United States v. Loe

Opinion

Revised May 4, 2001

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 99-40454

UNITED STATES OF AMERICA, Plaintiff - Appellee,

versus

CORNELIUS DEWITTE LOE, JR., also known as C.D. LOE; BABO BEAZLEY LOE; LOE'S HIGHPORT, INC., Defendants - Appellants.

Consolidated with Case No. 99-40495

LOE'S HIGHPORT, INC.; BABO BEAZLEY LOE, Defendants - Appellants.

Consolidated with Case No. 99-41470

BABO BEAZLEY LOE; LOE'S HIGHPORT, INC., Defendants - Appellants.

Consolidated with Case No. 00-40690

UNITED STATES OF AMERICA, Plaintiff - Appellee, versus

LOE'S HIGHPORT, INC.; BABO BEAZLEY LOE, Defendants - Appellants.

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

April 17, 2001

Before HIGGINBOTHAM and DeMOSS, Circuit Judges, and FISH,* District Judge.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

Appellants seek reversal of their convictions for conspiracy,

wire fraud, mail fraud, tax fraud, and money laundering. They

further challenge the sentence imposed by the district court. We

are unpersuaded by the majority of their numerous assertions of

error. However, as the evidence was insufficient to support a

conviction on three of the money laundering charges, we affirm in

part, reverse in part, and remand for resentencing.

I

Loe's Highport, Inc. operated Loe's Highport Marina, reputedly

the largest inland marina in the world. Situated on Lake Texoma,

the marina contains hundreds of boat slips, facilities for the sale

of boats, a disco, a corporate office, and other facilities.

Appellants Cornelius and Babo Loe ran the marina, which was located

* District Judge of the Northern District of Texas, sitting by designation.

2 on property leased from the U.S. Corps of Engineers. Under the

lease, the Corps was to receive a percentage of marina revenues.

In 1990, the lake experienced the greatest flood in its

history. Appellants submitted millions of dollars in claims to

their insurers, Lexington Insurance Company and Chubb Insurance

Company. In the wake of damage caused by a tornado in 1994,

Appellants submitted additional claims to Continental Insurance

Corporation.

In 1995, a disgruntled customer of LHI contacted the Federal

Bureau of Investigations, claiming to be the victim of fraud.

Further investigation by the FBI indicated that Appellants were

underreporting boat sales to the Internal Revenue Service and the

Corps. The FBI obtained a search warrant and seized thousands of

documents from the marina.

On September 11, 1997, a grand jury sitting in the Eastern

District of Texas indicted Appellants and three other individuals1

on various conspiracy, tax fraud, wire fraud, mail fraud, and money

laundering charges. A 1998 superseding indictment charged

Appellants on thirty-one counts.2 The Government alleged that

Appellants failed to report millions in boat sales to the IRS and

the Corps. Appellants were also accused of having defrauded their

1 Andrew Scott Howard and Roger Foltz were acquitted. Henry Blume Loe was granted a mistrial; he was convicted in a subsequent trial. 2 The various counts of the indictment did not uniformly encompass every defendant. In addition to the thirty-one substantive counts, the superseding indictment contained a forfeiture provision.

3 insurers, who collectively suffered millions of dollars in damage

due to Appellants' submission of altered or fabricated invoices for

losses and mitigation costs. The indictment alleged that Appellants

conspired to undertake these unlawful activities, and that they

used the proceeds of the fraud to acquire various forms of

property, including a house in Florida.

The district court severed the counts and held two trials.

Appellants were each convicted on some counts and acquitted on

others. The district court sentenced Cornelius and Babo Loe to jail

and required the Loes and LHI to pay large fines and restitution

damages.

II. CORNELIUS LOE

A

Cornelius Loe argues that his conspiracy conviction should be

reversed, asserting that his prosecution was barred by the statute

of limitations. The government alleged only one act in furtherance

of the conspiracy that fell within the five-year statute of

limitations.3 Cornelius Loe argues that the overt act alleged in

the indictment could not support a conviction.

The indictment alleged that the defendants conspired to

commit the following acts: "To devise and intend to devise a scheme

and artifice to defraud insurance companies and to obtain money and

3 See 18 U.S.C.A. § 3282 (2000) (articulating a five-year limitations period).

4 property by means of false and fraudulent pretenses and promises

and [to do so in violation of 18 U.S.C.A. § 1341 (mail fraud) and

in violation of 18 U.S.C.A. § 1343 (wire fraud)]." Given the

statute of limitations, the Government had to prove an act in

furtherance of the conspiracy after September 11, 1992. The

indictment alleged: "On or about December, 1992, BABO BEAZLEY LOE,

C.D. LOE, JR. and LOE's HIGHPORT, INC. effected a settlement of the

lawsuit and received a portion of the fraudulently obtained

insurance proceeds."

These allegations arose out of the following circumstances: In

July 1991, the Loes' insurer, Lexington, interpleaded $638,388.34

in state court to determine the portion of proceeds due to the Loes

and one of their tenants, David Hull. Hull apparently had refused

to endorse Lexington insurance checks that he received, checks made

out jointly to him and the Loes.4 According to the Government, the

vast majority of the interpleaded funds resulted from the insurance

fraud undertaken by the Loes. On March 27, 1991, the state court

ordered that $624,867.795 be paid to the Loes and that $15,520.55

be retained in the court registry. The court's calculation was

incorrect, as these amounts sum to $640,388.34. The investment firm

4 Hull had been the lessee of a restaurant located on the marina. Cornelius Loe allegedly attempted to enlist Hull in the conspiracy. In the wake of Hull's refusal to participate, the Loes ejected him from the premises and indicated that the restaurant would not be reopened. Litigation ensued. 5 Each of these sums was paid with interest; the amounts shown reflect only principal.

5 handling the proceeds consequently paid the Loes only $622,867.79.

By subsequent order, the court awarded Hull $13,520.55, leaving

$2,000 in the account. All of these events occurred before

September 11, 1992.

Meanwhile, the Loes sued Hull over a debt. In November or

December, 1992, Hull's attorney and the Loes' attorney negotiated

a possible settlement of litigation between the two parties. Hull's

attorney proposed a disposition of the funds remaining in the

registry account from this and earlier interpleader actions.

Following this conversation, Hull's attorney asked the court to

disburse $17,500 from an earlier interpleader to the Loes, plus the

$2,000 remaining by mistake, and to disburse the remainder to Hull.

The motion explained that the $17,500 was actually owed to Hull,

but should be given to the Loes to settle the debt litigation. The

court entered an order of disbursement on February 10, 1993.6

Based on these facts, Cornelius Loe contends, first, that the

$2,000 payment was merely the "result" of the conspiracy, and not

its object. He argues that the object of the conspiracy was

defrauding the insurance company. As the fraud was completed

outside the limitations period, Cornelius argues that the

6 The motion made clear that LHI was entitled to the $2,000 as a result of the prior mistaken order. The court's subsequent order of disbursement specifically included a $2,000 disbursement to Babo Loe as trustee of LHI.

6 Government can not demonstrate the commission of an overt act in

furtherance of the conspiratorial agreement.7

We are unpersuaded by Loe's argument. Receipt of the money was

an object, and not merely a collateral result, of the conspiracy.

The indictment so alleged, and a rational trier of fact could have

arrived at this conclusion.

Our holding in United States v. Girard8 is instructive. In

Girard, we reversed the dismissal of an indictment, which the

district court had found barred by the statute of limitations. The

defendant in that case had allegedly conspired to defraud the

government by rigging contract bids. Only the final payment was

within the statute of limitations; the bid rigging had occurred

long before.9 We held that the receipt of the money was properly

alleged as an object of the conspiracy, which did not end until the

last payment was made. Girard's overt act was the acceptance and

retention of the payment.10 We made the common sense observation

that the object of the conspiracy was not the making of rigged bids

itself, but the subsequent receipt of the proceeds.11 Similarly,

7 See Grunewald v. United States, 353 U.S. 391, 396-97 (1957). 8 744 F.2d 1170 (5th Cir. 1984). 9 Girard, 744 F.2d at 1171. 10 Id. at 1173. 11 Id. at 1172. The cases cited by Cornelius Loe are consistent with this reasoning, yet are factually distinguishable. In United States v. Colon-Munoz, 192 F.3d 210, 227-29 (1st Cir. 1999), the court held that obtaining specified property was the object of the conspiracy. Following the purchase of the property, a conspirator made payments on a loan financing the purchase. The court

7 receipt of the $2,000 in this case constituted an overt act falling

within the limitations period.

Cornelius Loe also contends that actions taken by Hull's

attorney are not actions taken by conspirators and therefore cannot

be actions taken in furtherance of a conspiracy.12 This argument

fails, first, because receipt of the money by the Loes was an overt

act within the scope of the conspiracy. Moreover, a rational jury

could conclude that the Loes, as parties to the settlement

agreement with Hull, took some overt action in connection with the

terms of the agreement.

Third, Cornelius Loe argues that, even if the $2,000 payment

made in February 1993 was an act in furtherance of the conspiracy,

the indictment failed to allege this act. Loe notes that the

indictment only alleged the 1992 settlement. In assessing whether

a conspiracy conviction under 18 U.S.C. § 371 withstands a statute

of limitations challenge, this Court has held that the overt acts

alleged in the indictment and proved at trial mark the duration of

correctly concluded that these later actions were not undertaken in furtherance of the conspiracy. See id. In United States v. Davis, 533 F.2d 921, 926 (5th Cir. 1976), we found that acts taken after false statements were made to the government were not part of a conspiracy. We emphasized that defendants were charged with conspiring to violate 18 U.S.C. § 1001, noting that the object of this offense was the making of false statements itself. We contrasted that offense with conspiracy to defraud the government. See id. at 927-28. As the conspiracy at issue in this case involves wire and mail fraud, it is distinguishable from Davis.

12 See United States v. Manges, 110 F.3d 1162, 1170 (5th Cir. 1997) (holding that, where a conspirator did not mail the letter implicated in mail fraud, the mailing by another person was insufficient to support conviction).

8 the conspiracy.13 Proof of an unalleged act can not surmount the

statute of limitations bar.

Loe's argument fails, however, because the motion to disburse

the $2,000 was itself part of the settlement, which was negotiated

in November or December 1992. The indictment indicated that

Appellants had "effected a settlement" and "received a portion of

the fraudulently obtained insurance proceeds." The broad language

of the indictment was sufficient to encompass the Loes' receipt of

the $2,000.

Finally, Cornelius Loe contends that the $2,000 is "interest"

from the interpled funds and consequently not the insurer's money.

This argument is creative advocacy, but wrong. The $2,000

unquestionably represented the remainder of the principal

originally registered with the court.14

B

Cornelius Loe further contends that the district court failed

to properly instruct the jury regarding the statute of limitations

in its aiding and abetting instruction for the conspiracy count.

Count 17 of the indictment charged Appellants with (1) conspiring

13 See Davis, 533 F.2d at 929. 14 Babo Loe adopts Cornelius Loe's arguments. For the reasons given above, they also fail. Indeed, Babo Loe's case is much weaker, as the $2,000 check was issued in her name.

9 to violate the mail and wire fraud statutes, and (2) aiding and

abetting this conspiracy, violating 18 U.S.C. § 2. As we understand

his argument, Cornelius Loe asserts that it is unclear from the

verdict whether the jury convicted him of aiding and abetting or

for his role as a member of the conspiracy itself. He argues that

the actus reus of aiding and abetting must itself occur within the

limitations period. Where the aidor-abettor's acts fall outside

this period, it is irrelevant that the overt acts taken by the

conspirators were not time-barred. According to Cornelius Loe, the

jury should have been informed of this distinction.

We doubt the validity of Loe's proposition. An aidor-abettor

is guilty in a derivative sense; his guilt is contingent on the

acts of another.15 Courts have recognized this relationship by

holding that aiding and abetting is governed by the statute of

limitations applicable to the predicate offense.16 One could

reasonably conclude that, as long as the acts of the conspirator

were not time-barred, it is of no moment that the aidor-abettor's

conduct fell outside the limitations period. We need not decide

this, however, as Cornelius Loe was a party to the Hull litigation.

A rational jury could have found that any acts of aiding and

15 See 18 U.S.C.A. § 2 (2000); United States v. Campbell, 426 F.2d 547, 553 (2d Cir. 1970) ("18 U.S.C. § 2 does not define a crime; rather it makes punishable as a principal one who aids or abets the commission of a substantive crime."). 16 See United States v. Musacchia, 900 F.2d 493, 499 (2d Cir. 1990), vacated on other grounds, 955 F.2d 3 (2d Cir. 1991); Campbell, 426 F.2d at 553; United States v. Gressett, 773 F. Supp. 270, 281 (D. Kan. 1991).

10 abetting committed by Cornelius Loe fell within the five-year

limitations period.

Even if we were to accept Cornelius Loe's argument, however,

the jury instructions sufficiently informed the jury that the

conspiracy limitations period applied to the aiding and abetting

offense. The court admonished the jury to consider the

"instructions as a whole" and to consider the aiding and abetting

instructions "together" with the conspiracy instructions. We do not

find that the court abused its discretion in incorporating the

statute of limitations by reference.17

C

Cornelius Loe also challenges the sufficiency of the evidence

supporting his conviction under Count 17. The applicable standard

of review requires us to determine whether a reasonable trier of

fact could have found that the evidence established guilt beyond a

reasonable doubt.18 The voluminous evidence in the record affirms

that Loe's challenge is meritless. We decline Loe's invitation to

re-weigh the credibility of the witnesses.19

17 See United States v. Pennington, 20 F.3d 593, 600 (5th Cir. 1994) (reviewing a court's refusal to submit a proposed jury instruction for abuse of discretion).

18 See United States v. Mergerson, 4 F.3d 337, 341 (5th Cir. 1993).

19 See United States v. Bailey, 444 U.S. 394, 414-15 (1980) (stating that it is for the jury, and not the court, to determine the credibility of witnesses).

11 D

Loe challenges the jury instructions for the conspiracy, mail

fraud, and wire fraud counts based on the court's failure to define

"materiality." Materiality is an element of the offenses of mail

and wire fraud, and must be included in the jury charge.20 In this

case, the court instructed the jury that the fraud must be

"material;" the only alleged error is its failure to define the

term.21

We review a trial court's refusal to include a requested jury

instruction for abuse of discretion, according the trial court

"substantial latitude in formulating the charge."22 We find

reversible error only where the requested instruction is

substantially correct; the actual charge given the jury did not

substantially cover the content of the proposed instruction; and

where the omission of the proposed instruction would "seriously

impair the defendant's ability to present a defense."23

20 See Neder v. United States, 527 U.S. 1, 25 (1999); United States v. Pettigrew, 77 F.3d 1500, 1510-11 (5th Cir. 1996). 21 The court instructed the jury in the following manner:

For purposes of both the mail and wire fraud statutes, a "scheme to defraud" includes any scheme to deprive another of money or property by means of false or fraudulent pretenses, representations, or promises. A representation may be "false" when it constitutes a half truth, or effectively conceals a material fact, provided it is made with intent to defraud. 22 Pettigrew, 77 F.3d at 1510.

23 Id.

12 The court only deviated from the instruction proposed by

Appellants in refusing to define "material."24 We have held that

failure to charge materiality to the jury requires reversal,

without considering whether the error was harmless.25 However, we

have not found that failure to define materiality compels the same

response. This is not a case where the actual instructions failed

to "substantially cover the content of the proposed instruction."26

Given the evidence presented at trial, which demonstrated that

Appellants' fraud increased the insurers' payments by millions of

dollars, the court's failure to define "material" was nothing more

than harmless error.27

III. BABO LOE

Babo Loe contends that she can not be convicted of conspiracy

on counts 1, 17, and 18, which alleged conspiracy to defraud the

government and conspiracy to commit mail and wire fraud. She

24 The proposed mail fraud instruction included the following definition of "materiality": "A statement is material if it has a natural tendency to influence, or is capable of influencing a decision by the party to whom the representation is made." In contrast, the proposed wire fraud instruction did not include a definition of materiality. 25 Pettigrew, 77 F.3d at 1511. 26 Id. at 1510. 27 See United States v. Davis, 226 F.3d 346, 358-59 (5th Cir. 2000) (upholding a jury instruction that failed to define "materiality"). Babo Loe adopts Cornelius Loe's argument regarding the jury instructions. The preceding analysis applies equally to her case.

13 argues, first, that being convicted of conspiring with LHI, which

she owned, is equivalent to being convicted of conspiring with

herself. Second, she notes that, with the exception of Cornelius

Loe, the other alleged co-conspirators were acquitted. She argues

that she can not be convicted of conspiracy if the other co-

conspirators were acquitted. Similarly, Babo Loe asserts that, if

the evidence was insufficient to support Cornelius Loe's conviction

under count 17, her conviction under that count also can not stand.

Her argument is without foundation. This Court has repeatedly

held that the acquittal of all other co-conspirators does not bar

conviction for conspiracy.28 We therefore need not address Babo

Loe's assertion that she can not be convicted of conspiring with

LHI.29

Babo Loe also contends that the district court erred in

denying her motion to suppress evidence seized pursuant to the

search of the marina. As we understand her argument, she asserts

that all of the evidence should be suppressed because of defects in

the warrant and its execution. She contends that the warrant was

28 See United States v. Zuniga-Salinas, 952 F.2d 876, 877-78 (5th Cir. 1992) (en banc); United States v. Bermea, 30 F.3d 1539, 1554 (5th Cir. 1994). 29 As noted above, the evidence was sufficient to support Cornelius Loe's conspiracy conviction under count 17. Moreover, counts 1 and 18 involved acquitted conspirators other than LHI. Babo Loe's arguments regarding LHI are consequently irrelevant.

14 overbroad and that the FBI exceeded the scope of the warrant in

conducting its search.

The affidavit upon which the warrant was based provided

evidence that the Loes (1) had underreported boat sales revenue to

the Corps; (2) had underreported boat sales revenue to the IRS; (3)

had not paid state sales tax on cash cover charges obtained from

bars and restaurants located on the marina; and (4) did not report

the cash sale of various boats, in violation of the Bank Secrecy

Act.30 The warrant authorized the search of the following areas: two

offices on level one of the corporate office building; all of level

two; the storage area of level three; a tan mobile home designated,

"Loe's Highport Yacht Sales"; and the safes and vaults of the

Pompano's Club and Clipper Bar. An attachment to the search warrant

listed approximately fifty-four categories of items to be seized.

The warrant did not authorize a search of the Loe's residence,

which was located on the third floor of the corporate office

building.

In reviewing the district court's ruling on a motion to

suppress evidence, we review factual findings for clear error.31 We

review de novo the court's legal conclusions regarding the

constitutionality of law enforcement action, sufficiency of the

30 See 31 U.S.C.A. §§ 5312(a)(2)(T), 5313 (2000).

31 See Davis, 226 F.3d at 350.

15 warrant, and the reasonableness of an officer's reliance on a

warrant.32

We address a Fourth Amendment challenge to a seizure conducted

pursuant to a search warrant by asking, first, whether the seizure

falls within the good-faith exception to the exclusionary rule.33

Under the good-faith exception, where a warrant was based on an

affidavit which was insufficient to establish probable cause, the

evidence obtained is still admissible if law enforcement officials

acted in "objectively reasonable good-faith reliance upon a search

warrant."34 If the good-faith exception applies, we need not examine

whether the warrant was supported by probable cause.35

When officers execute a warrant in a manner that offends the

Fourth Amendment, however, there is no "objectively reasonable

good-faith reliance." Evidence which falls outside the scope of the

warrant normally must be suppressed.36 However, two exceptions

apply. First, items of an "incriminatory character" which are found

in the course of a legal search, yet which were not described in

the search warrant, may be seized. Second, officers may seize

32 See id.

33 See United States v. Davis, 226 F.3d 346, 350 (5th Cir. 2000); see also United States v. Leon, 468 U.S. 897 (1984).

34 Davis, 226 F.3d at 351 (quoting United States v. Shugart, 117 F.3d 838, 843 (5th Cir. 1997)). 35 Davis, 226 F.3d at 351.

36 See Horton v. California, 496 U.S. 128, 140 (1990).

16 property which is not described in the warrant if the property

exhibits a "sufficient nexus" to the crime under investigation.37

The Fourth Amendment does not countenance, however, a "general,

exploratory search through personal belongings."38

Although the bulk of her arguments address the sufficiency of

the warrant itself, Babo Loe contends that the fourteen-hour search

of the marina exceeded the scope of the warrant. Agents seized

several hundred boxes of documents, of which 130 boxes were

subsequently returned as irrelevant to the Government's

investigation. Babo Loe fails to cite specific pieces of evidence

that were seized outside the scope of the warrant. While Babo Loe

argued to the district court that a variety of broad categories of

evidence were seized outside the scope of the warrant,39 her brief

does not indicate whether she is reiterating those arguments on

appeal. On appeal, she refers only to the seizure of estate

37 See Creamer v. Porter, 754 F.2d 1311, 1318 (5th Cir. 1985).

38 Id. 39 The district court examined the following categories of evidence which Babo Loe objected to as falling outside the scope of the warrant: (1) various date books, organizers, calendars, attendance lists, and Rolodexes; (2) entirely personal notes and files; (3) litigation and other legal files, including files relating to the Hull litigation; (4) state and federal labor law files; (5) trust and estate planning files; (6) gift and estate tax files; (7) files on property damage; (8) medical and health insurance files; (9) life insurance files; (10) automobile insurance files; (11) other insurance files unrelated to property insurance; (12) maps and floor plans; and (13) an audiotape. The district court found that, while some of the preceding categories of items appeared to fall outside the warrant's scope and did not demonstrate a sufficient nexus to the crimes investigated, the officers did not act in "blatant disregard of the search warrant."

17 planning files, the Loes' personal files, whole computers and

computer files, and litigation files.

Although we are troubled by the scope of the search conducted,

we are unprepared to say that the items seized should be suppressed

on the basis that they exceeded the terms of the warrant. The

warrant specifically authorized the seizure of computers and

computer files. Although the warrant did not refer to estate

planning files, it authorized, for example, the seizure of files

relating to any and all wire transfers and information relating to

stock/brokerage accounts. Without specifics, we are unable to

evaluate the merits of Babo Loe's contention that "personal files"

were seized. Finally, while the warrant did not expressly authorize

the seizure of litigation files, certain non-privileged documents

contained within those files may have fallen within the scope of

the warrant. Again, without specifics, we are unable to conclude

that any given file was seized improperly.

Babo Loe also complains of the extensive search of the Loe

residence. The warrant authorized a search of the third-floor

storage area. Because the elevator was either locked or inoperable,

agents could only access the storage area through the Loes'

residence, which was also on the third floor. Despite the warrant's

failure to authorize a search of the residence, the Government

18 argues that a "protective sweep" was necessary.40 The FBI knew prior

to the search that the Loes were registered gun owners, and a

search of their persons did not reveal firearms. Although examining

drawers and closets may or may not have been quick and limited—and

therefore within the scope of a protective sweep41—we need not

address this issue. No items from the residence were seized, nor

was anything from the residence used as evidence at trial.

Babo Loe further argues that the warrant itself was overbroad

because it authorized the seizure of many categories of documents

unrelated to the crimes described in the affidavit. The good-faith

exception articulated above does not apply where there is a

discrepancy between the assertions in the affidavit and the scope

of the warrant sufficient to make reliance on the warrant

unreasonable.42

While the wisdom of including such a broad array of documents

in the warrant is questionable, we are unprepared to find the

40 A protective sweep is justified when the searching officer reasonably believed "that the area swept harbored an individual posing a danger to the officer or others." Maryland v. Buie, 494 U.S. 325, 327 (1990).

41 See id. ("A 'protective sweep' is a quick and limited search of premises . . . narrowly confined to a cursory visual inspection of those places in which a person might be hiding."). But see United States v. Hernandez, 941 F.2d 133, 135-38 (2d Cir. 1991) (extending the proper scope of a protective sweep to a search for weapons that the arrestee could easily reach). 42 See United States v. Davis, 226 F.3d 346, 352 (5th Cir. 2000); United States v. Cherna, 184 F.3d 403, 409-10 (5th Cir. 1999). Babo Loe does not invoke the other bases for not applying the good-faith exception. See Cherna, 184 F.3d at 407-08. Given the specificity of the warrant, which lists fifty-four categories of evidence, we find that the warrant did not violate the particularity requirement of the Fourth Amendment. See United States v. Kimbrough, 69 F.3d 723, 727 (5th Cir. 1995).

19 officers' reliance on the warrant unreasonable. The district court

found that documents such as real estate and insurance files were

logical indicators of LHI's gross fixed assets. We agree. A

company's gross fixed assets may indicate a failure to report

income to the IRS and Corps, as well as Appellants' knowledge of

the unreported income. The twenty-two-page affidavit provided ample

indication of the Loes' failure to report income to the IRS and

Corps. Although the warrant authorized seizure of a vast array of

documents, the crimes alleged in the affidavit could reasonably be

viewed as requiring a search of this magnitude. The fifty-year

history of the marina and the scope of the operations under

investigation lend additional support to the breadth of the search

warrant. Moreover, the warrant expressly limited the search to a

portion of the marina's business premises, and nothing was seized

from the Loes' residence.43 The Loes point to the FBI's prompt

return of the 130 boxes of irrelevant documents as evidence of the

warrant's overbreadth. However, this is merely proof that the

proper breadth of a warrant is always clearer after the fact.

We find only that the agents' reliance on the warrant was not

objectively unreasonable and did not indicate bad faith.44

43 The search in this case is therefore distinguishable from the "all records" search discussed in United States v. Humphrey, 104 F.3d 65 (5th Cir. 1997). In Humphrey, we recognized that the Fourth Amendment requires "closer scrutiny of an all records search of a residence," noting that a search of this nature would only be upheld in "extreme cases." See id. at 69 & n.2. 44 Cornelius Loe adopts Babo Loe's Fourth Amendment arguments. For the reasons given above, these arguments also fail as applied to Cornelius Loe.

20 C

Babo Loe argues that the district court improperly applied the

Sentencing Guidelines in determining her sentence for money

laundering. She contends that fraud was the "essence" of her

offense. Accordingly, Babo Loe argues that she should have been

sentenced under the fraud guidelines, not the money laundering

guidelines.

This Court reviews a court's legal interpretations of the

Guidelines de novo.45 A sentencing court's refusal to depart from

the applicable guideline is unreviewable, however, unless the court

mistakenly believed that it lacked the authority to grant such a

departure.46 The district court here was aware of its power to grant

a downward departure.

Babo Loe attempts to escape this limitation on our power to

review sentencing decisions. She asserts that a court's application

of a guideline range is a purely legal interpretation, meriting de

novo review. We find no error in the sentencing court's decision to

apply section 2S.1 of the Guidelines to Babo Loe's violation of 18

U.S.C. § 1957. Appendix A of the Guidelines indicates that

guideline section 2S1.2 corresponds with violations of 18 U.S.C. §

45 See United States v. Barbontin, 907 F.2d 1494, 1497 (5th Cir. 1990).

46 See United States v. Powers, 168 F.3d 741, 753 (5th Cir. 1999).

21 1957.47 We would not hesitate to apply de novo review and correct

a court's misapprehension of this elementary component of the

sentencing architecture constructed by the Guidelines. However,

where a court finds that the facts in a section 1957 case are

sufficiently atypical as to warrant the application of a lower

guideline range, its decision constitutes a downward departure.48

The court in such an instance does not misinterpret the Guidelines

by failing to apply section 2S1.2; it exercises its discretion

under the facts of that case.49 The sentencing court's refusal to

apply a different set of guidelines in this case therefore

constitutes a refusal to grant a downward departure—a decision

which this Court may not review.

D

Babo Loe also challenges her money laundering conviction on

count 25, arguing that the evidence was insufficient to support the

verdict. We review the evidence to determine whether a reasonable

trier of fact could have found that the evidence established guilt

47 See U.S.S.G. App. A. (2000); U.S.S.G. § 1B1.2(a); U.S.S.G. § 2S1.2, cmt. 48 See United States v. Dadi, 235 F.3d 945, 954-55 (5th Cir. 2000); United States v. Hemmingson, 157 F.3d 347, 360-63 (5th Cir. 1998). Our Court therefore differs from those circuits which view the initial choice of which guideline to apply as a question of law subject to de novo review. See United States v. Smith, 186 F.3d 290, 297 (3d Cir. 1999). 49 See 18 U.S.C.A. § 3553(b) (2000) (requiring a court to follow the applicable guideline unless it finds that "there exists an aggravating or mitigating circumstance . . . not adequately taken into consideration by the Sentencing Commission").

22 beyond a reasonable doubt.50 Babo Loe notes that she spent some of

the fraudulently obtained money years after having received it. She

contends that the passage of time negates the inference that she

knew that she was spending "dirty" funds. This argument is

meritless. A rational jury could find that she possessed such

knowledge at the time of the transaction. Babo Loe asks this Court

to effectively re-weigh the evidence. We refrain from taking such

a step and reject her sufficiency challenge.51

E

Babo Loe argues that the forfeiture of the Florida property

should be reversed on three grounds: the indictment did not allege

the extent of her interest in the property; the forfeiture was not

incorporated in the judgment; and the forfeiture is

disproportionate to the offense. We reject each of these

contentions.

First, the indictment was sufficient. Rule 7(c)(2) of the

Federal Rules of Criminal Procedure states: "No judgment of

forfeiture may be entered in a criminal proceeding unless the

indictment or information shall allege the extent of the interest

or property subject to forfeiture." As this Court has noted, "[t]he

purpose of the notice of forfeiture in the indictment is to inform

50 See United States v. Mergerson, 4 F.3d 337, 341 (5th Cir. 1993).

51 See United States v. Bailey, 444 U.S. 394, 414 (1980).

23 the defendant that the government seeks forfeiture as a remedy."52

An indictment is sufficiently specific if it "puts the defendant on

notice that the government seeks forfeiture and identifies the

assets with sufficient specificity to permit the defendant to

marshal evidence in their defense."53 Babo Loe asserts that the

indictment was insufficient because it failed to specify the

interest in the property that was subject to forfeiture, which the

court later determined to be 52.6 percent. Rule 7(c)(2) does not

require the level of detail sought by Babo Loe. She had ample

notice that the Florida property itself was subject to forfeiture.

Her defense could not have been jeopardized by the Government's

failure to more precisely delineate the scope of the forfeiture.54

Second, the forfeiture was incorporated in the judgment. Rule

32(d)(2) of the Federal Rules of Criminal Procedure provides: "At

sentencing, a final order of forfeiture shall be made part of the

sentence and included in the judgment." In this case, Judge Brown

indicated orally at the sentencing hearing that the Florida

property would be forfeited. Moreover, the court issued a written

preliminary order of forfeiture on March 31, 1999. However, the

judgments of conviction did not refer to the March 31st order or

discuss forfeiture. Upon the Government's motion, the court entered

52 United States v. Puma, 937 F.2d 151, 156 (5th Cir. 1991) (quoting United States v. Cauble, 706 F.2d 1322, 1347 (5th Cir. 1983)). 53 Puma, 937 F.2d at 156.

54 See id. at 156-57.

24 a nunc pro tunc amendment to the written order describing the

forfeited property.55 We find nothing objectionable about this

procedure. Moreover, in the event of a conflict between an oral

judgment and a written order, the oral ruling prevails.56 The

court's oral pronouncement on forfeiture, which it issued at the

sentencing hearing, consequently remains effective in the face of

a contrary written judgment.

Finally, the forfeiture is not excessive. The court ordered

Babo Loe to forfeit only so much of the property as was purchased

with illegally obtained funds—money that she had no right to in the

first place.57 We therefore find no disproportionality, let alone

the "gross disproportionality" required by United States v.

Bajakajian.58

F

Babo Loe argues that the Government failed to adduce evidence

sufficient to support venue for count 19, mail fraud. As a

"continuing offense," mail fraud may be prosecuted in "any district

55 See Fed. R. Crim. Proc. 36 (2000). 56 See United States v. McDowell, 109 F.3d 214, 217 (5th Cir. 1997); United States v. Shaw, 920 F.2d 1225, 1231 (5th Cir. 1991). 57 See United States v. Tilley, 18 F.3d 295, 300 (5th Cir. 1994). 58 524 U.S. 321, 334 (1998). Cornelius Loe adopts Babo Loe's arguments regarding the forfeiture. For the reasons given above, they fail as applied to his case.

25 in which such offense was begun, continued, or completed."59

Although the government must prove venue by the preponderance of

the evidence, circumstantial evidence alone is sufficient to

establish venue.60 On appeal, we view the evidence in the light most

favorable to the Government, drawing all reasonable inferences in

favor of the verdict.61

Babo Loe's contention is meritless. The evidence supports a

finding that on three occasions she mailed numerous documents from

locations in the Eastern District of Texas in furtherance of the

fraudulent conspiracy. Babo Loe contends that, if the three

mailings described above support her conviction on mail fraud, that

count 19 suffered from duplicity. "An indictment may be duplicitous

if it joins in a single Count two or more distinct offenses."62

However, count 19 only alleges a single act of mail fraud. Babo Loe

also does not claim prejudice as a result of duplicity in count

19.63

Her argument is more appropriately considered as a claimed

variance. Variance results when "the charging terms of the

indictment remain unaltered, but the evidence at trial proves facts

59 18 U.S.C.A. § 3237(a) (2000).

60 See United States v. White, 611 F.2d 531, 534-35 (1980).

61 Id. at 535. 62 See United States v. Sharpe, 193 F.3d 852, 870 (5th Cir. 1999). 63 See United States v. Drury, 687 F.2d 63, 66 (5th Cir. 1983) (finding that, even if an indictment was duplicitous, there was no prejudice).

26 other than those alleged in the indictment."64 The dates of the

three mailings differ slightly from the date presented in the

indictment. Moreover, three acts of mail fraud were proven at

trial, whereas the indictment only charged one act. We are

unconvinced that this variance affected Appellant's "substantial

rights."65 Babo Loe does not allege prejudice and we do not discern

the potential for such prejudice on the facts of this case.

G

Babo Loe further contends that the cumulative effect of

numerous evidentiary errors committed by the district court

violated her rights under the Confrontation Clause.66 We review

evidentiary rulings for an abuse of discretion.67 Although Babo Loe

provides numerous cites to the record, she fails to indicate how a

specific cited decision by the court was erroneous. More

fundamentally, she concedes that none of these decisions

constituted an abuse of discretion. She argues that the cumulative

effect of these "errors" was prejudicial to her Sixth Amendment

rights.

64 Sharpe, 193 F.3d at 866 (quotations omitted).

65 See Fed. R. Crim. Proc. 52(a) (2000); Sharpe, 193 F.3d at 866; United States v. Faulkner, 17 F.3d 745, 760 (5th Cir. 1994); United States v. Winship, 724 F.2d 1116, 1122 (5th Cir. 1984). 66 U.S. Const. amend. VI.

67 See United States v. Pace, 10 F.3d 1106, 1113-14 (5th Cir. 1993).

27 We fail to see how the whole can be greater than the sum of

its parts. There can be no error if the district court acted within

its discretion. As the cumulative effect of such valid

discretionary decisions cannot violate the Sixth Amendment, Babo

Loe's argument fails.68

H

Babo Loe contends that the district court denied her right to

compulsory process by quashing the subpoena duces tecum she had

issued to the Corps. Under Rule 17(c) of the Federal Rules of

Criminal Procedure, a district court has discretion to "quash or

modify the subpoena if compliance would be unreasonable or

oppressive."69 On appeal, Babo Loe must show that (1) the subpoenaed

document is relevant, (2) it is admissible, and (3) that it has

been requested with adequate specificity.70 We review the grant of

a motion to quash for abuse of discretion.71

68 Babo Loe's reliance on United States v. Riddle, 103 F.3d 423, 434-35 (5th Cir. 1997), is misplaced. In that case, we held that the cumulative effect of actual errors—i.e., rulings in which the district court abused its discretion—prejudiced the defendant. We recognize that evidentiary rulings must be viewed in context. A decision to exclude evidence may, in light of prior evidentiary rulings, constitute an abuse of discretion where that same decision would not be erroneous if considered in isolation. Our holding today does not deny the path-dependent nature of individual evidentiary rulings. In this case, Babo Loe fails to contend or prove that a specific decision was itself erroneous in light of prior rulings. We hold that the cumulative effect of a series of valid discretionary judgments can not deny defendant's rights under the Confrontation Clause. 69 Fed. R. Crim. Proc. 17(c) (2000). 70 See United States v. Arditti, 955 F.2d 331, 345 (5th Cir. 1992).

71 See id.

28 The district court quashed the subpoena on the basis that it

lacked the requisite specificity. Babo Loe does not challenge the

court's finding. Instead, she argues that the court should have

modified, rather than quashed, the subpoena. This was not an abuse

of discretion.72

IV. LOE'S HIGHPORT, INC.

LHI argues that the money laundering convictions for counts

22-24 must be reversed. LHI contends, first, that the evidence can

not establish that at least $10,000 of the "traced" money was

fraudulently obtained "dirty money."73 LHI also argues that the

district court's jury instructions were erroneous. The court told

the jury that "you may find, but are not required to find, that in

a [transaction from a commingled fund], as the language of Section

1957 permits, that the transacted funds, at least up to the full

amount originally derived from the crime, were the proceeds of the

criminal activity or derived from that activity."

As this Court has noted, money is fungible.74 The commingling

of assets has placed courts in the difficult position of separating

"clean" from "dirty" funds. Although any accounting method employed

72 We note that Babo Loe never filed a request for a modified subpoena. 73 See 18 U.S.C.A. § 1957 (2000).

74 See United States v. Davis, 226 F.3d 346, 357 (5th Cir. 2000).

29 to this end inevitably exhibits certain "arbitrary"

characteristics,75 a rule of decision is necessary. In United States

v. Davis,76 we stated the following rule for section 1957 cases

involving commingled accounts: "[W]hen the aggregate amount

withdrawn from an account containing commingled funds exceeds the

clean funds, individual withdrawals may be said to be of tainted

money, even if a particular withdrawal was less than the amount of

clean money in the account."77 Davis also implies the converse—that

where an account contains clean funds sufficient to cover a

withdrawal, the Government can not prove beyond a reasonable doubt

that the withdrawal contained dirty money.78

In this case, counts 22-24 were based on transactions

originating in a $776,742 transfer from an account containing

$2,205,000 paid by Lexington to the Loes. Of the $2,205,000, only

$470,790.22 was fraudulently obtained. Since there was enough clean

75 See United States v. Moore, 27 F.3d 969, 976-77 (4th Cir. 1994). 76 226 F.3d 346 (5th Cir. 2000).

77 Davis, 226 F.3d at 357; see also United States v. Rutgard, 116 F.3d 1270, 1291-92 (9th Cir. 1997) (holding that money from a commingled account is presumed to be clean). But cf. United States v. Tencer, 107 F.3d 1120, 1131 (5th Cir. 1997) (holding that, for a conviction under section 1956, "it is sufficient if the government proves at least part of the money represents [proceeds of mail fraud]"). We note that the Fourth and Third Circuits employ a presumption contrary to that which we applied in Davis. See United States v. Sokolow, 91 F.3d 396, 409 (3d Cir. 1996) (articulating presumption that money from commingled account is dirty); Moore, 27 F.3d at 976-77 (same). The presumption employed in Sokolow and Moore may be constitutionally infirm. Cf. Sandstrom v. Montana, 442 U.S. 510 (1979) (holding that jury instructions creating a conclusive presumption against the defendant as to an element of a crime violates the Fourteenth Amendment).

78 Cf. United States v. Poole, 557 F.2d 531, 535-36 (5th Cir. 1977).

30 money in the account to cover the $776,742 transfer, the rule of

Davis mandates reversal of counts 22-24. No reasonable juror could

conclude that these money laundering convictions were warranted

beyond a reasonable doubt.79 Moreover, the jury instructions were

also plainly inconsistent with Davis. As Babo Loe adopts LHI's

arguments with respect to counts 22-24,80 her convictions under

these counts must also be reversed.81

79 See United States v. Giraldi, 86 F.3d 1368, 1371 (5th Cir. 1996). 80 Neither party appeals its money laundering convictions under counts 25, 29, 30, and 31. As discussed in a preceding section of this opinion, Babo Loe's sufficiency of the evidence challenge to count 25 is without merit. She did not adopt LHI's arguments for purposes of count 25. However, we note that application of the Davis rule would not change the outcome of her conviction on this count. 81 There is much to be said in favor of a "proportionality" rule. Under such a rule, courts would treat any withdrawal from an account as containing proportional fractions of clean and dirty money. Applying the facts of the instant case, "dirty" funds ($470,790.22) comprised approximately 21 per cent of the total amount in the account ($2,205,00). Applying this same proportion to the withdrawal in question ($776,742), $165,842.42 of the funds withdrawn would be" dirty." As this amount exceeds the $10,000 threshold articulated in section 1957, LHI's conviction would be justified. A proportionality rule would avoid some of the oddities associated with the Davis approach. Under Davis, if aggregate withdrawals are less than the amount of clean funds in the account, the statute is not violated. However, once withdrawals exceed the clean funds in the account, all subsequent transactions (including the transaction by which the defendant exceeds the clean-funds threshold) are transformed into "dirty" transfers warranting conviction. A proportionality rule avoids this somewhat mechanistic result. Moreover, a proportionality rule is more sensitive to the fungible nature of money. Whereas the Davis rule engages in a presumption that clean money is spent before dirty money, a proportionality rule recognizes that a withdrawal mirrors the sources of the money in the account. If the account is the product of clean and dirty money, a withdrawal should reflect this arrangement in equal proportions. Finally, this rule would be more faithful to the plain language of the statute. The Davis rule allows a court to look at the total number of withdrawals from an account, aggregating a series of transactions. See United States v. Davis, 226 F.3d 346, 357 (5th Cir. 2000); see also United States v. Heath, 970 F.2d 1397, 1404 (5th Cir. 1992). However, section 1957 imposes liability on a transaction-by-transaction basis. See 18 U.S.C.A. § 1957 ("Whoever . . . knowingly engages . . . in a monetary transaction in [dirty money] of a value greater than $10,000 . . . shall be punished."). A proportionality rule would avoid the aggregation mechanism condoned in Davis and more accurately reflect the

31 B

LHI also argues that the indictments for money laundering were

defective because they failed to list a "specified unlawful

activity" that was the source of the laundered money. Section 1957

requires that the defendant (1) knowingly (2) use "criminally

derived property of a value greater than $10,000" (3) in a monetary

transaction, and (4) that the property must be "derived from

specified unlawful activity."82

Each of the money laundering counts referred to one of the

counts alleging conspiracy to commit mail and wire fraud. The

conspiracy counts listed several alleged acts of mail and wire

fraud. LHI notes that the money laundering counts of the indictment

did not specify which act of mail or wire fraud was the source of

the funds. Consequently, LHI argues that the indictment allowed for

a non-unanimous jury verdict regarding which act of fraud was the

source of the money.

This argument misinterprets the term, "specified unlawful

activity." This term does not imply that the indictment must list

a specific unlawful act that is the source of the money. Instead,

the statute proposes "specified unlawful activity" as a term of

language and purpose of the statute. However, as the Davis rule is binding on this panel, see Broussard v. Southern Pac. Transp. Co., 665 F.2d 1387, 1389 (5th Cir. 1982) (en banc), we must apply it to the case at bar, leaving change to a case appropriately before the en banc court. 82 18 U.S.C.A. § 1957 (2000).

32 art.83 A specified unlawful activity is one of a set of federal

crimes listed in 18 U.S.C.A. § 1956(c)(7). Section 1957 merely

requires money to be derived from a particular set of federal

crimes. It does not require the indictment to specify which

unlawful activity generated the funds in question. In any case, we

note that the money laundering counts of the indictment included

allegations sufficient to (1) enumerate each element of the

offense; (2) provide Appellants with notice of the precise

transactions for which they were being prosecuted; and (3) prevent

future prosecutions for the same offense.84 Thus, the indictment was

sufficient.

Nor is jury unanimity regarding the specified unlawful

activity required. Our holding in United States v. Short85 affirms

this conclusion. In Short, we upheld the conviction of a defendant

as a "supervisor" of a continuing criminal enterprise.86 We found

that the jury need not unanimously agree on the identities of the

five subordinates required to make the defendant a supervisor.87

Short indicates that contextual, predicate information need not be

as precisely proven as the defendant's acts. In this case, LHI was

83 See 18 U.S.C.A. § 1957(f)(3) (2000).

84 See United States v. Flores, 63 F.3d 1342, 1360-61 (5th Cir. 1995). 85 181 F.3d 620 (5th Cir. 1999). 86 See 21 U.S.C.A. § 848 (2000); Short, 181 F.3d at 623-24.

87 See Short, 181 F.3d at 623-24.

33 indicted for the commission of a single act, engaging in a monetary

transaction. This act was clearly identified to the jury.88

LHI further argues that the district court erred in excluding

the testimony of an expert witness during the trial of counts 7-10.

These counts accused LHI of having made false statements on a tax

return, in violation of 26 U.S.C. § 7206(1). The defense expert

would have testified that LHI overpaid, rather than underpaid, its

taxes. LHI contends that the district court abused its discretion

and deprived LHI of its Sixth Amendment right to call witnesses in

its favor.

The district court offered three reasons for excluding the

testimony. First, the court found that the evidence was irrelevant.

Second, the court expressed serious doubts as to whether tax

liability could be accurately calculated given the poor condition

of LHI's books. Finally, the court found that the defense provided

the Government with inadequate notice that Appellants intended to

offer the expert's testimony.

88 LHI's reliance on United States v. Gipson, 553 F.2d 453 (5th Cir. 1977), is misplaced. In that case, we held that jury instructions that did not require unanimity regarding the defendant's actus reus violated his Sixth Amendment rights. See id. at 458-59. The jurors in Gipson could have disagreed as to whether the defendant "received" or "sold" stolen property. Consequently, the verdict could not be deemed unanimous. See id. at 458. In contrast, the conduct of the defendant in the instant case was identified to the jury.

34 LHI challenges each of the preceding bases for the court's

decision. LHI contends that evidence of tax liability is relevant

to its motive to make a false statement.89 LHI argues that proof of

motive tends to prove knowledge and intent. Therefore, if LHI had

overpaid its taxes, it is less likely that it would have intended

to make the false statement.

Although we recognize the intuitive appeal of this syllogism,

we are unpersuaded by LHI's reasoning. This Court has specifically

held that evidence of tax liability is irrelevant in false

statement cases.90 Although reliance on a qualified tax preparer is

an affirmative defense in such cases,91 LHI does not contend that

the expert's testimony would have established reliance.

Even if we found this testimony to be logically relevant to

LHI's intent, a court could reasonably find that other factors

outweighed its probative value. The court could have determined

that evidence of tax liability would confuse the jury, misleading

it into believing that tax liability is an element of the offense.

Moreover, the court could have found that such proof would waste

time on collateral issues.92 Nothing prevented Appellants or their

89 Violation of 26 U.S.C. § 7206(1) requires the Government to prove, inter alia, that a defendant willfully made and subscribed to false tax returns and that it did not believe the returns to be true as to every material matter. See United States v. Wilson, 887 F.2d 69, 72 (5th Cir. 1989). 90 See United States v. Johnson, 558 F.2d 744, 745 (5th Cir. 1977). 91 See Wilson, 887 F.3d at 73.

92 See Fed. R. Evid. 403 (2000); Johnson, 558 F.2d at 747.

35 tax preparers from testifying that they were unaware of their tax

liability or that they did not intend to make a false statement. We

find that the court did not abuse its discretion in excluding the

testimony.93 We therefore need not address the adequacy of the

court's additional reasons for excluding the testimony.94

LHI further contends that the district court erred in

computing restitution for the fraudulent invoices submitted to the

insurers. The district court ordered restitution of the entire

value of the invoices with no reduction to reflect the actual costs

that LHI incurred in mitigating losses. It is undisputed that LHI

expended substantial sums in mitigating damage from the 1990 flood.

On the basis of evidence submitted to the district court, LHI

contends that court abused its discretion in failing to offset

LHI's expenses from the restitution amount.95

LHI's argument is meritless. The court found that neither the

fraudulent invoices nor other evidence credibly reflected the

actual expenses incurred by LHI. LHI was unable to provide reliable

evidence supporting its claims. Although a defendant in LHI's

93 See United States v. Willis, 38 F.3d 170, 174 (5th Cir. 1994) (stating that a court's decision to exclude expert testimony is reviewed for abuse of discretion). 94 Babo Loe adopts the preceding argument, which fails for the reasons given above. 95 See United States v. Chaney, 964 F.2d 437, 451-52 (5th Cir. 1992) (articulating an abuse-of-discretion standard for restitution calculations).

36 position would normally be entitled to a reduction in the

restitution award,96 the absence of credible evidence to support a

claim of mitigation loss would preclude such an offset. We find

that the court's decision did not constitute an abuse of

discretion.97

V. CONCLUSION

We AFFIRM the conviction of Appellants as to all counts except

counts 22-24. As the evidence was insufficient to support a

verdict, we REVERSE the convictions of Babo Loe and LHI on counts

22-24 and REMAND to the district court for resentencing.

96 See U.S.S.G. § 2F1.1, cmt. note 8 (2000). 97 Cornelius Loe adopts the preceding argument. For the reasons articulated above, this argument fails as applied to his case.

37 DeMOSS, Circuit Judge, dissenting:

With all due respect, I cannot join in the generalizations and

circuitous reasoning by which the majority concludes that the

conduct charged in Count 17 of the indictment was not barred by the

five-year statute of limitations. Count 17 of the indictment

charged a conspiracy (in violation of § 371) “to defraud insurance

companies and to obtain money and property by means of false and

fraudulent pretenses and promises by use of facilities of the U.S.

mail (in violation of § 1341) and by use of transmissions in

interstate commerce by means of wire communications (in violation

of § 1343).

The elements of the offense prohibited by § 371 are (1) the

making of an agreement by two or more persons to violate a criminal

statute of the United States, and (2) the doing by one or more such

persons of any act to effect the object of such conspiracy, i.e.,

the violation agreed upon. In this case, Count 17 charges a

conspiracy to violate § 1341 (mail fraud) and § 1343 (wire fraud).

The elements of the offense of mail fraud are (1) the devising of

a scheme to defraud or for obtaining money or property by means of

false or fraudulent pretenses, representations, or promises, and

(2) placing any matter or thing in the U.S. mails for the purpose

of executing such scheme. The elements of wire fraud are (1)

38 devising a scheme to defraud or for obtaining money or property by

means of false or fraudulent pretenses, representations, or

promises, and (2) transmitting by means of wire, radio, or

television communication in interstate or foreign commerce any

writing, sign, signal, picture, or sound for the purpose of

executing such scheme.

In the indictment in this case, Count 17 contains a separate

section headed “THE SCHEME TO DEFRAUD.” That portion of Count 17

states that the defendants “would submit or cause to be submitted,

false and fraudulent claims to the insurance companies covering the

losses caused by the 1990 flood in order to inflate the loss to the

marina and the restaurants.” This portion of Count 17 goes on to

indicate that the false and fraudulent claims “would be false and

fraudulent in one or more of the following ways” and there follows

six separate subparagraphs specifically describing various

fictitious claims, duplicate invoices, invoices for losses which

had not actually occurred, invoices which were altered to increase

the amount of expenditure made, fictitious corporations that were

formed to be third-party contractors, and false claims for business

interruption loss which understated the amount of income to the

marina.

There then follows another subpart of Count 17 headed “MANNER

AND MEANS” which alleges the manner and means by which the scheme

to defraud would be accomplished as follows:

39 -39- 1)The defendants would systematically inflate casualty and business interruption losses to the property and businesses of LOE’S HIGHPORT, INC.

2)The defendants would submit, or cause to be submitted, via the United States Postal Service or by means of interstate wire communications, false claims to the insurance companies covering such losses for payment.

I think it is critically important to note that in the

subparts of Count 17 of the indictment, headed “THE CONSPIRACY”,

“THE SCHEME TO DEFRAUD”, and the “MANNER AND MEANS”, there is

absolutely no mention whatsoever of any controversy between the

defendants and David Hull, who leased a portion of the marina

premises for operating a waterfront restaurant. Likewise, there is

no mention of any kind of any controversy with David Hull regarding

distribution of insurance proceeds in connection with the 1990

flood damage.

Count 17 further alleged in 22 separate subparagraphs overt

acts which the defendants committed on specific days and in

specific manner. The first 20 of these subparagraphs allege overt

acts which expressly include references to use of facilities of the

U.S. Postal Service or interstate wire communications. The first

20 of these overt acts allege conduct occurring on dates that were

more than five years prior to the filing of the initial indictment

in this case. The overt act in paragraph 21 is alleged to have

occurred on November 26, 1990, which is more than five years prior

40 -40- to the filing of the original indictment in this case on September

21, 1997; and this subparagraph contains absolutely no allegation

of any kind relating to the use of facilities of the U.S. Post

Office or any interstate wire transmission facility. The conduct

described in subparagraph 21 is the filing of a lawsuit against

David Hull, individually, and in his capacity as Waterfront

Restaurant. David Hull is not a named co-conspirator in the

indictment nor is he named as an unindicted co-conspirator.

The last overt act alleged in Count 17 reads as follows:

22)On or about December, 1992, BABO BEAZLEY LOE, C.D. LOE, JR. and LOE’S HIGHPORT, INC. effected a settlement of the lawsuit and received a portion of the fraudulently obtained insurance proceeds.

While the date of December 1992 would be within five years of the

filing of the initial indictment, there is absolutely nothing in

this subparagraph 22 which specifies the use of any U.S. Post

Office facility nor any interstate wire transmission facility.

Neither § 1341 nor § 1343 makes a crime out of merely fraudulent

misrepresentations or false promises; rather, each of these

statutory provisions makes a crime out of (1) use of the U.S. mails

(§ 1341) or (2) transmission of a matter by interstate wire

communications for the purpose of “executing” some fraudulent

scheme. I find very convincing the arguments advanced by

defendant, C. D. Loe, Jr., (and adopted by Babo Beazley Loe and

Loe’s Highport, Inc.) that no such conduct on the part of any of

41 -41- the defendants was alleged in subparagraphs 21 and 22 of Count 17,

and there is no testimony in this record that any such conduct did

occur. The language in paragraph 22 of Count 17 that the

defendants “effected a settlement of the lawsuit” refers to the

lawsuit described in paragraph 21, which was filed on November 26,

1990. In this lawsuit, the Loes sought recovery of money loaned to

David Hull. There is no factual allegation and no factual proof

that the settlement of that lawsuit was the result of anything sent

by the U.S. mail nor any matter transmitted by wire communication.

There is no factual allegation nor any factual proof that the

settlement of such lawsuit was the result of any conduct that was

false, fraudulent, or misleading. There is no factual allegation

and no factual proof that the insurance company that was the victim

of the scheme to defraud alleged in subparagraphs one through 20 of

Count 17 even knew of such settlement, much less that it was

motivated to take any action based thereon. To the contrary, the

record evidence in this case is clear and unequivocal that the

insurance company had paid all sums of money which it intended to

pay on the “fraudulent” claims submitted by the Loes for the 1990

flood damage by July 11, 1991, some 14 months prior to September

12, 1992, the date upon which the five-year statute of limitations

cut off would be applicable. In my view, when the insurance

company deposits into the registry of the court a sum of money

which it considers to be full and final payment for all of the

42 -42- costs and losses sustained in the 1990 flood damage at the Loes’

marina, the fraud and misrepresentations would be complete

regardless of whether the Loes ever withdrew the money from the

registry of the court or not. Surely, actual receipt by a

defendant of the cash proceeds of his fraudulent conduct cannot be

an essential element of the offense; and “constructive receipt” by

the defendants of the cash proceeds by the placing of the funds in

the registry of the court as occurred in this case should start the

running of the statute of limitations. All of the funds paid by

the insurance company on the basis of fraudulent loss claims were

deposited into the registry of the state court (a total of close to

$2 million), and all but $2,000 of that sum was withdrawn by the

defendants more than five years prior to the filing of the first

indictment in this case. While it is true that the $2,000 was

disbursed from the registry of the court within five years prior to

the filing of the first indictment, I think even the majority would

agree with me that the facts clearly indicate that the defendants

had absolutely nothing to do with the delay in disbursement. That

delay was the result of (1) errors and omissions on the part of the

state district court in framing the disbursal order, (2)

unauthorized decisions by the investment company holding the funds

to give greater weight to the state judge’s language as to the

amount to be retained rather than the amount to be paid to the

defendants, and (3) a failure on the part of counsel for the

43 -43- defendants to promptly call for a correction of this mathematical

error.

With surprising candor, the government recognizes that the

only way it can avoid application of the five-year statute of

limitations to Count 17 is to persuade the Court that the conduct

described in overt act 22 (i) constitutes an act by one or more of

the defendants and (ii) constitutes an act “to effect the object of

the conspiracy” alleged in Count 17. In my view, the conduct in

overt act 22 was neither.

The case law precedents which should guide our determination

are for the most part well established. In Grunewald v. United

States, 353 U.S. 391 (1957), the Supreme Court clearly held that in

order for the government to sustain a conviction for conspiracy

against a statute of limitations defense, the government must prove

that the conspiracy was still in existence as of the limitations

bar date and that at least one overt act by a defendant was

performed after that date. Likewise, the Supreme Court has clearly

stated that when doubt exists about the statute of limitations in

a criminal case, the limitations period should be construed in

favor of the defendant. See United States v. Habig, 390 U.S. 222,

226-27 (1968). This rule of construction in favor of the defendant

has been recently recognized by our Circuit in United States v.

Meador, 138 F.3d 986 (5th Cir. 1998). The question of whether a

prosecution is barred by the statutes of limitations is a question

44 -44- of law, subject to plenary review on appeal in this Circuit.

United States v. Manges, 110 F.3d 1162, 1169 (5th Cir. 1997). In

Manges, our Court stated:

Shanklin claims that he was prosecuted in violation of the applicable five-year statute of limitations. See 18 U.S.C. § 3282. With respect to the conspiracy count only, we agree. Our review is plenary.

Id. at 1169 (emphasis added). The Supreme Court has also clearly

held that “statutes of limitations normally begin to run when the

crime is complete.” Pendergast v. United States, 317 U.S. 412, 418

(1943). And the text of the five-year statute (18 U.S.C. § 3282)

expressly states that the five-year limit applies “except as

otherwise expressly provided by law.” In light of these

principles, the Supreme Court has held that “the doctrine of

continuing offenses should be applied in only limited

circumstances” and should not be reached unless the explicit

language of the substantive criminal statute compels such a

conclusion.” Toussie v. United States, 397 U.S. 112, 114 (1970).

Finally, in United States v. Marion, 404 U.S. 307, 322 (1971), the

Supreme Court stated that statutes of limitations,

represent legislative assessments of relative interests of the State and the defendant in administering and receiving justice; they “are made for the repose of society and the protection of those who may (during the limitation) ... have lost their means of defense.” These statutes provide predictability by specifying a limit beyond which there is an irrebuttable presumption that a

45 -45- defendant’s right to a fair trial would be prejudiced.

Id. (citation omitted).

In addition to the foregoing Supreme Court authority, we have

clear holdings by panels of this Circuit to guide us in this case.

In the early case of United States v. Davis, 533 F.2d 921 (5th Cir.

1976), our Court wrestled with a controversy very similar to the

one in this case. In Davis, the indictment charged conspiracy to

violate 18 U.S.C. § 1006 by agreeing to make false, fictitious, and

fraudulent statements and representations to the Department of

Labor Manpower Administration, an agency of the United States

Government. Only two of the eight overt acts set forth in the

indictment were alleged as occurring within the five-year period of

the statute of limitations. The defendant in Davis asserted that

the two overt acts which happened within the five-year limitations

period did not constitute acts in furtherance of the conspiracy

alleged and our Court agreed. Relying on most of the Supreme Court

law referred to earlier, our Court concluded that the prosecution

of Davis was barred by the statute of limitations and granted a

judgment of acquittal.

Similarly, in United States v. Manges, supra, a panel of our

Court addressed specifically the circumstances of a charge of

conspiracy to violate the mail fraud statute against a defendant’s

contention that it was barred by the five-year statute of

limitations. In reversing the conviction of the defendant on this

46 -46- conspiracy count, our Court pointed out that the conspiracy statute

(18 U.S.C. § 371) “explicitly provides that for the crime of

conspiracy to be complete, one or more of the conspirators must

have performed an act to bring about the object of the conspiracy.

This language cannot be stretched to include the posting of a

letter by a non-conspirator.”

In my view, our Circuit holdings in Davis and Manges, provide

much clearer and better instruction as to the disposition of this

case now before us than does our holding in United States v.

Girard, 744 F.2d 1170 (5th Cir. 1984), which is the centerpiece and

corner-stone of the government’s theory in this case. In Girard,

the grand jury indicted the defendants for conspiring to defraud

the United States in violation of 18 U.S.C. § 371. The indictment

alleged that the scope of the conspiracy encompassed three

purposes: (1) to secure the contract for Girard Plumbing; (2) to

obtain Housing Authority funds under the contract; and (3) to

conceal the fraudulent nature of the bidding from the appropriate

authorities. The government asserted that the last payment due

under the contract occurred on a date inside the five-year statute

of limitations. In light of this payment, our Court concluded that

the conspiracy continued until this last payment was received and

that the acceptance of the last payment under the contract

satisfied the requirement that an overt act in furtherance of the

conspiracy occurred within the proscribed time frame.

47 -47- I note that the majority does not say that they are bound by

the prior decision in Girard, but merely categorize that decision

as “instructive.” I have no quarrel with our Court’s holding in

Girard based on the express circumstances described therein, but I

disagree wholeheartedly with the majority’s conclusion that it

provides even “instructive” help in deciding the issue here in Loe.

The distinctions between Girard and Loe are fundamental and

significant. In Girard, the charge was conspiracy to defraud the

United States directly under § 371; in Loe, the charge was

conspiracy to commit mail fraud and wire fraud against a private

insurance company. In Girard, there were express allegations of

three purposes for the conspiracy which included receipt of the

funds to be paid by the United States Government under the contract

with Girard which was fraudulently secured; and such allegations

tied in neatly with the fact of final payment by the United States

Government to Girard on the contract within the five-year statute

of limitations. I challenge my colleagues in the majority to find

similar express allegations in the language of Count 17 of the

indictment of this case. As I have described previously, in Count

17 there is nothing in the subparts thereof describing The

Conspiracy, The Scheme to Defraud, and The Manner and Means which

can be connected with or anticipates in any way the allegations in

subpart 22 of the overt acts. Finally, in Girard, it is clear that

the final payment on the contract came from the United States

48 -48- Government agency that was the victim of the fraudulent bidding

scheme. In contrast, here, it is clear even from the majority’s

opinion that the insurance company that was the target and victim

of the alleged mail and wire frauds deposited a final payment into

the registry of the court in the sum of $638,388.34 in July of

1991, some 14 months outside of the five-year limitations period,

which started on September 11, 1992. And in March 1992, some six

months outside of the limitations period, the state district court

ordered that $624,867.79 be paid to the Loes, which was their true

and rightful share of the insurance proceeds deposited into the

registry of the court. The $2,000 which was ultimately distributed

to Babo Loe as Trustee for Loe’s Highport in January or February

1993, was a part of the sum previously ordered to be distributed in

March 1992 by the district court. There is, therefore, no

allegation in Count 17 and no proof thereof cited by the government

that would indicate any payment by the insurance company that was

the victim of the alleged frauds to the defendants during the five-

year period of limitations.

For all of the foregoing reasons, I respectfully dissent from

the portion of the majority opinion that affirms the convictions

and sentences of the defendants relating to Count 17. In my view,

Count 17 was clearly barred by the statute of limitations, and the

convictions and sentences of defendants based on Count 17 should be

vacated and set aside. For two of the defendants, Babo Loe and

49 -49- Loe’s Highport, Inc., vacation of these convictions and sentences

would not produce any significant reduction in the sentences that

they received under other convictions from this indictment.

However, as to defendant, C. D. Loe, Jr., whose only conviction was

under Count 17, vacation of the conviction and sentence on Count 17

would relieve him of being a convicted felon and the burden of

having to respond in fines and restitution obligations after his

release from prison.

50 -50-