1.1 (1995). Another three
levels were added pursuant to § 3B1.1(b) of the Guidelines, on the
finding that Montgomery occupied a managerial position in criminal
activity involving five or more participants. Id. § 3B1.1(b). The
court also held Montgomery responsible for $346,194, the full
amount of the loss minus $34,408, the amount the district court
found ONTRA still owed TAGI, which enhanced her offense level by
another eight levels pursuant to § 2F1.1(b)(1)(J). With a total
offense level of 21, and a criminal history category of I,
Montgomery’s guideline range was 37-46 months imprisonment. The
court sentenced her to 37 months.
On appeal Montgomery challenges those three separate
enhancements. Clear error is our standard of review for the
district court’s finding that Montgomery obstructed justice, United
States v. Velgar-Vivero, 8 F.3d 236, 242 (5th Cir. 1993), cert.
denied, 511 U.S. 1096 (1994), for the finding that Montgomery was
a manager or supervisor, United States v. Valencia, 44 F.3d 269,
271-72 (5th Cir. 1995), and for the district court’s determinations
regarding the amount of loss under U.S.S.G. § 2F1.1. United States
v. Wimbish, 980 F.2d 312, 313 (5th Cir. 1992), cert. denied, 508
U.S. 919 (1993). Additionally, the commentary to § 2F1.1 provides
that "[f]or the purposes of subsection (b)(1), the loss need not be
26 determined with precision. The court need only make a reasonable
estimate of the loss, given the available information." U.S.S.G.
§ 2F1.1 cmt. 8.
Having reviewed the record, we have little doubt that
Montgomery occupied a managerial position in the conspiracy and
obstructed justice after the government began its investigation of
the case. Further, we do not agree with Montgomery’s contention
that the district court erred in holding her responsible for the
full amount of the loss. We affirm the district court with regard
to Montgomery’s sentence.
VII.
Burns contends that the district court erred in giving him a
two-level increase for more than minimal planning under
§ 2F1.1(b)(2) of the Guidelines. See id. § 2F1.1(b)(2). Burns
also complains that the district court wrongly held him responsible
for $48,600 in losses. We review the district court's determina-
tion regarding minimal planning for clear error. United States v.
Brown, 7 F.3d 1155, 1159 (5th Cir. 1993). Amount of loss is
reviewed under the same standard. Wimbish, 980 F.2d at 313.
The Sentencing Guidelines provide for an enhancement of two
offense levels "[i]f the offense involved (A) more than minimal
planning, or (B) a scheme to defraud more than one victim."
U.S.S.G. § 2F1.1(b)(2). Under the Guidelines "more than minimal
27 planning" is defined 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
cmt. 1(f). The Guidelines further provide that “‘[m]ore than
minimal planning’ is deemed present in any case involving repeated
acts over a period of time, unless it is clear that each instance
was purely opportune.” Id.
Burns argues that the district court erred in finding more
than minimal planning because the record contains no evidence that
he took affirmative steps to conceal his crimes. According to
Burns, he was linked to only one scheme, and did not engage in
repeated criminal acts. Burns argument is plainly contradicted by
the record. He falsely posed as the owner and president of CQ&S
when he bid on the repair work at Richwood Place Apartments. Burns
also went twice to JER’s offices to accept checks that JER had
issued to CQ&S. On this evidence we cannot conclude that the
district court’s determination of more than minimal planning was
clearly erroneous.
Burns further asserts that the district court erred in finding
him responsible for $48,600 in losses because he only received
$4,193 for his part in the scheme. In support of that argument
Burns relies on United States v. Smithson, 49 F.3d 138, 144 (5th
Cir. 1995), a case where we recognized that under U.S.S.G. § 2F1.1,
application note 8, a sentencing court may utilize the offender’s
g:\opin\96-20873.opn 28 gain as an alternative valuation method for assessing the amount of
loss when the loss is difficult to determine. Burns’ argument
fails because he has not shown that the amount of loss was
difficult to ascertain. Furthermore, there is more than enough
evidence in the record to support the district court’s loss
calculation. We affirm Burns’ sentence.
VIII.
Based on the foregoing reasons, we affirm the convictions of
appellants August, Montgomery, Alexander, and Burns. We also
affirm the sentences of Montgomery and Burns.
g:\opin\96-20873.opn 29