* Pursuant to 5 t h Cir. R. 47.5, the Court has determined that

this opinion should not be published and is not precedent except

under the limited circumstances set forth in 5 th Cir. R. 47.5.4. UNITED STATES COURT OF APPEALS

For the Fifth Circuit

___________________________

No. 00-10337

___________________________

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

VERSUS

DAVID LADON CRADER and GERALD KENNETH ECKERT,

Defendants-Appellants.

___________________________________________________

Appeals from the United States District Court

for the Northern District of Texas

(5:99-CR-92)

___________________________________________________

July 2, 2001

Before HIGGINBOTHAM, DAVIS, and BENAVIDES, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge: *

David Crader, Gerald Eckert, and Jeffrey Echols were indicted

on multiple charges of mail fraud, false claims, false statement to

a fe deral agency, fraud in connection with Social Security

payments, controlled substance offenses, money laundering, and

conspiracy, in violation of 18 U.S.C. §§ 287, 371, 1001, 1010,

1341, and 1956; 42 U.S.C. §§ 408(a)(4) and 1383a(a)(3); and 21

U.S. C. §§ 841(a)(1), 843(b), and 846. The core charges in the

indictment alleged that Cr ader, Eckert, and Echols defrauded2

clients of the South Plains Aids Resource Center (“SPARC”) and

various federal and private entities that provided grants to SPARC.

Echols died five days before trial. Crader and Eckert were tried

and convicted on more than seventy counts. They now appeal these

convictions on multiple grounds. For the reasons that follow, we

AFFIRM the judgment of the district court.

I.

The South Plains AIDS Resource Center of Lubbock, Texas, is a

n on-profit, tax-exempt organization that was formed in 1989 t o

provide direct services to persons afflicted with Acquired Immune

Deficiency Syndrome (“AIDS”) or Human Immunodeficiency Virus

(“HIV”) , and to provide community education on those diseases.

SPARC received its prim ary funding from federal grants, and

additional funding from non-governmental charitable entities.

Defendant-Appellant David Crader was Executive Director of

SPARC; Defendant-Appellant Gerald Eckert was the Care Coordinator

and generally considered the “number two” man. Jeffrey Echols, who

died five days before trial, was the Special Care Coordinator. The

multiple count indictment of all three men arose from their

activities in running SPARC. In essence, the government presented

evidence designed to show that the defendants concocted and carried

out a scheme to create a “cash hoard” by overcharging their clients

and fraudulently obtaining funds from various grant programs. The

government’s evidence also tended to show that the defendants used

this “cash hoard” for two purposes: to benefit themselves and to

secretly pay the salaries and expenses of favored SPARC clients1 T he government produced evidence that the defendants also

defrauded several other org anizations by either engaging in the

3 whose social security benefits would ha ve been terminated or

reduced if this additional income had been disclo sed. The

government also cha rged the defendants with controlled substance

violations for stockpiling the medication of deceased clients and

unlawfully dispensing it to living clients without a doctor’s

prescription.

At trial, the government presented specific evidence that the

defendants defrauded several federal programs providing he lp to

AIDS patients. For example, the Housing Opportunities for Persons

with AIDS (“HOPWA”) program, a United States Department of Housing

and Urban Development (“HUD”) initiative, provided funds for rent

and utilities for individuals with AIDS or HIV. SPARC administered

this program in the Lubbock area beginning in 1993. The HOPWA

rules generally required aid recipients to contribute the greater

of ten percent of their gross income or thir ty percent of their

adjusted gross income towards the ir rent, and the balance was

subsidized through HOPWA funds. SPARC collected more rent from the

clients than the regulations allowed, and then obtained grants on

the assumption that the clients had paid the s maller, correct

portion of th e rent. The government argued at trial that by

charging and collecting excess rent from clie nts while also

receiving fed eral assistance, defendants engaged in a “doubledipping,” resulting in both SPARC clients and the federal

government being defrauded. 1same double-dipping scheme, or by using the program’s funds for

unauthorized purposes. These organizations include the following:

T he Community Housing Resources Board of Lubbock; The Ryan Wh ite

Assistance Program; Cathol ic Family Services, Inc.; St. Mary’s

Hospital; Project HELP.

4 The evidence at trial showed that the defendants used a

portion of the funds they accumulated to secretly pay salaries of

favored SPARC clients. Because those favored SPARC clients’ social

security benefits would have been either reduced or terminated had

this extra income been reported, the defendants paid th e monies

intended for these favored clients to third parties. SPARC labeled

some of the payments as payments to clients’ landlords, alt hough

evidence at trial showed that SPARC officials knew that some of the

third parties to which the checks were made out were not the

clients’ landlords. In other instances, the defendants delivered

“expense” checks made payable to third party payees directly to

favored clients. By structuring the payments in this manner, the

defendants were able to circumvent the social security and tax

laws.

Numerous witnesses at trial testified regarding both the overcharging of rent and the payment scheme. One witness who

discovered that he was being overcharged for rent confronted

Crader, a nd was told that the excess went for needs of those who

were “worse off.” Crader suggested to certain employees of SPARC

that their salaries would be better paid to a third party so as not

to risk a reduction of the employees’ social secur ity benefits.

Crader asked several of his employees for names of other persons to5

w h om he could make out their checks. At least one witness

testified that he received a W-2 form including these payments, but

that when he compla ined, Crader said that he would “take care of

it,” and the witness never saw the form again.

Although much of the trial testimony focused on Crader, as the

head of the organization, the record is replete with evidence of

Eckert’s involv ement in the scheme. Although Echols usually

collected the cash rents from all of the clients, Eckert,

occasionally assumed these duties. The record also shows that

Eckert “cleaned up” the HOPWA files after a HUD audit of SPARC’s

offices, and falsified some of the records. Finally, twenty-one of

the forty-seven third party checks where signed by Eckert. Most

were signed by Crader as well, but four were executed by Eckert

alone. The government’s case included testimony that Eckert was

extremely involved in the day-to-day management of the office, with

many responsibilities and a great deal of direct clie nt contact.

Ecke rt was also Crader’s life partner, and as such, the two had

almost constant contact with each other, both at work and at home.

On the drug count s, appellants’ argued that the lengthy

waiting periods many AIDS patients were required to endure before

receiving government assistance to purchase medication placed the

lives of these patients in peril, and that providing these

medications immediately saved lives. Essentially, the defendants

argued that they were choosing between the “lesser of two evils.”

The defense requested a jury instruction on necessity directed at

this issue, but that request was denied by the trial court.6

Crader was indicted on seventy-two counts, and co nvicted by

the jury on all seventy-two. Eckert was charged with seventy-one

counts, and again, was convicted on all seventy-one counts. Both

defendants now appeal these convictions on the grounds discussed

below.

II.

The defend ants argue first that the evidence is legally

insufficient to support their convictions on the money laundering

count s (Counts 30-37, 39, and 43-76). When reviewing the

sufficiency of the evidence, this court views all evidence, whether

circumstantial or d irect, in the light most favorable to the

verdict with all reasonable inferences to be made in support of the

jury’s verdict. United States v. Salazar , 958 F.2d 1285, 1290-91

(5th Cir. 1992). The evidence is sufficient to support a

conviction if a rational trier of fact could have found the

essential elements of the crime beyond a reasonable doubt. I d. To

obtain a conviction for money laundering, the government must prove

that the defendant (1) conducted or attempted to conduct a

financial transaction; (2) which the defendant knew involved the

proceeds of a specified unlawful activity; (3) with the intent

either to promote the specified unlawful activity (the “promotion

prong”), or to conceal or disguise the nature, lo cation, source,

ownership, or control of the proceeds of unlawful activity (the

“concealment pron g”), or to engage in conduct constituting a

violation of section 7201 or 7206 of the Internal Revenue Code (the

“tax avoidance p rong”). 18 U.S.C. § 1956; s ee United States v.7

Wyly

, 193 F.3d 289, 295 (5th Cir. 1999). All forty-two money

laundering counts charged the defendants with violat ing the tax

avoidance and concealment prongs of the statute. Counts 65 through

76 also charged the defendants with violating the promotion prong.

Specifically, the defendants allege that the government’s

proof on these counts fails in three distinct areas:

A. The money laundering counts are merged into the counts

charging mail fraud and false statements because the unlawful

activity unde rlying these counts is the same activity that

com prises the factual basis for the financial transactions

under the money laundering offenses;

B. The gov ernment’s theory of the case is that the defendants

were concealing income to avoid the loss of Social Secu rity

benefits for the agency’s clients. The government’s evidence,

which proceeded under this theory, fails to establish an

intention to violate the income tax laws to meet the tax

avoidance prong of the money laundering offense; and

C. The f inancial transactions that are the basis of the money

launderin g counts are innocent spending of proceeds, not

illegal money laundering.

A.

O n the defendants’ first point, they argue that because

“specified unlawful activity” relied on by the government under the

money laundering statute was the same activity the government

relied on to establish the statute’s “financial transaction,” the8

government failed to prove these two independent statutory

elements. The defendants obviously misapprehend the government’s

case. Each money laundering count in the indictment alleges that

the defendants obtained the proceeds by means of the mail fraud

scheme outlined in Counts two through nine (the specified unlawful

activity). To establish this element, the government produced

proof that SPARC fraudulently charged clients for rent, utilities

and other services, while at the same time sought and collected

reimbursement f or those charges from federal and private grants.

To establish the additional eleme nt, the government produced

evidence that the defendants then engaged in separate financial

transactions by disbursing those fraudulently obtained funds to

favored SPARC clients via “rent” or “expense” checks made out to

third parties. Because the charged “specified unlawful activity”

is independent from the charged “financial transa c tions,” the

defendants’ merger argument fails.

B.

The defendants argue n ext that the conduct alleged does not

satisfy the tax avoidance p rong of the money laundering statute

because they had no intent to evade the income tax laws. Rather,

the third party payments were structured for the purpose of

preventing the true recipients of the payments fr om losing their

Social Security disability benefits. The tax avoidance prong of

the money laundering statute prohibits financial transactions made

with the proceeds of an unlawful activity with the “intent to

engage in conduct constituting a violation of Sec. 7201 or 7206 of9

the Internal Revenue Code of 1986.” 18 U.S.C. § 1956

(a)(1)(A)(ii). Section 7201 of the Internal Revenue Code prohibits

the evasion of income taxes. Section 7206 prohibits willfully

aiding, assi sting or counseling the preparation of any document

which is false or fraudulent and which relates to a matter arising

under the internal revenue laws.

The government produced sufficient evidence to establish that

the defendants intended to violate both Sections 7201 and 7206.

The defendants aided the ultimate beneficiaries of the third party

checks in evading income taxes by issuing the checks in a third

party’s name, rather than in the name of the actual recipient, and

by characteri zing the payments as rent or reimbursements, rather

than as salary or other income. SPARC’s accountants counseled the

defendants not to engage in these practices. The defendants also

failed to issue 1099's or W-2's to the ultimate beneficiaries of

the checks, which allowed them to evade income taxes due on those

funds. In addition, the defendants’ actions clearly violated

Section 7206. Following the issuance of the third party checks,

the defendants directed the preparation of Forms 1099 and W-2 which

reported taxable income under the names and tax i dentification

numbers of the third party recipients rather than the actual

recipients of the funds. These documents were false as to a

material matter in connection with the internal revenue laws. The

record shows that the defen d ants’ accountants also repeatedly

counseled a gainst these practices. Clearly the evidence of a

violation of the tax avoidance prong of the money laundering10

statute was factually and legally sufficient.

C.

The defendants’ final sufficiency argumen t is that the

financial transactions that are the basis of the money laundering

counts were consistent with legal, legitimate activities and based

on attorney/accountant advice; accordingly, they do not satisfy the

promotion prong of the money laundering statute. This argument

a lso fails. The advice of counsel defense was presented to the

jury by testimony of Crader and SPARC employee Strange that they

had been advised that the third party payments they were making

were legitimate. By finding the defendants guilty on all counts,

the jury obviously rejected this testimony, which is not surprising

in light of conflicting testimony by SPARC’s accountants that they

counseled defendants not to engage in these practices, and direct

evidence that the defendants acted deliberately to conceal the true

recipients of the payments.

Only counts six ty to seventy-six allege a violation of the

promotion prong of the money laundering statute. Those counts are

based on payments made to co-defendant Echols which were disguised

as paym ents to Mack Durran. We need not consider whether those

payments satisfy the promotion prong of the money laundering

statute. Those counts also alleged violations under the

concealment prong and tax avoidance prong. The tax avoidance prong

was discussed previously. By establishing that the defendants

used fictitious payees and disguised the nature of the many

payments as r eimbursements, the government also proved that the11

financial transactions were designed to conceal or disguise the

nature, ownership, or control of the proceeds of unlawful activity,

thus satisfying the concealment prong of the statute.

III.

Eckert also challen ges his money laundering convictions on

grounds t hat the evidence failed to establish a knowing or

intentional violation on his part. He argues that the evidence is

insufficient to show his knowledge under all three prongs of the

money laundering statute ( i.e.

, the concealment, promotion, and tax

evasion prongs discussed above).

After reviewing the record, we are convinced that the evidence

is sufficient to show that Eckert possessed the required mental

state to satisfy all three varieties of money laundering charged.

As discussed above, the evidence showed that Eckert was the number

two man at SPARC and also Crader’s life partner. Eckert

occasionally collected the illegal cash rents personally, “cleaned

up” files in the office after federal agency inspections, and

signed twenty-one of forty-seven third party checks, four without

Crader’s signature. It was certainly reasonable for the jury to

infer from these and other facts presented at trial that Eckert

knew of the “double-dipping” scheme and knew exactly why the third

part y checks were being issued, and knew that the use of this

payment method would result in tax fraud. The jury was therefore

reasonable in finding that Eckert was guilty of all three types of

money laundering charged, and we will not disturb its verdict.

IV.12

Defendants next argue that the district court erred in

refusing to instruct the jury on the defense of necessity as to the

controlled substanc e violations. We review the district court’s

failu re to submit the requested instruction for abuse of

discretion. U nited Sta tes v. Posado-Rios , 158 F.3d 832, 875 (5 t h

Cir. 1998).

To raise the defense of necessity, t he defense must present

evidence from which a reasonable jury could infer each of the

following:

(1) That defendant was under an unlawful and pr esent,

i mminent, and impending threat of such a nature as to

induce a well-grounded apprehension of death or serious

bodily injury;

(2) That defendant had not reckl essly or negligently

placed hi mself in a situation in which it was probable

that he would be forced to choose the criminal conduct;

(3) That defendant had no reasonable, legal alternative

to violating the law...; and

(4) That a direct causal relationship may be reasonably

anticipated between the criminal action taken a nd the

avoidance of the threatened harm.

United States v. Gant , 691 F.2d 1159, 1162-63 (5 th Cir. 1982).

A.

Because the defendants failed to submit evidence from which

the jury could have found the required elements of this defense,

the district court did not abuse its discretion in refusing to

submit the requested instruction.

First, the defendants failed to identify a single situation in

which their clients were faced with an “imminent threat...of death

or serious bodily injury,” which is required to establis h the2 R. at 6-1296; R. at 3-533-34.

13 defense of necessity. Although many SPARC patients ultimately died

as a result of complications arising from the AIDS virus, the

defendants could not pinpoint any particular episode in which one

of their clients was faced with an emergency condition that might

be alleviated through the use of the stockpiled medication. To the

contrary, the medical testimony at trial showed that “there is

rarely, if ever, an emergency to treating HIV/AIDS” and that “the

f act that there was a waiting period for [AZT] did not end anger

people’s health.” 2 Additionally, the evidence adduced at trial

confirmed that some of the medications defendants dispensed merely

eased pain or alleviated annoying, though not life-threatening

symptoms of the AIDS virus.

Second, the defendants’ evidence did not show that they had no

alternative but to stockpile and dispense the drugs. Although

there was a waiting period to obtain free prescriptions for many of

the drugs that defendants distributed, the def endants never

established why they could not have taken gravely ill patients to

the hospital, or used SPARC monies to purchase the needed

medications. Additionally, the record showed that numerous federal

and state programs as sist HIV/AIDS patients in obtaining

medication, sometimes in as little as two weeks, a nd pharmacies

sometimes assist patients by filling their prescriptions on credit

and waiting until a later d ate for payment. The defendants must

show that they actually tried the alternative, had no time to try3 This Court has deve loped a three-part test to determine

whether a jury in struction should be submitted: “(1) The

instruction is substantially c orrect; (2) The requested issue is

not substantially covered in the charge actually given to the jury;

and (3) The instruction concerns an important point in the trial so

that the failure to give it seriously impaired the defendant’s

ability to effectively present a defense.” U nited States v.

Correa-Ventura , 6 F.3d 1070, 1076 (5 th Cir. 1993).

14 it, or that a history of futile attempts revealed the illusionary

benefit of the alternative. G ant

, 691 F.2d at 1164. They made no

such showing.

Finally, the defendants failed to produce adequate evidence of

a direct causal relationship between their distribution of

stockpiled medication and the avoidance of a threatened harm. As

discussed above, no specific instance was identified in which the

defendants’ conduct saved a patient from death or great bodily

harm. On the contrary, the evidence at trial suggested that

distribution of medication in this manner c ould actually cause

greater harm, in the form of mutations in the AIDS virus due to

decreas ed potency of expired antibiotics and potentially fatal

heart attacks due to decreased potency of expired nitroglycerin.

B.

The district court was also correct in refusing to charge the

jury on necessity because the defendants failed to submit a jury

instruction that was “substantially correct.” 3 Defendants’

proposed instruction read as follows:

In order to excuse an act that would otherwise be

criminal, however, the defendants must, by a

preponderance of the evidence, show the following:

(1) That the defendants were faced with a choice of evils4 For example, the defendants purchased items such as clothing,

art supplies, and tanning products.

15 and chose the lesser evil;

(2) That the defendants acted to prevent imminent harm;

(3) That the defendants reasonably anticipated a causal

relationship between their conduct and the harmto be

avoided; and

(4) That there were no other reasonable legal

alternatives to violating the law.

The requested instruction misstates the la w of necessity in

omitting the requirement that they be operating under a “present,

imminent, and impending [t hreat] of such a nature as to induce a

well-grounded apprehension of death or serious bodily i njury

. ”

Choosing the “lesser of two evils” is clearly not the equivalent,

nor is acting to prevent “imminent harm.” Because the requested

instruction was not substantially correct, the district court did

not err in refusing to submit it to the jury.

V.

Finally, the defendants argue that the district court erred in

admitting SPARC American Express billing statements into evidence.

The government offered these records in an attempt to account for

the use of the illegally collected funds and to rebut defense

counsel’s opening statement that the defendants did not personally

benefit from these transactions. Many of the purchases made by

defendants on the account are obviously for their personal use. 4

Certainly, then, the government wanted these records in evidence to5 The defendants did object on 403 grounds to an earlier

introduction of summaries of these billing statements. These

summaries explained the charges made on the account and the

payments made against that account. The payments made were tracked

by their source

- e.g.

, those funds that came from SPARC to pay off

a portion of the American Express account were labeled “SPARC” and

those coming from Crader himself were labeled as such. However,

the government was unable to determine the source of the funds used

to pay approximately $38,000 in receipts. The government therefore

labeled the source of these funds as “unknown.” The defendants

objected to the use of the term “unknown” as unfairly prejudicial.

The trial court admitted the summaries over defense objection.

When the American Express records themselves were introduced,

defendants objected, as discussed above, on grounds that the

government did not lay a proper foundation to meet the business

records exception and “also fo r the reasons previously stated in

our motion outside the presence of the jury.” However, since the

previous objection was only to the use of the term “unknown” on the

billing summaries, this objection was certainly not sufficient to

preserve error as to the entire American Express statements on 401

and 403 grounds.

16 provide the jury with a basis to infer that the defendants

personally benefitted from their scheme.

The defendants argue that these records should have been

e xcluded under Federal Rules of Evidence 401 (relevance) and 403

(probative value outweighed by unfair p rejudice). We review the

district court’s admission of the records for abuse of discretion.

United States v. Pena , 949 F.2d 751, 757 (5 th Cir. 1991).

Although the defendants objected to the admission of the

records on the grounds that the government failed to lay the proper

foundation for the introduction o f the documents as business

records, they failed to object to the admission of the American

Express statements on either 401 or 403 g rounds. 5 We therefore

review the admission of the records for plain error. U nited States

v. Hernandez-Guevara , 162 F.3d 863, 873 (5 th Cir. 1998).17

Before an appellate court can correct an error not raised at

trial, there must be (1) error, (2) that is plain, (3) that affects

substantial rights, and ( 4) seriously affects the fairness,

integrity or public reputation of judicial proceedings. U nited

States v. Olano

, 507 U.S. 725, 732, 113 S.Ct. 1770, 1776 (1993).

The defendants have not demonstrated to us that the admission of

the records here meets any of the four prongs of this test. Even

if there were error, which is doubtful, there was no plain error,

and the district judge did not abuse his discretion in admitting

the American Express records into evidence.

VI.

For the foreg oing reasons, we AFFIRM the judgment of the

district court.