IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 16-51330

UNITED STATES OF AMERICA, 

 Plaintiff - Appellee

v.

SEAN JAMES HAGER, 

 Defendant - Appellant

Appeal from the United States District Court

for the Western District of Texas

USDC No. 1:15-CR-108-1

Before DENNIS, CLEMENT, and GRAVES, Circuit Judges.

PER CURIAM:

Defendant Sean Hager was a long-time salesperson for Velocity 

Electronics (“Velocity”), a computer parts distributor in Austin, Texas. From 

2008 to 2012, he misused Velocity’s confidential information to perpetrate a 

scheme that netted him $1.16 million. Hager was charged and convicted of 

mail, wire, and tax fraud, as well as money laundering. He raises numerous 

legal issues on appeal, but none is persuasive. We affirm his conviction on all 

charges.

I.

Velocity is essentially a middle-man broker: it buys computer parts on 

the open market from suppliers and then resells them at a 20% markup to 

United States Court of Appeals

Fifth Circuit

FILED

January 5, 2018

Lyle W. Cayce

Clerk
No. 16-51330

2

clients based on their specific needs. Velocity uses an in-house proprietary 

software system (“VIS”) to store and organize crucial business information, 

including its suppliers, clients, inventory, and past sales. The VIS aggregates 

and analyzes information about pricing—both the prices at which it purchases 

products, and the prices at which it sells products. The software generates 

pricing trends that can be organized by client and product, and it sets 

purchasing and selling price quotes that ensure a 20% profit margin. This 

quote establishes a “fail point,” meaning employees cannot enter price quotes 

resulting in a lower margin unless a manager manually overrides the software.

Velocity considers the information contained within the VIS to be 

confidential and makes this clear to its employees: employees sign multiple 

confidentiality agreements upon hiring; the employee manual expressly 

designates information contained in the VIS as confidential; and the 

importance of keeping the information confidential is “discussed frequently.” 

The confidentiality of its profit margin is particularly important because the 

release of this information would severely compromise its negotiations with 

clients. 

Hager was a well-respected Velocity employee. He was the salesman

responsible for Dell, one of the company’s most important clients. But Hager 

came to believe that Velocity did not have his “long-term interests at heart.” In 

2008, he decided to take advantage of his access to the company’s confidential 

information for personal gain. Hager formed a company called Echt Electronics 

(“Echt”) in his wife’s name. He used Echt to buy parts he knew Velocity needed 

because he was aware of which parts Dell was ordering. He would then sell 

those parts to himself as a Velocity salesperson at a price that he knew—

thanks again to his access to VIS data—would meet Velocity’s 20% profit 

margin. He thereby avoided triggering any “fail points” that would require

managerial override. Velocity then sold the parts purchased from Echt to Dell. 
No. 16-51330

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Hager employed this scheme for four years. During that time, Velocity 

purchased about $2.7 million in parts from Echt, and Hager made a profit of 

about $1.16 million from the fraud. 

While the scheme was ongoing, Hager lied to Velocity to prevent being 

caught. He told other Velocity employees, for example, that Echt was run by 

two fictional Asian people named “Tim” and “Mary,” who would only do 

business with him and did not want to communicate with anyone else. But 

Hager’s cover was poor: his scheme was discovered in 2012 when a fellow 

employee ran an internet search on Echt and discovered that the company was 

listed under Hager’s wife’s name and that its registered address was Hager’s 

home. Hager left Velocity soon thereafter. 

Over the course of his Echt scheme, Hager filed three federal tax 

returns—for 2008, 2009, and 2010. Hager hired a tax preparer to help file the 

returns. The tax preparer testified at Hager’s trial that Hager did not inform 

her of his income from Echt when she prepared his returns. 

Hager was indicted on two counts of mail fraud, two counts of wire fraud, 

one count of engaging in monetary transactions in property derived from 

specified unlawful activity, and three counts of aiding and assisting the 

preparation of false tax returns. After an eight-day trial, the jury found Hager 

guilty on all counts. He was sentenced to 42 months’ imprisonment for the 

fraud and money laundering counts and 36 months’ imprisonment for the tax 

counts, all to run concurrently. 

II.

The focus of Hager’s appeal contests his mail and wire fraud charges. He 

raises two legal challenges: First, he argues that the applicable provisions of 

the mail and wire fraud statutes, 18 U.S.C. §§ 1341 and 1343, no longer protect 

confidential business information after the Supreme Court’s opinion in 
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Skilling v. United States, 561 U.S. 358 (2010). Second, he argues that, even if 

they still protect confidential business information, they only protect a narrow 

subset—namely, trade secrets as defined by state law. Relying on these 

arguments, Hager contends that the mail and wire fraud counts of the 

indictment failed to allege an offense, and, in the alternative, that the evidence 

was legally insufficient to support his conviction on those counts. But, as 

explained below, the charges are supported by binding Supreme Court 

precedent, Carpenter v. United States, 484 U.S. 19 (1987), and his conviction

under these charges was adequately supported by record evidence.

This court “review[s] de novo questions of statutory interpretation, as 

well as whether an indictment sufficiently alleges the elements of an offense.” 

United States v. Kay, 359 F.3d 738, 742 (5th Cir. 2004) (internal quotation 

marks and footnote omitted). Our review of the sufficiency of the evidence to 

support a criminal conviction is, by contrast, highly deferential. “[T]he relevant 

question is whether, after viewing the evidence in the light most favorable to 

the prosecution, any rational trier of fact could have found the essential 

elements of the crime beyond a reasonable doubt.” Jackson v. Virginia, 443 

U.S. 307, 319 (1979).

To sufficiently allege a violation of the mail and wire fraud statutes, an 

indictment must charge the defendant with “devis[ing] or intending to devise 

any scheme or artifice to defraud, or for obtaining money or property by means 

of false or fraudulent pretenses.” 18 U.S.C. §§ 1341, 1343. Hager’s indictment 

alleged that he had defrauded Velocity “by depriving it of the exclusive use of 

its confidential and proprietary business information”—specifically, 

information stored on the VIS regarding the company’s relationship with Dell. 

The wire and mail fraud charges here are directly supported by the 

Supreme Court’s Carpenter opinion. In Carpenter, a business reporter for the 

Wall Street Journal was charged with mail and wire fraud under §§ 1341 and 
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1343 for divulging the contents of his regular column to stockbrokers before it 

was published. 484 U.S. at 22–23. Challenging the charge, he contended that 

the Journal’s interest in the column was an “intangible right” not covered by 

the statute. Id. at 25 (quoting McNally v. United States, 483 U.S. 350 (1987), 

superseded by 18 U.S.C. § 1346).

Rejecting this argument, the Court found that the content of the 

defendant’s column (prior to its publication) was the Journal’s confidential 

business information, which “ha[d] long been recognized as property.” Id. at 26 

(citing Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1001–04 (1984)). The 

information at issue was “acquired or compiled [by the Journal] in the course 

and conduct of its business,” which gave the Journal “the exclusive right and 

benefit” to use or withhold the information as it chose. Id. (quoting 3 W. 

Fletcher, Cyclopedia of Law of Private Corporations § 857.1, p. 260 (rev. ed. 

1986)). Notably, the fact that the information had an “intangible nature” did 

not “make [the information] any less ‘property’ protected by” §§ 1341 and 1343. 

Id. at 25.

Carpenter applies directly here. Hager deprived Velocity of the exclusive 

use of its confidential business information when he misused the information 

regarding its clients and pricing for his personal enrichment. The information 

was stored, aggregated, and analyzed by the VIS, Velocity’s proprietary, inhouse software. The information is crucial for Velocity’s business: It allows

Velocity to track pricing trends both for suppliers and for buyers, and offers 

employees guidelines regarding proper pricing. It also allows Velocity to 

maintain a specific profit margin, which is itself confidential. Moreover, 

Velocity has made its desire to keep this information private known to all of its 

employees, requiring them to sign numerous confidentiality agreements. The 

information qualifies as confidential business information creating a property 

right that is protected by the mail and wire fraud statutes. Hager’s misuse of 
No. 16-51330

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that information violated Velocity’s “exclusive right and benefit” to it. See Id.

at 26. In short, the mail and wire fraud counts of the indictment were proper.

And, as the foregoing demonstrates, a rational trier of fact could have convicted 

him on those counts.

Hager’s two legal challenges seek to block our application of Carpenter. 

First, Hager argues that Carpenter’s conclusion that “confidential business 

information” is protected under §§ 1341 and 1343 was severely curtailed by the 

Supreme Court in Skilling. This argument fails because the two cases concern 

entirely different interests. Whereas Carpenter sought to apply the mail and 

wire fraud statutes to property interests, the Court’s opinion in Skilling

referred to a separate interest: an “intangible right of honest services.”

Skilling, 561 U.S. at 368.

The distinction between property rights and the right to honest services 

was acknowledged by the Supreme Court in McNally. There, the Government 

prosecuted a private citizen under § 1341 who aided and abetted in a kickback 

scheme devised by government officials. McNally, 483 U.S. at 352–53. The 

Government argued that § 1341’s prohibition against “any scheme or artifice 

to defraud, or for obtaining money or property” protected not only property 

interests, but other intangible rights such as the “right of citizenry to good 

government.” Id. at 356. The Court found this to be an inappropriate extension 

of the statute. Instead, it interpreted “§ 1341 as limited in scope to the 

protection of property rights.” Id. at 360. 

Congress responded to McNally by enacting 18 U.S.C. § 1346. This 

section clarifies that “the term ‘scheme or artifice to defraud’ [in §§ 1341 and 

1343] includes a scheme or artifice to deprive another of the intangible right of 

honest services.” 18 U.S.C. § 1346. Cf. Skilling, 561 U.S. at 403. In other words, 

Congress expanded the breadth of the mail and wire fraud statutes to protect 

“an intangible right of honest services” in addition to property rights.
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Skilling, a case which concerned the Government’s prosecution of an 

Enron executive for his “wide-ranging scheme to deceive the investing public,”

examined the scope of § 1346. Id. at 368–69. The Court found that the phrase 

“intangible right of honest services” would be unconstitutionally vague unless 

interpreted narrowly. Id. at 404–08. In order to avoid that result, it 

purposefully interpreted the provision to apply only to “bribery and kickback 

schemes.” Id. at 412–14.

In light of this review, we see no basis for Hager’s assertion that Skilling 

abrogates Carpenter’s holding. As a preliminary note, Skilling never mentions 

Carpenter, and we doubt the Supreme Court would overrule a prior holding 

without explicitly doing so. Cf. Wilkerson v. Whitley, 28 F.3d 498, 504 (5th Cir. 

1994) (noting that “absent clear indications from the Supreme Court itself, 

lower courts should not lightly assume that a prior decision has been overruled 

sub silentio merely because its reasoning and result appear inconsistent with 

later cases” (internal citation omitted)). More importantly, Skilling and 

Carpenter involve distinct rights protected by the mail and wire fraud statutes: 

Skilling, the “intangible right of honest services,” Carpenter, property rights—

whether tangible or intangible. Indeed, the opinions are complementary

insofar as they both establish the same, fundamental distinction between 

property rights and the right of honest services. See Carpenter, 484 U.S. at 359 

(contrasting the intangible property interest at issue with the right to honest 

services, which the McNally Court had found “too ethereal in itself to fall 

within the protection of the mail fraud statute” (citing McNally, 483 U.S. at 

359 n.8)).

We conclude that Carpenter’s holding is unaffected by Skilling and, 

accordingly, that confidential business information remains a cognizable

property right protected by §§ 1341 and 1343. We are not alone in this 

conclusion. See, e.g., ReBrook v. United States, 589 F. App’x 130, 131 (4th Cir. 
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2014), affirming No. 2:10-CV-01009, 2014 WL 555283, at *4–5 (S.D. W. Va. 

Feb. 11, 2014) (noting the distinction between intangible rights no longer 

covered by §§ 1341 and 1343 after Skilling and intangible property, which 

remains covered); see United States v. Mahaffy, 693 F.3d 113, 126 (2d Cir. 

2012) (noting that “[a]fter Skilling, it is clear that to convict a defendant of 

honest services fraud, the government must prove paradigmatic kickbacks . . . 

or bribery”).

We also reject Hager’s argument in the alternative that, even if 

intangible property interests are protected under §§ 1341 and 1343, those 

interests are limited solely to trade secrets as defined by state law. Although 

state law is a valid source for defining the scope of property rights protected by 

federal laws, it is not the sole source. See Ruckelshaus, 467 U.S. at 1001 (noting 

that “property interests . . . . are created and their dimensions defined by 

existing rules or understandings that stem from an independent source such 

as state law” (emphasis added) (quoting Webb’s Fabulous Pharmacies, Inc. v. 

Beckwith, 449 U.S. 155, 161 (1972))); see also Dennis Melancon, Inc. v. City of 

New Orleans, 703 F.3d 262, 269 (5th Cir. 2012). Indeed, the Supreme Court in 

Carpenter relied on its own precedent, another federal statute, and a law 

treatise in concluding that confidential business information was a protected 

property interest. Carpenter, 484 U.S. at 26. There is a similar lack of authority 

to support Hager’s assertion that §§ 1341 and 1343 protect only trade secrets. 

Cf. Mahaffy, 693 F.3d at 135 (“Information may qualify as confidential under 

Carpenter even if it does not constitute a trade secret.”).
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In sum, neither of Hager’s arguments precludes the straightforward 

application of Carpenter to this case. The charges under §§ 1341 and 1343 were 

proper, and his conviction based on sufficient evidence.1

III.

Hager raises additional challenges to the proceedings below. For the 

reasons provided, none provides a basis for reversal.

A. Granting Immunity

We reject Hager’s argument that the district court should have granted 

his motion to order the Government to grant his wife immunity.2 This court 

has repeatedly held that “district courts have no inherent power to grant 

immunity.” United States v. Brooks, 681 F.3d 678, 711 (5th Cir. 2012) 

(alterations omitted) (quoting United States v. Follin, 979 F.2d 369, 374 (5th 

Cir. 1992)). “A district court may not grant immunity simply because a witness 

has essential exculpatory evidence unavailable from other sources. At most 

this Court has left open the possibility that immunity may be necessary to stem 

government abuse.” Id. (internal citation omitted). The exercise of this 

authority requires “extraordinary circumstances.” United States v. Chagra, 

669 F.2d 241, 258 (5th Cir. 1982), overruled on other grounds by Garrett v. 

United States, 471 U.S. 773 (1985).

Since Hager did not preserve this argument below, we review only for 

plain error, United States v. Comrie, 842 F.3d 348, 350 (5th Cir. 2016). Here, 

the only evidence of government misconduct Hager submitted is the 

Government’s response to his motion. Specifically, the Government stated that 

 

1 Because we conclude that Hagar was properly convicted under the mail and wire 

fraud statutes, we need not address the Government’s argument that he could still be 

convicted under the money laundering charge if he were improperly convicted on the fraud 

charges. 

2 Hager’s wife instead invoked her Fifth Amendment privilege and declined to testify 

at trial.
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his wife might have participated in the wrongdoing, so she was “not the kind 

of witness that would be granted immunity.” We discern no evidence of 

government abuse from this exchange, nor does it present the sort of 

extraordinary circumstances that might justify the exercise of the court’s

power to grant immunity. 

B. Evidentiary Rulings

We also reject Hager’s challenge to the district court’s rulings blocking 

the admission of certain evidence. This court reviews a district court’s 

evidentiary rulings for abuse of discretion, subject also to harmless error 

analysis. United States v. Skipper, 74 F.3d 608, 612 (5th Cir. 1996).

Hager sought to introduce evidence from a prior lawsuit between 

Velocity’s owners and their employers prior to forming Velocity. The former 

employers sued Velocity’s owners for having allegedly stolen proprietary 

information after leaving the company. Velocity’s owners defended their 

actions in part by arguing the data they took were neither trade secrets nor 

otherwise proprietary. Hager sought to introduce this information by two 

means: having an expert witness discuss the prior lawsuit to compare it with 

the Government’s present one, and submitting documents from the prior

lawsuit. The court denied the admission of the former on relevance grounds, 

and the latter on hearsay grounds.

We discern no reversible error. The relevance of this evidence to the 

Government’s criminal prosecution of Hager is, at best, tangential. There is 

little insight to be gleaned from a defensive position taken by Velocity’s owners 

in a civil suit that concerns different data. But even if we were to find the 

court’s evidentiary rulings erroneous, they were harmless. The district court 

expressly gave Hager permission to discuss the prior lawsuit as it related to 

confidentiality on cross-examination of witnesses, and even offer the same 

documents as impeachment evidence at that time. But Hager failed to question 
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any of Velocity’s employees about the previous lawsuit. Failing to present this 

information to the jury may well have been a strategic blunder, but it was not

due to an error by the district court. 

C. Motion to Sever Tax Fraud Counts

At trial, Hager moved to sever the tax fraud counts pursuant to Federal 

Rule of Criminal Procedure 14. The district court denied Hager’s motion. We 

affirm.

“The denial of a motion to sever is reviewed under an ‘exceedingly 

deferential’ abuse of discretion standard.” United States v. Whitfield, 590 F.3d 

325, 355 (5th Cir. 2009) (quoting United States v. Tarango, 396 F.3d 666, 673 

(5th Cir. 2005)). This court “will not reverse a conviction based upon denial of 

a motion to sever ‘unless the defendant can demonstrate compelling prejudice 

against which the trial court was unable to afford protection, and that he was 

unable to obtain a fair trial.’” Id. at 356 (quoting United States v. Massey, 827 

F.2d 995, 1004 (5th Cir. 1987)). The showing of prejudice must be “specific and 

compelling.” United States v. Ballis, 28 F.3d 1399, 1408 (5th Cir. 1994). 

Notably, this court has repeatedly held that severance “is not mandatory 

simply because a defendant indicates that he wishes to testify on some counts 

but not on others. . . . [S]everance for this reason, as for any other, remains in 

the sound discretion of the trial court.” Id. (alteration and internal quotation 

marks omitted) (quoting Alvarez v. Wainwright, 607 F.2d 683, 685 (5th Cir. 

1979)). “Consequently, a defendant seeking severance of charges because he 

wishes to testify as to some counts but not as to others has the burden of 

demonstrating ‘that he has both important testimony to give concerning one 

count and a strong need to refrain from testifying on the other.’” Id. (quoting 

United States v. Davis, 752 F.2d 963, 972 (5th Cir. 1985)). 

Hager argues that the court should have severed his tax counts because 

he wished to testify that that he had “specifically asked” his tax preparer about 
No. 16-51330

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the proper way to report his income from Echt, and that she had instructed 

him “that it would be easier to file an amended return.” The court’s denial of 

his motion precluded him from testifying, however, because he did not want to 

expose himself to cross-examination relating to the details surrounding the

mail and wire fraud counts. He feared this testimony would hurt his credibility.

Hager has not met his high burden. His reason for refraining from 

testifying—fear that cross-examination would elicit compromising evidence—

is the same reason that many defendants refuse to testify: It is, after all, the 

nature of cross-examination to impeach witnesses and make them seem less 

credible. There is nothing extraordinary about this prejudice. Moreover, 

because his tax fraud charge and the mail and wire fraud charges are 

intertwined, severing the claims would not provide Hager effective relief from 

his concern. Cf. United States v. McRae, 702 F.3d 806, 823 (5th Cir. 2012) 

(severing claims where the two charges were “only tangentially relevant” to 

each other). After all, the Government alleged that his tax fraud was 

perpetuated to cover up the broader fraud. Accordingly, even if the tax counts 

had been severed, it is still likely that the same sort of questions would arise 

on cross-examination. The district court’s denial of this motion to sever was 

not an abuse of its discretion. 

IV.

For the foregoing reasons, we AFFIRM.