IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

 

No. 94-20403

 

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

versus

WILLIA ALLEN, LLOYD SWIFT and 

FRANK C. CIHAK, 

Defendants-Appellants.

 

Appeal from the United States District Court

for the Southern District of Texas

 

February 27, 1996

Before REAVLEY, HIGGINBOTHAM, and BARKSDALE, Circuit Judges.

HIGGINBOTHAM, Circuit Judge:

This case involves an elaborate series of interlocking schemes

to defraud various banks, particularly First City National Bank of

Houston, of substantial sums of money. A grand jury returned a 34-

count indictment against Frank Cihak, Lloyd Swift, and Willia

Allen. After an eight week trial, the district court dismissed one

of the counts and submitted the remaining 33 to the jury. The jury

found the defendants guilty on all counts. The district court

sentenced Cihak to 151 months imprisonment, five years supervised

release, and an $800,000 fine. Allen received 70 months

imprisonment and five years supervised release. The court

sentenced Swift to 87 months imprisonment and $197.674.71 in
2

restitution payments to the FDIC. The defendants appeal their

convictions and sentences. We affirm.

I

We provide here a brief overview of the schemes exposed at the

trial. We begin by identifying the characters and outlining the

structure of the orchestrated scams. We then summarize the events

in rough chronological order.

A

1

The activities of defendant Frank Cihak lie at the center of

this case. In the early 1980s, Cihak was a Chicago banker.

Through holding companies, he controlled or owned a substantial

interest in several Illinois banks, including Worth Bank & Trust,

Mount Greenwood Bank, and First National Bank of Danville. Cihak

held high-level management or board positions at many of these

banks and maintained offices at most of them. In the middle of the

1980s, Cihak became involved in the recapitalization of the failed

First City National Bank of Houston, the largest of a number of

banks owned by a holding company called First City Bancorporation.

The principal figure in the First City recapitalization was Robert

Abboud. Cihak organized the nuts and bolts of the recapitalization

and assumed the number two position at First City Bancorporation

and Bank upon its completion.

Joseph Fahy was a New York City securities dealer. Throughout

the 1980s, he operated several businesses, including STS Holding

Corp. and Fahy & Co., which attempted to generate funds through
3

municipal securities and automobile loan transactions. Although

Fahy testified for the United States at trial under a subpoena, a

grant of immunity did not improve his poor memory of the events

involved.

David Lucterhand was a Chicago businessman who began as a

dealer on the Chicago Board of Options Exchange. In the 1980s,

Lucterhand operated businesses called the Lucterhand Group, Inc.

and L.L. Chandos Co. Lucterhand initially attempted several

business deals with Fahy. In desperate financial straits as a

result of these deals, he turned to Cihak for help in finding a way

to generate funds. Cihak eventually arranged for First City Bank

to hire Lucterhand as a consultant. Lucterhand testified on behalf

of the United States at trial as part of a plea bargain.

Defendant Lloyd Swift was a horse breeder with a farm in

Missouri. He ran a horse trading operation and other businesses

including Swift Thoroughbred, Swift Farms, and Swift Implement Co.

Swift also possessed considerable knowledge of automobile sale and

loan transactions. In the late 1970s and early 1980s, the market

for thoroughbreds crashed, and Swift’s financial situation

deteriorated. Cihak eventually arranged for First City to hire

Swift as a consultant on automobile matters.

Defendant Willia Allen was an accountant who owned and

operated her own accounting firm, Allen & Associates. Allen was

not a CPA. Together with another individual, Allen bought a

company called Shepherd Fleets, which eventually held Dollar RentA-Car franchises in at least three cities. Allen also owned a
4

construction firm called Combined General Contractors. Allen

possessed some knowledge of bank obligations under the Community

Reinvestment Act, a federal statute designed to encourage banks to

lend funds to lower income businesses and individuals in the banks’

communities. Cihak arranged for First City to hire Allen as a

consultant on CRA matters.

The Cochonours were a wealthy Chicago family. Two Cochonour

brothers, Don and Robert, had extensive dealings with Swift’s horse

businesses. At one time, the two brothers also owned a percentage

in Tri-Star Cablevision, Inc.; Cihak claimed an interest in this

company as well.

2

According to the government, Cihak used two principal methods

to divert funds from First City bank to his own use. In the first

method, Cihak used his position at First City to have that entity

hire Lucterhand, Swift, and Allen as consultants. Cihak had these

consultants bill First City for substantial sums of money in

consulting fees. Cihak approved the invoices, and First City paid

them. The consultants normally transferred the proceeds of these

fees from accounts in their names at First City to accounts in

their names at one of Cihak’s Chicago banks, in order to avoid the

watchful eyes of First City auditors. Once the funds were out of

Houston, the consultants transferred a portion of their fees to

Cihak. These kickbacks occurred either when a consultant wrote a

check to Cihak or authorized an internal transfer, or when Cihak
5

used his position at the Chicago banks to transfer the funds to

himself on his own.

In the second method of defrauding the First City entities,

Cihak used his position to arrange for First City Bank to fund

various loans to Lucterhand, Swift, and Shepherd Fleets. Cihak

then either diverted the funds generated to his own use or received

bribes from the borrowers. In Lucterhand’s case, Cihak used the

funds generated from the consulting fees to pay back these loans.

B

This story begins in the early 1980s. From 1982 through 1985,

Cihak persuaded the boards of directors of two of his Chicago

banks, Mount Greenwood and First of Danville, to loan federal bonds

of large face value to Fahy. Fahy represented that he would

deposit these bonds in an account at a different corporation, where

they would remain to serve as the regulatory capital necessary for

Fahy to operate his securities dealing businesses, primarily STS.

First of Danville and Mount Greenwood together loaned Fahy bonds

with a total face value of $2,000,000. The bonds did not remain in

the corporate account as promised; instead, Fahy sold the bonds or

borrowed against them and used the funds generated for, in his

words, “legal fees, accounting fees, salaries, travel and

entertainment and . . . those arenas.”

When Mount Greenwood and First of Danville began to demand the

return of the bonds, or the money that should have been generated

from their maturity, Cihak secretly arranged to pay back the banks

himself. He had Fahy open a custodial trust account at Worth Bank
6

& Trust in the name of STS. This account became one of the primary

conduits for the funds generated by the frauds involved in this

case.

In November of 1986, Cihak personally attempted to borrow

$1,600,000 from Citibank in New York, representing that he would

invest the funds generated in an auto receivables company. As

collateral, Cihak offered two purported letters of credit in his

favor, one from Mount Greenwood and one from Worth, each in the

amount of $800,000. To support the letters, Cihak presented

purported bank documents, including board minutes memorializing the

authorizations of the letters of credit. On the strength of the

letters of credit and supporting documents, Citibank funded the

loan in full. The letters of credit and the supporting documents

were fraudulent. Each letter bore the forged signature of Randall

Ytterberg; although Ytterberg was at various times involved with

Mount Greenwood and the holding company that owned some of the

Chicago banks, he did not have authority to sign letters of credit

for either bank in November, 1986. Neither bank board ever

authorized the issuance of the letters of credit.

Apparently still short of funds necessary to resolve the Fahy

problem, Cihak orchestrated a certificate of deposit scam at Worth

in late 1986 and early 1987. Using various brokers, Cihak offered

jumbo CDS in the amounts of $99,000 and $100,000. Cihak

represented that these CDS belonged to Worth, a federally insured

bank. Several pension funds and other investors deposited large

amounts into the Worth STS trust account. Cihak then diverted the
7

money to his own use. Using his position in the Worth management,

Cihak had subordinates prepare false account documents for each CD.

Cihak paid the interest on the CDS and eventually returned the

principal to the investors when the CDS “matured” one or two years

later.

Using the money from the Citibank loan and the CD scam, Cihak

resolved the Fahy debt to First of Danville and Mount Greenwood.

Cihak funneled the Citibank money through the Worth STS trust

account and bought back the Fahy bonds that had not yet matured.

He returned these bonds, together with the cash supposedly

representing the money from the mature bonds, to Mount Greenwood

and First of Danville.

Cihak renewed his contact with Lucterhand in Chicago at around

this time. Lucterhand initially became involved with STS, but when

the Fahy business ventures failed, Lucterhand’s financial situation

became desperate. In late 1987, Cihak arranged for Mount Greenwood

to loan Lucterhand $15,000 without adequate supporting documents or

collateral. When Lucterhand was unable to pay back the loan, Cihak

arranged for a $5000 good faith payment on the loan. In return,

Cihak had Lucterhand open a custodial trust account at Worth and

sign a form authorizing Cihak to control the account. Thereafter,

Cihak had Lucterhand bill First of Danville $3000 per month,

although Lucterhand was providing no services to that bank.

By this time, Cihak was heavily involved at the

recapitalization of First City Bank in Houston. In January, 1988,

Cihak presented Lucterhand with a check for $96,500 from First City
8

Bank to the Lucterhand Group. Cihak had Lucterhand endorse it and

deposit the funds into the Worth Lucterhand trust account. At the

time, Lucterhand had done no work for First City Bank, and in fact,

had never been to Houston. Cihak funneled most of this money

through the Worth STS trust account to Citibank to pay off the

Citibank loan. Cihak suggested that Lucterhand come to Houston to

work as a consultant at First City. Lucterhand did so. The two

began a pattern of kickback payments. Lucterhand billed First City

for consulting fees and Cihak approved the invoice; Lucterhand then

deposited the money into his own First City account and transferred

it to the Worth Lucterhand trust account, where Cihak diverted most

of the funds to his own use.

Beginning in early 1988, Cihak arranged for First City to hire

Allen as a consultant. Using information already available to the

general public, Allen compiled three volumes of information

relevant to First City Bank’s duties under the Community

Reinvestment Act and gave a seminar on the same subject. For these

services, she billed First City Bank over $425,000 in a series of

invoices beginning in April of 1988. Cihak approved most or all of

the Allen invoices. Allen deposited the money generated by the

First City checks into her First City Bank account and moved the

funds into a Worth checking account in the name of Allen &

Associates. She then transferred to Cihak well over one fourth of

the money she earned.

Also in early 1988, Cihak arranged for First City Bank to hire

Lloyd Swift as a consultant to examine the bank’s automobile
9

accounts. Swift arranged a sale of a large and suspect automobile

loan portfolio for $.97 on the dollar and began to liquidate First

City Bank’s stock of repossessed automobiles. Swift and Cihak then

began kickbacks. After Cihak approved a Swift invoice and First

City wrote a check, Swift deposited the money into a First City

Bank account in the name of one of his businesses. Swift moved a

portion of the money to one of the various accounts that Swift or

his businesses held at Worth, and transferred a substantial

percentage of the proceeds to Cihak’s personal account at Worth or

to other Cihak accounts at other banks.

In the summer of 1988, Cihak arranged for First City to loan

Allen and another investor $686,000, without proper loan documents,

to buy Shepherd Fleets. Shepherd Fleets eventually owned Dollar

Rent-A-Car franchises in three cities. Under Cihak’s direction,

First City Bank funded this loan out of a department that did not

normally deal in loans of this type and in spite of the fact that

neither Allen nor her partner had any experience in the car rental

business. The Shepherd Fleets business was a disaster. The

company had debts of over $400,000 not disclosed at the time of the

purchase, and Allen succeeded in siphoning off hundreds of

thousands of dollars of Shepherd Fleets money to her own fledgling

construction company, Combined General Contractors. Under Cihak’s

direction, First City Bank increased the loan to Shepherd Fleets to

$960,000 on the strength of financial statements in which Allen

falsely represented herself to be a CPA and forged signatures of

CPAs on the staff of Allen & Associates. When Shepherd Fleets
10

plunged further into debt, First City increased the loan by

$400,000 more to cover overdrafts it had already honored, again on

the strength of documents in which Allen falsely represented

herself to be a CPA. First City Bank never recovered most of this

loan. As part of his reward for his role in this transaction,

Cihak received a Cadillac from the Shepherd Fleets stock.

In the middle of 1988, Cihak began receiving pressure from

Citibank to pay off the $1,600,000 loan. In August of the same

year, Cihak had Lucterhand borrow $1,800,000 from First City Bank.

Under Cihak’s direction, First City Bank made the loan without the

financial statements normally necessary for a loan of that size.

To provide collateral for the loan, Cihak and Lucterhand produced

false documents purporting to memorialize a fictional transaction

in which Lucterhand purchased a set of condominiums from the FSLIC

and resold them to a Japanese investor named Hui-Nan Lin at a large

profit. These documents bore the forged signature of Randall

Ytterberg, an attorney named Ken Young, and another attorney named

John Wu.

Cihak had Lucterhand open an account at First City Bank and

used his position as a bank officer to exercise control over this

account. After instructing First City Bank underlings to fund the

Lucterhand loan with deposits into this account, Cihak wired over

$1,200,000 of the money to the Worth Lucterhand trust account,

after which Cihak wired the money to his personal account at

Citibank to pay off his loan there.
11

Upon completion of this transaction, and under pressure from

First City Bank officials, Cihak arranged documentation to support

the Lucterhand loan. Cihak introduced Lucterhand to Allen. In a

three-hour meeting with Lucterhand, Allen took down false financial

figures that Lucterhand provided to her orally; Lucterhand changed

the figures when Allen’s facial expressions and body language

suggested that they were insufficient to support the loan.

Lucterhand provided no underlying tax or other documentation to

support the figures he gave to Allen. Allen took these fabricated

financial figures and prepared false financial statements for him

and his businesses, documentation to justify the already funded

loan. Allen forged the name of a CPA in her firm to engender

confidence in the financial figures.

Each time a payment became due on the Lucterhand loan from

First City Bank, Cihak had Lucterhand invoice the bank for amounts

large enough to cover the loan payments. Cihak approved the

invoices. In this manner, Lucterhand was able to “pay back” the

loan.

Also in August, 1988, Cihak arranged for First City Bank to

loan Swift $300,000 despite the absence of the usual documentation.

In November, 1988, Cihak had First City Bank increase this loan by

$650,000, and in January of 1989 arranged another $65,000 increase.

A portion of these funds was diverted to Cihak’s use. At the time,

Swift stated that the loan would be secured by a first mortgage on

his farm in Missouri, but he failed to provide appropriate

appraisals and title documents. When Swift did provide loan
12

documents, they failed to disclose the fact that Swift already owed

over $1,000,000 to the Cochonours. The documents also bore the

forged signature of a CPA with Allen & Associates; Allen was

Swift’s accountant at the time. A title search on the Swift Farm

found that at least two liens already existed on the Swift property

and that First City’s collateral was wholly inadequate.

In December, 1988, Cihak had to raise funds sufficient to pay

back the principal on his bogus jumbo CDS. To help generate the

necessary money, Cihak arranged for First City Bank to loan

Lucterhand an additional $200,000. Cihak told Lucterhand to tell

the bank’s loan officers that the money was needed to pay taxes.

After Lucterhand had deposited this money into the Worth Lucterhand

trust account, Cihak moved it to the Worth STS trust account and

used it to pay off the CD holders.

Later in 1989, under pressure from First City Bank officers,

and under the threat of possible discovery by federal regulators,

Cihak set about removing the Swift loan from the books of First

City. Cihak arranged a transaction in which First City funded a

dummy note from the Cochonours, which Cihak signed. Cihak used

most of the money produced to pay off the Swift loan; around

$170,000 of this money was wired to an account controlled by the

Cochonours. The next day, the Cochonours purported to forgive

Swift’s outstanding million plus debt to them in return for a deed

to the Swift farm, in spite of the fact that the farm’s appraised

value was significantly below $1,000,000. The Cochonours then

purported to borrow over $1,000,000 from a business called Vinland
13

Property Trust and sought to use the farm as collateral. Cihak

guaranteed the loan for the Cochonours, who never made a payment.

Instead, Cihak made all of the payments through one of his

businesses, Orland Enterprises. When Vinland discovered the shaky

nature of the Swift farm collateral, Cihak pledged certain

condominiums belonging to Orland Enterprises.

The various interlocking schemes began to unravel in late

1989, when federal regulators and internal bank investigators in

Chicago examined certain of Cihak’s transactions. To explain their

activities, Cihak, Allen, Swift, and Lucterhand recounted an

elaborate series of transactions. According to them, the money

moving from Lucterhand to Cihak, and later from Cihak through the

Worth Lucterhand trust account, represented a deal in which

Lucterhand initially bought and then sold back to Cihak a portion

of Orland Enterprises’ interest in the mortgages on certain

condominiums. The transfers from Swift to Cihak represented

payments on a pre-existing loan from Cihak to Swift. The transfers

from Allen to Cihak represented money that Allen actually owed to

the Cochonours; the Cochonours simply asked Allen to pay Cihak in

order to retire a pre-existing debt they owed to him.

II

The indictment charged Cihak with conspiracy, bank fraud,

eight counts of wire fraud, eleven counts of misapplication of bank

funds, two counts of making false statements to obtain loans, three

counts of making false entries in bank records, six counts of money
14

laundering to conceal the proceeds of specified unlawful activity,

and money laundering to promote specified unlawful activity. Allen

was indicted for conspiracy, bank fraud, wire fraud, three counts

of misapplication, making false statements to a bank, and money

laundering to conceal the proceeds of specified unlawful activity.

The grand jury charged Swift with conspiracy, bank fraud, two

counts of wire fraud, three counts of misapplication of bank funds,

making false statements to a bank, and two counts of money

laundering to conceal the proceeds of specified unlawful activity.

The district court dismissed one of the wire fraud counts against

Cihak and Allen at the close of the evidence, and the jury

convicted on all remaining counts.

Defendants here share three arguments. Their primary joint

contention concerns the victim of their various frauds. Defendants

argue that insufficient evidence established that they defrauded

federally insured First City Bank, a federally insured entity,

rather than First City Bancorporation, which was not. The second

argument common to all defendants is that the evidence was

insufficient to allow the jury to disbelieve the cover stories the

defendants provided for the various transactions. A rational jury,

the defendants argue, would have accepted these explanations. The

third shared argument concerns the counts alleging money laundering

to conceal the proceeds of specified unlawful activity. The

defendants ask us to reverse these convictions on the ground that

the funds allegedly laundered were not yet “proceeds” at the time

of the laundering.
15

Defendant Cihak appeals his conviction and sentence on other

grounds as well. He argues that certain of the wire transfers

forming the basis for the wire fraud counts were not covered by the

wire fraud statute because they were not in furtherance of the

specified scheme to defraud, which was already complete at the time

of the transfers. Cihak also uses this rationale to challenge his

conviction for money laundering to promote specified unlawful

activity. Cihak challenges one of his wire fraud convictions, on

a charge stemming from the First City Bank loan to Shepherd Fleets,

on the ground that insufficient evidence linked Cihak to this wire

transfer. All of his convictions must fall, he argues, because the

trial court abused its discretion on certain evidentiary rulings.

Cihak further requests that we upset his sentence on the ground

that the trial court miscalculated the amount of money involved in

the various convictions. Finally, in an argument raised for the

first time in their reply briefs, Cihak and Allen argue that the

district court committed plain error by not submitting to the jury

the issue of the materiality of their misrepresentations to First

City Bank.

Defendant Swift challenges his conviction of conspiracy on the

ground of fatal variance, arguing that the evidence at trial

established nine separate conspiracies while count one of the

indictment alleged a single conspiracy. Swift also claims that the

trial court abused its discretion in proceeding with the trial on

a day that Swift was unable to attend. Defendant Allen makes no

other arguments.
 

1 As Professor Pamela Bucy has explained, the mens rea

requirement for certain portions of the money laundering statutes

can be less than stringent. See Pamela H. Bucy, Epilogue: The

Fight Against Money Laundering: A New Jurisprudential Direction,

44 Ala. L. Rev. 839, 843 (1993). 

16

Some defendants make certain other arguments. Cihak, for

instance, argues that the record did not include evidence

sufficient to allow the jury to conclude that his approval of the

invoices was a factor in causing their payment, or that he

attempted to conceal the proceeds of the kickbacks. We find no

merit in these other arguments from Cihak, and given the clarity of

the record on these questions,1 we will not unnecessarily lengthen

this opinion with a full discussion of them.

III

A

The primary grounds upon which the defendants rely to attack

their convictions is sufficiency of the evidence to prove that

First City National Bank, as opposed to First City Bancorporation,

was the intended and actual victim of their illegal activities.

The defendants’ argument runs as follows. At the time of the

schemes, the federal statutes covering misapplication of bank funds

and falsification of bank records covered only activities designed

to defraud certain listed institutions, and the lists of covered

institutions included in these statutes did not include holding

companies. See 18 U.S.C. § 656 (1988) (misapplication); 18 U.S.C.
 

2 In 1989 and 1990, Congress amended some of the statutes at

issue in this case to cover activities directed against holding

companies of federally insured depository institutions. See, e.g.,

Pub. L. No. 101-73, § 962, 103 Stat. 501-03 (1989); Pub. L. No.

101-647, § 2595, 104 Stat. 4906-07 (1990).

17

§ 1005 (1988) (falsification).2 First City Bank, but not First

City Bancorporation, was a federally insured entity. Accordingly,

the government had to introduce evidence sufficient to prove that

the defendants defrauded First City Bank, not the holding company,

in order to sustain convictions for misapplication and

falsification. The government did not do so.

The defendants further argue that the counts in the indictment

alleging wire fraud, money laundering to conceal the proceeds of

specified unlawful activity, conspiracy, and bank fraud, all

depended in one way or another upon the allegations in the

misapplication and falsification counts. The defendants note that

the wire fraud counts alleged that the fraud occurred in wire

transfers designed to further the misapplication; the money

laundering allegedly concealed the proceeds of the misapplication;

the conspiracy count recited misapplication and falsification as

among objectives of the conspiracy; and the bank fraud count

alleged as part of the scheme a series of transactions to defraud

First City by misapplying its funds. See 18 U.S.C. § 371

(conspiracy); 18 U.S.C. § 1343 (wire fraud); 18 U.S.C. § 1344 (bank

fraud); 18 U.S.C. § 1956(a)(1)(B)(I) (money laundering to conceal

the proceeds of specified unlawful activity). The defendants argue

that any variation as to the victim of the frauds between the

scheme alleged in the indictment and that proved at trial
18

constituted a fatal variance; that the wire transfers could not

constitute wire fraud because the underlying transaction furthered

by the transfer, the alleged misapplication, was not itself

illegal; and that the jury may have convicted on the conspiracy and

bank fraud counts on the legally insufficient grounds that the

defendants designed a scheme to misapply bank funds and falsify

bank records.

In addition, citing United States v. McDow, 27 F.3d 132, 135-

36 (5th Cir. 1994), the defendants argue that even if their scams

did in fact harm First City, the government introduced insufficient

evidence to allow a rational jury to find that they knew they were

defrauding a bank. Accordingly, the defendants ask us to reverse

their convictions on the ground that no rational jury could infer

that they possessed the necessary criminal intent.

In response, the United States does not take issue with any of

the defendants’ legal reasoning or inferences. The government

argues only that the evidence at trial was sufficient to allow the

jury to find that the defendants intended to and did defraud the

bank, at least temporarily. We reach only the narrow question of

whether sufficient evidence established that the defendants

intended to and did deprive First City Bank of its funds. We

answer this question affirmatively.

Most of the alleged misapplications and falsifications

occurred in the context of the kickbacks of the consultants’ fees,

in which Swift, Allen, and Lucterhand provided invoices for

consulting services and transferred a percentage of the resulting
19

payments to Cihak. The government introduced copies of the checks

issued to the consultants into evidence at trial. The face of

these checks all bore the label “First City National Bank of

Houston;” none of them mentioned the holding company or any other

entity as the signing party or the owner of the funds in the

account corresponding to the checks. All of the checks were

signed, and underneath the signatures on some checks was the

identifier “Vice President and Cashier.” Nothing on the face of

the check identified the instrument as a cashier’s check or

anything other than a First City Bank check signed by a First City

Bank officer. Cf. United States v. Schultz, 17 F.3d 723, 726 n.7

(5th Cir. 1994) (deeming an FDIC logo on one of 1200 checks

insufficient to establish that the bank cutting the check was

federally insured).

In addition, all of the checks were drawn on account number

80-90017. Government rebuttal witness Vernon Pool, First City

Bank’s vice-president and manager in charge of accounts payable,

testified that this account held the funds of First City Bank.

Pool agreed that the holding company ultimately reimbursed the bank

for the consultant’s fees at the end of each month, but maintained

that all of the consultant fees for all of the entities owned by

the holding company were initially covered by the bank, which then

sought reimbursement from the proper entity within the holding

company or from the holding company itself.

The defendants attempt to minimize the importance of Pool’s

testimony by labeling Pool a “surprise rebuttal witness” and by
 

3 Defendant Cihak also makes much of the testimony of several

witnesses that the consultants’ expenses were charged to various

“cost centers” corresponding to the holding company or to other

entities within it but not to the bank. The evidence at trial

established, however, that these cost centers were merely

accounting devices to keep track of which entity should ultimately

be charged for which expense. The cost centers had nothing to do

with whose money was actually in account 80-90017. The fact that

all of the consultants’ checks were drawn on the same account, in

spite of being charged to different cost centers, supports Pool’s

testimony that the bank initially paid all of the consultant fees.

20

attempting to show how his testimony conflicted with that of other

government witnesses. The record includes no defense objection

when the government announced its intention to call Pool and

informed the court in the presence of defense counsel of the

evidence he would provide; in any case, the trial court did not

abuse its discretion in allowing Pool to testify. Moreover, Pool’s

testimony did not contradict that of the few other witnesses who

testified that the consultant’s fees were charged to the holding

company or some other entity within it. Pool agreed that the

holding company ultimately bore the costs of the defendants’

schemes, but stated that all of the consultants were initially paid

with First City Bank’s funds. No evidence suggested that any of

the witnesses allegedly contradicting Pool had ever seen the face

of the consultant checks themselves.3

Defendants also rely heavily on the theory that the

arrangement described in Pool’s testimony violated federal statutes

governing a bank’s lending relationship with its holding company

and other affiliated entities. See 12 U.S.C. § 371c(c) (requiring

that loans from a bank to an affiliated entity be secured by

specified collateral); 12 U.S.C. § 371c-1(a)(1)(A) (requiring
21

transactions between a bank and its affiliate to be on market

terms). Defendants’ arguments are unpersuasive for several

reasons. First, the record includes no testimony establishing any

arrangement between the bank and the holding company regarding the

payment of the consultant fees, beyond the fact that reimbursement

occurred at the end of each month. For all the record discloses,

the bank and the holding company did have a deal consistent with

these banking statutes. We decline the defendants’ invitation to

equate a silent record with one affirmatively showing a violation

of federal law. Second, even if the record did disclose that the

arrangement Pool described violated federal statutes, this fact

would at most create a jury question as to the credibility of

Pool’s testimony. A rational jury may certainly believe testimony

establishing a violation of a federal statute.

United States v. McDow, 27 F.3d 132, 135-36 (5th Cir. 1994),

does not support defendants’ argument of insufficient evidence of

criminal intent. In McDow, a defendant prosecuted under 18 U.S.C.

§ 1014 made fraudulent statements in a mortgage application to a

mortgage company owned by a federally insured bank. The government

did not have to prove that the defendant knew that his intended

victim was a federally insured institution; it did have to prove

that he knew he would victimize a bank. We reversed the

defendant’s convictions in part because the government did not

suggest how the McDow defendant might have acquired the knowledge

that he was defrauding a bank as opposed to a mortgage company.
22

Two factual differences distinguish this case from McDow.

First, the financial sophistication of the defendants in this case

is, to say the least, greater than that of the McDow defendant.

Here we have a lifetime banker, an experienced financial

consultant, and an accountant, all with extensive knowledge of

banks, loans, consultant fees, and checks. The jury could infer

much from the fact that Cihak, Swift, and Allen, in contrast to the

McDow defendant, were not members of the “public generally,” and

that they had “particular expertise in banking matters.” 27 F.3d

at 136. Second, nothing in the McDow opinion suggests that the

defendant in that case received documents notifying him that he was

dealing with a bank. In this case, in contrast, the checks

themselves bore only the name of First City Bank, and some

identified the signing party as a First City Bank official.

Although the defendants seek to avoid the force of this evidence by

analogizing these checks to cashier’s checks, they produced no

evidence to support this contention at trial, and indeed did not

argue the intent issue below. To discover the victim of their

schemes to defraud, these financially sophisticated defendants had

to look no farther than the face of the checks. We hold that the

evidence was sufficient to allow a rational jury to find that the

defendants intended to deprive First City Bank of its funds

temporarily.
23

B

The second argument common to all defendants is that no

rational jury could fail to believe the explanations for the

transfers of funds. We disagree.

The jury had ample ground to disregard the cover stories, and

we pause here to note only some of the reasons. The cover story

transactions were memorialized by post hoc documents, the creation

of which was prompted by internal bank investigations, or by no

documents at all. The stories contradicted earlier statements

given to First City Bank auditors that Swift, Cihak, and Allen had

no business dealings with one another. None of these transactions

were ever disclosed to First City Bank, in spite of bank rules

requiring disclosure. In several cases, the numbers in the

financial transactions alleged in the cover stories did not match

the flow of funds documented in the bank records. In one

explanation, defendant Swift simply forgot that he had already paid

a $1,000,000 debt to the Cochonours at the time he took out a loan,

in spite his impressive recall of exculpatory details, and in spite

of the fact that Swift testified otherwise before the grand jury.

The cover stories, and the documentation provided to support them,

changed over time as bank investigators and federal prosecutors

confronted the defendants with emerging details. The flow of the

consultant fees was circuitous, with money taking unnecessary trips

through Chicago banks, suggesting that the defendants sought to

hide their scheme from First City auditors, who would have no

access to the records of other banks. Cihak repeatedly arranged
24

for First City to fund loans in the total absence of supporting

documentation to highly suspect business ventures and against the

judgment of the relevant loan officers. To support these loans,

Allen created post hoc financial statements, statements fabricated

in the total absence of the necessary tax and other records. Allen

admitted in her grand jury testimony that she forged the signatures

of several Allen & Associates CPAs and falsely represented herself

to be a CPA in these statements. The story covering the kickbacks

from Allen to Cihak depended on the bizarre contention that the

Cochonours suddenly needed $150,000 to pay off a debt to Cihak not

due for at least another five years, this in the face of uniform

testimony from several witnesses, including the defendants, that

the Cochonours’ financial position was such that they could have

borrowed or paid this amount of money with ease at any point during

the relevant events. A rational jury could disregard such stories.

C

The final argument common to all three defendants is the

contention that their convictions for money laundering to conceal

the proceeds of unlawful activity may not stand because the funds

at issue were not yet proceeds at the time they were laundered.

See 18 U.S.C. 1956(a)(1)(B)(I) (making unlawful transactions

designed to conceal the origin of the “proceeds” of unlawful

activity). This attack concerns counts 28-33 of the indictment.

It is without merit.

Counts 28-31 all involved the kickback of the consultant fees

from Lucterhand, Swift, and Allen. In each of the transactions
25

corresponding to these counts, the consultant invoiced First City

Bank, Cihak approved the invoice, the Bank issued a check, and the

consultant deposited the check into an account at First City Bank

in the name of either the consultant or one of the consultant’s

businesses. The consultant then transferred the money from the

First City Bank account into an account at Worth. From the Worth

accounts, the consultant kicked a portion of the funds back to

Cihak. The defendants argue that the illegality of the transaction

stemmed from their failure to disclose to First City that a portion

of fees charged in the invoice was to benefit Cihak. See 18 U.S.C.

§ 656 (misapplication of bank funds); 18 U.S.C. § 1344 (bank

fraud). Therefore, the defendants argue, the money could not

constitute proceeds of a misapplication or fraud until the moment

Cihak received the benefit of the funds. Since the transactions

specified in the indictment took place before this moment, they

could not constitute laundering of the proceeds of illegal

activity.

Counts 32 and 33 concerned the First City Bank loan of

$1,800,000 to Lucterhand, which Cihak used for his own purposes.

After First City Bank funded a portion of this loan, Cihak had

Lucterhand transfer $300,000 of the money from Lucterhand’s account

at First City Bank to the Worth Lucterhand trust account. Cihak

used his position at Worth to transfer this $300,000 through his

personal account at Citibank to Citibank in repayment of his

$1,600,000 loan. In June, 1990, a payment on the First City Bank

loan came due. Lucterhand notified Cihak, then invoiced the bank
 

4 The only problem created by a refusal to kick back is

evidentiary, not legal. The government might have more difficulty

convincing a jury that a bank officer approved the invoice with

intent to defraud, when the bank officer never received the benefit

of the alleged scheme. If the government were able to solve this

26

for a consulting fee. After Cihak had approved the invoice,

Lucterhand deposited the resulting First City Bank check into his

account at the bank. Lucterhand ended up transferring $112,515.84

of this fee to the bank as a payment on the loan. Count 32 alleged

that the transfer of the $300,000 from Lucterhand’s First City Bank

account to the Worth Lucterhand trust account constituted money

laundering. Count 33 recited an identical charge in the transfer

of the $112,515.84 from Lucterhand’s account at the bank to the

bank in repayment of the loan.

Defendants’ contentions fail because the funds at issue in

each of the transactions became proceeds at the moment the money

left the control of First City Bank and was deposited into an

account of a consultant or borrower. See United States v. Cauble,

706 F.2d 1322, 1254 (5th Cir. 1983) (“[T]he crime [of

misapplication] is complete at the time the misapplication

occurs.”) (alterations added), cert. denied, 465 U.S. 1005 (1984).

Suppose, for example, a consultant and a bank officer agree to an

invoice and kickback scheme, but the consultant decides to cheat by

keeping all the money and making no kickback. The two would have

perpetrated a fraud against the bank. The bank officer in this

example participated in the scheme by approving the invoice with

intent to defraud. The dishonor among thieves is not relevant,

certainly not to the bank.4
evidentiary problem, for instance, by taping conversations between

the consultant and the bank officer, no legal principle would bar

a conviction of fraud or misapplication.

27

As this hypothetical illustrates, the fraudulent scheme

produces proceeds at the latest when the scheme succeeds in

disgorging the funds from the victim and placing them into the

control of the perpetrators. Had Swift, Lucterhand, and Allen

refused to kick back money to Cihak, they nonetheless would have

been guilty. Accordingly, the money produced from the defendants’

fraud became proceeds when it left the control of First City Bank

and came into the possession of one of the consultants. The jury

could infer, from the circuitous nature of the subsequent

transactions as well as the other evidence in the case, that the

flow of funds recited in the indictment was designed to conceal the

fact that these funds were proceeds of fraud from First City Bank

internal auditors and from federal regulators.

For similar reasons, the defendants’ implication that First

City Bank did not overpay the consultants, who performed valuable

services for the bank and First City Bancorporation, is beside the

point. If, as the jury found, the defendants perpetrated a

kickback scheme, then by definition the consultants were willing to

perform these tasks for less money than they actually charged. The

bank, not Cihak, should have been the beneficiary of consultants’

willingness to do the job for less.

Nothing in our resolution of this case conflicts with United

States v. Johnson, 971 F.2d 562, 567-70 (10th Cir. 1992). In

Johnson, the defendant convinced several investors to dedicate
28

millions of dollars to a non-existent currency exchange business.

Some of the investors wired their funds from their own bank

accounts to that of the defendant. The indictment charged a

violation of 18 U.S.C. § 1957, which renders unlawful the knowing

execution of a transaction involving more than $10,000 of the

proceeds of illegal activity, alleging that the deposit of the

funds from the investors into the defendant’s account as a result

of the wire transfer violated the statute. The Tenth Circuit

reversed the defendant’s convictions under section 1957, holding

that the wire transfers did not involve proceeds of criminal

activity because the money did not become proceeds until the wire

transfers, which did constitute wire fraud, were completed.

The difference between Johnson and this case is in the timing

of the wire transfers. The Johnson court held, in essence, that

the money at issue did not become proceeds until it left the

account of the victims and reached the account of the defendant.

The wire transfers were the means by which the funds made this

journey and thus occurred too early to form the basis of a money

laundering conviction. In this case, the consultant fees and loans

left the control of First City Bank and reached the accounts of the

conspirators before the wire transfers occurred. The wire

transfers distributed the proceeds among the various defendants and

helped hide the fraud from First City auditors and federal

regulators.
29

IV

Cihak makes several arguments unique to his convictions. None

have merit.

A

Cihak attacks two of his convictions for wire fraud and one of

his convictions for money laundering to promote specified unlawful

activity on the ground that the wire transfers and the transaction

specified in the indictment did not further the fraud. We

disagree.

Count 10 concerned the $1,600,000 loan that Cihak obtained

from Citibank upon the strength of the two fraudulent letters of

credit from Worth and Mount Greenwood. To repay these loans, Cihak

had Lucterhand borrow $1,800,000 from First City. Cihak, either on

his own or through Lucterhand, wired approximately $250,000 of the

proceeds of this first Lucterhand loan to the Worth Lucterhand

trust account, for use in repaying the Citibank loan. Count Ten

charged that this wire transfer furthered a fraud against Citibank.

See 18 U.S.C. § 1343.

Counts nine and 34 concerned the CD scam. Shortly before

several of the fake CDS matured, Cihak had Lucterhand borrow an

additional $200,000 from First City Bank. Cihak, either on his own

or through Lucterhand, wire transferred this money into the Worth

Lucterhand trust account, where he moved it to the Worth STS trust

account to use to repay the principal on the now matured CDS.

Count nine alleged that this wire transfer furthered a fraud

against Worth. Count 34 alleged that the movement of the funds
30

through the Worth trust accounts constituted money laundering to

conceal the proceeds of and promote the carrying on of specified

unlawful activity. See 18 U.S.C. § 1956(a).

Cihak attacks all three of these convictions on the ground

that the fraud inherent in these transactions had been completed by

the time any wire transfer or money laundering had occurred. He

thus contends that the evidence was insufficient to establish that

the wire transfers and laundering furthered a scheme to defraud.

Read broadly, Cihak’s argument amounts to the proposition that

acts occurring after the defrauding defendant already controls the

proceeds of the fraud may never further the fraud. Circuit

precedent in the closely analogous mail fraud setting squarely

forecloses this sweeping contention. See United States v. Bowman,

783 F.2d 1192, 1197 (5th Cir. 1986) (“‘[I]t is a well-established

principle of mail fraud law that use of the mails after the money

is obtained may nevertheless be “for the purpose of executing” the

fraud.’”) (alteration in original) (quoting United States v.

Ashdown, 509 F.2d 793, 799 (5th Cir.), cert. denied, 423 U.S. 829

(1975)); see also, e.g., United States v. Bruno, 809 F.2d 1097,

1104 (5th Cir.) (“[C]ases construing the mail fraud statute apply

to the wire fraud statute as well.”) (alteration added), cert.

denied, 481 U.S. 1057 (1987).

Read more narrowly, Cihak’s contention is that the use of the

wire transfers, and the laundering of the money, did not further

the overall scheme. See Schmuck v. United States, 489 U.S. 705,

712 (1989) (stating that the in furtherance requirement of the mail
31

fraud statute is satisfied if the use of the mails is “‘incident to

an essential part of the scheme’”) (quoting Pereira v. United

States, 347 U.S. 1, 8 (1954)); cf. United States v. Maze, 414 U.S.

395, 402-05 (1974); United States v. Heaps, 39 F.3d 479, 484-86

(4th Cir. 1994). In assessing this argument, we follow Schmuck and

begin with a careful analysis of the nature and scope of the scheme

to defraud. See 489 U.S. at 711; see also Grunewald v. United

States, 353 U.S. 391, 406-11 (1957) (considering carefully the

scope and purpose of a conspiracy in establishing its duration and

in classifying which of several alleged overt acts furthered it).

In this case, a rational jury could conclude that Cihak intended

from the beginning to deprive Worth, the CD investors, and Citibank

of the use of their money, not to steal the money permanently. In

essence, Cihak defrauded his victims of the high interest rate

corresponding to the risky making of an unsecured loan to pay a bad

debt. The jury could conclude that Cihak returned this money to

its rightful owners as part of his scheme to obtain its use and in

order to avoid detection of his frauds.

We reject Cihak’s argument. Repaying the CD investors and

Citibank was an essential portion of Cihak’s scheme. To do so, he

used the wires and laundered money. In both cases, the illegal

activities furthered the scheme to defraud.

At oral argument, defense counsel argued that actions designed

solely to avoid detection, if taken after the defendant had control

over the money produced by the fraud, could not by definition be in

furtherance of a scheme to defraud. But all frauds depend upon
32

avoiding detection for at least a period of time sufficient to

allow the perpetrator to escape apprehension. Moreover, both this

court and the Supreme Court have recognized that actions taken to

avoid detection, or to lull the fraud victim into complacency, can

further the fraud, even after the victim has ceded its funds or

goods to the perpetrator’s control. See Maze, 414 U.S. at 402-03

(holding that the mailings at issue in a prior case met the in

furtherance requirement because they “were designed to lull the

victims into a false sense of security, postpone their ultimate

complaint to the authorities, and therefore make the apprehensions

of the defendants less likely than if no mailings had taken

place”); Bowman, 783 F.2d at 1197 (holding that implementation of

a “lulling scheme” satisfied the in furtherance requirement);

United States v. Cavalier, 17 F.3d 90, 93 (5th Cir. 1994) (mail

fraud); see also United States v. West, 22 F.3d 586, 591 & n.13

(5th Cir.), cert. denied, 115 S.Ct. 584 (1994).

B

Cihak’s next argument concerns count eight, which alleged that

Allen and Cihak committed wire fraud in connection with the First

City Bank loan to Allen’s car rental business, Shepherd Fleets.

The wire fraud occurred after First City Bank extended a second

loan to Shepherd Fleets on the strength of financial documents

bearing the false representation that Allen was a CPA. Allen

caused the proceeds of the second loan to be wired from First City

Bank to a Shepherd Fleets account at a different bank. The

indictment alleged that Cihak was responsible for this wire fraud
 

5 The jury heard testimony from several witnesses that

Hamidanian was Cihak’s right hand man.

33

as well. Cihak, but not Allen, appeals his conviction of this

count, arguing that insufficient evidence established that Cihak

knew that Allen submitted false documentation. We disagree.

Cihak’s relationship with Allen began long before April of

1989, when First City Bank funded the second Shepherd Fleets loan.

Testimony at trial established that Cihak arranged for First City

to hire Allen as a consultant in early 1988, and had previously

referred several potential clients to Allen, including Swift.

Shortly after the bank made the August, 1988 loan to Lucterhand,

Cihak arranged for Allen to aid Lucterhand in manufacturing false

financial documents to support the already funded loan. At around

the same time, Cihak arranged for First City Bank to fund a

fraudulent loan to Swift based on financial papers bearing the

forged signature of an Allen & Associates CPA.

In addition, Cihak had extensive involvement in the Shepherd

Fleets loans themselves. First City Bank loan officer M.G. Shetty,

a government witness at trial, described Cihak’s role in the

Shepherd Fleets transactions. After receiving a phone call on

September 23, 1988, Shetty went to a meeting with Hamid Hamidanian,

executive assistant to Cihak at First City Bank.5 The purpose of

the meeting was to discuss the funding of a loan to allow Allen and

her business partner to buy Shepherd Fleets, a Chicago business

that owned Dollar Rent-A-Car franchises. The only documentation

provided at the time was a fax from Allen and Associates to Cihak,
34

which Hamidanian gave to Shetty, containing certain financial

projections for Shepherd Fleets. Shetty prepared the first

documents for a loan of $686,000, took them to Hamidanian, received

them back with Cihak’s initials on them, and the bank funded the

loan the same day.

Shetty testified that this loan was fairly unusual. The loan

was to a business with no Texas ties. Normally, Shetty did not

handle loans of this size or to Chicago businesses. Financial

statements for the business and documentation of collateral were

not present. Neither Allen nor Thomas had previous experience in

the car rental business. The revenue of Shepherd Fleets was small

in comparison to the amount of the loan, and the business did not

appear to be very profitable. The loan was to be funded the same

day. Nevertheless, Shetty helped arrange to fund the loan because

“this loan was originated by the senior management of the bank, Mr.

Cihak. So we are very sensitive to this relationship since it is

coming from the top.”

In April of 1989, Shetty received a second phone call, this

time from Allen. Allen told Shetty that Shepherd Fleets needed

more money to buy another Dollar Rent-A-Car franchise and that

Cihak had approved the loan. Shetty immediately called Hamidanian,

who already knew of the proposed loan. The next day, Shetty

participated in a meeting with Allen, her business partner,

Hamidanian, and Shetty’s immediate superior. In the middle of this

meeting, Cihak stopped by to ask if everything was fine with the

loan. Reluctantly, Shetty arranged for a second loan to be funded.
35

It was this loan that gave rise to Allen’s submission of false

documents and the subsequent indictment.

From these facts, the jury could infer Cihak’s participation

in the wire fraud. The jury could conclude that Cihak caused First

City Bank to fund both of the Shepherd Fleets loans from his

initials on the first set of documents, Allen’s statement to Shetty

that Cihak had already approved the second loan, Allen’s fax to

Cihak, Cihak’s brief visit to the meeting involving the second loan

to make sure that nothing was amiss, and the active participation

of Cihak’s executive assistant throughout the entire matter. The

jury could infer that this loan was part of the payback to Allen

for her participation in the kickback scheme. The jury could

conclude that Cihak knew from their prior dealings that Allen was

not a CPA. Finally, the jury could infer that Cihak knew that

Allen would make false representations on her own loan documents,

as Cihak had arranged for her to do in the documents accompanying

the Swift and Lucterhand loans, and that Cihak intended to have the

bank fund the loan in spite of these misrepresentations. In short,

sufficient evidence linked Cihak to the second Shepherd Fleets loan

transaction.

C

Cihak argues that all of his convictions must be reversed

because the trial court abused its discretion with regard to

evidentiary rulings regarding the admission of other bad acts and

the impeachment of one of his witnesses. We reject Cihak’s
36

contentions because any arguable error in the court’s rulings was

harmless.

1

Cihak argues that the district court misconstrued Fed. R.

Evid. 404(b) in allowing the admission of several pieces of

evidence. His primary attack centers on the evidence corresponding

to count ten, which alleged that in 1988 Cihak committed wire fraud

against Citibank while repaying the $1,600,000 loan he obtained

upon the strength of two forged letters of credit from Worth and

Mount Greenwood banks. Cihak’s first argument is that the evidence

of the forgeries themselves was inadmissible. We do not agree.

The forgeries were the very fraud charged in count ten, and thus

their creation and use were not prior bad acts within the meaning

of Rule 404(b).

Cihak’s second argument is that the trial court erred in

admitting evidence of a different letter of credit in the amount of

$1,400,000 purportedly issued from Worth to Acstar Insurance

Company in 1991. The government concedes that Rule 404(b) governs

the admissibility of this document but contends that the Acstar

letter constituted evidence of modus operandi. We agree with the

prosecution.

The Worth and Mount Greenwood letters issued to Citibank bore

the forged signature of Randall Ytterberg, purportedly an officer

of both banks. Ytterberg testified that his signatures were

forgeries and that neither bank issued any such letters. A series

of purported renewals of these letters of credit dated through 1987
37

also bore Ytterberg’s forged signatures. The 1991 letter

purportedly from Worth to Acstar bore Cihak’s signature and another

forgery of “Randall Ytterberg.” Worth officer Joan Meyer testified

that in response to a phone call from Acstar, she established that

Worth never issued the 1991 letter. Upon further investigation,

Meyer found the computer memory of the Acstar letter in the files

of Kathie Ellis, Cihak’s long-time secretary and administrative

assistant. Given the fact that some of the Citibank letters and

the Acstar letter issued from the same bank, bore the forged

signature of the same bank officer, and went to benefit the same

person, we hold that “the circumstances of the extraneous act were

so similar to the offense in question that they evince[d] a

signature quality -- marking the extraneous act as the handiwork of

the accused.” United States v. Sanchez, 988 F.2d 1384, 1393 (5th

Cir.) (alteration added, internal quotation marks omitted), cert.

denied, 114 S.Ct. 217 (1993); see also United States v. Brookins,

919 F.2d 281, 285 (5th Cir. 1990). The trial court did not abuse

its discretion in admitting evidence of the Acstar letter.

2

Cihak next attacks certain testimony of Waseem Ahmad, an

officer of Gruntal & Company. Gruntal was the company holding the

bonds Fahy borrowed from First of Danville and Mount Greenwood at

the beginning of the series of transactions covered by the

indictment. Ahmad testified that his signature on a letter

purportedly from him to Mount Greenwood and First of Danville

officers verifying that Gruntal held $2,000,000 worth of bonds in
 

6 The defense might have been entitled to an instruction

limiting the use of Ahmad’s testimony to the issue of Cihak’s

motive, and clarifying that the jury should not use evidence that

Fahy was a forger to infer that Cihak was a forger. The defense

requested no such instruction; instead, Cihak asked the trial court

to instruct the jury to disregard Ahmad’s testimony entirely. The

district court properly rejected this argument.

38

the name of Joseph Fahy was a forgery, and that in fact no such

bonds were in Fahy’s Gruntal account on the date of the letter.

The trial court committed no error in admitting this

testimony. Although Ahmad’s testimony may have concerned a prior

bad act, a forgery, no evidence suggested that Cihak committed or

had contemporaneous knowledge of this act. The letter was on the

stationery of Fahy’s company, STS, and bore Fahy’s signature, not

Cihak’s. Regarding relevance, the forgery showed motive. The

testimony verified that Fahy had converted the Mount Greenwood and

First of Danville bonds to his own use, causing a potential

$2,000,000 deficit in the accounts of the banks as a result of a

loan that Cihak had suggested and championed in the banks’ board

meetings. This deficit was the motive for the Citibank loan and

the CD scam, as Cihak sought to use fraud and his personal

financial strength to make Mount Greenwood and First of Danville

whole. Thus, Ahmad’s testimony could not allow the jury to infer

that Cihak was a forger because nothing suggested that Cihak forged

this signature. Cihak could suffer little if any prejudice if the

jury concluded that Fahy was a forger, and the evidence was

otherwise relevant. See Fed. R. Evid. 403. No error occurred.6
39

3

Cihak’s next Rule 404(b) contention concerns the prosecutor’s

closing argument that Cihak accepted a bribe from the Cochonours in

return for arranging a loan to the buyer of one of their companies,

Tri-Star Cablevision. We find Cihak’s reliance on Rule 404(b)

unconvincing because his challenge is to argument, not evidence,

and because he himself introduced the underlying evidence.

One of the government’s witnesses was Les Cheatle, the

president of First National Bank of Danville. Cheatle testified

that in the early 1980s, First of Danville made a $900,000 loan to

a Virginia limited partnership called Tri-Star Cablevision, Ltd.,

and that the funds were used to buy a corporation called Tri-Star

Cablevision, Inc. The Cochonours were principal shareholders of

Tri-Star, Inc., and Cihak signed many of the relevant loan

documents on behalf of First of Danville. Cheatle further

testified that if Cihak had benefitted from the loan to the buyer

in this transaction, he should have disclosed this fact to the

board of First of Danville before closing, and that Cihak had made

no such disclosure at the time. Cheatle then published to the jury

a document from Citibank’s records, which Citibank received from

Cihak, reciting that Cihak claimed an ownership interest in TriStar, Inc. worth around $150,000. The defense did not object to

Cheatle’s testimony, and no other government witness addressed the

matter.

Cihak called Don and Robert Cochonour. Both Cochonours

testified that although Cihak never owned shares in Tri-Star, Inc.,
40

they had agreed to pay him $200,000 as a fee or bonus for his

months of work in finding a buyer for the corporation at a time

when the brothers were anxious to exit the business. The sale of

Tri-Star allowed the Cochonours to turn their investment in the

corporation into cash. The Cochonours testified that they paid

$50,000 of this “fee” at the time of the sale by check; years

later, they memorialized the remaining $150,000 debt in a letter to

Cihak, a copy of which the defense introduced at trial. Don

Cochonour also testified that later in 1988, defendant Swift owed

the Cochonours over $800,000 as a result of several horse

transactions. Don Cochonour, believing Swift to be insolvent, sold

this debt to defendant Allen, who believed that Swift would soon

become solvent as a result of a loan she was helping to arrange

from the State of Missouri. Allen bought the loans for $166,000.

Cochonour asked Allen to pay Cihak directly in order to retire the

remaining $150,000 debt still outstanding as a result of the TriStar transaction. 

At closing argument, defense counsel contended that the

kickbacks from Allen to Cihak were payments on this debt, in

accordance with the Cochonours’ testimony. At rebuttal, the

prosecution argued that the $50,000 payment from the Cochonours to

Cihak was a bribe, quid pro quo for Cihak’s orchestration of the

First of Danville loan to the Tri-Star buyer. The prosecution also

argued that the promise to pay $150,000 never existed and was part

of a cover story to conceal the Allen kickbacks. The defense
41

objected on Rule 404(b) grounds and moved for a mistrial; the

district court overruled the objection and denied the motion.

The district court committed no error. Rule 404(b) applies to

evidence, as the first word in its text suggests. Nothing in the

text of the rule extends its scope to argument. Nor did the trial

judge err in permitting the argument. Cihak, not the prosecution,

introduced the evidence of the $50,000 payment from the Cochonours,

and the prosecution’s interpretation of the evidence constituted

fair comment. Nothing in Rule 404(b) allows a defendant to

introduce evidence, then cry foul when the prosecution turns that

evidence against him, so long as the government’s interpretation is

not otherwise misleading. See United States v. Archer, 733 F.2d

354, 361-62 (5th Cir.) (holding that a defendant cannot use Rule

404(b) to contest cross-examination of her character witness

regarding her previous acts of dishonesty when she questioned the

witness as to her reputation for honesty), cert. denied, 469 U.S.

861 (1984).

4

Cihak’s next evidentiary challenge concerns evidence regarding

the transaction that Cihak arranged to remove the Swift loan from

the books of First City Bank. In this transaction, Cihak arranged

for First City Bank to fund a dummy note, which he alone signed, to

the Cochonours in an amount sufficient to retire the Swift loan.

The next day, a wire transfer arrived from a bank called Vinland

Trust to retire the dummy note. Further evidence showed that the

Vinland Trust wire transfer came from a loan from Vinland to the
42

Cochonours which Cihak guaranteed. Orland Enterprises, one of

Cihak’s businesses, made all of the payments on the Vinland loan.

Cihak relies on Rule 404(b) to contend that the trial court erred

in allowing government witness Richard Hendee, a First City Bank

loan officer, to testify regarding a note allegedly memorializing

a debt that the Cochonours owed to First City Bank in the amount of

$1,150,000. The note was found in Vinland’s files, and Hendee

testified that there was no such note in the files of First City.

Cihak did object to Hendee’s testimony, but not on Rule 404(b)

grounds. He objected to the foundation for admitting the note. We

review only for plain error, and find none.

5

Cihak’s final evidentiary challenge concerns the impeachment

of Glen Magnuson, former corporate counsel to First City

Bancorporation. In response to the district court’s ruling on a

defense motion in limine, Cihak elicited the fact that Magnuson had

previously been convicted of bank fraud. Over a defense objection,

the prosecution established on cross-examination that Magnuson had

defrauded First City entities during Cihak’s tenure.

We refuse to reach the correctness of the trial court’s ruling

on this issue because we hold that any error was harmless beyond a

reasonable doubt. From direct examination, the jury knew that

Magnuson had worked for First City for a significant portion of his

career, that he had since terminated his employment there, and that

he had been convicted of bank fraud. The trial court properly

admitted the evidence of the bank fraud for impeachment purposes,
43

see Fed. R. Evid. 609(a)(2), and the defense elicited the rest of

this information. No testimony linked Magnuson to the specific

frauds Cihak perpetrated against First City, and the government

suggested no link during argument or cross-examination. Given the

district court’s instruction limiting the use of the evidence of

Magnuson’s prior conviction to impeachment, any marginal prejudice

to Cihak from the extra details disclosed to the jury had little or

no effect upon the verdict. See United States v. Gadison, 8 F.3d

186, 192 (5th Cir. 1993) (The test for harmlessness is “whether the

inadmissible evidence actually contributed to the jury's verdict”

and suggesting that we will “reverse a conviction only if the

evidence had a substantial impact on the verdict”) (internal

quotation marks omitted).

D

For the first time in their reply briefs, defendants Cihak and

Allen attack their convictions for misrepresentation and

misapplication on the ground that the trial judge improperly

removed the element of the materiality of their misstatements from

the jury. Citing United States v. Gaudin, 115 S.Ct. 2310, 2322

(1995), the defendants argue that the materiality of their

misstatements should have been submitted to the jury. The

defendants concede that, because they did not raise this argument

in the trial court, our review on this question is limited to a

search for plain error. For its part, the government asks us to

reach this issue in spite of the fact that the defendants did not

raise it in their original briefs. Moreover, the government at
 

7 We also accept the government’s invitation to assume

without deciding that materiality is an element of the crimes

involved in this case. But see Gaudin, 115 S. Ct. at (Rehnquist,

C.J., concurring).

44

oral argument suggested that we assume that a Gaudin error had

occurred at trial. We accept the invitation, assume that Gaudin

establishes that the removal of the materiality issue from the jury

constituted error,7 and review this question for plain error only.

United States v. Keys, 67 F.3d 801, 811 (9th Cir. 1995), was

a perjury prosecution in which the defendant had joined the

prosecution in requesting an instruction that the materiality of

his misstatement was not a jury question. The court, although

noting that the defendant Keys had invited any Gaudin error,

nevertheless used the plain error framework to decide the case.

The court further assumed that the “plainness” of the error should

be decided by reference to the status of the law at the time of

direct appeal, not at trial. But see United States v. Kramer, Nos.

90-5055, 90-5360, 90-5431, 90-5751, 91-5659 and 93-4951, 1996 WL

13778 (11th Cir. Jan 16, 1996) (noting some confusion among the

courts regarding at what point in a defendant’s case an error must

be plain). Finally, the Keys court assumed that because the error

was arguably “structural,” the defendant might not need to show

that the mistake affected the result of his trial. But see Kramer,

1996 WL at *6, *7 (holding that a Gaudin error did not affect the

defendant’s substantial rights because no rational jury could have

disputed the materiality of the misstatements at issue).

Nevertheless, the court refused to exercise its discretion to
 

8 We are aware that in the Ninth Circuit, both of our

assumptions are law. See United States v. Gaudin, 28 F.3d 943,

951-52 (9th Cir. 1994), aff’d, 115 S.Ct. 2310 (1995).

45

reverse because it found the evidence of materiality overwhelming.

See United States v. Olano, 113 S. Ct. 1770 (1993) (stating that

even if the three prerequisites of plain error are met, a court of

appeals has discretion to affirm or reverse). The court reasoned,

“In the circumstance of an error which did not matter, and was not

error when made, reversal of the conviction rather than affirmance

would impair the fairness, integrity and public reputation of

judicial proceedings.” 67 F.3d at 811.

We follow Keys in this case. We assume that any error was

plain because the Supreme Court handed down Gaudin during appellate

review of this case, and we assume that the “structural” nature of

the error relieves the defendant of the necessity of showing

prejudice, although we believe that the Kramer approach has great

appeal.8 We nevertheless refuse to exercise our discretion to

disturb these convictions.

The misrepresentations covered by the defendants’ Gaudin

argument span the entirety of their various schemes. In each case,

the evidence of materiality was overwhelming. We find it difficult

to believe, for instance, that the credit unions and pension funds

would still have invested in Cihak’s bogus “CDS” at Worth had they

known that their funds would not be federally insured and that

Cihak would use the money to pay back a prior bad debt of Cihak’s

business associate. Any suggestion that First City would have paid

consultant fees had it known that Cihak would receive kickbacks is
46

untenable, equally so that the bank would have funded loans had it

known that the borrower had far less income than was represented in

the loan documents or already owed previously undisclosed

$1,000,000 to a wealthy Chicago family. We are not convinced that

Citibank would have loaned Cihak $1,600,000 on an unsecured basis,

especially had it known that Cihak would use the money to pay back

the Fahy debt instead of to start a business. We find it hard to

believe that First City did not consider important Allen’s

misrepresentations that the financial statements supporting the

fraudulent loans were prepared by a CPA. In each instance,

substantial testimony from various officials at Citibank, the

credit unions, the pension funds, and First City established that

these entities would not have engaged in the transactions

underlying the indictment had they known the truth.

It was perhaps for these reasons that the defendants never

mentioned materiality to the district court. Cf. United States v.

Wells, 63 F.3d 745, 748 & n.3 (8th Cir. 1995) (reversing where “the

materiality issue was hotly disputed”), cert. pet. filed Jan 31,

1996, No. 95-1228. Although defense counsel at oral argument

stated that the defendants had argued materiality to the district

court, she did not specify where, we have been unable to locate

such argument in the record. The defense elicited little or no

testimony to the effect that, assuming the government’s theory of

the case was correct, the misrepresentations had not substantially

affected the actions of the fraud victims. They did not alert the

trial judge during the discussion of the charge, or in their post-
 

9 The government has not perfected a cross-appeal in this

case.

 

10 The government disputes whether Cihak raised this question

below. Because we find no error in this portion of the

calculation, we would also find no plain error.

47

trial memoranda, that they disputed materiality. We fail to see

how reversing these convictions would serve judicial integrity, or

why principles of fundamental fairness require a second chance to

argue a theory so lacking support in evidence and reality that the

defendants chose not to raise it below.

E

In his final attack on the district court’s handling of this

case, Cihak argues that the district court erred in calculating his

offense level corresponding to the money laundering convictions.

The Pre-Sentence Report calculated the value of the funds laundered

by adding together the total value of the fraudulent loans and

consulting fees. Upon Cihak’s objection, the district court

completed a new calculation based only upon the amount of money

diverted to Cihak’s benefit.9 In this court, Cihak argues that

this new calculation was also erroneous, and that the court should

have excluded Lucterhand’s consulting fees because they were used

to repay the Lucterhand loan.10 Cihak also contends that the

district court erred in including the value of the Citibank loan

because no evidence supported a conclusion that these funds were

laundered.

We reject Cihak’s first argument. Although he uses terms like

“artificial inflation” instead of “loss,” Cihak’s contention is
48

that the Lucterhand consulting fees should not be included because

they caused no additional loss to First City Bank. The money

laundering guideline does not depend on loss; it depends on the

“value of the funds” that the defendant laundered. U.S.S.G. §

2S1.1(b)(2); United States v. Johnson, 971 F.2d 562, 576 (10th Cir.

1992); cf. United States v. Frydenlund, 990 F.2d 822, 826 n.5 (5th

Cir.) (applying U.S.S.G. § 2F1.1 to a check kiting scheme, and

focusing on the amount of “loss” the scheme produced), cert.

denied, 114 S.Ct. 337 (1993). The difference in focus in section

2S1.1 from, for instance, section 2F1.1, depends on the different

nature of the harms they measure. Section 2S1.1 measures the harm

to society that money laundering causes to law enforcement’s

efforts to detect the use and production of ill-gotten gains.

Section 2F1.1 measures the harm to society and the individual

suffered when an innocent person is deprived of her money. In

applying section 2S1.1, courts should follow the guideline’s plain

language and focus on the value of the funds laundered.

We also reject Cihak’s second argument. The evidence at trial

showed that Cihak flushed the proceeds of the Citibank loan through

the Worth STS trust account, used some of the money to repurchase

the unmatured federal bonds that Fahy had previously converted to

his own use, and returned the bonds and remaining cash to Mount

Greenwood and First of Danville. This transfer was cumbersome and

unnecessary; Cihak could easily have conducted the same

transactions from his own account at Citibank. The trial court

could infer that the purpose of using the Worth STS trust account
49

as a conduit for these funds was to conceal the fact that Cihak,

not Fahy, was making the banks whole. The court could conclude

that this concealment helped forestall what might have been

uncomfortable questions from officials at Mount Greenwood and First

of Danville, some of whom also had a relationship with Worth,

regarding how Cihak collateralized such a large loan used entirely

to pay off a previously existing bad debt. Finally, the court

could conclude that large checks written to entities not associated

with any automobile accounts receivable business might have

prompted inquiries from Citibank. We find no error in Cihak’s

sentence.

V

Defendant Swift makes two additional arguments.

A

Swift argues that there was a fatal variance between

allegation of a single conspiracy to defraud First City Bank found

in count one and the proof at trial, which assertedly showed

multiple overlapping conspiracies. We disagree.

Count one alleged a single conspiracy implemented by the

kickbacks from the various consultants to Cihak and the various

fraudulent loans Cihak arranged for First City Bank to fund to

Allen, Swift, and Lucterhand. The evidence at trial supported the

grand jury’s allegations as to the implementation of the kickback

and fraudulent loan schemes. The issue is whether the jury could

conclude from the evidence that there was a single conspiracy.
50

In deciding whether a string of actions by various individuals

is a single conspiracy or multiple conspiracies, we look to three

factors: “(1) the existence of a common goal; (2) the nature of

the scheme; and (3) overlapping of participants in the various

dealings.” United States v. DeVarona, 872 F.2d 114, 118 (5th Cir.

1989). In United States v. Richerson, 833 F.2d 1147, 1149-54 (5th

Cir. 1987), several employees of an entity involved in oil drilling

conspired with employees of vendors. The conspirators arranged a

series of kickbacks and bribes, with the vendors recovering their

costs by falsely invoicing the drilling company and with the

company’s conspirators approving the invoice. We held that the

conspirators labored towards the common aim of enriching themselves

at the expense of a single victim, the drilling company. Regarding

the scheme’s inherent nature, we noted that the level of each

conspirator’s participation depended on his position in the various

businesses involved, but that each conspirator furthered the

scheme, and the scheme’s implementation involved the repetition of

similar modus operandi. Finally, we held that the common

participants factor was satisfied, reasoning that a “single

conspiracy exists where a ‘key man’ is involved in and directs

illegal activities, while various combinations of other

participants exert individual efforts toward a common goal.” 833

F.2d at 1154.

We find Richerson instructive. As in that case, the common

goal among Cihak, Swift, Allen, and Lucterhand in this conspiracy

was to defraud a single victim, First City. As in Richerson, the
51

steps taken to reach this common goal bore a marked continuity and

similarity: kickbacks from consultant fees and fraudulently

obtained loans. Cihak was the key person directing and overseeing

the activities of the conspirators. See DeVarona, 872 F.2d 119

(relying on the continuing participation of a “key figure” to hold

that the evidence supported the jury’s inference of a single

conspiracy). There were additional points of overlap. At Cihak’s

direction, Allen helped Lucterhand prepare false documents to

support Lucterhand’s $1,800,000 loan. A forged signature of an

Allen & Associates’ CPA appeared on the Swift loan documents; Allen

had been Swift’s accountant for years at the time of the loan. The

cover story for the Allen kickbacks to Cihak involved Allen

purchasing certain debt that Swift owed to the Cochonours. The

Cochonours’ name appears again in removal of the Swift loan from

the books of First City.

Swift does not take issue with this. Instead, he denies that

he had anything to do with Cihak’s fraudulent activities in Chicago

regarding Fahy, the Citibank loan, and the CD scam; he urges that

the government’s proof of these activities at trial risked an

improper rub-off of Cihak’s guilt to him. Swift has not appealed

the trial court’s denial of his motion to sever or argued a due

process violation. Instead, he has relied on a fatal variance

theory. No variance existed because count one of the indictment

did not recite Cihak’s Chicago activities as part of the manner or

implementation of the conspiracy against First City.
52

B

Swift’s second argument is that the trial court abused its

discretion in allowing testimony to continue for one of the thirtyeight days of trial in his absence. Any error was harmless beyond

a reasonable doubt.

After several weeks of trial, and at the end of his case,

Swift took the stand. On Thursday, October 28, 1993, the

government began to cross-examine Swift. At the end of the day,

the court recessed for the weekend. On the following Monday

morning, Swift’s counsel found Swift prostrate in his bathroom.

The court continued the case until Wednesday afternoon, at which

time it held a hearing. At the hearing, the court heard

representations from the prosecution that Swift’s physicians had

determined that no medical basis existed to explain his condition.

The trial judge stated that an hour before he had spoken to Swift’s

doctor, who informed him that no medical condition explained

Swift’s condition and that tests had revealed the presence of

unprescribed drugs or other medication in Swift’s system. The

trial judge then repeated his belief, expressed numerous times

throughout the trial, that Swift was medicating himself with

improper drugs in an effort to obtain a mistrial or a severance.

The court also noted that Swift had frequently excused himself from

the courtroom and stayed absent for periods of time.

The court ordered the trial to resume the following morning,

and expressed a willingness to recall witnesses if necessary. At

that time, the court informed the jury that Swift’s absence was due
53

to an illness. Defendant Allen called Thomas Clements and Don

Cochonour. Swift’s counsel had no questions for Clements, who had

no information regarding his case, but he did conduct a lengthy and

extensive cross-examination of Cochonour in an attempt to show that

Swift had paid back the entirety of his debts to the Cochonour

family at the time he borrowed money from First City Bank. This

cross-examination exhaustively covered several years of horsedealings and land and insurance transactions. The next day, Swift

returned to the trial without comment.

Fed. R. Crim. P. 43 provides the defendant a right to be

present at trial, but we have held repeatedly that a Rule 43

violation can constitute harmless error. United States v. Alikpo,

944 F.2d 206, 209-11 (5th Cir. 1991); United States v. Gradsky, 434

F.2d 880, 884 (5th Cir. 1970), cert. denied, 409 U.S. 894 (1972);

see Fed. R. Crim. P. 52(a). Our cases have identified at least two

sources of prejudice to a defendant from the continuation of the

case against her in her absence: that the jury might draw an

adverse inference from the absence, and that the defendant might

have information necessary to the effective advocacy of her case.

We find no reasonable possibility that either type of

prejudice existed here, and in the unlikely event that the trial

court erred, we find that error harmless. Regarding the

possibility that the jury might draw an adverse inference, we note

this trial consisted of dozens of witnesses and over seven weeks of

testimony. Swift repeatedly absented himself from the proceedings

of his own accord. The record reflects that defendant Cihak left
54

early one afternoon to attend his daughter’s wedding. The trial

court told the jury that Swift was absent because he was ill.

Given these facts, it is difficult to believe that the jury, during

its deliberations, even remembered that Swift had been absent for

this portion of the trial, much less drew an adverse inference. We

find no reasonable possibility of prejudice in the jury’s

deliberations. Cf. Alikpo, 944 F.2d at 209-10 (expressing concern

that the jury might draw an adverse inference when the defendant

“cavalierly” walked into the courtroom after missing the beginning

of the trial, when the jury had no explanation of the defendant’s

absence).

Regarding the second possible source of error, we see no

possibility that Swift could have assisted his counsel in the

cross-examination of Don Cochonour so as to change the jury’s

verdict. Counsel’s cross-examination was detailed and extensive,

covering several years of horse dealings between the Cochonours and

Swift. Although Cochonour may have been an important witness to

Swift, we note that Swift apparently did not intend to call

Cochonour during his own defense. Cochonour’s basic testimony on

direct and cross-examination, that Swift owed the Cochonour family

over $1,000,000 at the time he borrowed money from First City, was

corroborated by Swift’s own grand jury testimony. At the

conclusion of Cochonour’s testimony, Swift’s counsel made no

objection to excusing the witness and did not at any later time

accept the trial court’s offer to recall witnesses. On appeal to

this court, Swift has identified no subject area left uncovered as
55

a result of his absence, nor any question left unasked. We realize

that the government’s burden to prove harmlessness in such

circumstances is an “onerous one,” Alikpo, 944 F.2d at 211, and we

are especially wary of labeling such an error harmless when the

absence at issue occurs during the trial testimony of a fact

witness. Nevertheless, our cases establish that no per se rule

requires us to reverse, and our review of the record convinces us

that no reasonable possibility exists that Swift’s absence

contributed in any way to the jury’s verdict.

AFFIRMED.