United States v. Tencer

• Court: Court of Appeals for the Fifth Circuit
• Decided: June 2, 1997
• Docket: 95-31135
• Status: Published

Opinion

REVISED UNITED STATES COURT OF APPEALS for the Fifth Circuit _____________________________________

No. 95-31135 _____________________________________

UNITED STATES OF AMERICA,

Plaintiff-Appellee - Cross-Appellant,

VERSUS

STEVEN B. TENCER,

Defendant-Appellant - Cross-Appellee,

AND

RONALD LAZAR,

Defendant-Appellant - Cross-Appellee.

______________________________________________________

Appeals from the United States District Court for the Eastern District of Louisiana ______________________________________________________ March 10, 1997 Before WISDOM, DAVIS, and DUHÉ, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Steven Tencer and Ronald Lazar challenge their convictions on

multiple counts related to their scheme to submit fraudulent claims

to insurance companies and obtain proceeds for unperformed

chiropractic services. The government cross-appeals a number of

the district court's rulings. For reasons that follow, we affirm

in part, reverse in part, and remand this case to the district

court for sentencing. I.

Appellants Tencer and Lazar, both licensed chiropractors,

worked at the Allied Chiropractic Clinic ("Allied") in Kenner,

Louisiana. Tencer, who owned the clinic, turned over the bulk of

his practice to Lazar, his employee, in 1989; thereafter, Tencer

generally supervised the clinic's financial affairs while Lazar

treated patients on a day-to-day basis. From sometime in 1988 to

early 1992, Allied submitted false insurance claims to three

insurance companies, Blue Cross/Blue Shield of Louisiana ("Blue

Cross"), Mail Handlers Benefit Plan ("Mail Handlers"), and National

Association of Letter Carriers ("NALC"), and collected proceeds for

patients who were not treated at all or who received only minimal

treatment.

To execute the fraud, the appellants paid insurance premiums

for some patients who, in return, signed multiple sign-in sheets

indicating their presence in the office awaiting treatment. Those

sheets were then used to generate false insurance claims.

Appellants followed a similar pattern with patients recruited from

local and federal government agencies; patients with good insurance

benefits for chiropractic services were paid to sign their names

and the names of family members on the clinic's sign-in sheets.

They were also compensated for referring coworkers to Allied.

While Allied apparently provided some legitimate services,

many patients testified that they and their family members received

either no treatment or only cursory treatment consisting of brief

massages or the application of heat pads. Yet, the claim forms

2 Allied submitted for these same patients reported complicated

diagnoses and elaborate treatment regimens. As a result of the

scheme, Allied submitted hundreds of fraudulent claims and

collected more than $450,000 in insurance proceeds related to these

patients.

Before trial, Tencer moved unsuccessfully to sever his trial

from Lazar. Following the jury trial, Tencer was convicted of one

count of conspiracy to commit mail fraud and money laundering in

violation of 18 U.S.C. § 371 (count 1); seventeen counts of mail

fraud in violation of 18 U.S.C. § 1341 (counts 2-18); and eighteen

counts of money laundering in violation of 18 U.S.C. § 1956 (counts

19-29, 31-37). The jury also returned a special forfeiture verdict

of $1,598,645.18 and two vehicles allegedly involved in the money

laundering. The district court acquitted Tencer on five money

laundering counts (counts 26-29, 37) and reduced the jury's

forfeiture order to $700,000. Tencer was sentenced to 78 months'

imprisonment, fined $17,500, and ordered to pay restitution of

$451,969.60 and to forfeit $700,000.

Lazar was convicted of conspiracy, mail fraud, and money

laundering (counts 1-18, 37), but the court acquitted him on the

money laundering count (count 37). He was sentenced to 33 months'

imprisonment and fined $30,000. Tencer and Lazar raise a number of

issues on appeal, which we discuss below. We also consider below

several issues the government raises in its cross-appeal.

II.

Both Tencer and Lazar argue that the evidence is insufficient

3 to support their convictions for mail fraud, money laundering, and

conspiracy. Faced with such a challenge, this court must determine

"`whether, after viewing the evidence and all inferences that may

reasonably be drawn from it in the light most favorable to the

prosecution, any reasonably minded jury could have found that the

defendant was guilty beyond a reasonable doubt.'" United States v.

Krenning, 93 F.3d 1257, 1262 (5th Cir. 1996) (quoting United States

v. Leahy, 82 F.3d 624, 633 (5th Cir. 1996)).

A.

To establish a mail fraud violation under 18 U.S.C. § 1341,

the government must demonstrate (1) a scheme to defraud; (2) the

use of mails to execute that scheme; and (3) the defendant's

specific intent to commit fraud. United States v. Fagan, 821 F.2d

1002, 1008 (5th Cir. 1987), cert. denied, 484 U.S. 1005 (1988).

Counts 2-18 charged appellants with using the mails in furtherance

of a scheme to defraud Blue Cross, Mail Handlers, and NALC. Counts

2-10 stem from nine separate mailings of checks from Blue Cross to

Allied. Counts 11-18 involve checks mailed from Mail Handlers and

NALC. The individual check that government relies in for the

"mailing" on each of the mail fraud counts is identified in the

indictment and was introduced in evidence at trial.

1.

Appellants first argue that the evidence fails to establish

the mailing requirement as it relates to the Blue Cross checks

underlying counts 2-10. To convict a defendant under § 1341, the

use of the mails must be "'incident to an essential part of the

4 scheme.'" Schmuck v. United States, 489 U.S. 705, 711 (1989)

(quoting Pereira v. United States, 347 U.S. 1, 8 (1954)). That is,

completion of the alleged scheme must depend in some way on the

information or documents that passed through the mail. United

States v. Pazos, 24 F.3d 660, 665 (5th Cir. 1994). Even a routine

or innocent mailing may supply the mailing element as long as it

contributes to the execution of the scheme. Schmuck, 489 U.S. at

714-15.

Ample evidence supports the existence of a scheme to defraud

Blue Cross, Mail Handlers, and NALC, and appellants' use of mails

to execute that scheme. Several patients testified that they never

received treatments for which their insurers were billed, and

insurance representatives testified that payments for all claims

were mailed to Allied. The evidence regarding Blue Cross in

particular showed that Allied billed the insurer for 2,944 visits

with patients about whom testimony was offered; Allied received

approximately $362,000 from Blue Cross in payment for the visits.

The Blue Cross-insured patients testified that they received little

or no chiropractic care in return for the money Blue Cross paid

Allied.

As to each of the counts at issue here (counts 2-10), the

indictment alleges that Blue Cross mailed a specific check to pay

fraudulent claims. The government, however, failed to produce any

evidence tending to connect these individual checks with fraudulent

claims. The record does not reveal the name of the patient, the

date of the treatment, or other relevant information demonstrating

5 what claims the individual checks paid. As the government

acknowledged, Allied submitted some valid claims for legitimate

treatment. Consequently, the government's evidence is insufficient

to establish that the checks relied on in counts 2-10 were in

payment of fraudulent claims and therefore were used to execute the

scheme to defraud.

The government argues that a review of claim forms, the

checks, and patient testimony supports the inference necessary for

convictions on these counts. According to the government, given

the regularity with which patients signed in and claims were

submitted and paid, the checks described in counts 2-10 must

contain fraudulent payments. We disagree. The government

submitted no evidence to indicate how quickly Blue Cross responded

to claims or to illustrate the number or amount of legitimate

claims Allied submitted to Blue Cross. Therefore, any conclusion

that the nine individual checks were in payment for fraudulent

claims is speculative.

Alternatively, the government asserts that proof that each

check contained fraudulent proceeds is not necessary to sustain

mail fraud convictions. Simply put, the government argues that

because the evidence of both a scheme to defraud and the use of

mails is overwhelming, this court should overlook its failure to

identify specific checks containing fraudulent proceeds.

The government relies on United States v. Reid, 533 F.2d 1255

(D.C. Cir. 1976), in which the defendant, a credit director,

submitted for payment inflated bills to a collection agency. The

6 defendant argued that the evidence was insufficient to support his

mail fraud convictions because it did not demonstrate that the

invoices or checks on which the mail fraud counts were based were

inflated billings or payments. Id. at 1263. The court disagreed,

stating:

As a matter of practicality, in most schemes to defraud, it would be very difficult for the prosecution to show that any particular check or invoice was in itself false or inflated in amount, because in a course of dealing over a period of months the bills sent and the payments made are not necessarily tied in with ascertainable and accurate accounting data. In fact, it may be assumed that persons engaged in such a scheme to defraud would take some pains not to tie in the invoices and checks with other records which would be in the hands of the person or company being defrauded, in order to escape detection.

Id.

However, Reid's reasoning is not applicable here. The D.C.

Circuit in Reid emphasized that because of the nature of the

fraudulent scheme, determining what invoices or checks were

fraudulent would be nearly impossible. In contrast, the government

here makes no contention that the nature of the fraud made it

difficult for it to demonstrate what checks contained fraudulent

proceeds; it argues instead that such a link is unnecessary to

support a conviction. We disagree, and we decline to endorse a

broad reading of § 1341's mailing requirement that would relieve

the government of the burden of proving that mailings underlying

mail fraud counts are related to the fraud being perpetrated.1

1 The government also asserts that because the continuing payment of all Blue Cross claims--both legitimate and illegitimate- -was integral to the success of appellants' scheme, it is unnecessary to establish what checks contained fraudulent proceeds.

7 In sum, we can identify no record evidence demonstrating that

the checks underlying counts 2-10 contained fraudulent proceeds.

Without such evidence, a rational trier of fact could not have

found Tencer and Lazar guilty beyond a reasonable doubt of the

offenses charged in those counts. Because the government's

evidence as to counts 2-10 was legally insufficient to establish

guilt beyond a reasonable doubt, the convictions of Tencer and

Lazar on those counts must be reversed.

2.

Counts 11-18 charge mail fraud based on checks mailed to

Allied from Mail Handlers and NALC.2 Tencer argues that because

the Allied patients insured by NALC or Mail Handlers testified that

they had no direct dealings with him, the evidence is insufficient

to establish the specific intent to defraud required by 18 U.S.C.

§ 1341 as to these counts. Tencer misconstrues the intent

requirement. The government need not demonstrate that Tencer was

aware that these particular patients were scheme participants;

rather, the intent element is satisfied as long as the government

showed that Tencer willfully participated in a scheme to defraud

"with the intent that the scheme's illicit objectives be achieved."

United States v. Rochester, 898 F.2d 971, 977 (5th Cir. 1990); see

We acknowledge that "innocent" mailings can sometimes support mail fraud convictions. Schmuck, 489 U.S. at 714-15. However, the government has failed to offer any explanation as to how the payment of legitimate claims furthered the scheme to defraud. 2 Because each of these checks identified the claims being paid, we are not faced with the gap in the evidence just discussed in connection with the Blue Cross checks.

8 also United States v. Jimenez, 77 F.3d 95, 97 (5th Cir. 1996).

That is, the government must show Tencer participated in the scheme

to defraud, not that he took part in every aspect of that scheme.

Indeed, given Tencer's admittedly supervisory role in the clinic,

evidence of direct patient contact on his part would be unlikely.

The government presented overwhelming evidence of Tencer's

participation in a scheme to defraud insurance companies. Allied

employees testified that Tencer reviewed claim forms and, at times,

tacked on charges to inflate billings, regardless of whether

additional services had been provided. Patients testified that

Tencer regularly paid for their insurance in return for their

signature on sign-in sheets and that he instructed them to lie

about their health to insurance representatives to enable them to

obtain insurance more easily. This evidence is sufficient for a

rational trier of fact to find that Tencer had the requisite intent

to defraud.

Both Tencer and Lazar argue that the government failed to

submit evidence of fraud as to three of the counts (counts 13, 15-

16). Count 13 involved a payment from Mail Handlers for a claim by

Darryl Smith, and counts 15 and 16 involved claims for Smith's then

three-year-old daughter, Madeline. Neither of these patients

testified at trial. However, Jerry Kelley, a coworker of Darryl

Smith, testified that Smith referred Kelley to Allied and that

Smith told him he would be paid for his visits. Shortly

thereafter, Smith and Kelley visited Allied together, and Smith

gave Kelley money for the visit. In light of Kelley's testimony

9 that he was recruited into the scheme by Smith and later paid by

Smith for his participation in insurance fraud, the jury could

infer that Smith was intimately involved in the fraud himself and

that the claims submitted on behalf of Smith were fraudulent.

Counts 15 and 16 were based on checks paying claims for

treatment to Madeline Smith. During a five-month period, Allied

billed Madeline's insurer for 49 visits for a total of $6,735.50.

Appellants offered no explanation for the excessive number of

visits by a three-year-old child. In addition, Kelley and other

patients testified that the appellants encouraged them to bring

their children into the clinic and to sign their names, regardless

of whether they needed or received treatment.

This circumstantial evidence, viewed in the light most

favorable to the government, is sufficient to support appellants'

convictions on counts 13, 15, and 16.

Finally, Lazar argues that the government failed to establish

that mailings underlying five counts (counts 11-12, 14, 17-18) were

used to execute the fraud. Specifically, he contends that no

evidence shows that the checks from NALC and Mail Handlers were for

fraudulent claims. We disagree.

The checks at issue were in payment for claims by Rashad

Sanders, Jerry Kelley, Kelley's four-year-old son, Jerry Kelley

Jr., Barbara Blanchard, and Blanchard's son, Matthew Blanchard.

The government presented testimony by Sander's mother, Ernestine

Gray, Kelley Sr., and Barbara Blanchard. Each testified that they

were paid to visit the clinic, to refer coworkers and family

10 members, and to pre-sign Allied's sign-in sheets. For example, the

elder Kelley testified that, beginning in March 1992, he visited

the clinic two to three times a week and signed in his own name and

the names of his wife and son. Although Kelley brought his son to

the clinic only twice, Allied billed Mail Handlers for 44 visits

for the younger Kelley over a three-month period.

Similarly, although Gray visited the clinic only four times in

all, Allied submitted 38 claims for her and 35 claims for her son,

Rashad. On two occasions, Lazar even brought sign-in sheets to

Gray's home for her to sign. Lastly, Barbara Blanchard testified

that she and her two children visited Allied about five times

during spring 1992. Allied billed NALC for 22 visits for Barbara

Blanchard and for 24 visits for her son, Matthew.

Viewing the evidence in the light most favorable to the

government, a reasonable jury could conclude beyond a reasonable

doubt that the checks underlying counts 11, 12, 14, 17, and 18 were

mailed as a result of Allied's fraudulent billing and, therefore,

that mails were used to execute the appellants' fraud.

B.

Tencer next challenges the sufficiency of the evidence

supporting his conviction for money laundering on six counts

(counts 31-36), and the government, on its cross-appeal, challenges

the district court's acquittal of both Tencer and Lazar on one of

the money laundering counts (count 37). To support a conviction

under 18 U.S.C. § 1956, the money laundering statute, the

government must prove that the defendant 1) conducted or attempted

11 to conduct a financial transaction, 2) which the defendant knew

involved the proceeds of a specified unlawful activity, 3) with the

intent to conceal or disguise the nature, location, source,

ownership, or control of the proceeds of unlawful activity. United

States v. West, 22 F.3d 586, 590-91 (5th Cir. 1994), cert. denied,

115 S. Ct. 584 (1994); 18 U.S.C. § 1956(a)(1)(B)(i).

Tencer contends first that the government failed to produce

sufficient evidence to establish the concealment element of six of

the money laundering counts (counts 31-36). Those counts stemmed

from six transfers of funds by wire and check from various money

market accounts throughout the country into one account in Tencer's

name at California Federal Bank in Las Vegas, Nevada. A brief

description of the facts is necessary to understand Tencer's

argument.

Between May 1989 and April 1992, Tencer opened bank accounts

in various banks across the country and deposited checks drawn on

his personal account at Fidelity Homestead and on the Allied Clinic

account at Whitney National Bank. On July 9, 1992, a little more

than a week after federal agents had executed a search warrant at

Allied Clinic, Tencer faxed instructions to several of the regional

banks where he had accounts. He directed those banks to transmit

his funds on deposit by mailing cashiers checks by Federal Express

to an Algiers, Louisiana, address at which Tencer neither worked

nor resided. On July 13, 1992, Tencer opened an account at

California Federal Bank in Las Vegas, Nevada, using some of the

12 cashiers checks; his initial deposit totaled $662,637.06. He told

employees at the Las Vegas bank that he was moving into the area

and needed cash to buy a business. He also directed banks that had

not yet mailed cashiers checks to the Algiers address to wire funds

totaling $312,297.89 to the account at California Federal Bank.

The next day, Tencer deposited an $89,832.10 cashiers check into

the account and withdrew $9,900.3 Later that day, Tencer arranged

to have the entire balance in the account--roughly $1,055,000--

delivered to him in cash at a local airport. Before the funds

could be picked up by a security company and delivered to Tencer,

a seizure warrant was executed on the California Federal account.

Tencer argues that the government has presented no evidence

that he sought to conceal the nature, source, ownership, or control

of the funds. He contends that when he opened the regional

accounts initially and later transferred those balances to the

California Federal account, he used his own name and handled his

own transactions. No third parties were used, and a paper trail

clearly connected Tencer to both the regional and California

Federal accounts.

The government counters that the use of a false identity is

not essential to a money laundering conviction. It contends that

Tencer's request that funds be sent to an address at which he

neither worked nor resided, his use of a Las Vegas bank hundreds of

3 Withdrawals of more than $10,000 in cash require the completion of a Currency Transaction Report; according to a bank official, withdrawals slightly below the regulated amount are not unusual.

13 miles away from his home and business to consolidate funds, and his

false statements to bank employees about his plans to move to the

area demonstrated his intent to conceal.

We reject as overly narrow Tencer's view that § 1956's

concealment element is satisfied only by an attempt to disguise the

defendant's identity. Several circuits, including this one, have

recognized that the government need not "prove with regard to any

single transaction that the defendant removed all trace of his

involvement with the money or that the particular transaction

charged is itself highly unusual." United States v. Willey, 57

F.3d 1374, 1386 (5th Cir.), cert. denied, 116 S. Ct. 675 (1995);

see, e.g., United States v. Kinzler, 55 F.3d 70, 73 (2d Cir. 1995)

("§ 1956(a)(1)(B)(i) does not require an attempt to conceal the

identity of the defendant; a scheme that conceals only the source

of the funds falls within the purview of the statute."); United

States v. Manarite, 44 F.3d 1407, 1416 (9th Cir.) (holding that

defendants, by cashing gambling chips in small quantities and at

different times and places, showed intent to conceal even though

they made no intent to disguise their identities), cert. denied,

115 S. Ct. 2610 (1995); United States v. Campbell, 977 F.2d 854,

857-58 (4th Cir. 1992) (upholding conviction where evidence of

concealment consisted of real estate agent's suspicion that

client's funds were derived from illegal activity coupled with

under-the-table cash transfer of $60,000 cash down payment on

home), cert. denied, 507 U.S. 938 (1993); United States v. Lovett,

964 F.2d 1029, 1034 n.3 (10th Cir.) ("To find that the money

14 laundering statute is aimed solely at those transactions designed

to conceal the identity of the participants to the transaction is

to ignore the broad language of the statute."), cert. denied, 506

U.S. 857 (1992). Thus, the fact that Tencer did not seek to

conceal his identity while depositing funds in the California

Federal account does not require us to reverse his conviction on

these counts.

Tencer argues that this court's decision in United States v.

Dobbs, 63 F.3d 391 (5th Cir. 1995), supports reversal. In Dobbs,

the defendant deposited proceeds of bank fraud into his wife's bank

account, converted other proceeds into cashiers checks, and then

used the account and checks for family and business expenses. This

Court found insufficient evidence to sustain the defendant's money

laundering convictions because the transactions were "open and

notorious" and no third parties were used to make purchases or hide

his activity. Id. at 397; see also Willey, 57 F.3d at 1388

(reversing conviction where only evidence of concealment was

transfer of money from one account to another).

In Dobbs, unlike today's case, the government produced no

evidence that the transactions were conducted to disguise the

relationship between the defendant and the fraudulent proceeds.

Dobbs, 63 F.3d at 398. Whereas Dobbs openly used fraudulently

obtained funds to pay for business and family expenses, Tencer

endeavored to consolidate illicit funds in a city that was hundreds

of miles from his home and where large cash transactions are

commonplace. He asked regional banks to wire funds to an address

15 to which he had no connection. His false statements to bank

officials showed an intent to minimize attention to the

transactions. Based on the evidence in the record, a jury could

infer that Tencer was attempting to conceal the nature of the funds

and facilitate laundering of the proceeds of his fraudulent

activities.

Tencer argues next that if his conviction on mail fraud counts

2-10 are reversed, the money laundering convictions must be

reversed as well because the government failed to prove "specified

unlawful activity." A review of the money laundering statute and

relevant case law persuades us that Tencer's conviction under §

1956 will stand; the government has demonstrated that the funds

involved are proceeds of a "specified unlawful activity" as

statutorily defined.

Section 1956 requires that the financial transaction "in fact

involve[d] the proceeds of specified unlawful activity." 18 U.S.C.

§ 1956(a)(1) (emphasis added). "Specified unlawful activity," by

statute, includes any racketeering offense listed in 18 U.S.C. §

1961(1). 18 U.S.C. § 1956(c)(7)(A). In turn, mail fraud, as set

forth in § 1341, is one of the offenses listed in § 1961(1).

Tencer argues that the government did not establish that any

Blue Cross mailings occurred in furtherance of the scheme to

defraud. We disagree. In reversing the appellants' convictions on

counts 2-10, we concluded that the government established at trial

both the existence of a scheme to defraud Blue Cross and

appellants' use of mails to execute that scheme. Patients insured

16 by Blue Cross testified that they never received treatments for

which Blue Cross was billed, and a Blue Cross representative

testified that payments for all claims were mailed to Allied. More

particularly, the government produced evidence that Allied

submitted roughly $362,000 in claims to Blue Cross that were

related to patients about whom testimony was given. Those patients

testified that they received no treatment in connection with a

majority of the claims submitted on their behalf. Blue Cross then

transmitted checks in payment of those claims through the mail to

Allied. We are unable to affirm the mail fraud convictions as to

counts 2-10 because the evidence is insufficient to show that the

specific Blue Cross checks alleged in the indictment--the mailings

on which those counts are based--were in payment of fraudulent

claims and therefore used to execute the insurance fraud. However,

our reversal as to those counts does not disturb our conclusion

that the evidence demonstrated that Allied received more than

$300,000 through the mail from Blue Cross in payment of fraudulent

claims. This adequately established mail fraud for purposes of the

money laundering counts.

Tencer contends that this court and others have reversed money

laundering convictions where convictions as to the predicate

unlawful activity have been reversed. See United States v.

O'Hagan, 92 F.3d 612, 628 (8th Cir. 1996), cert. granted on other

grounds, 117 S. Ct. 759 (1997); United States v. Brumley, 79 F.3d

1430, 1442 (5th Cir.), reh'g en banc granted, 91 F.3d 676 (5th Cir.

1996). In O'Hagan, the court first vacated securities fraud counts

17 and then vacated mail fraud counts premised in the indictment on

acts that allegedly constituted securities fraud. O'Hagan, 92 F.3d

at 627. Because the court vacated all of the securities fraud and

mail fraud counts, it found no unlawful activity on which to base

money laundering convictions. Id. at 928. Similarly, in Brumley,

this court vacated a defendant's money laundering convictions where

the counts in the indictment identified the "specified unlawful

activity" by cross-referencing wire fraud counts that had been

vacated. Brumley, 79 F.3d at 1442.

In Tencer's case, the relevant money laundering counts in the

indictment (counts 31-36) identified the funds at issue as

"proceeds of specified unlawful activity, that is, the knowing and

intentional commission of mail fraud" under 18 U.S.C. § 1341.

These counts then incorporated by reference paragraphs in the

indictment describing the nature of the scheme to defraud.

However, neither the paragraphs incorporated by reference nor the

language in counts 31-36 define the predicate unlawful activity as

the mail fraud charged in counts 2-18. Because the money

laundering counts do not define "specified unlawful activity" in

terms of the mail fraud activities described in counts 2-18, this

court is not limited to considering only those activities. Cf.

United States v. Smith, 44 F.3d 1259, 1264-65 (4th Cir.) (holding

that indictment describing funds involved in transaction generally

as wire fraud proceeds was sufficient to define specified unlawful

activity at issue), cert. denied, 115 S. Ct. 1970 (1995).

Thus, Tencer's convictions on counts 31-36 will stand as long

18 as the jury, viewing the evidence in the light most favorable to

the government, could infer that the six deposits by wire and cash

into the California Federal account "involved" mail fraud proceeds

for purposes of § 1956(a)(1). To do so, the government need not

prove that all of the money involved in the transfers were proceeds

of mail fraud; it is sufficient if the government proves at least

part of the money represented such proceeds. See, e.g., United

States v. English, 92 F.3d 909, 916 (9th Cir. 1996); United States

v. Cancelliere, 69 F.3d 1116, 1120 (11th Cir. 1995); United States

v. Jackson, 935 F.2d 832, 840 (7th Cir. 1991); cf. United States v.

Moore, 27 F.3d 969, 976 (4th Cir.), cert. denied, 115 S. Ct. 459

(1994).

As noted above, the government presented evidence that from

May 1989 to April 1992, Tencer opened accounts in various banks

across the country and deposited checks drawn on his personal

account at Fidelity and on Allied's account at Whitney National

Bank. Marcus Veazey, an FBI agent, testified that the majority of

deposits into the Whitney account were from insurance companies and

that the specific checks in evidence were deposited into that

account as well. From July 1989 through July 1992, $2,681,205.60

in insurance proceeds were deposited into the account. Agent

Veazey testified that nearly $452,000 was related to patients who,

according to patient testimony, participated in the insurance

fraud; of that amount, roughly $362,000 came from Blue Cross

checks.

Veazey then testified as to the movement of funds from the

19 Whitney account. Checks written on that account went to Allied's

operating account at Fidelity Homestead, Tencer's personal account

at Fidelity, and to several regional accounts. From July 1989 to

summer 1992, $756,066.20 from the Whitney account was deposited

into Tencer's personal account at Fidelity. Veazey testified that

during this time period, Tencer deposited checks drawn on his

personal account into regional accounts as well. According to a

chart introduced by the FBI agent, Tencer deposited nearly $1.4

million in regional accounts during the three-year period. On July

13, 1992, he opened an account at California Federal and deposited

$662,637.06 in checks drawn on five of those accounts. He also

directed four banks to wire funds totaling $312,297.89 to the

account. On July 14, Tencer deposited $89,832.10 in a check drawn

on one regional account. By establishing that fraudulent proceeds

were initially deposited into the Whitney account and that Tencer

later transferred funds from that account into regional accounts

and, then, into the California Federal account, the government has

adequately established that the six transfers at issue "involved"

unlawful proceeds.

In sum, while the government has not demonstrated what

specific Blue Cross checks included fraudulent proceeds, it did

establish that Blue Cross paid Allied approximately $362,000 that

was directly related to patients who testified that Allied

submitted claims to Blue Cross on their behalf even though they

received little or no treatment. The government then established

that the checks making up the $362,000 were deposited in the

20 Whitney account. Funds from the Whitney account were later

deposited in Tencer's personal account, his regional accounts, and,

finally, in the California Federal account.

Given this evidence and the volume and scope of the insurance

fraud, the jury was entitled to infer that most of the $362,000 was

in payment for fraudulent claims. Furthermore, the jury could

infer that the six transactions underlying counts 31-36 involved

proceeds from this unlawful activity--specifically, mail fraud.

The government cross-appeals the district court's acquittal of

both Tencer and Lazar on one of the money laundering counts (count

37). That count charged a violation of 18 U.S.C. § 1956 in

connection with Lazar's August 10, 1992 deposit of approximately

$60,000 in insurance checks into an Allied Clinic account with Dean

Witter Reynolds. Lazar made the deposit at Dean Witter's New

Orleans office on the same day Tencer opened the account in a Dean

Witter office in southern California. Lazar directed the New

Orleans branch to credit his deposit to the Allied account Tencer

opened with Dean Witter in California. Some of the more than

$60,000 in insurance checks Lazar deposited were in payment for

claims for patients who had not received the reported treatment.

As discussed above, to support a money laundering conviction,

the government must show that the defendant acted with an intent to

conceal. In support of the concealment element, the government has

shown only that a deposit was made with a national brokerage firm

in New Orleans to be credited to an existing account with the same

21 firm in California. We agree with the district court that although

a geographically distant financial transaction is a factor that can

be considered in support of the concealment element, it does not

alone establish intent to conceal.

We recognize that the timing of this transaction is

suspicious: the deposit was made shortly after the government

seized Tencer's funds in the Las Vegas account. But the government

provided no evidence that the transfer of the funds from New

Orleans to the existing California Dean Witter account made the

account harder to find or that a depositor would believe such a

transfer would tend to conceal the funds. The district court

correctly acquitted both Tencer and Lazar on this count.

C.

Finally, Tencer contends that the evidence is insufficient to

support his conviction for conspiracy. To establish conspiracy

under 18 U.S.C. § 371, the government must establish "(1) an

agreement between two or more persons, (2) to commit a crime

against the United States, and (3) an overt act in furtherance of

the agreement committed by one of the conspirators." Krenning, 93

F.3d at 1262. Conspiracy may be proved through circumstantial

evidence, and the agreement need not be formal or spoken. Id. at

1264. Here, abundant evidence presented at trial in support of the

mail fraud and money laundering counts set forth above demonstrated

the active participation of both appellants in the scheme to

defraud and their cooperative efforts in ensuring its success.

This circumstantial evidence of agreement, together with evidence

22 of the appellants' active participation in the scheme, is

sufficient to support appellants' convictions for conspiracy.

III. Tencer argues next that the

district court's denial of his severance motion prevented him from

introducing exculpatory testimony by Lazar, who would testify only

in a separate trial. To support his motion, Tencer submitted

Lazar's affidavits, which stated that, to his knowledge, Tencer did

not commit any of the acts underlying the charged offenses.

This court has recognized that, as a general rule, persons

indicted together should be tried together, especially in a

conspiracy case, United States v. Neal, 27 F.3d 1035, 1045 (5th

Cir.), cert. denied, 115 S. Ct. 530 (1994), and that "'a district

court should grant a severance only if there is 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.'" Id. (quoting Zafiro v. United States, 506 U.S. 534,

537 (1993)). To obtain a severance based on a codefendant's

exculpatory testimony, a defendant must initially demonstrate (1)

a bona fide need for the testimony; (2) the testimony's substance;

(3) its exculpatory nature and effect; and (4) the willingness of

the codefendant to testify. United States v. Ramirez, 979 F.2d

1024, 1035 (5th Cir. 1992), cert. denied, 508 U.S. 913 (1993).

Upon such a showing, a court must consider, among other things, the

significance of the testimony in relation to the defendant's theory

of defense and the extent of prejudice caused by the absence of

such testimony. Id. This court reviews the denial of a motion to

23 sever for abuse of discretion. United States v. Dillman, 15 F.3d

384, 393 (5th Cir.), cert. denied, 115 S. Ct. 183 (1994).

The government contends that Tencer failed to meet his initial

burden because he did not establish the exculpatory nature of

Lazar's proposed testimony. Lazar's affidavits assert generally

that Tencer did not conspire with Lazar to defraud insurance

carriers and, more specifically, that he was not aware that Tencer

approved billing for unnecessary treatments, paid patients to sign

names of friends and family on sign-in sheets, or offered to pay

patients' health-insurance premiums in order to submit false

claims. Lazar further stated that he, not Tencer, initiated the

clinic practice of paying new patients a "referral fee" and paying

for patients' transportation costs. We agree with the government

that Lazar's proposed testimony as to Tencer's lack of knowledge of

the scheme to defraud consists of conclusory allegations and

contains no specific facts that would exonerate him. United States

v. Broussard, 80 F.3d 1025, 1037-38 (5th Cir.), cert. denied, 117

S. Ct. 264 (1996); see also United States v. DeSimone, 660 F.2d

532, 540 (5th Cir. 1981) (upholding denial of severance where

affidavit "amount[ed] to little more than a bare, conclusory

assertion that he did not conspire with his co-defendants, nor they

with him"), cert. denied, 456 U.S. 928 (1982). Tencer argues that

he did not know of fraudulent billing practices underlying the

offenses charged and that Lazar's testimony would have cleared him

of any involvement. However, even if the jury had heard and

accepted Lazar's testimony that, to Lazar's knowledge, Tencer knew

24 nothing of billing errors and falsified sign-in sheets, such

testimony would have had little evidentiary value in light of the

abundant evidence of Tencer's role in generating fraudulent claim

forms and paying for patients' insurance. See United States v.

Jobe, 101 F.3d 1046, 1060 (5th Cir. 1996). Moreover, Lazar's

affidavits admit to no mail fraud or money laundering activities.

A codefendant's proposed testimony lacks credibility when it does

not contravene his own penal interests. See DeSimone, 660 F.2d at

540; Dillman, 15 F.3d at 394. While Lazar acknowledged that he

paid referral fees and transportation costs to patients, he denies

knowledge of the fraudulent billing from which the mail fraud

counts arose.

In sum, Lazar's affidavits failed to set forth specific

exonerative facts from which the district court could have

concluded that his testimony would have had an exculpatory effect,

and Tencer has not demonstrated that he suffered specific and

compelling prejudice by the denial of his severance motion.

Accordingly, the district court did not abuse its discretion in

denying Tencer's motion to sever.

IV.

Both Tencer and the government challenge the district court's

forfeiture order. The jury returned a special forfeiture verdict

of $1,598,645.18 and two vehicles allegedly involved in all of the

money laundering counts. Because the court vacated counts 26-29

and count 37, it similarly vacated the forfeiture verdict related

25 to those counts.4 Of the remaining money laundering counts (counts

31-36), a verdict of $1,055,395.71--representing the balance on

deposit in the California Federal account--was returned. The

district court reduced the forfeiture to $700,000. Tencer argues

that the forfeiture order must be reversed in its entirety because

it includes proceeds from legitimate insurance claims. The

government responds that reversal is inappropriate and that,

instead, the jury verdict ordering forfeiture of the California

bank account should be reinstated.

Forfeiture in this case was imposed pursuant to 18 U.S.C. §

982(a)(1), a mandatory criminal forfeiture provision stating:

The court, in imposing sentence on a person convicted of an offense in violation of . . . Section 1956 . . . of this title, shall order that the person forfeit to the United States any property, real or personal, involved in such offense, or any property traceable to such property.

18 U.S.C. § 982(a)(1) (emphasis added). The government argues that

all of the funds in the California Federal account were forfeitable

because any legitimate funds involved and "facilitated" the offense

by providing a cover for the tainted funds. This "facilitation

theory" rests largely on a passage in the legislative history of §

981,5 § 982's civil counterpart: "[T]he term 'property involved' is

intended to include the money or other property being laundered

4 The government does not challenge this action. 5 Section 981, like § 982, uses the phrases "involved in" and "traceable to." Relatively few cases have interpreted § 982; those that have often rely on § 981 case law. See, e.g., United States v. Voigt, 89 F.3d 1050, 1087 (3d Cir.), cert. denied, 117 S. Ct. 623 (1996); United States v. Swank Corp., 797 F. Supp. 497, 500 (E.D. Va. 1992) (both relying on § 981 cases to interpret § 982 language).

26 (the corpus), any commissions or fees paid to the launderer, and

any property used to facilitate the laundering offense." United

States v. All Monies ($477,048.62) In Account 90-3617-3, 754 F.

Supp. 1467, 1473 (D. Hawaii 1991) (citing 134 Cong. Rec. S17365

(daily ed. Nov. 10, 1988) (emphasis added)). Facilitation occurs

when the property makes the prohibited conduct "less difficult or

more or less free from obstruction or hindrance." United States v.

Schifferli, 895 F.2d 987, 990 (4th Cir. 1990) (defining term in

context of a drug forfeiture statute that expressly used the

"facilitating" language (internal citations omitted)).

Several district courts have upheld the forfeiture of the

entire balance of accounts containing both tainted and untainted

funds. There, courts have concluded that the commingling of crime

proceeds and "clean" money makes money laundering less difficult

and may even be necessary to successful completion of the offense.

Such untainted funds have therefore been found to be "involved" for

purposes of the forfeiture statute. See United States v. Contents

of Account Numbers 208-06070 and 208-06068-1-2, 847 F. Supp. 329,

335 (S.D.N.Y. 1994); United States v. Certain Accounts, Together

with All Monies on Deposit Therein, 795 F. Supp. 391, 396-97 (S.D.

Fla. 1992); United States v. Certain Funds on Deposit in Account

No. 01-0-71417, 769 F. Supp. 80, 84-85 (E.D.N.Y. 1991). The

district court here adopted the facilitation theory and instructed

the jury that "property involved" in the money laundering offense

included "any property used to facilitate the laundering offense."

Appellants argue that this instruction was incorrect and rely

27 on a Seventh Circuit decision. In United States v. $448,342.85,

969 F.2d 474 (7th Cir. 1992), the court refused to extend § 981's

reach beyond "property used in or traceable to" the criminal

offense. There, the government sought forfeiture of funds involved

in a fraudulent sales scheme that were pooled with allegedly

untainted funds and argued that the balances of seized accounts

were forfeitable regardless of whether all of the funds were

traceable to "specified unlawful activity." Id. at 476. The court

rejected this argument and reasoned that simply commingling tainted

funds with legitimate funds did not make an entire account subject

to forfeiture. Id. at 476. The Seventh Circuit then affirmed the

forfeiture of all the funds in the seized accounts because the

summary judgment evidence revealed that the criminal proceeds

"vastly exceed[ed] the sums on deposit at the time of the seizure."

Id. at 477.

We agree with the Seventh Circuit that merely pooling tainted

and untainted funds in an account does not, without more, render

that account subject to forfeiture. Nevertheless, we do not read

$448,382.85 as inconsistent with the facilitation theory as applied

by many district courts.6 We find the reasoning of the Southern

District of New York persuasive. That court noted:

[L]imiting the forfeiture of funds under these circumstances to the proceeds of the initial fraudulent activity would effectively undermine the purpose of the forfeiture statute. Criminal activity such as money

6 As the Seventh Circuit acknowledged, "money need not be derived from crime to be 'involved' in it; perhaps a particular sum is used as the bankroll facilitating the fraud." $448,382.85, 969 F.2d at 476 (emphasis added).

28 laundering largely depends upon the use of legitimate monies to advance or facilitate the scheme. It is precisely the commingling of tainted funds with legitimate money that facilitates the laundering and enables it to continue.

Contents of Account Numbers 208-06070 and 208-06068-1-2, 847 F.

Supp. at 334-35 (quoting Certain Funds on Deposit in Account No.

01-0-71417, 769 F. Supp. at 84-85). The court held that forfeiture

of legitimate and illegitimate funds commingled in accounts was

proper as long as the government demonstrated that the defendant

had pooled the funds to disguise the nature and source of his

scheme. Contents of Account Numbers 208-06070 and 208-06068-1-2,

847 F. Supp. at 335. Other courts have similarly required the

government to demonstrate a substantial nexus between the money

laundering offense and the legitimate funds. See Marine Midland

Bank v. United States, No. 93 Civ. 0207, 1993 WL 158542 at * 7-8

(S.D.N.Y. May 11, 1993) (refusing to apply facilitation theory

where legitimate funds in account had merely an "incidental or

fortuitous" connection to illegal activity), aff'd in part,

remanded in part, 11 F.3d 1119 (2d Cir. 1993); Certain Accounts

with All Monies on Deposit Therein, 795 F. Supp. at 394 (holding

that funds derived from legitimate sources are forfeitable if used

to effectuate money laundering but refusing to allow forfeiture of

funds in indirect accounts where evidence showed only that checks

were written against suspect account); cf. United States v. Voigt,

89 F.3d 1050, 1087 (3d Cir.) (noting that government must prove

that property seized under § 982(a)(1) has "some nexus to the

property 'involved in' the money laundering offense" (emphasis in

29 original), cert. denied, 117 S. Ct. 623 (1996).

In this case, the money laundering counts arose from six

transfers of funds by wire and check from various accounts

throughout the country into one account in Tencer's name at

California Federal. All of the funds--both legitimate and

illegitimate--were quickly moved into the account within a few days

in order to conceal the nature and source of the mail fraud

proceeds. Faced with such evidence, the jury was entitled to infer

that all of the funds in the account were "involved in" the money

laundering and subject to forfeiture pursuant to § 982. Because

sufficient evidence supports the jury verdict, the district court

was bound by the mandatory provisions of § 982 and erred in

reducing the forfeiture.7

V.

In its judgment, the district court ordered Tencer to pay a

combined total of $451,969.60 in restitution to Blue Cross, Mail

Handlers, and NALC. Tencer's final contention is that the district

court lacked sufficient factual basis for its restitution order.

Specifically, Tencer challenges the restitution order's inclusion

of claims paid on behalf of Darryl Smith, his wife, and his

daughter as to which, he says, there was no evidence of fraud. He

further challenges the court's use of the entire amount of claims

7 Tencer also argues that forfeiture of all of the funds violated the Eighth Amendment's Excessive Fines Clause, but he provides no persuasive analysis to support his argument. Given the extensive nature of the criminal activity in this case over a three-year time span and the large sum of money derived from that activity, we conclude that the forfeiture does not represent an excessive fine under the Eighth Amendment.

30 filed on behalf of patients about whom evidence of fraud was

presented; he contends this is excessive because some of these

patients testified that they had received minimal treatment.

Restitution, a criminal penalty, is reviewed de novo. United

States v. Hayes, 32 F.3d 171, 172 (5th Cir. 1994). An order of

restitution must be limited to losses caused by the specific

conduct underlying the offense of conviction. United States v.

Chaney, 964 F.2d 437, 452 (5th Cir. 1992). As established above,

we found that the testimony of Jerry Kelley, a coworker of Darryl

Smith, sufficiently supported a jury finding that the claim forms

submitted in connection with Smith were fraudulent. Moreover,

while some patients did testify that they received treatment, no

patient testified that the cursory treatment they received was

beneficial or designed to improve their health. Given the evidence

of rampant fraud and patient testimony that most of the claims

submitted on their behalf were completely baseless, we conclude

that the district court's restitution award is proper. Cf. United

States v. Seligsohn, 981 F.2d 1418, 1421 (3d Cir. 1992) (upholding

insurance fraud award for fraudulent claims even though some of

defendant's claims were legitimate where defendant's own fraudulent

conduct prevented victim from distinguishing between legitimate and

fraudulent payments).

VI.

The government cross-appeals on two sentencing issues;

specifically, it contends that the district court erred (1) in

refusing to enhance appellants' sentence pursuant to the

31 obstruction of justice provision of the federal sentencing

guidelines and (2) in determining the "value of funds" laundered in

order to set Tencer's base offense level. We review the district

court's findings of facts for clear error and its application of

the Sentencing Guidelines de novo. United States v. Dean, 59 F.3d

1479, 1494 (5th Cir. 1995), cert. denied, 116 S. Ct. 794 (1996).

At the appellants' sentencing hearings, the government argued

that evidence in the record supported a two-level sentence

enhancement under § 3C1.1 of the federal sentencing guidelines.8

In addition, such an enhancement was recommended by the presentence

investigation report. With one exception, the district court, in

refusing to allow the obstruction of justice enhancement for both

Tencer and Lazar, satisfactorily explained her reasoning. However,

the government pointed specifically to trial testimony that after

a federal search warrant was executed on the clinic and Tencer's

home and a grand jury subpoena was served on Lazar for clinic

records, Lazar and another man9 visited a Carencro storage facility

that Lazar had rented earlier under a false name and removed clinic

records stored there. According to the storage facility manager,

8 Section 3C1.1, the Sentencing Guidelines' obstruction of justice provision, states: If the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice during the investigation, prosecution, or sentencing of the instant offense, increase the offense level by 2 levels. U.S. Sentencing Guidelines Manual § 3C1.1 (1995). 9 There was some dispute at trial as to whether the man accompanying Lazar was Tencer.

32 some of those records were discarded in a dumpster. If the court

credited this testimony, we see no apparent reason why the

appellants' conduct should not warrant enhancement. We remand this

issue for reconsideration by the district court.

We reject the government's contention that the district court

improperly calculated the "value of funds" laundered for sentencing

purposes. This court reviews the district court's valuation of

funds under the money laundering provision of the Sentencing

Guidelines for clear error. United States v. Tansley, 986 F.2d

880, 884 (5th Cir. 1993).

Under § 2S1.1 of the guidelines, a defendant's offense level

is increased for sentencing purposes according to the value of

funds involved. Here, the district court reversed for insufficient

evidence counts amounting to roughly $500,000--one-third--of the

approximately $1,500,000 commingled funds involved in the original

money laundering counts. It then concluded that, for sentencing

purposes, it should reduce the value of ill-gotten gains laundered-

-roughly $452,000--by one-third as well. Based on this reasoning,

the court placed a value of $285,000 on the funds laundered. Under

this calculation, Tencer was subjected to a two-level increase to

his offense level under § 2S1.1(b)(2)(C), rather than the three-

level increase warranted under § 2S1.1(b)(2)(D) when the value of

funds is more than $350,000. Given the broad discretion accorded

to sentencing judges on determining value, we cannot say that the

court clearly erred in its determination.

33 VII.

In sum, we affirm the conviction of both Tencer and Lazar on

all counts except counts 2-10; we reverse those counts because the

evidence is insufficient to support the conviction. We also affirm

the district court's restitution order. However, we vacate the

court's forfeiture award, and for reasons stated above, direct the

district court to reinstate the jury's forfeiture award related to

counts 31-36.

Because of our reversal of counts 2-10 for both defendants,

the case must be remanded for resentencing. At resentencing, the

district court should also reconsider its refusal to enhance

appellants' sentences for obstruction of justice consistent with

our discussion of this issue.

Accordingly, the judgment of the district court is AFFIRMED in

part; REVERSED in part; and REMANDED for further proceedings

consistent with this opinion.