Petition for Writ of Certiorari — West v. United States

Supreme Court. U.S.

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No. OFFICE OF THE CLERK

In The

Supreme Court of the United States

October Term, 1994

¢

BRUCE R. WEST, SR.,

Petitioner,

versus

THE UNITED STATES OF AMERICA,

Respondent.

Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Fifth Circuit

PETITION FOR A WRIT OF CERTIORARI

*

HERBERT V. LARSON, JR.

700 Camp Street

New Orleans, Louisiana 70130

(504) 528-9500

Attorney for Petitioner

Bruce R. West, Sr.

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED FOR REVIEW!

18 USC § 1956, the principal money laundering stat-

ute, requires a “financial transaction” with the “pro-

ceeds” of “specified unlawful activity.” This case presents

the question of whether the very transaction that creates

the “proceeds,” such as the deposit of checks represent-

ing “clean” funds from innocent third parties, is “money

laundering” under the statute.

1 The names of all parties to this proceeding appear in the

caption. See Rule 14.1(b) of the Supreme Court Rules.

TABLE OF CONTENTS

Page

QUESTION PRESENTED FOR REVIEW ............ i

pr Be es PPUPPETET TTT Tere eee etree ii

EAR UP Ae O Oe 0.66. ee eennsvsderictovesss iii

OPINIONS DELIVERED IN THE COURTS BELOW 2

STATEMENT OF THE GROUNDS ON WHICH THE

JURISDICTION OF THE COURT IS INVOKED... 2

CONSTITUTIONAL AND STATUTORY PROVI-

NS DIVINE oi. occu 2

STATEMENT OF THE CASE..............--2.0005. 3

ARGUMENT AND REASONS FOR GRANTING THE

WOE 6 cosas cas vena cdcunuas vseneeee 7

OONIIEIIIME 005s eee 17

BIPRIIEE ®4O so ohcncccisckte ee App. 1

“> eh y

ower < -< =

ili

TABLE OF AUTHORITIES

Page

CASES

United States v. Cavalier, 17 F.3d 90 (5th Cir.1994) ...4, 8

United States v. Edgmon, 952 F.2d 1206 (10th Cir.), cert.

denied, __U.S.\_, 112 S.Ct. 3037, 120 L.Ed.2d

TS ee re re ee rent 7 ae ee 8

United States v. Johnson, 971 F.2d 562 (10th

CSR 60 ks 40s Pe ets bias h eae 1, 31, 32, 4

United States v. Lovett, 964 F.2d 1029 (10th Cir.), cert.

denied, _U.S.___, 113 S.Ct. 169, 121 L.Ed.2d 117

4} Ry re on Sea hs A Beas FAY 8, 16

United States v. Paramo, 998 F.2d 1212 (3d Cir.

1993), cert. denied, _U.S.__, 114 S.Ct. 1076, 127

ee RS er a ee an meyer 16

United States v. Piervinanzi, 23 F.3d 670 (2nd

CARO Pe kc hvcaundis . Sicaeee vst 13, 14, 16

United States v. West, 22 F.3d 586 (5th Cir.1994).. 9, 10, 16

STATUTES

Se a EE ins wh wn hc wa sais ede chao passim

OTHER AUTHORITIES

Carpenter, K., Money Laundering, 30 Am.Crim.L.ReEv.

OP CPR aos be hod ken be ra Php oe hee ends at 7

Strafer, G.R., Money Laundering: The Crime of the

‘90's, 27 Am. Crm. L. Rev. 149 (1989) ............. 11

Tarlow, B., RICO: The New Darling of the Prosecu-

tor’s Nursery, 49 ForDHAM L. Rev. 165 (1980)....... 15

Thompson, L. and Johnson, E., Money Laundering:

Business Beware, 44 ALaBAMa L. Rev., 703 (1993) ..... 8

; — —E

TE Wat pin Mase * i6¢ + 21 PAR EIRERNN a A 2 TN

¢

In The

Supreme Court of the United States

October Term, 1994

+

BRUCE R. WEST, SR.,

Petitioner,

versus

THE UNITED STATES OF AMERICA,

Respondent.

+

Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Fifth Circuit

oe

PETITION FOR A WRIT OF CERTIORARI

+

Petitioner Bruce R. West, Sr. respectfully prays that

this Honorable Court issue a writ of certiorari to review

the judgment and opinion of the United States Court of

Appeals for the Fifth Circuit issued on May 31, 1994, in

proceedings #93-4935, entitled United States of America v.

Bruce R. West, Sr., and the judgment and opinion of that

Court issued on August 1, 1994, in that same proceeding,

which denied petitioner’s petition for an en banc rehear-

ing.

OPINIONS DELIVERED IN THE COURTS BELOW

The May 31, 1994 opinion of the Fifth Circuit Court of

Appeals is reported at 22 F.3rd 586 (5th Cir.1994) as

United States v. West, and is attached hereto as Appendix

“A”. The August 1, 1994 order of the Court of Appeals

denying the petition for en banc rehearing is not reported.

A copy of that order is attached to this petition as Appen-

dix “B”.

¢

STATEMENT OF THE GROUNDS ON WHICH THE

JURISDICTION OF THE COURT IS INVOKED

In this petition, Bruce R. West, Sr.. seeks review of a

May, 31, 1994 decision of the Fifth Circuit Court of

Appeals which affirmed a criminal conviction and sen-

tence. Petitioner Bruce R. West, Sr., timely sought an en

banc rehearing of that decision in the Court of Appeals.

West’s petition for rehearing was denied on August 1,

1994. Accordingly, this Court has-jurisdiction over this

matter pursuant to Title 28, United States Code, Section

1254(1).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

Title 18, United States Code, Section 1956(a)(1) pro-

vides in pertinent part as follows:

§1956 Laundering of monetary instruments

(a)(1) Whoever, knowing that the property

involved in a financial transaction represents

the proceeds of some form of unlawful activity,

conducts or attempts to conduct such a financial

transaction which in fact involves the proceeds

of specified unlawful activity -

(A)(i) with the intent to promote the carry-

ing on of specified unlawful activity; or

+ + +

(B) knowing that the transaction is

designed in whole or in part -

(i) to conceal or disguise the nature,

the location, the source, the ownership,

or the control of the proceeds of speci-

fied unlawful activity;

[shall be punished as provided by law].

e

STATEMENT OF THE CASE

A. Course of proceedings and disposition in the

courts below

On June 11, 1992, a federal grand jury sitting in the

Eastern District of Texas, Sherman Division, returned a

thirty-four (34) count indictment against Bruce West, Sr.,

and his son, Bruce West, Jr. The original indictment was

followed by a thirty-one (31) count superseding indict-

ment on September 10, 1992. The superseding indictment

charged the Wests with bankruptcy fraud (18 USC §152),

money laundering (18 USC §1956), and conspiracy to

commit those offenses (18 USC §371).

The Wests’ trial by jury before United States District

Judge Paul N. Brown began on Monday, March 8, 1993,

and ended on March 25, 1993, when the jury returned its

verdict. Bruce West, Jr. was acquitted of all charges. Bruce

West, Sr. was convicted on twenty-two (22) counts,

including eleven (11) counts of money laundering. On

June 11, 1994, West was sentenced to seventy (70) months

imprisonment. West’s notice of appeal to the United

States Court of Appeals for the Fifth Circuit was filed that

same day.

Oral argument was heard by the Court of Appeals on

February 2, 1994.2 On May 31, 1994, the court affirmed

West’s conviction and sentence on all counts. On August

1, 1994, the court denied West's petition for rehearing en

banc.

B. Statement of facts relevant to the question pre-

sented

On April 2, 1990, Bruce West, Sr., a real estate devel-

oper since the late 1970s, filed a personal [Chapter 7]

bankruptcy in the Eastern District of Texas. West, like

many others whose fortunes were closely tied to the

Texas real estate market, had experienced severe eco-

nomic problems in the mid and late 1980s.

During the year prior to his bankruptcy, West

engaged in three property transactions, all of which

related to his efforts to sell his homestead, Dondi Farms,

and acquire a new homestead. These transactions later

became the factual core of the indictment returned

against him. Of these, only the first, the “Dondi Farms

transaction” is relevant to this petition.

2 The case was consolidated for oral argument with United

States v. Cavalier, 17 F.3d 90 (5th Cir.1994).

In April 1989, Bruce West sold Dondi farms, which

consisted of his home and seven acres in McKinney,

Texas, to Earlene Jett, who was acting as trustee for her

son, Dr. Scott Mays. The consideration for the sale consis-

ted of $75,000 cash, and a note in the amount of $277,500.

This note, which became known as “the Jett note,” was

signed by Earlene Jett, as maker, and by her son, Dr. Scott

Mays, as guarantor. The Jett note was payable in quar-

terly installments of $8,900.

The legality of the sale of Dondi Farms was never

questioned by the government. Rather, it is the payments

received by West on the Jett note, all of which were made

by check, and the subsequent deposit of those checks,

that formed the basis for ten of the eleven counts of

money laundering of which West was convicted. The

superseding indictment returned against West simply

alleged that the payments on the note represented the

proceeds of specified unlawful activity, to wit, bank-

ruptcy fraud, and that the act of depositing those checks

was a “financial transaction” involving those proceeds,

and that consequently, West was guilty of money launder-

ing.

The eleventh, and final money laundering count with

which West was charged, and subsequently convicted,

rests on a parallel factual premise. In 1985, West pur-

chased at auction a 1962 Rebo-Mazda Coupe for $2,700.

He later gave this miniature vehicle, powered by a motor-

cycle engine, to his eleven year old daughter. At the date

of filing the bankruptcy, West and his son jointly owned a

1935 Austin automobile which they purchased as a “pro-

ject” car, hoping to realize a profit on it after restoring it

together.

On November 7, 1990, West sold the Austin to Great

Cars, Inc. for $5,750, and traded the Mazda for a dune

buggy. Although West was acquitted of omitting his inter-

est in these cars from his schedules and of fraudulently

transferring and concealing them from the bankruptcy

court, he was convicted of money laundering, a charge

based on his deposit of the check representing the pro-

ceeds from the sale of these two automobiles.

In sum, the government’s theory of prosecution was

the same in all eleven counts of money laundering:

because the assets at issue (the Jett note and the cars)

were not correctly disclosed on West’s bankruptcy sched-

ules, he had committed bankruptcy fraud. Consequently,

the government contended that financial transactions

involving any moneys related to these assets, even “clean

,

funds,” was money laundering, even if such transaction

consisted of nothing more than depositing the checks to

obtain the proceeds.

C. The resolution of the issue in the district court,

and the court of appeals

Prior to trial, counsel for West moved to dismiss all

money laundering counts in the indictment, on the

grounds that even if every factual allegation in the counts

were proven, the counts failed to state an offense against

the United States. During trial, counsel moved twice to

dismiss these counts, pursuant to Fed.R.Cr.Proc. 29, to no

avail.

On appeal, West’s second “issue presented” was as

follows:

II.

Whether proof that a defendant merely

received and deposited “clean funds” obtained

from innocent third parties constitutes proof of

a violation of 18 USC §1956 [the money launder-

ing statute], when the statute requires that the

financial transaction charged be conducted with

property which “represents the proceeds of

some form of unlawful activity.”

As was the case in the district court, the court of appeals

rejected West’s arguments.

ARGUMENT AND REASONS FOR

GRANTING THE WRIT

THIS PETITION PRESENTS AN ISSUE AS TO WHICH

THE UNITED STATES COURT OF APPEALS FOR THE

FIFTH CIRCUIT HAS RENDERED A DECISION

WHICH IS IN CONFLICT WITH DECISIONS OF THE

TENTH CIRCUIT AND SECOND CIRCUIT.

1. Introduction

In passing the Money Laundering Control Act of

1986, Congress sought to do that which had never been

done: to strike directly at the profit motive for criminal

conduct, by “bringing the proceeds of organized crime

well within the reach of federal law.” Carpenter, K.,

Money Laundering, 30 Am.Crim.L.Rev. 813, 817 (1993). In

seeking to do so, however, Congress was careful to create

a new federal crime, not just a rehash of old ones:

The Senate report and the statute itself indicate

that the Congress intended simply to add a new

criminal offense to punish activity that was not

previously punished criminally. Congress aimed

the crime of money laundering at conduct that

follows in time the underlying crime rather than

to afford an alterative method of punishing the

prior “specified unlawful activity.” United States

v. Edgmon, 952 F.2d 1206, 1214 (10th Cir.), cert.

denied, __U.S.__, 112 S.Ct. 3037 (1992).

Congress had to “aim” carefully, however. If it aimed

too broadly, it would criminalize routine business trans-

actions, and expose legitimate businesses to criminal lia-

bility. Thompson, L. and Johnson, E., Money Laundering:

Business Beware, 44 ALABAMA L. Rev., 703, 704 (1993). More

significantly, if it did not insure that the conduct being

criminalized followed the specified unlawful activity, the

money laundering statutes would contravene the double

jeopardy clause, given that the statutes contain as an

element a predicate “specified unlawful activity.” See,

e.g., United States v. Lovett, 964 F.2d 1029, 1041-42 (10th

Cir.), cert. denied, __U.S.__, 113 S.Ct. 169, 121 L.Ed.2d

117 (1992).

However accurate the aim of Congress, in the eight

years that followed the passage of the Money Laundering

Act, courts read it more and more expansively, until the

principles that guided Congress were in peril of being

lost in a sea of interpretation. With the decision of the

Court of Appeals for the Fifth Circuit in this case, and the

“companion” case of United States v. Cavalier, 17 F.3d 90

(5th Cir.1994), those principles are no longer just in peril,

they have been thrown overboard tied to an anchor.

a!

2. The conflict between the Fifth Circuit and the

Tenth Circuit

As can be seen from the opinion of the Court of

Appeals, West’s position has always been straightfor-

ward:

West contends that the crime of money

laundering “must always have at its core [the]

act of taking ‘dirty money’ and making it

‘clean.’ ” In contrast, West submits that “[t]he

act at the core of this case . . . was the taking of

‘clean money’ and making it ‘dirty.’” United

States v. West, 22 F.3d 586, 591 (5th Cir.1994).

This position is based on a simple premise: until West had

actually obtained, and had possession of and control over

the proceeds of the checks given to him as payments on

the Jett note, or in payment for the cars, he was not, in

fact, dealing with “proceeds,” much less proceeds of

specified unlawful activity. To put it another way, in

West’s case, it was the financial transaction that created,

and gave him control over the proceeds of the specified

unlawful activity, as opposed to what the money launder-

ing statute actually envisions: the creation of unlawful

proceeds, followed by a financial transaction.

The Court of Appeals purported to resolve the ques-

tion raised by the government’s anachronistic approach

to the money laundering statute by virtually ignoring it,

blithely asserting that:

... the checks that Jett and Great Cars gave to

West involved the proceeds of unlawful activity

- West’s attempts to fraudulently conceal assets,

in contemplation of a case under title 11 or with

intent to defeat the provisions of title 11. Had

10

West not undertaken such a course of action, he

would not have received any funds from Jett or

Great Cars. United States v. West, at 591.

Even when the Court’s factual speculations are accepted

as true, the question raised by West goes unanswered:

when do “clean funds” from innocent third parties

became proceeds? - before the financial transaction that

gives one control and possession of such funds, or after

it? If the answer is after, then the money laundering

statute has no application in situations such as West’s -

which is precisely the conclusion reached by the Courts

of Appeals for the Tenth and Second Circuit.

The first court of appeals to comprehensively address

this type of financial transaction was the Tenth Circuit, in

United States v. Johnson, 971 F.2d 562 (10th Cir.1992). In

Johnson the defendant, who was conducting a classic pyr-

amid fraud scheme, had investors wire funds to his bank

account Johnson, pp. 564-565. Twenty-eight (28) of these

transfers became money laundering counts (18 USC

§1957) in the indictment returned against Johnson. John-

son, p. 567.

Johnson argued that “ . .. he did not obtain the

proceeds of the wire fraud unti! they were credited to his

account. Thus, he maintain[ed], the transaction in which

those funds were wired to him did not involve ‘criminally

derived property.’ ” Johnson, p. 567.

In response to this argument, the Court of Appeals

for the Tenth Circuit stated:

We agree with appellant that under the facts

presented here, the transfer of funds from the

5

é

a

11

investors to the defendant’s account did not

constitute violations of §1957.3

To reach this conclusion, the Court of Appeals for the

Tenth Circuit looked to the plain language of the statute,

and to the legislative history of the Money Laundering

Control Act of 1986. Johnson, p. 568. The Court found that

the plain language of the statute “ . suggests that

Congress viewed a violation of §1957 as occurring only

after the individual involved in the specified criminal

activity gained possession or disposal of the proceeds

generated by the criminal activity.” Johnson, p. 568. The

Court of Appeals for the Tenth Circuit further found that

although the legislative history of the Act was “fairly

sparse;”

... [t]he examples of money-laundering activity

discussed throughout these reports show that

Congress had in mind the “classic” case of laun-

dering drug money - that is, where a drug traf-

ficker collects large amounts of cash from drug

sales and, acting with the complicity of a banker

or other person in a financial institution,

deposits the drug proceeds in a bank under the

guise of conducting a legitimate business trans-

action. The Act appears to be part of an effort to

criminalize the conduct of those third persons —

bankers, brokers, real estate agents, auto

3 Although Johnson involves an analysis of the meaning of

the phrase “criminally derived property,” as used in §1957, and

this case involves the phrase “the proceeds of some form of

unlawful activity,” as used in §1956, the distinction favors West.

As G. R. Strafer noted in Money Laundering: The Crime of the ‘90's,

27 Am. Crim. L. Rev. 149, 182-185 (1989), the term “proceeds”

must be given a more narrow construction than “criminally

derived property.”

12

dealer[s] and others - who have aided drug

dealers by allowing them to dispose of the

profits of drug activity, yet whose conduct has

not been considered criminal under traditional

conspiracy law. It must be noted, however, that

the Act itself prohibits a much broader range of

conduct than just the “classic” example of

money laundering. Johnson, pp. 568-569.

(emphasis provided)

The Court of Appeals for the Tenth Circuit then consid-

ered its earlier decisions interpreting the Act, specifically

§1956, and again concluded that “Congress aimed the

crime of money laundering at conduct that follows in time

the underlying crime rather than to afford an alternative

means of punishing the prior ‘specified unlawful activity.’ ”

Johnson, p. 569, quoting United States v. Edgmon, 952 F.2d

1206, 1214 (10th Cir.1991), cert. denied, ate Boe

S.Ct. 3037 (1992) (emphasis provided). The Court then

concluded:

.. . both the plain language of §1957 and

the legislative history behind it suggest that

Congress targeted only those transactions occur-

ring after proceeds have been obtained from the

underlying unlawful activity. At the very least,

the statute is ambiguous on this point because,

after examining all the relevant material which

might aid us in construing its provisions, a rea-

sonable doubt persists as to the statute’s

intended scope. Moskal v. United States,

__U.S.___, 111 S.Ct. 461 (1990). Accordingly, the

“rule of lenity” requires that we adopt the more

lenient interpretation (citation omitted). Johnson,

p- 569.

13

Consistent with its interpretation of the statute, the Court

of Appeals for the Tenth Circuit reversed the appellant's

convictions on the pertinent money laundering counts.

3. The conflict between the Fifth Circuit and the

Second Circuit

Ironically, the Court of Appeals for the Second Cir-

cuit considered the question raised in this petition at

almost the same time as the Fifth Circuit, with

diametrically opposed results. In United States v. Pier-

vinanzi, 23 F.3d 670 (2nd Cir.1994), defendant Michael

Piervinanzi had been convicted of a charge of violating 18

USC §1957, for his role causing the fraudulent transfer of

$24 million from Morgan Guaranty Bank in New York to

an account in London. The relevant facts, as found by the

Court of Appeals, were that:

. The clerk processed the transfer, but

reported her suspicions to a supervisor. Either

the supervisor or the clerk then contacted Shear-

son [the righful owner of the $24 million] and

learned that the transaction had not been autho-

rized. Although the $24 million had already

reached Bankers Trust, the wire transfer was

stopped and reversed. United States v. Pier-

vinanzi, 23 F.3d at 674.

On his appeal, Piervinanzi, joined by the Government,

moved to vacate his conviction on this count:

Count seven charged that Piervinanzi vio-

lated §1957 by fraudulently causing the transfer

of approximately $24 million from Morgan

Guaranty. Piervinanzi argues that the language

of the statute only encompasses transactions in

14

which a defendant first obtains “criminally

derived property,” and then engages in a mone-

tary transaction with that property. Because the

funds transferred from Morgan Guaranty were

not yet property derived from the wire fraud

and bank fraud scheme, Piervinanzi contends,

his actions did not come within the purview of

§1957. The government does not dispute this

reading of the statute, and joins Piervinanzi’s

request to vacate his conviction on this count.

United States v. Piervinanzi, 23 F.3d at 676-677.

The Court of Appeals first looked to the language of

the statute, finding that it supported Piervinanzi’s argu-

ment:

The language of §1957 supports Pier-

vinanzi’s interpretation of that statute. The ordi-

nary meaning of the word “obtained” entails

possession of a thing. See Webster’s Third New

International Dictionary 1559 (1986). Similarly,

the word “property” implies ownership, or the

“exclusive right to possess, enjoy, and dispose of

a thing.” Id. at 1818. The use of such language

demonstrates a congressional intent that the

proceeds of a crime be in the defendant’s pos-

session befére he can attempt to transfer those

proceeds in violation of §1957. United States v.

Piervinanzi, 23 F.3d at 677.

The Court of Appeals for the Second Circuit then cited

United States v. Johnson, supra, specifically referring to its

finding that “Congress targeted only those transactions

occurring after proceeds have been obtained from the

underlying unlawful activity.” United States v. Piervinanzi,

at 677. The Second Circuit then found that Piervinanzi

15

had been improperly convicted, and reversed his convic-

tion on this count.

To put the matter most plainly: the Court of Appeals

for the Second Circuit, like the Court of Appeals for the

Tenth Circuit, refuses to allow the government to use the

transaction which unlawfully gives a defendant posses-

sion and control of proceeds belonging to another as the

“financial transaction” in money laundering count. The

Fifth Circuit has no such inhibitions, a fact which pro-

duces reasoning that is at best illogical.

4. Reasons for granting the writ

As demonstrated above, the decision of the Court of

Appeals for the Fifth Circuit plainly conflicts with the

decisions of the Tenth and Second Circuit Courts of

Appeal. For that reason alone, certiorari should be

granted. However, other reasons compel the granting of

the writ.

Despite repeated importunings, the Supreme Court

has never addressed the Money Laundering Act, notwith-

standing the fact that it has become the latest “darling in

the prosecutor’s nursery.” Cf. Tarlow, B., RICO: The New

Darling of the Prosecutor’s Nursery, 49 ForDHAM L. Rev. 165

(1980). One need only review the latest advance sheet for

the Federal Reporter to see how frequently the money

laundering statutes are being used.

However, as important as uniformity among the

Courts of Appeal might be, guidance is more important —

particularly guidance in the murky area of just when

predicate “specified unlawful activity” ends, and money

16

laundering begins. Because 18 USC §1956 has as one of its

elements a predicate “specified unlawful activity,” this

question will necessarily arise whenever a defendant par-

ticipates in both the predicate activity, and the money

laundering. See, e.g., United States v. Piervinanzi, supra,

and United States v. Lovett, supra. That the problem exists

is the fault of Congress. That it arises so frequently is the

fault of prosecutors, who use the money laundering stat-

utes whenever, and wherever possible.

In West’s case, the Fifth Circuit of necessity found

that that his bankruptcy fraud had been completed before

the financial transactions in question, else it could not

find money laundering. United States v. West, at p. 591.

However, the specific money launaering statute used in

West’s case required the government to prove that the

money laundering “promoted” further illegal activity.

Because West’s “money laundering” merged both factu-

ally and chronologically with his bankruptcy fraud, the

Fifth Circuit was constrained to join the Court of Appeals

for the Third Circuit in finding that one can “promote” an

activity that has been concluded, in order to preserve its

conclusion that West had laundered funds to promote

specified unlawful activity. United States v. West, at 591,

fn. 13, citing United States v. Paramo, 998 F.2d 1212, 1218

(3d Cir. 1993), cert. denied., _U.S.___, 114 S.Ct. 1076, 127

L.Ed.2d 393 (1994). Congress did not intend such absurd

results, the statute should not be used to achieve them,

and this Court should put an end to them.

en eee, eee eee

aaa

17

CONCLUSION

Wherefore, this Court is respectfully urged to grant

the foregoing petition, and to issue a writ of certiorari to

the United States Court of Appeals for the Fifth Circuit in

the instant proceeding, and to thereafter vacate the judg-

ment and opinion of that court.

Respectfully submitted,

HERBERT V. LARSON, JR.

Counsel of Record

700 Camp Street

New Orleans, Louisiana 70130

(504) 528-9500

Attorney for Petitioner

Bruce R. West, Sr.

Dated this 27th day of October, 1994.

App. 1

APPENDIX A

UNITED STATES of America

Plaintiff-Appellee,

Vv.

Bruce R. WEST, Sr., |

Defendant-Appellant.

No. 93-4935.

United States Court of Appeals,

Fifth Circuit.

May 31, 1994.

Defendant was convicted, in the United States Dis-

trict Court for the Eastern District of Texas, Paul N.

Brown, J., of bankruptcy fraud and money laundering.

On appeal, the Court of Appeals, Emilio M. Garza, Cir-

cuit Judge, held that: (1) evidence supported convictions,

and (2) admission of extrinsic act evidence was not abuse

of discretion.

Affirmed.

Michael S. Fawer, Lynn M. Cruce, Law Offices of

Michael S. Fawer, Dallas, TX, Herbert V. Larson, Jr., New

Orleans, LA, for defendant-appellant.

Ellen R. Meltzer, Special Counsel, Michael D. Love

and David A. Frank, Trial Attys., U.S. Dept. of Justice,

Crim. Div., Fraud Sec., Washington, DC, Bob Wortham,

U.S. Atty., Beaumont, TX, for plaintiff-appellee.

Appeals from the United States District Court for the

Eastern District of Texas.

App. 2

Before WISDOM, BARKSDALE, AND EMILIO M.

GARZA, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

Defendant Bruce West, Sr. was tried before a jury and

convicted of ten counts of bankruptcy fraud, in violation

of 18 U.S.C. § 152 (1988), eleven counts of money launder-

ing, in violation of 18 U.S.C. § 1956, and one count of

conspiring to commit bankruptcy fraud, in violation of 18

U.S.C. § 371. West now appeals his conviction, contend-

ing both that the indictment did not properly charge

violations of the bankruptcy fraud and money laundering

statutes and that the district court’s admission of and

refusal to admit certain evidence deprived him of a fair

trial. We affirm.

I

Bruce West, Sr., a Texas real estate developer, experi-

enced serious financial problems as a result of the decline

in the Texas economy during the mid- to late 1980s. West

eventually filed a petition in bankruptcy on April 2, 1990.

This criminal case enianates from West’s bankruptcy fil-

ing, with many of the charges contained in the indictment

based on three transactions that West participated in

shortly before filing his bankruptcy petition.

A

In April 1989, West sold his homestead (“Dondi

Farms”) to Earlene Jett, as trustee for her son, Scott Mays.

West received $75,000 in cash and a note signed by Jett in

the amount of $277,500 (“the Jett note”). As part of the

ne, see

App. 3

transaction, West leased, and held an option to purchase,

a lakehouse owned by Jett. The Jett note was payable in

quarterly installments of $8900; under the terms of the

sale contract, however, West allowed Jett to deduct from

the note payments the monies due Jett as a result of the

lakehouse lease. West received ten payments on the Jett

note, all of which are the basis of money laundering

charges.!

In June 1990, West arranged for a third party to

purchase Jett’s lakehouse for an amount slightly exceed-

ing its existing mortgage. After the sale had closed, Jett

paid the excess — $2,613 — to West, who subsequently gave

the money to Betty Ruben and Jo Ann Johnson as com-

pensation for finding the buyer. Jett also received a

refund on her insurance escrow account, which she paid

to West and he then paid to Johnson. West’s involvement

with the sale of the lakehouse and its proceeds forms the

basis for a single count of bankruptcy fraud.

1 Jett wrote checks for three payments that were payable to

West; West deposited these checks into an account held by

Exalter, Inc. (“Exalter”), a Texas corporation formed by West

and owned by West’s three children. West deposited a fourth

check into an account held by Sandra Malmay, his then-girl-

friend; Malmay subsequently transferred the proceeds of that

check into Exalter’s account. West also deposited three checks,

made payable to Exalter, directly into Exalter’s account. West

deposited the final three checks, which were made payable to

him, into Malmay’s account; the proceeds from these checks

apparently were not transferred to Exalter’s account.

App. 4

B

The second transaction at issue involved the 1989

purchase of two notes executed by West and held by the

Federal Deposit Insurance Corporation (“FDIC”). In 1984,

West purchased a building in Addison, Texas (“the Broad-

way building”) for $650,000, financing $350,000 of the

purchase price with a loan from Parkway Bank & Trust

(“Parkway”). A deed of trust for the building secured

West’s promissory note. In 1988, Parkway failed, the

FDIC was appointed as receiver, and West defaulted on

the loan.2 The FDIC, through bank liquidation specialist

Lawrence Greer, began negotiating with West to work out

or liquidate the loans for the sum of $150,000. West

informed Greer that although he did not have the funds

to make payment on the Parkway notes, he had

“arranged for and [had] an agreement from a company to

make it possible to purchase the notes for $150,000.”

After receiving assurances from West that the transaction

between West and North Star Funding (“North Star”) -

the corporation that had agreed to purchase the Parkway

notes — occurred at “arms-length,” the FDIC agreed to sell

the notes to North Star. Unbeknownst to the FDIC, how-

ever, North Star had agreed to act as a nominee, or

“straw,” purchaser on West’s behalf.* Thus, West

2 West also defaulted on a second loan secured by three

relatively worthless over-the-counter stocks.

3 Although West’s brief on appeal suggested that he was

not challenging any of the factual findings made by the jury,

West does argue that the FDIC knew of and encouraged his use

of a straw purchaser. Indeed, at oral argument West’s counsel

asserted that two FDIC witnesses - Greer and Walter Keller,

who dealt with West after Greer left the agency — committed

App. 5

supplied the $150,000 needed to purchase the notes and

later arranged for North Star to foreclose on the notes

and sell the Broadway building to Exalter, his children’s

corporation.*

c.

The third transaction at issue involves Exalter’s pur-

chase and subsequent sale to West of a house in Frisco,

Texas (“the Frisco house”). In June 1989, Richard McCally

sold the Frisco house and an adjacent vacant lot to Exalter

in exchange for $125,000 in cash and the Broadway Build-

ing, which McCally valued at $545,000.5 West subse-

quently purchased the Frisco house, and used it as his

homestead, from Exalter for $622,500, which included

$312,524 in cash, a personal note in the amount of

$277,500, which was secured by the Jett note, and a

promissory note in the amount of $32,746, which was

secured by a first lien deed of trust on the property. The

cash portion of the purchase price consisted of “loans”

previously made by West to Exalter. West’s transfer of a

perjury by denying they knew that West was the actual pur-

chaser of the notes.

4 West obtained the $150,000 when Jack Franks - a West

business associate — repaid a loan made by West, which was

secured by a lien on real estate that Franks owned. West previ-

ously had reported to the FDIC that the value of his lien was

“materially affect[ed]” because prior, senior liens on the real

estate were “in default and posted for foreclosure.”

> McCally testified that, until the date of closing, he

believed West to be the purchaser. West concedes that he con-

ducted the negotiations resulting in Exalter’s purchase of the

Frisco house.

App. 6

security interest in the Jett note to Exalter forms the basis

of a single bankruptcy fraud count.

D

West’s failure to report his interest in two bank

accounts forms the basis for two additional counts of

bankruptcy fraud - Counts 24(a) and 2. In April 1989,

Jack Franks wired $219,930 to Commonwealth National

Bank in West’s name. Because West did not have an

account at Commonwealth, a bank employee opened an

account in West’s name into which the funds could be

deposited. In May, West ordered the bank to close the

account and disburse the funds as follows: a $150,000

cashier’s check payable to the FDIC listing North Star

Funding as the remittitur, which West subsequently pre-

sented to the FDIC in exchange for the Parkway notes;

$50,000 deposited into a new account in Exalter’s name;®

and the balance of $19,930 in cashier’s checks payable to

West.

Count 26 charged West with fraudulently transfer-

ring and concealing funds in a second Commonwealth

account, which was opened by Sandra Malmay, West’s

then-girlfriend, in September 1989. Maimay testified that

- West directed her to open the account in her name

because he was afraid that any accounts held in his name

would be garnished. Malmay further stated that checks

drawn on the account “mostly” benefitted West and were

paid with funds deposited by West. Moreover, West

6 This deposit forms the basis for one count of bankruptcy

fraud — Count 7.

App. 7

deposited several payments made pursuant to the Jett

note into the account, the proceeds of which then were

transferred to Exalter.

Count 31 charged West with money laundering. The

transactions underlying this count involved two auto-

mobiles — a 1962 Mazda coupe and a 1935 Austin. West

failed to list the Mazda on the appropriate bankruptcy

schedules and erroneously indicated that he held only a

one-half interest in the Austin. However, West subse-

quently conveyed the cars to Great Cars, Inc. (“Great

Cars”) in exchange for a dune buggy’ and $5,750 cash,

which was deposited into the Malmay ‘account.

II

West was convicted of several counts of bankruptcy

fraud, in violation of 18 U.S.C. § 152.” Three of these

counts charged West with fraudulently transferring funds

to Exalter during February and March 1989. West con-

tends that transfers, which occurred more than one year

prior to the filing of his bankruptcy petition, cannot

provide the basis for a § 152 prosecution because the

transfers were “outside the jurisdiction of the Bankruptcy

Code.” As support for his construction of § 152, West

points to 11 U.S.C. § 548(a), which allows a bankruptcy

trustee “to avoid any transfer of an interest of the debtor

7 The relevant portion of this statute provides that “[w]hoe-

ver... in contemplation of a case under title 11 by or against

him... , or with intent to defeat the provisions of title 11,

knowingly and fraudulently transfers or conceals any of his

property” shall be guilty of bankruptcy fraud. 18 U.S.C. § 152

{ 7.

App. 8

in property . . . that was made .. . on or within one year

before the date of the filing of the petition.” West submits

that because the trustee lacked jurisdiction over the trans-

ferred funds, the government may not prosecute him for

bankruptcy fraud.®

We disagree with West’s interpretation of § 152. The

plain language of § 152 certainly cannot be read to

impose the requirement suggested by West. See United

States v. Moody, 923 F.2d 341, 347 (5th Cir.1991) (noting

that “words in a statute are to be given their plain and

ordinary meaning”). Moreover, in light of the explicit

intent requirements found in § 152, we will not transplant

from the Bankruptcy Code the additional requirement

that a fraudulent transfer, to be prosecutable as bank-

ruptcy fraud, must be made within one year prior to the

defendant’s filing of his bankruptcy petition. A defendant

may knowingly and fraudulently transfer property in

contemplation of or with the intent to defeat the provi-

sions of Title 11 without necessarily transferring the

property within one year before filing a bankruptcy peti-

tion. Cf. Ralph C. McCullough, II, Bankruptcy Fraud: Crime

Without Punishment, 96 Com.L.J. 257, 268 (1991) (“Theo-

retically, bankruptcy fraud could occur in contemplation

8 With regard to this argument, West does not challenge the

sufficiency of the evidence as to the mens rea requirements

found in paragraph 7 of § 152 — i.e., whether he transferred or

concealed property (1) knowingly, (2) fraudulently, and (3) in

contemplation of a case under title 11 or with intent to defeat the

provisions of title 11. Instead, West argues only that the govern-

ment is precluded from prosecuting him for transfers occurring

more than one year prior to the date he filed his bankruptcy

petition.

App. 9

of an apparently inevitable bankruptcy which the debtor

later managed to escape.”). Indeed, a knowledgeable

defendant bent on pursuing a fraudulent course of action

would effect a fraudulent transfer outside the one year

period within which the bankruptcy trustee could rescind

it. See United States v. Dandy, 998 F.2d 1344, 1348 (6th

Cir.1993) (defendant convicted of bankruptcy fraud when

he exercised power over the bankrupt corporation “for

exactly one year and one day in order to prevent [the

bankrupt] from declaring bankruptcy during the one-year

period within which [the defendant’s diversion of assets]

could be rescinded as an avoidable transfer under bank-

ruptcy law”); Stegeman v. United States, 425 F.2d 984, 986

(9th Cir.1970) (§ 152 “ ‘attempts to cover all the possible

methods by which a bankrupt. . . may attempt to defeat

the Bankruptcy Act through an effort to keep assets from

being equitably distributed among creditors.’ ”) (citation

omitted). Consequently, we hold that the government

may prosecute individuals under 18 U.S.C. § 152 for

transfers of property occurring more than one year prior

to the filing of a petition in bankruptcy if such transfers

are made knowingly, fraudulently, and in contemplation

of a case under the 11 or with intent to defeat the provi-

sions of title 11.9 Cf. United States v. Grant, 971 F.2d 799,

805 (1st Cir.1992) (refusing to apply the “relation back”

doctrine developed under the Bankruptcy Act in a crimi-

nal bankruptcy fraud case because the doctrine was not

? Notwithstanding West’s contentions to the contrary, the

fraudulent transfers are made in contemplation of title 11 or

with the intent to defeat the provisions of title 11 — a question

that must be resolved by the jury — provides federal! courts with

jurisdiction.

App. 10

°

“designed to insulate bankruptcy fraud, either in the

bankruptcy proceeding itself or in any related criminal

proceeding”).1°

Ill

West next challenges the sufficiency of Counts IX

through XVIII and Count XXXI of the indictment, arguing

that the government failed to adequately allege the ele-

ments of the charged offenses - money laundering, in

violation of 18 U.S.C. § 1956.11 “Whether an indictment

10 West alludes to, but does not directly assert, the argu-

ment that his discharge in bankruptcy, entered in a bankruptcy

proceeding to which an agency of the United States was a

claimant, precluded a criminal prosecution for bankruptcy

fraud. To the extent West does assert this argument, however,

we reject it. See United States v. Tatum, 943 F.2d 370, 382 (4th

Cir.1991) (holding that a discharge in,bankruptcy does not pre-

clude a subsequent criminal prosecution for bankruptcy fraud).

11 West’s reply brief characterizes his argument as a chal-

lenge to the sufficiency of the evidence or as a claim of “plain

error” under Fed. R.Crim.P. 52(b). We, however, believe that

West’s argument properly should be viewed as a challenge to

the sufficiency of the indictment. See United States v. Cavalier, 17

F.3d 90, 92 (5th Cir.1994) (rejecting a similar argument made as a

challenge to the sufficiency of the indictment); United States v.

Johnson, 971 F.2d 562, 567 (10th Cir.1992) (“Although appellant’s

argument is characterized as a challenge to the sufficiency of the

evidence, it raises a question concerning the proper scope of

§ 195Z and it requires us to interpret the language of the stat-

ute.”); United States v. Jackson, 935 F.2d 832, 839-40 (7th Cir.1991)

(noting that although the defendant styled a similar argument

“in terms of the sufficiency of the evidence, we believe that it

involves a preliminary question of statutory construction.”).

App. 11

sufficiently alleges the elements of an offense is a ques-

tion of law to be reviewed de novo.” United States v.

Shelton, 937 F.2d 140, 142 (5th Cir.), cert. denied, ___ US.

__, 112 S.Ct. 607, 116 L.Ed.2d 630 (1991). To obtain a

conviction for money laundering, the government must

prove “[t]hat the defendant 1) conducted or attempted to

conduct a financial transaction, 2) which the defendant

knew involved the proceeds of unlawful activity, 3) with

the intent [either] to promote or further unlawful activ-

ity” or to conceal or disguise the nature, location, source,

ownership, or control of the proceeds of unlawful activ-

ity. United State v. Ramirez, 954 F.2d 1035, 1049 (5th Cir.),

cert. denied, __ U.S. ___, 112 S.Ct. 3010, 120 L.Ed.2d 884

(1992); see 18 U.S.C. § 1956(a)(1)(A)(i) & (B)(i). The gov-

ernment submits that West violated the money launder-

ing statute by accepting and depositing payments

received pursuant to the Jett note and his sale of the two

automobiles to Great Cars, Inc., acts that constitute bank-

ruptcy freud.!2

West contends that the crime of money laundering

“must always have at its core [the] act of taking ‘dirty

money’ and making it ‘clean.’ ” In contrast, West submits

that “[t]he act at the core of this case . . . was the taking of

‘clean money’ and making it dirty.’ ” In other words, West

contends the monies he received form Jett and Great Cars

were not proceeds of some unlawful activity, but instead

constituted the proceeds of lawful activities - namely,

Jett’s purchase of Dondi Farms and Great Cars’ purchase

of the two automobiles. We disagree. The mere fact that

12 Bankruptcy fraud is a specified unlawful act under the

money laundering statute. See 18 U.S.C. § 1956(c)(7)(D).

App. 12

Jett and Great Cars were innocent third parties — i.e., they

did not conspire with West to commit bankruptcy fraud -

does not preclude West’s conviction for money launder-

ing. Instead, the checks that Jett and Great Cars gave to

West involved the proceeds of unlawful activity — West’s

attempts to fraudulently conceal assets, in contemplation

of a case under title 11 or with intent to defeat the

provisions of title 11. Had West not undertaken such a

course of action, he would not have received any funds

from Jett or Great Cars. Consequently, the checks at issue

resulted from West’s concealment of assets and, therefore,

constituted the proceeds of West’s bankruptcy fraud.!%

See Cavalier, 17 F.3d at 92-93. Accordingly, we conclude

that West was properly charged with and convicted of

money laundering.!4

13 In his reply brief, West alludes to the argument that

because the bankruptcy fraud offenses underlying several of the

money laundering counts were completed when West trans-

ferred the security interest in the Jett note to Exalter, subsequent

deposits of payments made on the note could not constitute

money laundering. However, we rejected this very view in Cav-

alier. See 17 F.3d at 93 (“According to Cavalier, one cannot pro-

mote a completed unlawful activity for the purposes of

§ 1956(a)(1)(A)(i). We disagree.”) (footnote omitted); see also

United States v. Paramo, 998 F.2d 1212, 1218 (3d Cir. 1993) (same)

cert. denied, U.S. __, 114 S.Ct. 1076, 127 L.Ed.2d 393 (1994).

14 Our conclusion is supported by United States v. Levine,

970 F.2d 681, 686 (10th Cir.1992). In Levine, the defendants

engaged in a scheme to hide the existence of four tax refund

checks to which their creditors or the bankruptcy estate was

entitled. The court held that the refund checks, which were

issued by innocent third parties — the Federal government and

the state of Colorado - “came from an unlawful source as they

emanated from a bankruptcy fraud.” Id. Consequently, the court

upheld the defendants’ money laundering convictions.

App. 13

IV

West also challenges several evidentiary rulings

made by the district court. We review the district court’s

determinations as to the admissibility of evidence using

the abuse of discretion standard. See United States v.

McAfee, 8 F.3d 1010, 1017 (5th Cir.1993) (exclusion of

evidence); United States v. Loney, 959 F.2d 1332, 1340 (5th

Cir.1992) (admission of evidence).

A

West first contends that the district court erred in

refusing to allow him to introduce evidence that “it was a

routine practice of the FDIC to sell notes held by a failed

institution as a discount, and that the FDIC frequently

allowed parties to purchase their own discounted note

through third parties who were .. . ‘straw purchasers.’ ”

West argues that such evidence was both relevant to the

issue whether the FDIC knew that West was using North

Star as a straw purchaser in the Parkway notes transac-

tion and admissible as a “routine practice” of the FDIC.'5

15 West has not alleged that he established, by proffer or

otherwise, that non-FDIC employees Jack Franks, Doug Pen-

nington, Nathan Reeder, or Philip Palmer ever had dealings

with the FDIC during which they became familiar with the

FDIC’s routine practices. See Fed.R.Evid. 602 (“A witness may

not testify to a matter unless evidence is introduced sufficient to

support a finding that the witness has personal knowledge of

the matter); Fed.R.Evid. 701 (limiting lay witnesses to giving

opinions based upon first-hand knowledge or observation).

Consequently, the district court did not abuse its discretion in

excluding testimony from those individuals regarding the

FDIC’s routine practices.

App. 14

Rule 406 provides that “[e]vidence of the habit of a

person or of the routine practice of an organization . . . is

relevant to prove that the conduct of the person or orga-

nization on a particular occasion was in conformity with

the habit or routine practice.”1© Fed.R.Evid. 406.

Although “[t]here is no precise formula for determining

when a practice becomes so consistent as to rise to the

level of routine,” “adequacy of sampling and uniformity

of response are controlling considerations.” G.M. Brod &

Co. v. U.S. Home Corp., 759 F.2d 1526, 1533 (11th Cir.1985)

(internal quotations omitted); see also Reyes v. Missouri

Pacific R.R., 589 F.2d 791, 795 (5th Cir.1979).

After reviewing the record, we conclude that the

evidence offered by West to prove the FDIC’s routine

practice, when considered in light of the FDIC’s dealings

with literally thousands of debtors during the mid- to late

1980s, “falls far short of the adequacy of sampling and

uniformity of response which are the controlling consid-

erations governing admissibility.”17 G.M. Brod, 759 F.2d at

16 “Rule 406, on its face, applies in only two instances: (1) to

show that an individual acted in conformity with his or her

habit, and (2) to show that an organization acted in conformity

with its routine practice.” United States v. Rangel-Arreola, 991

F.2d 1519, 1523 (10th Cir.1993). Here, the first application is not

relevant as the proffered evidence involves neither Greer’s nor

Keller’s habitual conduct. Thus, to utilize Rule 406, West must

demonstrate that the excluded testimony would have related

the routine practice of the FDIC. [sic]

17 Additionally, to the extent West asserts that the district

court erred in not allowing him to introduce evidence regarding

the FDIC’s policies, we disagree. Rule 406 is concerned not with

an organization’s policy, but with specific instances of conduct.

Thus, Rule 406 does not require the district court to admit

App. 15

1533. In fact, West has not attempted to make a compari-

son of the number of transactions in which the FDIC

allegedly allowed straw purchasers with the number in

which the FDIC did not. See Simplex, Inc. v. Diversified

Energy Sys., Inc., 847 F.2d 1290, 1294 (7th Cir.1988) (noting

the “the Rule 406 inquiry also necessitates some compari-

son of the number of instances in which any such conduct

occurs with the number in which no such conduct took

place”) (internal quotation omitted). Finally, we note that

both FDIC officials involved in the negotiations with

West testified that they did not direct West to utilize a

straw purchaser.!® See United States v. Newman, 982 F.2d

665, 669 (1st Cir.1992) (“[W]e are aware of no case, and

the appellant cites none, in which the routine practice of

an organization, without more, has been considered pro-

bative of the conduct of a particular individual within the

organization.”). Consequently, the district court did not

abuse its discretion in finding Rule 406 inapplicable to

the evidence presented by West.!9

evidence pertaining to alleged policies followed by the FDIC.

West does not argue that the policy evidence is admissible

under some other rule, and we therefore do not reach this issue.

See, however, 23 Charles A. Wright & Kenneth W. Graham,

Federal Practice & Procedure § 5274, at 47 & n. 35 (1980), where

they distinguish evidence admissible under Rule 406 from evi-

dence inadmissible under that Rule but admissible under

another Rule, such as Rule 401.

18 West asserted at oral argument that the FDIC officials

“lied.”

19 Our conclusion is supported by the policies underlying

Rule 406:

The need for [routine practice] evidence rises out of

the fact that in a large organization it is unlikely that

App. 16

B

West next contends that the district court erred in

allowing the government to impeach Jack Franks, a pros-

ecution witness, by means of Franks’ prior convictions for

mail fraud and two other felonies. Fed.R.Evid. 607 pro-

vides that “[t]he credibility of a witness may be attacked

by any party, including the party calling the witness.”20

However, the government may not introduce evidence of

prior conviction “ ‘under the guise of impeachment for

the primary purpose of placing before the jury substantive

evidence which is not otherwise admissible.’ ” United

States v. Hogan, 763 F.2d 697, 702 (5th Cir.1985) (quoting

United States v. Miller, 664 F.2d 94, 97 (5th Cir.1981), cert.

denied, 459 U.S. 854, 103 S.Ct. 121, 74 L.Ed.2d 106 (1982)).

West argues that the government introduced evidence at

trial regarding Franks’ prior convictions for just such a

any individual will remember one of a large number

of repeated transactions, and even if he does, the cost

of finding that person and producing him in court is

disproportionate to the value of his testimony... .

[T]he conduct to be defined as ‘routine practice’ for

purposes of Rule 406 should be of such a nature that it

is unlikely that the individual instance can be recalled

or the person who performed it can be located.

23 Wright & Graham, Federal Practice & Procedure § 5274, at

45-56. Here, as previously noted, the FDIC officials with whom

West dealt testified at trial that they did not direct West to

utilize a straw purchaser.

20 Fed.R.Evid. 609 provides that the credibility of a witness

other than the accused may be attacked using evidence that the

witness has been convicted of a crime punishable by imprison-

ment in excess of one-year.

App. 17

prohibited purpose — namely, to prove West’s guilt by his

association with Franks.

West contends that the sole purpose behind Rule 607

is to allow the government to “pull the sting” of impeach-

ment — i.e., to allow the government on direct examina-

tion to elicit the fact of conviction so as to prevent the

defendant from exposing the conviction during cross-

examination, thereby giving the jury the impression that

the government was concealing a relevant fact about its

witness. West submits that the government's intent to use

Franks’ convictions as substantive evidence of West’s

guilt is clear because West “guaranteed” that he would

not impeach Franks using Franks’ three prior felony con-

victions. Over West’s objections and in spite of West’s

“guarantee,” however, the district court ruled that the

government could introduce evidence of the prior convic-

tions during direct examination.?!

21 The government argued at trial that the fact of conviction

was admissible because “[i]t is appropriate . . . for the jury to

look at all factors which bear on a witness’ credibility,

and... prior felony convictions have a tendency and reason to

affect the issue of credibility.” West argues that the govern-

ment’s reason for questioning Franks about his prior convic-

tions is mere subterfuge. We, however, have approved the very

course of action taken by the government. See United States v.

Woolridge, 572 F.2d 1027, 1029 (Sth Cir.1978) (“The Govern-

ment’s questioning of its own witness concerning prior felony

convictions was admissible to enable the jury to evaluate the

witness’ testimony.”); see also United States v. Bileck, 776 F.2d 195,

198 (7th Cir.1985) (“The candor of the prosecutor in eliciting the

fact that a witness has a felony conviction is to let the jury know

precisely the kind of witness he is relying on. Such a technique

is proper and often used.”); United States v. Bad Cob, 560 F.2d

877, 883 (8th Cir.1977) (noting that the introduction on direct

App. 18

After reviewing the record, we conclude that the

government's primary purpose in calling Franks was not

to establish West’s guilt by his association with Franks.

Indeed, West admits that Franks’ testimony “played a

critical role in several facets of the case.” Moreover, the

government neither emphasized nor urged the jury to

consider Franks’ convictions as evidence of West’s guilt.

Cf. United States v. Hernandez, 921 F.2d 1569, 1582-83 (11th

Cir.1991) (despite the absence of a cautienary instruction,

the district court did not abuse its discretion in allowing

the government to introduce a codefendant’s guilty plea

when the government did not emphasize it or urge the

jury to consider it); United States v. Gorny, 732 F.2d 597,

604 (7th Cir.1984) (government’s impeaching its own wit-

ness was not reversible error where it did not call the

witness “merely for the purpose of introducing irrelevant

evidence or of establishing the defendant’s guilt by asso-

ciation with the witness”). Finally, the district court

instructed the jury that it was to consider the evidence of

Franks’ prior convictions “solely in judging the cred-

ibility of the witness” and not to consider the evidence

“for any purpose in judging the innocence or guilt of”

West. See Zafiro v. United States, ___ U.S. ___, 113 S.Ct. 933,

examination of a witness’s prior convictions “serves a twofold

purpose: (a) to bring out the witness’ ‘real character,’ the whole

person, particularly his credibility, and (b) to draw the teeth out

of the adversary’s probable use of the same evidence on cross-

examination”); People v. Minsky, 227 N.Y. 94, 124 N.E. 126, 127

(1919) (noting that “when a disreputable witness is called and

frankly presented to the jury as such, the party calling him

represents him for the occasion and the purposes of the trial as

worthy of belief”).

ee

App. 19

939, 122 L.Ed.2d 317 (1993) (noting that juries are pre-

sumed to follow their instructions). Accordingly, the dis-

trict court did not abuse its discretion in allowing the

government during direct examination to inquire about

Franks’ prior convictions.

/

Prior to trial, West moved in limine for an order

directing the government to refrain from offering evi-

dence pertaining to (1) West’s fluctuating, and generally

declining, net worth, (2) West’s purchase and use of cash-

ier’s checks during December 1987 and January 1988, (3)

West’s participation in cash transactions involving

amounts of $9,500 during December 1987, January, May

and June 1988, and February 1989, and (4) West’s rental

or use of one or more safe deposit boxes. The district

court refused to consider the issue until the government

sought to offer the evidence at trial. When the govern-

ment did offer the evidence, West argued that the court

should exclude it as evidence offered by the government

merely to prove that he was a person of bad character.

Alternatively, West contended that the probative value of

the evidence was substantially outweighed by the danger

22 Fed.R.Evid. 404(b) prohibits the government from intro-

ducing such evidence to demonstrate the defendant's bad char-

acter:

Evidence of other crimes, wrongs or acts is not admis-

sible to prove the character of a person in order to

show action is conformity therewith. It may, however,

be admissible for other purposes, such as proof of

motive, opportunity, intent, preparation, plan, knowl-

edge, identity, or absence of mistake or accident.

App. 20

of unfair prejudice.?> The district court overruled West’s

objections. On appeal, West offers the same arguments to

convince us that the district court erred in admitting the

challenged evidence.74 The government, on the other

hand, contends that the challenged evidence is relevant

both to West’s intent — i.e., whether he acted in contem-

plation of bankruptcy or with the intent to defeat the

provisions of title 11 —- and to plan — his scheme to deter

and prevent creditors from tracing funds to which he had

access.

23 See Fed.R.Evid. 403 (“Although relevant, evidence may

be excluded if its probative value is substantially outweighed

by the danger of unfair prejudice... . ”).

24 We note that West’s failure to specifically identify those

portions of the record relevant to his claim of error borders on

waiving any claim of error. See Fed.R.App.P. 28(a)(4) (noting

that the argument section of the appellant’s brief “shall contain

the contentions of the appellant with respect to the issues pre-

sented, and reasons therefor, with citations to the . . . parts of the

record relied on”) (emphasis added). Instead of adhering to the

commands of Rule 28, West merely alleges that the Rule 404{b)

evidence at issue was “quite significant: see Volume 13, pp.

1351-1388, and virtually all of Vols. 14, 15, and Vol. 16; Govern-

ment Exhibits 269-363.” Although West contends that “it is diffi-

cult if not impossible to simply extract those segments of the

transcript where the evidence is addressed,” we have reviewed

the cited portions of the record and have found that much - if

not most — of the testimony simply did not pertain to any

challenged evidence. Moreover, three of the 82 exhibits cited by

West are directly relevant to Count 4 of the indictment, and West

failed to object at trial to 11 additional exhibits when they were

offered by the government. We trust that in the future, counsel

will specifically identify those portions of the record relevant to

the contentions made in the briefs.

App. 21

When extrinsic offense evidence is offered, Rule

404(b) calls for a two-step approach. First, evidence of

prior extrinsic acts must be “relevant to an issue other

than the defendant’s character.” United States v. Beechum,

582 F.2d 898, 911 (5th Cir.1978) (en banc), cert. denied, 440

U.S. 920, 99 S.Ct. 1244, 59 L.Ed.2d 472 (1979). Evidence is

relevant when it has “any tendency to make the existence

of any fact that is of consequence to the determination of

the action more or less probable than it would be without

the evidence.” Fed.R.Evid. 401. “Second, the evidence

must possess probative value that is not substantially

outweighed by its undue prejudice and must meet the

other requirements of Rule 403.” Beechum, 582 F.2d at 911.

1

Evidence of prior extrinsic acts is admissible to prove

“plan” where the existence of a plan is relevant to some

ultimate issue in the case. United States v. Krezdorn, 639

F.2d 1327, 1331 (5th Cir.1981). For example,

evidence of an extrinsic offense may be admissi-

ble when it logically raises an inference that the

defendant was engaged in a larger, more com-

prehensive plan. The existence of a plar then

tends to prove that the defendant committed the

charged crime, since commission of that crime

would lead to the completion of the overall

plan. This use of extrinsic evidence to establish

the existence of a plan is allowed by Rule 404(b)

because,

[it] involves no inference as to the defen-

dant’s character; instead his conduct is said

to be caused by his conscious commitment

to a course of conduct of which the charged

App. 22

crime is only a part. The other crime is

admitted to show this larger goal rather

than to show defendant’s propensity to

commit crimes.

Id. (quoting 22 Wright & Graham, Federal Practice &

Procedure § 5244, at 500 (1978) (footnotes omitted)).

Evidence of prior extrinsic acts also is allowed by

Rule 404(b) to establish that the defendant acted with the

requisite criminal intent. See United States v. Goodstein, 883

F.2d 1362, 1370 (7th Cir.1989) (“Fraudulent intent may be

proved by circumstantial evidence.”). “Persons whose

intention is to shield their assets from creditor attack

[using the bankruptcy laws] while continuing to derive

the equitable benefit of [their] assets rarely announce

their purpose. Instead, if their intention is to be known, it

must be gleaned from inferences drawn from a course of

conduct.” In re May, 12 B.R. 618, 627 (N.D.Fla.1980). Con-

sequently, to prove intent, the government may introduce

evidence relevant to establishing that a defendant

engaged in a course of conduct designed to defraud his

creditors or the bankruptcy trustee.

We conclude that the district court did not err in

finding that the evidence offered by the government was

relevant to whether West acted with the requisite intent

or whether he acted pursuant to a plan to defeat the

rights of his creditors. For example, the financial state-

ments prepared on West’s behalf indicate that West’s net

worth fell dramatically after 1985. Because the deteriora-

tion of West’s financial situation bears strongly on both

his incentive and need to seek bankruptcy protection,

such evidence is relevant not only to West’s motive for

hiding assets from creditors, but also indicated that it was

App. 23

very probable that he knew that he was going to file a

petition in bankruptcy long before March 1990.25 See 18

U.S.C. § 152 J 7 (noting that the transfer or concealment

of property must occur “in contemplation of a case under

title 11” or “with intent to defeat the provisions of title

11” to constitute bankruptcy fraud); see also United States

v. Lerch, 996 F.2d 158, 162 (7th Cir.1993) (admission of tax

court and bankruptcy court opinions from prior proceed-

ings was proper under Rule 404(b) because they demon-

strated the defendant’s “motive for hiding assets”).

Moreover, the financial statements generally were consis-

tent with West’s testimony that his net worth reached its

peak of between seventeen and nineteen million dollars

in 1985 and declined precipitously thereafter.?° Finally,

we note that the district court gave the appropriate limit-

ing instruction.27 Consequently, the district court cor-

rectly found that the financial statements were relevant to

25 West testified that he did not decide to file his bank-

ruptcy petition until late March 1990.

26 In fact, West testified that by 1988, his net worth was

“pretty well destroyed” and he practiced “survival techniques”

in an effort to keep his business enterprises alive.

27 The district court cautioned:

You must not consider [the testimony regarding

West’s financial statements and the financial state-

ments themselves] in deciding if the Defendant Bruce

West, Sr. committed the acts charged in the Indict-

ment. However, you may consider this evidence for

other limited purposes. If you find beyond a reason-

able doubt from the other evidence in this case that

the Defendant did commit the acts charged in the

Indictment, then you'may consider evidence of these

Financial Statements to determine whether the Defen-

dant had the state of mind or intent necessary to

commit the crime charged in the Indictment or

App. 24

the issue of intent. See United States v. Haymes, 610 F.2d

309, 311-12 (5th Cir.1980) (in bankruptcy fraud case, testi-

mony given by the defendant’s secretary that he was

concerned about his company’s “grave financial condi-

tion and the likelihood it would fall into bankruptcy” was

relevant to intent; when determining when the defendant

began acting with the requisite intent, “[a] jury must be

allowed to put two and two together”).

The evidence regarding West’s purchase and use of

cashier’s checks during December 1987 and January 1988

also was relevant to the issue whether West acted with

the requisite intent. Miriam Lewis, West’s secretary, testi-

fied as to why West directed her to cash various checks

and obtain cashier’s checks:

We had conversations about certain checking

accounts that had been attached over periods of

time. [West stated,] “If the money wasn’t in a _

checking account, it couldn’t be attached.”

Moreover, the pattern of check use is similar and rela-

tively close in time to the transactions undergirding the

instant case, and the district court cautioned the jury not

to use the evidence improperly.?8 See Lerch, 996 F.2d at 162

whether the Defendant committed the acts for which

he is on trial in this case by accident or mistake.

13 R. at 1380.

28 The district court instructed the jury as follows:

I want to instruct you that you may not consider [the

testimony regarding West’s use of cashier’s checks

and the checks themselves] in deciding if the Defen-

dant Bruce R. West, Sr. committed the acts charged in

the Indictment. However, you may consider this evi-

dence for other very limited purposes.

oe hs A MS

2 5 AOR a Ce th cit ence nt i, “esha ARI Ae Ae ais

App. 25

(admission of tax court and bankruptcy court opinions

from prior proceedings proper under Rule 404(b) because

the “events underlying both opinions are . . . similar and

close in time to the instant case”).

The government next introduced evidence pertaining

to West's participation during December 1987, January,

May and June 1988, and February 1989 in cash transac-

tions involving amounts of $9,500. Lewis testified that

starting in 1987, the amount of cash West obtained from

various accounts that he had access to increased dramati-

cally.29 Prior to 1987, Lewis would cash checks only for

travel expenses and petty cash. After a conversation with

West during which they discussed the federal law requir-

ing banks to report certain cash transactions to the inter-

nal Revenue Service,2° however, West directed Lewis to

If you find beyond a reasonable doubt from other

evidence in this case that the Defendant did commit

the acts charged in the Indictment, then you may

consider evidence of the checks that have just been

admitted into evidence for other very limited pur-

poses, to which you may consider to determine

whether the Defendant had the state of mind, and I’m

talking about the Defendant Bruce R. West, Sr., had

the state of mind or intent necessary to commit the

crime charged in the Indictment or whether the

Defendant acted according to a plan or in preparation

for commission of a crime.

14 R. at 1432.

29 Lewis also related that West began talking to her about

declaring bankruptcy in early 1987 and that those conversations

occurred with increasing frequency between that time and 1990.

30 See 31 U.S.C. § 5313(a) (requiring financial institutions

involved in a cash transaction exceeding $10,000 to file a report

with the Secretary of the Treasury).

le

App. 26

cash several checks in amounts of $9,500, thereby avoid-

ing the reporting requirements. Thus, this evidence is

relevant to whether West acted with the intent to defeat

the provisions of the Bankruptcy Code and whether he

acted pursuant to a plan to defeat the rights of his credi-

tors. Consequently, the evidence was admissible under

Rule 404(b).3!

Finally, we conclude that the district court did not err

in admitting the evidence regarding West’s rental or use

of various safety deposit boxes. Lewis testified that dur-

ing or after March 1989, as part of the duties relating to

her employment with West, she went with West’s daugh-

ter to First City Bank, where the daughter removed cash

31 We note that the district court again cautioned the jury as

to the appropriate use of this evidence:

Ladies and Gentlemen of the jury, any testimony with

regard to obtaining cashier’s checks for $9500 and

any such checks admitted into evidence and testi-

mony regarding them is not to be considered by you

in deciding if the Defendant committed the acts

charged in the Indictment. However, you may con-

sider this evidence for other very limited purposes.

If you find beyond a reasonable doubt from other

evidence in this case that the Defendant Bruce West,

Sr. did commit the acts charged in the Indictment,

then you may consider evidence of the checks

obtained in the amount of $9500 and testimony

regarding them for other very limited purposes. You

may consider them to determine whether the Defen-

dant had the state of mind or intent necessary to

commit the crime charged in the Indictment or

whether the Defendant acted according to a plan or in

preparation for commission of a crime.

14 R. at 1440.

Need Gch te’

App. 27

from a safety deposit box. Lewis and the daughter then

proceeded to “several different banks and got cashier’s

checks.” Lewis mailed the cashier’s checks to Jack Franks,

one of West’s business associates. This evidence was rele-

vant to the issue of intent because it indicated the exis-

tence of a plan to hide West's assets and avoid attachment

of his bank accounts, thereby defrauding his creditors.

2

West next contends that even if the challenged evi-

dence was relevant under Rule 404(b), the district court

should have excluded the evidence pursuant to Rule 403

because its probative value was substantially outweighed

by the danger of unfair prejudice. We must determine

“whether the danger of undue prejudice outweighs the

probative value of the evidence in view of the availability

of other means of proof and other facts appropriate for

making decisions of this kind under Rule 403."

Fed.R.Evid. 404(b) advisory committee’s note. “The

exclusion of evidence under Rule 403,” however, “should

occur only sparingly.” United States v. Pace, 10 F.3d 1106,

1115 (5th Cir.1993); see also United States v. McRae, 593

F.2d 700, 707 (5th Cir.) (noting that Rule 403’s “major

function is limited to excluding matter of scant or

cumulative probative force, dragged in by the heels for

the sake of its prejudicial effect”), cert. denied, 444 U.S.

862, 100 S.Ct. 128 62 L.Ed.2d 83 (1979).

At trial, the only real issue in dispute involved West's

intent — i.e., whether he acted in contemplation of declar-

ing bankruptcy or with intent to defeat the Bankruptcy

——_—_o

App. 28

Code. Direct means of proof tending to make the exis-

tence of criminal intent on West’s part more probable

than it otherwise would be is generally unavailable in

bankruptcy fraud prosecutions. See In re May, 12 B.R. at

627. Consequently, Rule 404(b) evidence indicating that

West acted with the requisite intent was extremely impor-

tant to the government’s case. Furthermore, the prior acts

occurred relatively close in time to the conduct charged

in the indictment, thereby increasing the probative value

of the 404(b) evidence. See United States v. Rubio-Gonzalez,

674 F.2d 1067, 1075 (5th Cir. 1982) (upholding trial court's

decision pursuant to Rule 404(b) to admit evidence of 10-

year-old acts). Finally, the district court properly

instructed the jury on four occasions as to the limitations

on consideration of the extrinsic offense evidence.%? See

32 In addition to the instructions given when the district

court admitted the challenged evidence, see notes 27, 28, and 31

supra, the court gave the following instruction immediately

before deliberations began:

During the course of the trial, testimony or evidence

was presented to you concerning alleged acts com-

mitted by the Defendant Bruce R. West, Sr. in addition

to what has been alleged in the Indictment. . . . Such

acts do not constitute any offense charged in the

Indictment in this case, but it would, at most, consti-

tute evidence of acts other than those alleged in the

Indictment.

You must not consider any of this evidence in

deciding if the Defendant Bruce R. West, Sr. commit-

ted the acts charged in the Indictment. . . . However,

you may consider this evidence for other, very lim-

ited, purposes.

If you find beyond a reasonable doubt from other

evidence in this case that the Defendant Bruce R.

West, Sr. did commit the acts charged in the

App. 29

United States v. Elwood, 999 F.2d 814, 817 (5th Cir. 1993)

(no Rule 403 breach where the trial court instructed the

jury on three occasions of the limitations in the consider-

ation of extrinsic offense evidence). Consequently, we

conclude that the district court did not breach Rule 403

by admitting the Rule 404(b) evidence.

D

West’s final assertion is that his trial was rendered

fundamentally unfair because the district court refused to

allow two bankruptcy experts - Philip Palmer and Wil-

liam H. Brister - to testify regarding the relationship

between the Texas Homestead Act*? and federal bank-

ruptcy law. West contends that such testimony would

have demonstrated that he at all times acted in good

faith, and thus was relevant to the issue of his intent.

indictment, then you may consider evidence of the

other acts allegedly committed on other occasions to

determine:

One, whether the Defendant Bruce R. West, Sr.

had the state of mind or intent necessary to commit

the crime charged in the Indictment;

Two whether the Defendant Bruce R. West, Sr.

had the motive or the opportunity to commit the acts

charged in the Indictment, or;

Three, whether the Defendant committed the acts

for which he is on trial by accident or mistake.

26 R. at 3219-20.

33 Section 41.001 of the Texas Property Code provides that a

homestead is “exempt from seizure for the claims of creditors.”

Tex.Prop.Code Ann. § 41.001 (Vernon Supp.1994).

34 At trial, the government had the burden of proving that

West “knowingly and fraudulently [transferred] or [concealed]

App. 30

Here, West's good faith defense was centered upon his

asserted reliance on the advice of his bankruptcy counsel -

Philip Palmer - and his accountant —- Nathan Reeder.

Although both Palmer and Reeder testified they advised

West to structure the Dondi Farms, Broadway building, and

Frisco house transactions as he did and that the transactions

were lawful, West contends that the district court erred in

not allowing him to demonstrate “that it was reasonable to

follow [the advice supplied by Palmer and Reeder] - a

showing that of necessity would include some explanation

of .. . what a Texas homestead exemption was, and how one

could lawfully preserve it, under bankruptcy law.”%5

Under Fed.R.Evid. 702 “[i]f scientific, technical, or

other specialized knowledge will assist the trier of fact to

understand the evidence or to determine a fact in issue, a

witness qualified as an expert by knowledge, skill, expe-

rience, training, or education may testify thereto in the

i aL

any of his property” “in contemplation of a case under Title 11... or

with intent to defeat the provisions of Title 11.” 18 U.S.C. § 152 { 7.

Thus, if West acted in good faith, he could not have acted with the

_ fraudulent intent necessary to support a conviction for bankruptcy

fraud. See United States v. Zehrbach,___ F.3d ___, 1994 WL 96690, *4

(3d Cir. Mar. 28, 1994); see also McCullough, Bankruptcy Fraud, 26

Com.L.J. at 267 (“The role of advisors, such as attorneys, may

affect a finding of intent.”).

35 West informed the district court that Brister and Palmer

would . . . have been able to testify to the Texas

Homestead Law concerning the use of proceeds from

the sale of a homestead for a six-month period, the

reinvestment of those proceeds in a new homestead,

and the exempt nature of the note payments [as] such

proceeds.

25 R. at 3131.

App. 31

form of an opinion or otherwise.” Here, the critical issue

at trial was whether West acted in good faith and relied

upon the advice of counsel. Thus, the district court cor-

rectly allowed West to testify that he at all times relied in

good faith upon the advice of experts and both Palmer

and Reeder to testify that they advised West to structure

the transactions as he did.* Cf. Miller v. United States, 120

36 The district court, in fact, comprehensively explained to

the jury West’s advice of counsel defense:

The defense in this case contends that the actions of

Bruce R. West, Sr. concerning the acquisition of the

Parkway Notes from the FDIC, the foreclosure of the

Broadway Building, Exalter’s involvement in the

exchange of the Broadway Building for the Frisco

House, the subsequent transfer of the Frisco House to

West, Sr. and the associated transfer of tunds by West,

Sr., did not constitute a fraud on West, Sr.’s creditors,

the trustee in bankruptcy, or any other person, and

that such transactions were structured based on

advice from his attorney and accountant.

If, before taking the actions charged in the Indict-

ment, Bruce West, Sr., while acting in good faith and

for the purpose of securing advice on the lawfulness

| of his possible future conduct, sought and obtained

the advice of an attorney or accountant whom he

considered to be competent, and made a full dis-

closure of all important and material facts of which he

had knowledge or had the means of knowing, and

acted in accordance with the advice his attorney or

accountant gave following this full report or dis-

closure, then the Defendant would not be willfully or

deliberately doing a wrong in performing or omitting

some act the law forbids or requires.

However, reliance upon the advice of an attorney

or an accountant is not an absolute defense to the

crimes charged in the Indictment. Rather, it is a

eS ee

App. 32

F.2d 968, 970 (10th Cir. 1941) (stating that the defendant

may buttress his testimony of lack of intent “with testi-

mony of relevant circumstances, including conversations

had with third persons or statements made by them,

tending to support his statement that he had no intent to

circumstance which you should consider in determin-

ing whether a Defendant was acting in good faith or

without fraudulent intent. No one can willfully and

knowingly violate the law and excuse himself by sim-

ply claiming that he followed the advice of an attor-

ney or accountant. Rather, for advice of an attorney or

accountant to be considered as a circumstance that

disproves fraudulent intent, the evidence must show

that the advice was given after a Defendant made a

full and accurate report or disclosure to his attorney

or accountant of all the important and material facts

of which the Defendant Bruce R. West, Sr. had knowl-

edge or had the means of knowing. The evidence

must also show that the Defendant acted in

accordaiice with the advice that his attorney or

accountant gave following this full report or dis-

closure.

Whether Defendant Bruce West, Sr. acted in good

faith for the purpose of truly seeking guidance as to

questions about which he was in doubt, and whether

he made a full and complete report or disclosure to

his attorney or accountant, and whether he acted in

accordance with the advice received, are all questions

for the jury to determine.

26 R. at 3251-53. On appeal, West does not independently chal-

lenge the jury instructions, but instead contends that the district

court’s refusal to allow expert testimony, in light of the jury

instructions, rendered his trial fundamentally unfair. To the

extent West intended to challenge the sufficiency of the jury

instructions, he has failed to brief the issue and, therefore, has

waived it. See Edmond v. Collins, 8 F.3d 290, 292 n. 5 (5th Cir.

1993).

App. 33

defraud”). Moreover, the district court further allowed

Palmer to testify that: (1) West made full disclosure

regarding the transactions; (2) he advised West that the

Frisco house transaction “was a legal and proper transac-

tion”; (3) the Frisco house transaction caused no harm to

West’s creditors; (4) the Jett note was exempt from the

claims of creditors; (5) the Jett note retained its exempt

status after the Frisco house transaction because it was

“used in the acquisition of the new homestead which is

what [the homestead] exemption is all about”; and (6) he

advised West that West was free to use payments made

both pursuant to the Jett note and after West had sought

bankruptcy protection because such payments were

exempt. Consequently, West’s defense - that he in good

faith relied on the advice of counsel - was squarely

placed before the jury.°” Because the typical juror is quali-

fied to determine intelligently and to the best degree

possible both the reasonableness of a client relying upon

the advice of an attorney and accountant retained to

render such advice and whether the client did so in good

faith after making full disclosure, expert testimony as to

the legal basis underlying the advice - i., the rea-

sonableness of their interpretation of the provisions of

the Texas Homestead Act - would not have assisted the

jury. See Fed.R.Evid. 702 advisory committee’s note (not-

ing that the test “for determining when experts may be

used” is “the common sense inquiry whether the

37 Indeed, the issue of intent was squarely placed before the

jury in light of West's explicit testimony that he never acted with

the intent to defraud his creditors, the bankruptcy trustee, or

anyone else.

App. 34

untrained layman would be qualified to determine intel-

ligently and to the best possible degree the particular

issue without enlightenment from those having a spe-

cialized understanding of the subject”) (internal quota-

tion omitted). Accordingly, the district court did not

abuse its discretion in refusing to admit expert testimony

regarding the Texas Homestead Act.

West nonetheless contends that precedent required

the district court to admit the experts’ testimony. West

primarily relies upon United States v. Garber, 607 F.2d 92,

97-100 (5th Cir.1979) (en banc), where we held that

because the taxability of the unreported income at issue

was uncertain as a matter of law, the trial court erred in

excluding the testimony of an expert about the unre-

solved nature of the law.5® We find Garber inapposite

38 Garber was one of only two or three persons in the world

whose blood was known to contain a certain valuable antibody.

She thus was able to generate substantial income by selling her

blood plasma. Because Garber failed to report this income, the

government prosecuted her for the willful evasion of income

taxes. At trial, the government conceded that the taxability of

income generated by selling blood plasma was an issue of first

impression. Thus, Garber sought to introduce the testimony of a

certified public accountant that a recognized theory of tax law

supported Garber’s belief that such income was not taxable.

Considering the question of taxability to be one of law, the trial

court refused to allow the proffered testimony and instructed

the jury that the income Garber received from the sale of her

blood was taxable. Garber, 607 F.2d at 94-96. We reversed Gar-

ber’s conviction, holding that the expert’s testimony was rele-

vant to the issue of Garber’s intent:

The tax treatment of earnings from the sale of blood

plasma or other parts of the human body is an

unchartered area in tax law. The parties in this case

App. 35

given the substantial differences between the facts of that

case and the case sub judice.59 For example, the trial court

in Garber refused to allow the defendant to present any

testimony suggesting that the law supported her actions.

Id. at 99 (“By disallowing [the expert’s testimony] that a

recognized theory of tax law supports Garber’s feelings,

the court deprived the defendant of evidence showing

her state of mind to be reasonable.”). Here, however, the

district court allowed West to testify both that he consul-

ted with Reeder and Palmer before structuring the Dondi

Farms, Broadway Building, and Frisco house transactions

and that he followed their advice. Additionaily, the dis-

trict court allowed both Palmer and Reeder to testify that

they advised West to structure the transactions as he did

and that the transactions were perfectly legal. Thus,

West’s reliance upon Garber is misplaced.4° Moreover,

presented divergent opinions as to the ultimate tax-

ability by analogy to two legitimate theories in tax

law. The trial court should not have withheld this fact,

and its powerful impact on the issue of Garber’s will-

fulness, from the jury.

Id. at 99.

39 In prior cases, we have “limited Garber to its bizarre facts

- where the level of uncertainty [of the applicable law]

approached legal vagueness.” United States v. Daly, 756 F.2d

1076, 1083 (Sth Cir.1985) (citing United States v. Burton, 737 F.2d-

439, 443-44 (5th Cir. 1984)).

40 West’s reliance upon Cheek v. United States, 498 U.S. 192,

111 S. Ct. 604, 112 L.Ed.2d 617 (1991), United States v. Onumonu,

967 F.2d 782 (2d Cir. 1992), and United States v. Lankford, 955 F.2d

1545 (11th Cir. 1992), is similarly misplaced. Cheek, which

merely held that the jury in a criminal tax fraud case must be

allowed to consider the defendant's subjective understanding of

the legality or illegality of his acts, 498 U.S. at 199-203, 111 S.Ct.

App. 36

West has not argued on appeal that the relevant law was

unsettled, that he or his advisors subjectively saw any

such uncertainty, or that his advisors explained the Texas

Homestead Act to him in anything other than very gen-

eral terms. See United States v. Harris, 942 F.2d 1125, 1132

n. 6 (7th Cir. 1991) (noting that where the defendant or

his tax advisors may have subjectively, but wrongly, seen

an ambiguity, the defendant may present evidence to the

jury demonstrating the basis of the erroneous, good faith

belief). The typical juror is perfectly capable of determin-

ing, based on the evidence presented, whether West acted

in good faith, disclosed all the relevant facts, and then

at 609-11, does not provide West with any support because the

district court allowed the jury to consider West’s subjective

intent. Lankford held that the trial court erred in totally exclud-

ing expert testimony relevant to the defendant’s intent to com-

mit tax fraud. 955 F.2d at 1551 & n. 14 (expert testimony as to

whether a campaign contribution should be classified as a gift

or as income, an issue about which most jurors “simply lack the

specialized knowledge, background, and experience needed to

assess the reasonableness of the” defendant’s gift/income char-

acterization). In Onumonu, the defendant, an alimentary-canal

drug smuggler on trial for importing heroin, testified that he

thought he was smuggling diamonds, not heroin. The trial court

excluded expert testimony offered by the defendant regarding

the feasibility and profitability of smuggling diamonds in the

alimentary canal. The Second Circuit held that the trial court

erred in excluding such testimony because it was relevant to the

defendant’s intent and the average juror knows very little

“about the feasibility of internally smuggling diamonds by

swallowing [diamond-filled] condoms.” 967 F.2d at 788. We find

the latter cases distinguishable from the case at bar, where West

testified as to both his subjective intent and his reliance upon

the advice of his retained experts and West’s attorney and

accountant each testified regarding the advice they gave West.

App. 37

acted in reliance upon the advice obtained. Consequently,

we must reject West’s contention that the district court

erred in excluding the proposed testimony regarding the

provisions of the Texas Homestead Act. Cf. United States

v. Burton, 737 F.2d 439, 444 (Sth Cir. 1984) (noting that the

trial court “ordinarily will be the sole source of the law”).

V

For the foregoing reasons, we AFFIRM the judgment

of the district court.

App. 38

APPENDIX B

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 93-4935

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

BRUCE R. WEST, SR.,

Defendant-Appellant.

Appeal from the United States District Court for the

Eastern District of Texas

ON SUGGESTION FOR REHEARING EN BANC

(Opinion February 2, 1994, 5 Cir, __, ___ F.3d __)

(August 1, 1994)

Before WISDOM, BARKSDALE and Emilio M. Garza, Cir-

cuit Judges.

PER CURIAM:

(/f) Treating the Suggestion for Rehearing En Banc as a

Petition for Panel Rehearing, the Petition for Panel

Rehearing is DENIED. No member of the pane! nor Judge

in regular active service of the Court having requested

that the Court be polled on rehearing en banc (FRAP and

Local Rule 35), the Suggestion for Rehearing En Banc is

also DENIED.

( ) Treating the Suggestion for Rehearing En Banc as a

Petition for Panel Rehearing, the Petition for Panel

App. 39

Rehearing is DENIED. The Court having been polled at

the request of one of the members of the Court and a

majority of the Judges who are in regular active service

not having voted in favor (FRAP and Local Rule 35), the

Suggestion for Rehearing En Banc is DENIED.

ENTERED FOR THE COURT:

Emilio M. Garza

United States Circuit Judge