F ILED U.S. COURT O F APP EALS EL EV EN TH C IRC UIT May 5 , 2 008 T HOMA S K. KA HN CLERK

The Honor able Da

vid M. Ebel, United States Circuit J udg e for the Tenth Circuit, sitting * by desig nation. [PUBLISH]

INTH E U

NI TE D S TA TE S CO URT OF AP PE AL S FO R T HE EL EV EN TH CIRC UI T

____ ____ ____ _ N o. 06- 1164 3

____ ____ ____ _ D. C. Docket N o. 04-00329 CR-01-JT C-1 UNITED STAT ES OF AMERIC A, Plaintiff- Appellee,
ve rs us CHARLES E. EDWARDS, Defend an t-Ap pe ll an t.

____ ____ ____ ____ ____ ____ __ Appe al f ro m the U nit ed

S ta te s D istri ct

Co urt fo r the N orthe rnD istri ct

of G eo rg ia

____ ____ ____ ____ ____ ____ __ (M ay 5 , 200 8) Befo re TJ OFLAT, BLACK andEBEL , Cir cu itJu dg es . *“Ge neric ally , a Ponzi s cheme is a phony investment plan in which monies paid by later 1 investors are used to pay

artificia lly

high r eturns to the initial investors, with the g oal of attrac ting more investors.” United States v. Silvestri, 409 F.3d 1311, 1317 n.6 ( 11th Cir. 2005) (quotation omitted). 2 TJO FL AT , C ircuit Judg e: T his c as e inv olv es abus ine ss tha t the de fe ndant, Ch ar le s E
. E dw ar ds, claim ed wa s legitim ate. ANorther n District of G eorgia j ury , how ever, found that E dw ar ds w as ope ratin g aP onz i sc he m e an d c onvi ct ed him of w ir e fr au d and
re la te d c ri m es . E dw ar ds n owappe al s hi s c onvi ct ion s and the pr iso n se nte nc e he 1
re ce ive d. W e af

fi rm his c onvi ct ion s bu t va cate his pr iso n te rm and r em an d th e cas e fo r a n ew se nt en ci ng he ari ng . I. A. Fro m it s fo un di ng on Ju ne 7, 1 99 4, t hr ou gh Sep te m be r 11 , 20 00 , Cha rle s E. Edw ards wa s the Chairm an of the Board and sol e owner of E TS Pay

phon es, I nc. (“ E T S” ), apr ivate ly

owne d G eo rg iac or

por at ionthat pr ovi de d m an ag em en t
s e rv i c e s t o p ayp h o n e o w n e r s . E dw ar d s a l s o c o n tr o l l e dP ayp h o n e S ys t e ms Ac quisi tions , I nc. ( “ PSA ”), a D elaw are corporation that was a whollyowned subs idi ar y of E T S. E dw ar ds and o the rs of te n r ef er re d to the se tw o c om

panie s – and others Edwards form ed to supp ort ET S’ s pay phon e program

– collectively

as3

ET S, and we do lik ew ise. Edw ards organized E TS to im plem ent his idea of selling coin-operated pay phon es to investo rs w ho would th en lease the phones back to Edwards for a guaranteed rate of return. E dwar ds dis cussed his id ea w ith an acquaintance, Beverly Slater , who sug gested that he use ins urance agents, those sellin g life insurance, including annu ities, to m arket the pay phon es. Edw ards liked her sugg estion and p ersuaded her to establish a network of independent ins urance ag en ts t o se ll the pho ne s. S he w oul d se rv e as the dis tr ibu tor of the pho ne s, pur ch as ing the m

f ro m E T S an d se lli ng the m

to the inv es tor s so lic ite d by the insurance agents. S later f orm ed BE E C omm

unication s, I nc. ( “ BE E” ) to perform th e d is tri bu to rs hi p fu nc ti on s. To m Mu rray was on e o f BEE’s in su ran ce ag en ts . He was so su cces sf

ul sel li ng pa y

ph on es th atEdward s m ad e h im a di st rib ut or . L ike S la te r, Murr ay

f orm ed ac or por at ionto ope rate his dis tr ibu tor shi p, N at ion al Com m unication s Marketing, Inc. (“ NCM I”). Sh ortly a ft er E dw ar ds’ s sa le and l ea se -b ac k pl anw as up and r unni ng, E dw ar ds f

orm ed P SAto de al w iththe dis tr ibu tor s. T he sa le and l ea se -b ac k of the pay phon es we re handled as follows. T he insurance agent, having found an investo r, contacted the distribut or, and the dis tributor sent th e agent a f ive-y ear le as e al re ady

e xe cu te d by

E T S, a s le sse e, f

or the inv es tor

to sig n, a s le sso r. T heThe lea se agree ment g ave the investor the option of par ticipating w ith ETS in t he 2 servicingof the pa

y phones, in which c ase the investor would re ceive some of the pr ofits the ph on e s yie lde d. Th is o pti on pla y e d n o r ole in t

he ind uc e me nt o f i nv e sto rs to p art ic ipate in Edwar ds’s sale a

nd lease -bac k program. The c ommissi ons varied f rom time to tim e, ra

ng ing f rom a total of 20% in 1998 to 25% 3 in 2 00 0. Th e amou

nts the dis tr ibutor

and ins ur a nc e a g e nts re c e ive d a lso va ri e d, wi th t

he a g e nts rec eivingapproximately

75% of the total c ommissi on.

4 le as e ide nti fi ed

the loc at ionf

or the pay phon e the inv es tor

w as pur ch as ing , spe ci fi ed the r en t E T S w oul d be pay ing the inv es tor e ac h m onth, spe lle d ou t

2 ET S ’s r e s p o n s i b i l i ty fo r

i n s t a l l i n g an ds e rv i c i n g th e p h o n e s , an dc o n t a i n e dab u yba ck pr ovi sio n. T he buy -b ac k pr ovi sio n r equir ed E T S to p ur ch as e the pay phon e fr om the inv es tor

a t the e nd o f the le as e fo r the sam e pr ic e the inv es tor ha d pa id fo r the pho ne . T he pr ovi sio n a lso gave the inv es tor the r igh t t o se ll the pay

phon e t o ET S f o r th a tp r i c e a tan y t i me du r i n g th e t e rm o f th e f i v e - ye ar l e a s e o n1 8 0 d ays no ti ce t o ETS. If the investor agree d to thi s arrangem ent, the investor gave the insurance ag en t a c he ck m ad e out to the dis tr ibu tor

f or the pr ic e of

the pay phon e. T he a ge nt the n f or w ar de d th e ch ec k to the dis tr ibu tor , w hic h de posi te d th e ch ec k in to i ts bank a cc ount . O nc e the inv es tor ’ s c he ck c le ar ed , the dis tr ibu tor

de duc te d th e sa le s c om m iss ion , w hic h w as div ide d be tw ee n it and the ins ur an ce a ge nt, and 3
w ir e tr an sf

er re d th e ne t sa le pr oc ee ds t o P SA ’ s bank a cc ount . O n ar eg ular ba sis , PS Aw ir ed

f unds f ro m it s a cc ount

to E T S fo r ope ratin g e xpe nse s, le as e paym en ts,In 1 99 6 a nd 19 97 , th e ph on e s so ld f

or $5 ,0 00 and

$6 ,0 00 , r e sp e c tiv e ly , a

nd the monthl y 4 renta l pay ment stay ed at $75. Thus, the r ate of return w as 18% f

or 1996 and 15% for 1997. Investingin ETS’s pay

phone program be came extremely popular be cause it offer ed a 5 signific antly

highe r rate of re turn than annuities and othe r for ms of investment and allowe d the investor to canc el the lea se prior to its expiration, trigg eringETS’s buy -bac k obligation without p e n a l ty. 5 an d buy -b ac ks. P SAa lso w ir ed f unds to som e 114 ac co unt s de sig na te d by E dw ar ds. S om e of

the se a cc ount s r el at ed

to E T S’ s bu sin es s, som e w er e he ld b y oth er bus ine ss e nti tie s E dw ar ds o w ne d, and s om e ac co unt s w er e he ld b y E dw ar ds fo r his and h is w if

e’ s pe rs ona l e xpe ndi tur es . T he pr ic e the inv es tor

pa id f or apay phon e an d th e re nt E T S re m itt ed to the inv es tor vari ed a s E dw ar ds’ s pl anunf

old ed
. I n 19 94, the pay

phon es w er e sol d f

or $4, 770, and the m onthly

r en ta l paym en t w as $75
. T his gave the inv es tor an 18
. 8%
re tur n onhis inv es tm en t. B y

199 9, the pay

phon es w er e sol d f

or $7, 000, and the
m on th ly rent al pa ym en t was $8 2, fo r a ret urn o n i nv es tm en t o f 14 %. 4 T he ins ur an ce a ge nts toute d th e E T S pay phon e pr ogr am

a s ahig hly profitable alternative to investing in annuit ies or other form s of life insurance. 5 E T S pr ovi de d th e ag en ts w ithpr om oti ona l m at er ia ls f or dis tr ibu tio n to prospective inv estors, prim arily seniors, claim ing th at the pay phon e industry

wa s

“ virtua lly r ec es sio n- pr oof

, ” that i t w as “pr im ed

f or asuc ce ssf

ul and p ro fi ta

ble futur e, ” an d th at

“pay pho ne pr of

its have gr ow n dr am at ic al ly and are e xpe ct ed

toET S a lso g ave its top a g e nts oc e an c ru ise s a nd Euro pe an v a c atio ns . 6 ETS’s senior mana g ement staff trac ked this information and provide d it to Edwards on 7 a re gula r b a sis
. 6 co nt in ue to esc al at e.” ETS’s sl og an was, “ Opp or tu ni ty doe sn ’t always kn oc k . . .
som etim es it rings.” Th e r ev en u es th e p ayp h o n es g en er at edwe re i n s u ff i ci en tt o co v erETS ’s ope ratin g e xpe nse s, le as e paym en ts, and b uy -b ac k ob lig at ion s. I n sh ort, E dw ar ds’ s pay

phon e busi ne ss w as ne ve r pr of ita ble
. B ec au se P SApa id i ts dis tr ibu te rs and i nsur an ce a ge nts c om m iss ion s of

up t o 25 % of

the r et ai l pr ic e of
ea chpho ne sol d, and E T S w as c ontra ct ua lly obl igate d to buy

ba ck e ve ry pho ne 6 for the full price paid by

the investor, E TS im

m ediately owed ea ch investor m ore m one y than it c oll ec te d onthe sa le of

the pho ne – ade fi ci t tha t c oul d on ly be
ove rc om e by

ope ratin g th e phon es a t a sub stanti al pr of

it. T he r ev enue s th e pay phon es provided, however, we re e xtrem ely inadequate; by

2000 , E TS wa s operating its p hones at a loss o f $5 m illion a m onth
. Ne arly 90% of the installed pa y ph on es were u np ro fit ab le . This pro bl em was c om po un de d b y

th e fac t t ha t ETS leased m ore pay

phon es from

investors th an it actually placed into service, a gap that increased fr om

150 in Oc tober 1996 to 17,960 b y Septem ber 11, 2000. E TS ,

7 the re fo re , a lw ay s de pe nde d onthe inf lux of m one y f ro m ne winv es tor s to sus ta in its pay phon e business. Moreover, if E TS suffere d a “ run on the bank ” – a suddenET S’ s b oa rd c on sis te d o f E dw ard s a

nd ET S se nio r s ta ff

me mbe rs . 8 One of the re asons why

the investors we re una

war e of ET S’s financia l plight was the 9 fa c t th at E TS p a id t

he le a se pa

y me nts du e inv e sto rs on

tim e . E TS k e pt i ts p ay

me nts c ur re nt u nti l it filed for ba

nkruptcy in September 2000. 7 inv oc at ionof

the le as e’ s buy -b ac k pr ovi sio n by asig nif ic an t num be r of inv es tor s – the c om pany w oul d have c oll ap se d. Whe ne ve r E T S’ s bo ar d of dir ec tor s m et , 8 E T S’ s m ount ing f

inanc ia l l oss es and the opt im ist ic out loo k E T S w as portr ay ing to the investo rs w ere discuss ed. Ac cording to Charles Bynum , E TS ’ s Chief Oper ating Offic er, Edw ards attitude was that “ we can’ t poss ibly let [investors] see what is re ally

going on because if this m oney com ing in from

[newinvestors] e ver sto ppe d, the w hol e thi ng w oul d c ra sh. ” E dw ar ds’ s atti tud e pr ev ai le d; the inv es tor s w er e ke pt i n th e dark
. 9 E T S’ s f inanc ia l outlo ok a

ppe ar ed shaky f ro m the out se t. B y

199 6, the
co m pany ha d le as ed

750 pay phon es , but

onl y 600 w er e in o pe ratio n. O f the 600 , at le as t 15 0 of

the pho ne s w er e not

m ak ing e noug h m one y

to co ve r the $70
m onthly paym en t du e the te le phon e co m pany , le t a lon e the a ddi tio na l op er at ing
expe nse s attr ibu ta

ble to tho se pho ne s, suc h a s r ep ai rs , m ai nte nanc e, and the c ost of
co l l ec t i n g th e c o i nre v en u e. Af t erco n du ct i n g a c o m

p re h en s i v e a n al ysi s o f E TS ’s ope ratio na l stru ct

ur e in O ct obe r 1996 , By

num w ro te in a m em or an dum to E dw ar ds that E T S w as not

y et a“ via ble c om pany ” an d th at

the y w er e curr en tly

“ inFor example, in April or May 1997, Edwar ds informed potential investor B en B olt that 10 ETS was “r ock solid” and that his investment would be ext reme ly safe . Edwar ds went on to say that “God ha d rea lly

blessed” E TS and that Bolt had “ nothing to wor ry about” be cause ETS would ref und his investment within t wo wee ks if he eve r dec ided to sell his pay phones. Having be e n th us a ssu re d, B olt bo ught a tot a l of 86 pa y ph on e s. In Augus t 19 97 , E dw ard s, in r e sp on se to po te nti a l inve sto r John Wo od le y ’s su g g e sti on tha t E TS w a s o pe ratin ga

“ Pon zi sc he me ,” sa id that ETS’s operations provided all the funds the c ompany require d and that an inf

lux of money from new investors was not nee ded. F ollowing this conve rsation, Woodley boug ht 15 pay

phones and later purcha sed 115 more. 8 co m m an d of ane ar c er ta in d isa ste r. ” E dw ar ds r ec ogni ze d th is d ir e sit ua tio n and acknowledged that ET S w as “ hem orrhaging” m oney . By num rec omm ended shuttin g do w n th e 150 unpr of ita ble pho ne s. E dw ar ds r ej ec te d th e re co m m en da tio n. H e tol d B ynum that i f the inv es tor s f

ound out that E T S w as not operating a pay

phon e for e very

lease, they

would panic and dem and their m oney ba ck
. B ynum

a lso r ec om

m en de d th at

E dw ar ds s hut

down th e le as ing sid e of the busi ne ss and n ot b ri ng o n any m or e inv es tor s. E dw ar ds r ej ec te d th is
re co m m en da tio n a s w el l and c ont inu ed to re cr uit inv es tor s. H e he ld w ee kly
sem inars for prospective investors – all ident ified by the distribu tors’ insurance agents – at ET S’ s offices, wher e he w ouldpitch ET S’ s sale and lease-bac k program as extrem ely

profitable. By

num left E TS in January

1997
. He wa s 10 concerned about ET S’ s financial conditio n and the legality of w hat Edw ards’ s was do in g, co nc ern s h e co nv ey edto th e FBI aft er l eav in g t he co m pa ny. Inthe spr ing of

199 8, E T S hir ed

the G ro ss C oll ins a cc ount ing f irm toSpecifica lly , from the outset, Edwa rds had instructe d that ETS classify the sale a nd 11 le a se -b a c k p ro g ra

m a s an o pe ratin gle a se a s o pp os e d to a c a pit a l le a se . An o pe ra

tin gle a se is essentially

a re ntal situation where the lessor (owne r) tra nsfer s the rig ht to use the proper ty to the le sse e . A t th e e nd

of the le a se pe ri od , th e le sse e re tur ns the pr op e rt

y to t he le sso r. Th e le a se pay ments are treated as a

monthly operating e x pense a

nd the balanc e shee t does not ref lect the lia bil ity fo r f utu re le a se pa

y me nts . In a

c a pit a l le a se , th e le sse e a c c ounts fo r t he a sse t a s th ou g h it had ac tually

purcha sed the a sset (eve n if the lessor r etains the title to the asset); that is, the ba lanc e sh e e t r e fl e c ts the le sse e ’s tot a l f utu re ob lig atio n u

nd e r t he le a se . B a se d o n G e ne ra lly Acc epted Ac countingPrinciples (“G AAP”), the auditors informed E dwar ds that the sale a nd lease -bac k prog ram wa s undoubtedly a ca pital lease – a

conclusion af

firmed by multipl e ETS chief financ ial office rs and a

subsequent ana ly sis of the lease classification by the ac counting firm of Gr ant Thornton in 1999. As a r esult, the money that ETS/PS A re ceive d from the pay phone sale s could not proper ly be cha rac terized as re venue; r ather , it had to be cha rac terized a s d e bt b e c a

us e it e ve ntu a lly

ha d to be pa id b a c k to the inv e sto rs wi th i nte re st i n th e fo rm of le a se pay ments. Although ET S was not leg ally obligated to use GAA P in compili ngits financial re po rt s f or int e rn a l us e , th is a c c ounti ngdif fe re nc e c ha

ng e d th e a

pp e ara nc e of ET S f ro m a company that was losingmilli ons of dollars a year to a company

that was e arningsubstantial pr of its
. 9 pe rf orm an audi t. I n Ju ly , audi tor s S te ve G ro ss and D er ek S tarn es m et

w ith E dw ar ds and p re se nte d hi m w ithar ep ort of

the ir pr el im inary

f ind ing s. T he y

tol d E dw ar ds tha t the r ev enue ge ne rate d by the pay phon e ope ratio n w as not

suf fi ci en t to cover the required m onth ly lease pay m ents to the inv estors, that E TS had leased far m or e pay

phon es than it

ha d pl ac ed

in se rv ic e, and tha t E T S did not have the fi nanc ia l r es our ce s to f

und its buy -b ac k ob lig at ion s. T he audi tor s a lso tol d E dw ar ds tha t E T S’ s c hara ct er iz at ionof the m oni es ge ne rate d th ro ugh the p ayp h o n e s al es as re v en u e p ai n t edan i n ac cu ra t e p i ct u re o f t h e c o m p an y’ s financial health. When the audito rs finished their presentation, Edw ards threw 11 th ei r rep or t i n t he tra sh can an d d is ch arg edth ei r fi rm .As nume ro us ET S c hie f f ina nc ia l of fi c e rs and outsi de a ud ito rs te sti fi e d at tr ia l, t

he se 12 n o n - G A A P numb e r s w o u l d dr a s t i c a l l y m i s l e a d

i n v e s t o r s a s t o th e c o mp any’ s p r o f i t a b i l i ty. 10 On Mar ch 30, 2000, Edw ards sent a m em o to all ET S em ploy ees stating that

“pr of its w er e be lowe xpe ct at ion s in199 9” and tha t the c om pany ha d e nte re d in to a pe ri od o f “ dr as tic ti m es f or the P ay phon e In dustry . ” E dw ar ds k ep t this inf orm at ionf

ro m E T S’ s di str ibu tor s and the ir ins ur an ce a ge nts . T he a ge nts , havin g no r ea son to que sti on E T S’ s f inanc ia l vi ab ili ty , the re fo re ke pt t out ing E T S’ s pr ogr am

a s asound i nve stm en t. E dw ar ds a lso c ont inu ed to pa int ar osy pic tur e of E T S’ s pr of

ita bil ity f or inv es tor s. I n M ay

200 0, he gave agr oup of pr ospe ct ive inv es tor s atour of E T S’ s of fi ce s. A t the c om

ple tio n of the tour, he tol d th em that E T S ha d sa le s of

$28 m ill ionthe pr ev iou s y ear, ne tte d $8 m ill ionin pr of it , an d p la nn edto ex pa ndit s b us in es s i nt o M ex ic o a ndth e Carrib ean . 12 B y m i d
- 2 0 0 0 , i n v e s t o r s we r e c an c e l l i n g th e i r l e a s e s an dtr i g g e r i n g th e b u yba ck pr ovi sio n a t an in cr ea sin g r at e, c au sin g si gni fi cant c as h f lowpr obl em s f

or the
co m pany . N ev er

the le ss, E dw ar ds c ont inu ed to w oo i nve sto rs w ithr ep re se ntatio ns of E TS ’ s prosperity
. On July 1, 2000, he wrote his existin g investo rs a letter statin g th at

E T S w as f

inanc ia lly sta ble , “ m ad e a pr of

it of ne ar ly $8, 700, 000 la st ye ar an d[ th a ti t s ] p r o f

i tp o t e n t i a l l o o k s e v e nb r i g h t e r f o r th i s ye ar . ” Ad d i t i o n a l l y, w he n E dw ar ds l earn ed

that so m e of

the ins ur an ce a ge nts w er e advis ing the irE dw ar d s s e n ts i m i l ar l e t t e r s t o B E E a g e n t s S c o t tF o un t a i nan d P h i l K e r l e y o nJ u l y 5 13 and 14 , 2 00 0, re sp e c tiv e ly , thre ate nin gle g a l a c tio n if the y e nc oura g e d inve sto rs to c anc e l th e ir lease s. Many

of the pa y phones ETS was lea sing w ere situated in kiosks. 14 11 inv es tor c lie nts to canc el the ir

le as es , he too k st ep s to dis sua de the m . F or i n s t an ce , o nJ u l y 5 , 2 0 0 0 , h e s en tth e f o l l o wi n g l et t ert o Ro nBryan t , o n e o f B EE’s ag en ts, w ho h ad

r ec om m en de d th at

his c lie nts r eque st an e ar ly te rm inatio n of

the ir le as e ag re em en ts: The E TS corporate f

am ily m ade a profit of over eight m illion dollars last y ear ($8,000,000+) and this y ear look s even better.
. . . If y ou are te ll in g adi ffer en t s to ry

to ou r Les so rs , y ou m ay

be ass ur edth atETS will not hesitate to take legal action against y ou to set th e re cord s tr a i g h ti nap ub l i c f

o r u m. 13 Edwar ds ech oe d s im il ar s en ti m en ts in a Ju ly 12, 2 00 0, s pe ech to do zen s o f BEE ag en ts i n C ar

te rs vil le , G eo rg ia , r ea ssuri ng the m that E T S w as f

inanc ia lly sol id and that the y sho uld f oc us o n se lli ng m or e pay phon es . At som e point in the spring of 20 00, E dwar ds hired a consult ant, K en Baker, to c ondu ct

af inanc ia l ana ly sis of

E T S an d T w in L ea f Me dia – ac om pany E dw ar ds ha d f orm ed to se ll adve rt isi ng s pot s onthe pay phon e kio sks
. E dw ar ds thoug ht

14 that the incom e T win L eaf produced m ight alleviate ET S’ s financial problem
. In July 2000 , B aker inform ed Edw ards that even if highly successful, T win L eaf would not b e able to solve the problem ; ET S’ s sale and lease-bac k program wa sAs ind ic ate d in no te 9, su

pr a , E TS p a id i ts i nv e sto rs a ll the re nt t he y we re du e until it 15 f i l e d f o r b an kr u p t c y. 12 not sus ta ina ble
. Whil e co nti nui ng t o se ll m or e pay phon es w oul d pr olo ng the
co m pany ’ s e xis te nc e, e ve ntu al ly the num be r of ne wsa le s w oul d no t be suf fi ci en t to servi ce t he m ou nt in g d eb t, wh ic h B ak er p ro jecte d t o re ach $1 .7 b il li on by 200 4. Insho rt , Bake r tol d E dw ar ds tha t i t w as onl y am atte r of

ti m e unt il E T S w oul d have to file for bankruptcy , and he recom m ended that ET S seek bankruptcy pr ote ct ionin O ct obe r 2000
. D es pit e K enBake r’ s gr im pr oj ec tio ns, E dw ar ds c ont inu ed a ggr es siv el y

to
m ark et h i s co m

p an y as fi n an ci al l y s o u n d . On J u l y 2 9 , h e s en ta l et t ert o ETS ’s inv es tor s, statin g th at

E T S co nti nue d to pr ospe r an d th at he “pe rs ona lly

be lie ve [d ] that this [was] without a doub t the best tim e to be in the pay phon e industry !” Sh ortly the re af te r, on Augus t 3, he w ro te af oll ow -u p le tte r to R on B ry an t, statin g that “ [t] here is no legitim ate re ason to adv ise any Le ssor to liq uidate his or her pay phon es . ” T hr ee w ee ks l at er , E dw ar ds h ir ed tw o of his lon g- tim e inv es tor s, Bob and Alice W orsham , to contact other investors who had notified ET S that the y w er e canc el lin g th ei r le as es and try to co nvi nc e the m

to w ith dr awthe ir notices. H e offe red to pay the W orsham s $100 for ever y phon e that they 15 convin ced the investors to k eep. As it turned out, they we re a ble to persuade atThe law s g overningChapter 11 pr ocee dings a re c odified at 11 U.S.C. §§ 1101-74. 16 PSA continued to sell, and ETS continued to lease, pa y phones until a day

or two 17 befor e filingthe petitions. 13 least thirty -nine investo rs to stay with E TS
. In a final e ffort to generate addition al
re ve nue , E dw ar ds s en t a

m em or an dum

to BE E and N CM I on S ep te m be r 1,
announ ci ng a

$35 0 r eb at e fo r any one w ho p ur ch as ed apay phon e w ith in thirty day s. O n S ep te m

be r 11, 200 0, E T S an d P SAf ile d pe tit ion s f

or Ch ap te r 11 bankr upt cy r el ie f in the U nit ed

S ta te s B an kr

upt cy Co urt f or the D istri ct

of De laware. D uring the two m onth s prior to filing th ese petitions, PSA , at

16 E dw ar ds’ s di re ct ion , c ont inu ed to se ll pay

phon es , takin g in$22 m ill ionf ro m in ve st or s. The s al es ceas edaft er t he pe ti ti on s wer e fi le d. As of S ep te m be r 11 , 17 E T S ha d 73 , 107 pay

phon es und er

le as e an d w as c ontra ct

ua lly obl igate d to buy ba ck tho se pho ne s at a

tot al c ost of $41 4, 091, 985. E dw ar ds’ s inve sto rs los t
m ill ion s, but

E dw ar ds f

ai re d qu ite w el l. H e re ce ive d m or e than $2 1 m ill ionf ro m ET S and its subs idiaries in the form of salary , c onsu lting fee s, and interest fr ee

“ loans” that he ne ve r re pa id. H e use d th is m one y to pur ch as e “ [e ] ve ry

thi ng f ro m expensiv e cowboy

boots to m illion -dollar hom es.”

B. On June 8, 2004, a N orthern District of Ge orgia grand jur y indictedTh e a pp lic a ble statut or

y te xts pr ov ide a s f

oll ow s: 18 Whoever, having de vised or intendingto devise any scheme or ar

tifice to def

raud, or fo r o bta ini ngmon e y

or pr op e rt y by me ans of fa lse or fr a ud ule nt p re te ns e s, repr esentations, or promises, transmits or cause s to be transmitted by means of wire, r adio, or tele vision communication in int erstate or for eig n commerc e, any writing s, signs, sig nals, pictures, or sounds for the pur

pose of e x ecutingsuch scheme or ar

tifice, shall be f

ined under

this ti tle or imprisoned not more than f ive y ear s, or both. I f the violation aff ects a financ ial institution, such person shall be fined not more tha

n $1,000,000 or imprisoned not more than 30 year s, or both. 18 U.S.C. § 1343 (2000). (a ) Wh oe ve r, in a

ny of the c ir c ums tanc e s se t f

or th i n s ub se c tio n ( d) , k

no wi ng ly eng ag es or attempts to enga g e in a moneta ry transac tion in criminally

derive d proper ty of a va lue g reater than $10,000 a nd is derived f

rom specif

ied unlawf

ul activity , shall be punished as pr ovided in subsection (b). (b)( 1) Except as provided in pa ragraph ( 2), the punishment for a n offe nse under this section is a fine under title 18, United States Code, or imprisonment for not more than te n y ear s or both. (2) The court may

impose an alter

nate f ine to that imposable under pa ragraph ( 1) of no t mo re tha

n tw ic e the amou

nt o f t he c ri min a lly

de ri ve d p ro pe rt

y inv olv e d in the transa ction.

. . . . (d) The circ umstances r efe rre d to in subsection (a) a re – (1) that the of

fense under this sec tion takes place in the United States . . . .

. . . . (f) As used in this section – (1) the te rm “moneta

ry transac tion” means the de posit, withdrawal, tra nsfer , or exchang e, in or a ffe ctinginterstate or fore ign c ommerce , of funds or a monetary instrument (as def

ined in section 1956(c )(5) of this titl e) by , throug h, or to a financ ial institution (as def ined in section 1956 of this title), including a ny transac tion that would be a fina ncial tra nsaction under

section 1956(c )(4) (B ) of this ti tle . . . . 14 E dw ar ds o n f

if ty -s ev enc ount s of

w ir e fr au d, 18 U
. S. C. § 13 43, and tw en ty -f ive
co unt s of m one y launde ri ng, 18 U
. S. C. § 19 57. Asup er ce din g in dic tm en t 18(2) the te rm “c riminally derive d proper

ty ” mea ns any proper ty constituting, or derive d from, proc eeds obta ined from a criminal off

ense; a nd (3 ) t he te rm “ sp e c if ie d unla wf ul a c tiv ity” ha s th e me anin gg ive n th at te rm in section 1956 of this title. 18 U.S.C. § 1957 (2000). 18 U.S.C. 1956(c)(7) (A) ( 2000) def ines “spec ified unlawf

ul activity ” as “ any

act or a c tiv ity c on sti tut ingan o ff

e ns e lis te d in

se c tio n 1 96 1( 1) of

[titl e 18 ] exc e pt a

n a c t whic h is ind ic ta ble un de r s ub c ha

pte r I Iof c ha pte r 5 3 o f t itl e 31 .” A v iol atio n o f s e c tio n 1 34 3 ( re latin gto wire f raud) is list ed as a

n offe nse in section 1961(1)
. 18 U.S.C. § 1956(h) (2000) pr ovides that “[a]ny person who c onspires to commit any 19 of fe ns e de fi ne d in

thi s se c tio n o r s e c tio n 1 95 7 s ha ll b e su bje c t to the same pe na lti e s a s th os e presc ribed for

the offe nse the c ommissi on of which w as the objec t of the conspira cy .” 18 U.S.C. § 982(a) (1) pr ovides that “[t] he cour t, in impos ing se ntence on a per son 20 convicted of

an off ense in violation of [18 U.S.C. §§ 1956 or 1957] shall order that the per son forf eit to the United States any proper ty , rea l or persona l, involved in such offe nse, or a ny proper ty trac eable to such proper

ty .” 15 re tur ne d onAugus t 10 , 200 4, a dde d an a ddi tio na l c ount f or c onsp ir ac y

to co m m it
m one y launde ri ng, 18 U
. S. C. § 19 56( h) , and a f or fe iture pr ovi sio n. I n to ta l, 19 20 E dw ar ds w as c harg ed

w ithe igh ty -thr ee c ri m ina l of fe nse s. Edwar ds pl edno t g ui lt y

to all co un ts an d e le ct edto st an d t ria l b efo re a ju ry . Pr ior to tr ia l, he f

ile d tw o m oti ons in l im ine that are a t i ssu e in this appe al
. T he fi rs t so ught

the e xc lus ionof

doc um en ts the G ove rn m en t ob ta ine d f ro m the Se curi tie s and E xc hange Co m m iss ion( “ SE C” ) inv es tig at ionon the the or y that the SE C and the U nit ed

S ta te s A tto rn ey ’ s O ff

ic e ha d c ondu ct ed

aj oin t and c oll usi veTh e his tor y of thi s inve sti g atio n a

nd the su bs e qu e nt l e g a l pr oc e e din g s a re de ta ile d in 21 SEC v. ET S Pay

ph on e s, Inc ., 30 0 F .3 d 1 28 1 ( 11 th C ir . 2 00 2) , r e v’ d, 54 0 U .S. 38 9, 12 4 S. Ct. 892, 157 L . Ed. 2d 813 (2004), a nd SEC v. ETS P ay

phones, Inc., 408 F .3d 727 (11th Cir. 2005). Rul e 29 (a ) s tate s: 22 Be fore Submis sion to the J ury . After the g overnme nt closes its evidence or af ter the close of

all the evidenc e, the c ourt on the def endant’ s motion m ust enter a jud g me nt o f a c qu itt a l of

any of fe ns e fo r whic h th e e vid e nc e is i ns uf fi c ie nt t o su sta in a c onvic tio n. Th e c ourt

may on its own c on sid e r whe the r t he e vid e nc e is insufficient to sustain a c onviction. I f the c ourt denies a motion for a judg ment of acquittal at the c lose of the g overnme nt’s evidenc e, the de fenda nt may offe r evidenc e without havingrese rved the rig ht to do so. Fe d. R. Crim. P . 29(a)
. 16 inv es tig at ionint o E dw ar ds’ s bu sin es s op er at ion s. T he se co nd m oti on a ske d th e 21
co urt t o in voke the “ se que str at ionr ule ” an d e xc lud e se ve ra l G ove rn m en t witnesses from

the courtroom

prior to their taking the witness stand
. The district
co ur t d en ie d b ot h m ot io ns . E dw ar ds’ s tr ia l be gan onS ep te m be r 12, 200 5. A ft er

the G ove rn m en t pr es en te d it s c as e in c hie f, E dw ar ds m ove d th e dis tr ic t c ourt t o e nte r a j udge m en t of acquittal on all count s pursuant to Rule 29(a) of the Federa l Rules of Crim inal Pr oc ed ur e. T he c ourt de nie d th e m oti on, and E dw ar ds p ro ce ed ed to put on a 22 de fe nse . A ft er

r es tin g hi s c as e, E dw ar ds r en ew ed his Ru le 29( a) m oti on. T he court denied it. T he Governm ent then presented its rebuttal, after which both sides
re ste d and the pr es en ta tio n of e vid en ce c los ed
. A t this poi nt, E dw ar ds d id n ot17

ren ew hi s m ot io n fo r acq ui tt al , andth e co ur t s ub m it te d t he cas e to th e jury. T he j ur y r ec ei ve d th e ca se in the a ft er noonof S ep te m be r 28 and r et

ur ne d it s ve rd ic ts the ne xt m or

nin g, f ind ing E dw ar ds g uil ty

on a ll co unt s. O n F eb ru ar

y 23, 200 6, the dis tr ic t c ourt se nte nc ed E dw ar ds t o on e pr iso n se nte nc e of

156 m onths and o rd er ed him to pay r es tit uti on t o 10 , 662 inv es tor s in the a m ount

of $32 0, 397, 837 an d f

or fe it se ve ra l pr ope rt ie s th at w er e inv olv ed

in the of fe nse s to the U nit ed

S ta te s. T his appe al f

oll ow ed
. E dw ar ds p re se nts six arg um en ts; f our r el at e to h is c onvi ct ion s, tw o to his
se nte nc e. R eg ar din g hi s c onvi ct ion s, he f ir st s ee ks a

j udgm en t of

a cquitta l ona ll
co unt s onthe gr ound

that the dis tr ic t c ourt e rr ed in de ny ing his m oti on f

or ju d g men to f

a c qu i t t a l mad e a f

t e r h e r e s t e dh i s d e f

e n s e . Ne x t , an da l t e rn a t i v e l y, E dw ar ds s ee ks a

ne wtr ia l onthr ee gr ound s: ( 1) the dis tr ic t c ourt de nie d hi m af ai r tr ia l and the abil ity

to co nf ro nt s ev er al pr ose cu tio n w itn es se s, in vio la tio n of his Fi fth and S ixth A m en dm en t r igh ts, w he n it r ef use d to inv oke the F ed er al Ru le of E vid en ce 615 se que str at ionpr ovi sio n and p er m itt ed the w itn es se s to r em ai n inthe
co urtr oom

and l ist ento the te sti m ony be fo re the y

too k th e stand t o te sti fy ; ( 2) the
co urt e rr ed

in de ny ing his m oti on t o su ppr es s c er

ta in d oc um en ts h e subm itt ed to th e S E C du r i n g i t s i n v e s t i g a t i o no f th e E T S s a l e an dl e a s e - b a c kp r o g r a m – doc um en ts the U nit ed

S ta te s A tto rn ey ’ s O ff

ic e la te r obt ai ne d f

or use in theEdwar ds also argues that the c umulative eff ect of these thre e er

rors de nied him his due 23 proce ss rig ht to a fair tr ial. As our discussion of his claims of trial e rror reve als, no err or oc c ur re d. Con se qu e ntl y , h e wa s n ot d e nie d a fa ir tr ia l. Edwar ds could have moved the district cour t for judg ment of ac quittal within s even 24 day s after the jury verdic t, see F ed. R. Crim. P. 29(c), but he fa iled to do so. 18 pr ose cu tio n of

thi s c as e; and ( 3) the c ourt’ s j ur y ins tr uc tio ns c onstru ct ive ly
am en de d th e ind ic tm en t. 23 E dw ar ds c ha lle nge s hi s se nte nc e on the gr ound s th at ( 1) the c ourt e rr ed

in
ca lc ulatin g th e am ount

of f unds inv olv ed

in the m one y

launde ri ng c ount s, and ( 2) the c ourt’ s r es tit

uti on o rd er

w as e nte re d invio la tio n of his S ixth A m en dm en t r igh t to a jury det erm in at io n o f th e el em en ts of h is off en se s. W e co ns id er fi rs t Ed ward s’s ar gu m en ts co nc ern in g h is co nv ic ti on s. II. A. E dw ar ds c ont en ds tha t the dis tr ic t c ourt e rr ed in de ny ing his m oti on f

or j udgm ent of acquittal m ade af ter he r ested his defense. A s we note above, E dw ar ds f

ai le d to r en ewhis m oti on f or j udgm en t of

a cquitta l at the c los e of

a ll of the e vid en ce a s r equir ed

by Ru le 29; he the re fo re f

ai le d to pr es er

ve his r igh t t o ch al le nge the suf

fi ci en cy of the e vid en ce . E dw ar ds arg ue s th at he pr ope rl y 24 pr es er ve d hi s ob

j ec tio n by

m ovi ng f or aj udgm en t of

a cquitta l a ft er

r es tin g hi s ca se . T ha t i s, he c ont en ds tha t this pr es er ve d hi s ob

j ec tio n to the suf

fi ci en cy of the19

ev ide nc e an d th at

Ru le 29( a) did

not r equir e him

to re ne whis m oti on at the c los e of all the evidence. W e disagree. T he drafter s of the Rule plainly contem plated that i n th e ev en t, a s he re , the de fe ndant p ut o n a c as e an d th e pr ose cu tio n presented rebuttal evidence, the district court would on ly be required to consider the sufficiency

of the evidence if the def endant m oved for a j udgm ent of acquittal at “ the c los e of

a ll the e vid en ce . ” S ee U nit ed S ta te s v. Ri gsby , 943 F
. 2d 6 31, 643
- 44 (6t h C ir. 1 99 1)
. Although Edw ards failed to preser ve his objection to the court’ s Rule 29(a)
ru lin g, he is not

f or ec los ed f ro m havin g th is c ourt r ev ie wthe e vid en ce that l ed to the j ury ’ s verdicts. I f w e find “ a m anifest m iscarria ge of j ustice – if the evidence
on a ke y e le m en t of

the of fe nse is so t enuous that a c onvi ct ionw oul d be sho ck ing ”
– w e w ill se t a sid e a co nvi ct ion
. U nit ed S ta te s v. Bi ch se l, 156 F
. 3d 1 148, 115 0 (1 1thCi r. 1998 ) (quot at ionom itt ed ). W e tur n, the n, to the que sti on o f w he the r the
ar gum en ts E dw ar ds p re se nts e sta bli sh tha t a

m an if es t m isc ar

ri ag e of j ust ic e w oul d
oc cu r if we affi rm

th e d is tri ctco ur t’s jud gm en t. E dw ar ds f

ir st arg um en t a ddr es se s th e w ir e fr au d c onvi ct ion s. H e que sti ons w he the r the e vid en ce e sta bli she d th at

he int en de d to de fr au d hi s in ve sto rs ; a bse ntI f t he wi re fr a

ud c onvic tio ns are vu lne ra

ble and mus t be se t a sid e fo r l a c k o f i nte nt t o 25 defr aud, Edwa

rds submits that we must rever se his money launder ing c onvictions since they depend on the validity

of his wire f

raud c onvictions.

20 such intent , the w ire fr aud convictio ns fail. W e ar e satisfied that the j ury had 25
am ple e vid en ce of

int en t t o de fr au d be fo re it , and h en ce , E dw ar ds’ s w ir e fr au d
co nv ic ti on s s ta nd
. The j ury learned that E dwar ds, w ith full kn owledge that E TS wa s

“ he m or rh ag ing m one y ” an d un ab le to sus ta in i ts o pe ratio ns w ith out ac onst an t influx of inv estm ent capital, a ggressivelycourted both n ewand existing investors with assurances that E TS wa s financially soundand profitable. I ndeed, less than
se ve n w ee ks b ef

or e se ek ing the bankr

upt cy c ourt’ s pr ote ct ionund er

Ch ap te r 11, Edwar ds sen t a l et te r to in ve st or s p ro cl ai m in g t ha t ETS co nt in ue d t o p ro sp er. Mor eo ve r, he ne ve r dis cl ose d to his inv es tor s th at E T S w oul d be una

ble to buy back the pay

phon es, a s required by

its leases, if

a substantial nu m

ber of investors tr igg er ed the buy -b ac k pr ovi sio n. F ro m thi s e vid en ce a lon e, ar at ion al j ur y c oul d de te rm ine that E dw ar ds i nte nde d to de fr au d hi s in ve sto rs . G ive n th e oth er f ac ts recited in part I .A , supra, we find that the Governm ent presented m ore than
s u ff i ci en tev i d en ce t o m ak e o u tth e w i re fr au do ff en s es ; th u s , a ff

i rmin g Ed wa rd s ’s
co nv ic ti on s fo r th os e o ffen se s wo ul d n otres ul t i n am is carr ia ge of ju st ic e. Ne xt, ac cording to Edwar ds, his convictio n for conspiracy to com m it m oneyTo convict Edwa rds on the money

launder ing c onspiracy

char g e, the Gove rnment had 26 to prove that (1) an agree ment exis ted betwe en two or more persons to violate 18 U.S.C. § 1956 or §1957 and ( 2) that Edwa rds knowing ly

and voluntarily

participated in that agree ment. United States v. Sil vestri, 409 F.3d 1311, 1328 ( 11th Cir. 2005). Edwar ds asserts that the G overnme nt fa ile d to pr ov ide su ff

ic ie nt e vid e nc e of

the fi rs t e le me nt. 21 launde ri ng c annot

stand b ec au se the G ove rn m en t f ai le d to e sta

bli sh tha t he conspired with another person to laun der m oney . T he Governm ent’ s posi tion at 26 trial w as that Edw ards conspired with his wife, Evely n Sue E dwar ds, and Joan Sh ep le r, his a ssi stant. A ft er e xam ini ng the tr ia l transc ri pt, how ev er , w e ar e le ft
w ithan a bid ing im pr es sio n th at

a lth oughMr s. E dw ar ds a ssi ste d he r husb an d to

“ launde r” som e of

the pr oc ee ds o f pay

phon e sa le s, f

re que ntl y f or he r ow n be ne fi t, the e vid en ce f

ai le d to e sta

bli sh tha t sh e ac tua lly

c onsp ir ed

w ithhe r husb an d to laun de r th os e p ro ceed s –th atsh e was aware t ha t wh athe was d oi ng was i ll eg al
. Whether E dwar ds was guilty of the conspiracy

offense there fore turns on whether Sh ep le r was im

pl ic at ed
. Cr im ina l c onsp ir ac ie s, be ca use the y are ine vit ab ly

se cr et , are r ar el y es ta bli she d by

dir ec t e vid en ce . T he c as es a cc or din gly tur n onw he the r the re is circum stantial evidence that two or m ore persons conspi red to com m it the crim inal of fe nse . S ee U nit ed

S ta te s v. Me rc er , 165 F
. 3d 1 331, 133 3 ( 11th C ir
. 199 9)
. T he ind ic tm en t a lle ge d th at

E dw ar ds and o the rs c onsp ir ed to use the pr oc ee ds f

ro m the
sa le of the pay phon es ( the “ fr au d pr oc ee ds” ) (1 ) to c ondu ct f inanc ia l transa ct ion s22

with the intent to prom ote the schem e to defra ud; (2) to condu ct financial tr an sa ct ion s w iththe int en t t o c onc ea l and d isg uis e the sourc e, loc at ion , ownership, nature, and control of the proceeds; and (3) to engage in m onetary tra ns act io ns in am ou nt s g reat er t ha n $ 10 ,00 0. A ft er c ar ef ul e xam inatio n of

the r ec or d, w e co nc lud e that the G ove rn m en t proved that Jo an Shepler knowingly acted as a

coconspirator in the m oney launde ri ng s ch em e. T he e vid en ce ind ic at ed that S he ple r w as an in te gr al part of the se nio r m an ag em en t of E T S an d P SA , r eg ularl y

a tte ndi ng b oard

m ee tin gs wher e the financial w oes of the com pany we re discussed and perform ing su ch hi gh lev el tas ks as i nt erv ie win g p ot en ti al ch ie f fi na nc ia l o ffi cer c an di da te s. Sh ep le r se rv ed

a s th e poi nt p er son fo r al l m oni es w ir ed to E T S an d P SAby

it s dis tr ibu te rs , m one y

that w as the n us ed

to supp ort the ope ratio ns s ide of the busi ne ss and m ai nta in the appe ar an ce of via bil ity that a llo w ed

the f ra ud t o co nti nue . A ddi tio na lly , S he ple r co or din at ed ase ri es of

c om ple x w ir e tr an sa ct ion s (m any of w hic h ine xc es s of

$10 , 000) that r out ed

f ra ud p ro ce ed s f

ro m E T S an d PSAthrough the 114 variou s bank accounts con trolled by Edw ards. Beca

use an agreem ent m ay

be proven by

“ inference s from

the conduct of the alleged part ic ipants or

f ro m c ir cum stanti al e vid en ce of asc he m e, ” U nit ed

S ta te s v. Silvestri, 409 F. 3d 13 11, 1328 (11t h Cir. 2005 ) (quotation om itted), the j ury hadRul e 61 5 p ro vid e s a s f oll ow s: 27 At the re quest of a pa

rty the cour t shall order w itnesses excluded so that they cannot he ar the testimony of other w itnesses, and it may make the or der of

its own motion. This rule does not authorize exclusion of (1) a pa rty who is a natura l person, or (2) a n office r or e mploy ee of

a par ty which is not a natura l person de signate d a s it s r e pr e se ntativ e by its atto rn e y , o r ( 3) a

pe rs on wh os e pr e se nc e is shown by a par ty to be essential to the pr esentation of the party ’s ca use, or ( 4) a pe rs on a uth or ize d b y

statut e to b e pr e se nt. Fe d. R. Evid. 615. 23 suf fi ci en t e vid en ce be fo re it to fi nd tha t S he ple r co nspi re d w ithE dw ar ds t o laun de r th e fraudpro ceed s. B. R ule 615 of

the F ed er al Ru le s of

E vid en ce pr ovi de s th at

w itn es se s m ay

be
ex cl ude d f

ro m the c ourtr oom

w hil e a tr ia l i s on goi ng s o th at the y c annot he ar the te sti m ony of oth er w itn es se s. T he r ea son fo r the r ule is obvi ous – to pr ev en t 27
w itn es se s f

ro m “ ‘ ta ilo ri ng’ the ir

te sti m ony

to that of e ar lie r w itn es se s” and t o

“ ai d[ ] in de te ct ing te sti m ony that i s le ss than c an did
. ” G ed er s v. U nit ed S ta te s, 425 U
. S. 80, 87, 96 S
. Ct
. 133 0, 133 5, 47 L
. E d. 2d 5 92 ( 1976 ). R ule 615
re co gni ze s an e xc ep tio n, how ev er , f or “ a pe rs on a

uth or iz ed by statut e to b e pr es en t. ” T he Cr im e V ic tim s’ Ri ght s A ct ( “ CV RA ”) , 18 U
. S. C. § 37 71, pr ovi de s suc h an e xc ep tio n: the vic tim of ac ri m e ha s “ [t ] he r igh t no t t o be e xc lud ed f ro m any . . . pub lic c ourt pr oc ee din g. ” 18 U
. S. C. § 37 71( a) (3 ). T he A ct , tho ugh,Edwar ds does not argue that he pr ovided the district cour t with clear

and convinc ing 28 evidenc e of the likelihood that the victim-witnesses would materia lly alter the ir testimony

if they wer e not seque stered. I

n fac t, he conc edes that the “degree to which these w itnesses may have ‘tailored’ their testimony

to eac h other is not discerna ble from the r ecor d.” Appe llant Br. a t 57. In B onne r v . Ci ty

of Pr ic ha rd , 6 61 F .2 d 1 20 6, 12 09 (1 1th Cir . 1 98 1) (e n b anc ), thi s 29 c ourt a do pte d a s b ind ingpr e c e de nt a ll d e c isi on s o f t he fo rm e r F if

th C ir c uit ha nd e d d own p ri or

to October 1, 1981. 24 au tho ri ze s th e co urt t o e xc lud e a vic tim -w itn es s if it f ind s by c le ar and c onvi nc ing
ev ide nc e that the w itn es s’ s te sti m ony “ w oul d be m at er ia lly

a lte re d if the vic tim he ardot he r te st im on y

at t ha t p ro ceed in g.” Id. Pr ior to the c om

m en ce m en t of

his tr ia l, E dw ar ds m ove d th e dis tr ic t c ourt t o se que ste r al l po te nti al pr ose cu tio n w itn es se s, inc lud ing tho se w itn es se s who pur porte d to be the vic tim s inthe c as e. C iti ng the CV RA , the c ourt de nie d th e m otion as to the victim -w itnesses. In his brief on appeal, Edw ards argues that Ru le 615 is co nst itutio na lly ba se d and tha t the dis tr ic t c ourt’ s in voc at ionof the CV RAto de ny

his m oti on d en ie d hi m

his F if th A m en dm en t du e pr oc es s r igh t t o a fa ir tr ia l and h is S ixth A m en dm en t r igh t of c onf ro ntatio n. T his arg um en t f ai ls 28 fo r one sim

ple r ea son: Ac ri m ina l de fe ndant h as no c onst itutio na l r igh t t o e xc lud e witnesses from

the courtroom
. Mathis v. W ainwright, 351 F. 2d 48 9, 489 (5th Cir. 1965 ); Be ll v. D uc kw orth, 861 F
. 2d 1 69, 170 ( 7thCi r. 198 8)
. W e ac co rd ing ly

29 h o l dth at th e d i s tri ctco u rtco m m i t t edn o ab u s e o f d i s cr et i o ni nd en yin g Ed wa rd s ’s
m ot io n.See supra note 21. 30 T h e d i s tri ctco urtd es cr i b edth es e d o cu m en t s i ni t s M ar ch 2 4 , 2 0 0 5 , o rd er d en yi n g 31 Edwar ds’s motion to suppress the documents in the instant case . In his moti on, Edwar ds repr esente d that he had pr oduced the documents as pa rt of settlement ne g otiations he was having with the SEC. 25 C. O n S ep te m

be r 29, 200 0, e igh te enday s a ft er E T S an d P SAsou ght

r el ie f in the bankrupt cy

court, the S EC brought suit againstET S and E dwar ds in th e U nited St at es D istri ct

Co urt f or the N orthe rnD istri ct

of G eo rg ia , a lle gin g th at

E T S’ s sa le and lease-back of pay

phon es constitu ted the fraudulent sale of unregistered securities in violatio n of feder al securities law s and seeking in j unctive relief. 30 D ur ing the c our se of

the li tig at ion , the c ourt or de re d E dw ar ds t o pr oduc e ce rt ai n docum ents – Edwards’ s personal incom e tax re turns for 1995 through 1999 , an ap pr ai sa l of

c er ta in i nve stm en t pr ope rty , and c onso lid at ed f inanc ia l st at em en ts and
ac co unt ing pa

pe rs pr ep ar ed

by G ro ss C oll ins f

or E T S – and f

ile the m w iththe court under seal. E dwar ds prom ptly com plied with the court’ s order. T he docket 31 sh eetforth e cas e in di cat es th atth ey are s ti ll un de r se al
. E dw ar ds anti ci pa te d th at

the G ove rnm ent m igh t atte m pt t o us e co pie s of these docum ents in prosecuti ng the ins tant case and m oved to su ppress suchIn his brief to this court, Edwa rds re prese nts that his mot ion to suppress included a 32 “leng thy decla ration” he submitt ed to the district cour t on October

11, 2000, in oppositi on to the SEC’s moti on for a

preliminary

injunction. I n rea ding E dwar ds’s motion to suppress, we find no me nti on of the de c laratio n. No r d oe s th e dis tr ic t c ourt , in its Ma rc h 2 4, 20 05 or de r m e nti on thi s document. Edwa

rds’s brie f ac knowledg es such lac k of explicit refer ence to the decla ration and sug g ests that we should still consider it beca use a f air re adingof his motion to s uppress indicates that the motion was ref

err ing to a

ny evidenc e the United States A ttorney acquir ed fr om the SEC. At trial, the prose cutor used E dwar ds’s dec laration to im peac h Edwar ds while he wa s testifying in his own de fense . His attorney objected to suc h use. The obje ction, which wa s based on the c ourt ’s ins tr

uc tio n a s to the mann e r i n whic h e xhibi ts w e re to b e ide nti fi e d, wa s me ri tle ss. Edwar ds’s motion to suppress did not cite these Fif th Amendment provisions as the 33 bases f or re lief. Those c itations appear for the f irst time in his brief on a

ppeal. Appe llant Br. at 66. The motion stated that the duplicate documents should be suppre ssed for this re ason: Any evidenc e that the Gove rnment re ceive d from the SEC from SEC settlement ne g oti atio ns or

pr oc e e din g s, inc lud ingtho se fi le d b y [the dis tr ic t c ourt ] und e r s e a l sh ou ld be excluded fr om presentation by the Gover

nment, as this evidence was obtaine d by the Go ve rnme nt i n b a d f

a ithand c ontr ary to t his Court ’s pr e c e de nt. 26 dupl ic at es . E dw ar ds r ep re se nte d th at the S E C f

ile d su it ag ai nst

him f or the 32 pur pose of a cquir ing e vid en ce f

or the U nit ed

S ta te s A tto rn ey ’ s us e in the ins tant prosecution , and had th e SE C inform ed him that it had filed suit for that purpo se, he w oul d no t have pr oduc ed the doc um en ts. S uc h ata ct ic , he arg ue d, sm ac ke d of
co llu sio n and i nf

ri nge d hi s r igh t un de r the F if th A m en dm en t’ s D ue P ro ce ss C lause an d th e A m en dm en t’ s pr ote ct iona ga ins t se lf -i nc ri m inatio n. T he c ourt de nie d hi s 33
m ot io n i n a n o rd er en te redon Marc h 2 4, 2 00 5. Edw ards argues that the docum ents sho uld have been sup pressed because

“ the S E C p ro vid ed

the se doc um en ts i n ba d f ai th t o th e U nit ed

S ta te s A tto rn ey

to facilitate [ his] crim inal prosecution
. . . afte r the [S EC , E TS and Edw ards] rea chedThe quoted la nguag e, take n from the district cour t’s Marc h 24 order , expresses 34 Ed wa rd s’ s r e a so n f

or su pp re ssi ngthe do c ume nts . 15 U.S.C. § 77t(b) provides that the SEC “may transmit such evidenc e as ma y be 35 available conce rningsuch ac ts or prac tices [that constitut e a violation of the law] to the Attorney Gene ral who ma

y , in his discretion, institute the nec essar y criminal proc eeding s.” 15 U.S.C. § 78u(d)( 1) provides that the SEC “may transmit such evidenc e as ma y be ava ilable conc erning such ac ts or prac tices as may constitute a violation of any provision of this chapter

or the rule s or regulations thereunde r to the Attorney Gene ral, who ma

y , in his discretion, institute the nec essar y criminal proc eeding s.”

27 anim pa sse w ithr es pe ct

to the se ttl em en t of

the S E C c as e. ” T he c ourt f ound no 34
m er it in E dw ar ds’ s m oti on t o su ppr es s be ca

use E dw ar ds h ad

pr es en te d
no e vid en ce of

ba d f ai th b y the gov er

nm en t w ithr es pe ct

to the doc um en ts [at i ssu e]
. T he ta x r et

ur ns . . . w er e re ad ily

a cc es sib le by

the gov er

nm en t fr om the be gin nin g of

thi s c as e, w ith out

r eg ar d to the [ se al ing ] or de r in the SE C case. T he other docum ents . . . we re produced pursuant to a grand jury subp oe na . [ E dw ar ds] ha s no t c ont es te d th e fa ct that a ll the doc um en ts w oul d have been obtainable (or we re obtained) by the governm ent independ ent of .

. . the se al ing or de r in the S E C c as e. T he re is sim ply no e vid en ce he re of any bad faith or im

proper exploitatio n of the SE C case by the United State s Att orne y forth e p ur

po se of d ev el op in g i ts cri m in al pro se cu ti on . W e fi nd n o e rr or

in the dis tr ic t c ourt’ s r

uli ng. T he S E C i s auth or iz ed by statut e, 15 U
. S. C. §§ 7 7t( b) , 78u (d ), to pr ovi de e vid en ce of m isc ondu ct

to the 35 D ep ar tm en t of Jus tic e. Mo re ove r, the re is nothin g inthi s r ec or d th at sug ge sts , m uc h le ss e sta

bli she s, that the S E C and the U nit ed S ta te s A tto rn ey

som eh owIn support of his argument that the district court e rre d, Edwar ds primarily relies on two 36 district court dec isions, United St ates v. Scrushy , 366 F. Supp. 2d 1134 (N.D . Ala. 2005), a nd United States v. Stringe r, 408 F . Supp. 2d 1083 (D. Ore . 2006), over ruled by United States v. Stringe r, No. 06-30100, 2008 WL 901563 (9th Cir. Apr. 4, 2008). In Scrushy , the district court suppressed the introduction of the def endant’ s SEC depositi on at his criminal trial and dismissed the per jury counts predic ated on that testimony . 366 F. Supp. 2d at 1138-40. In Stringe r, the district court dismissed the defe ndants’ sec urities fra ud indictments beca

use the United States Attorney had used the guise of an SEC investig ation to conce al its interest in prosec uting the de fe nd ants . 4 08 F . Su

pp . 2 d at 10 85 -8 6, 90 . B oth of the se c a se s a

re dis tin guis ha

ble a s th e ir holdings re st on a showingof prose cutorial misconduct. 28 co llu de d to de ny

E dw ar ds h is c onst itutio na l r igh ts. 36

D. As his final challenge to his convi ctions, Edw ards contends th at the district
co urt c onstru ct ive ly

a m en de d th e ind ic tm en t i n it s in str uc tio n to the j ur

y a s to the de fi nit ionof

a“ Po nz i sc he m e. ” T he a m en dm en t, he sub m its , a llo w ed the j ur y to
co nv ic t h im

of wi re fra udwit ho utfin di ng th athe act edwit h t he in te ntto de frau d.

“ Aj ur y ins tr uc tio n th at

c onstru ct ive ly

a m en ds a

gr an d j ur y ind ic tm en t
co nst itute s pe r se r ev er sib le e rr or be ca use suc h an in str

uc tio n vi olate s a de fe ndant’ s [ Fi fth A m en dm en t] r igh t t o be tr ie d ononl y tho se c harg es pr es en te d in
a gr an d j ur

y ind ic tm en t. ” U nit ed

S ta te s v. Canc el lie re , 69 F
. 3d 1 116, 112 1 ( 11th Ci r. 199 5)
. Ac onstru ct ive “ am en dm en t oc curs w he n th e es se nti al e le m en ts o f the of fe nse . . . are a lte re d to br oa de n th e poss ibl e ba se s f or c onvi ct ionbe y ond w ha t i s contained in th e indictm ent.” United State s v. K eller, 916 F.2d 628, 634 (11t h Cir. 1 9 9 0 ). To d et erm i n e w h et h ererro r h as o cc u rr ed , we co n s i d erth e c o u rt ’s29

instructio ns as a whole, rea ding them in ligh t of the trial transcript. Se e U nited St at es v. D el ev ea

ux, 205 F
. 3d 1 292, 129 6 ( 11th C ir
. 200 0) ; Unit ed S ta te s v. Artrip, 942 F. 2d 15 68, 1570 (11t h Cir. 1991 ). Co nvi ct ionund er

the w ir e fr au d st at

ute r equir es that the de fe ndant ( 1) int en tio na lly

part ic ipate d inasc he m e or art if ic e to d ef ra ud anothe r pe rs on o f
m one y or pr ope rty and ( 2) use d or

c au se d th e use of

int er state w ir es to ex ec ute the
sc he m e o r art ifi ce. Uni te d S ta te s v . W ard , 48 6 F .3d12 12 , 12 22 (11 th Cir . 20 07 ). T he f ir st e sse nti al e le m en t of

the of fe nse , m en s r ea , w as spe lle d out i n th e ind ic tm en t thusl y : Edw ards did kno wingly

and willfully

devise and intendto devise a sc he m e an d art if

ic e to d ef ra ud i nve sto rs thr oughthe sa le of c oin
ope rate d pay

phon es and t o ob ta in m one y f ro m tho se inv es tor s by m eans o f fa lse and f

ra udul en t pr et en se s and r ep re se ntatio ns, and b y om iss ion s of

m at er ia l f

ac ts, w el l kn ow ing and h av ing r ea son to k now that su chpr et en se s and r ep re se ntatio ns w er e an d w oul d be f al se and fr au dul ent whe n m ad e an d c au se d to be m ad e an d th at sa id o m iss ion s w er e an d w oul d be m at er ia l. W e nowtur

n to the j ur

y ins tr uc tio n a t i ssu e to d et er

m ine w he the r it am en de d th e ind ic tm en t by

e ff ec tiv el y e lim inatin g th e m en s r ea e le m en t f

ro m the w ir e fr au d offense. Ref

erring to Counts One through Fifty -seven, the c ourt inform ed the j ury as f oll ow s: T itl e 18, U nit ed

S ta te s C ode , S ec tio n 13 43 m ak es it af ed er al c ri m e or of fe nse f or any one to use int er state w ir e co m m uni catio ns f

ac ili tie s in30

carr y ing out asc he m e to d ef

ra ud. T he de fe ndant c anbe f ound gui lty of that of fe nse onl y

if a ll of the f oll ow ing f

ac ts are pr ove d be y ond a re as ona ble doubt. F ir st, that the de fe ndant k now ing ly de vis ed or part ic ipate d inasc he m e to d ef ra ud o r fo r obt ai nin g m one y or pr op ert y by m ean s o f fal se pre te ns es , rep res en ta ti on s, o r pr om is es . Second, that the f

alse pretenses, repre sentations , or prom ises related to a m at er ia l f

ac t. T hir d, that the de fe ndant d id s o w ill fu lly and w ith the int en t t o de fr au d and, f ourth, that the de fe ndant transm itt ed or c au s e dt o b e tr an s mi t t e db y w i r e i ni n t e r s t a t e c o mme r c e s o me co m m uni catio n f

or the pur pose of e xe cu tin g th e sc he m e to d ef ra ud. T he c ourt the n w en t onto expoun d up on the m eanin g of se ve ra l ke y

te rm s to he lp the j ur y be tte r unde rs tand the e le m en ts o f the w ir e fr au d of fe nse , be gin nin g w ith

“ schem e to defra

ud”: T he te rm sc he m e to d ef

ra ud i nc lud es any

plan or c our se of a ct ion int en de d to de ce ive or

c he at som eo ne out

of m one y or pr ope rty by m eans o f fa lse or

f ra udul en t pr et en se s, r ep re se ntatio ns, or pr om ise s. N ow , in thi s c as e the gov er nm en t a lle ge s th at

the de fe ndant o p e r a t e daP o n z i s c h e me w h i c h d e f r au d e di n v e s t o r s . AP o n z i s c h e me is a fra udul ent investm ent schem e in which “profits” to invest ors[] are not c re at ed by the suc ce ss o f the und er ly ing bus ine ss v en tur e, but instead are derived f

raudulentlyfrom

capital contributio ns of other inv es tor s. I n aty

pic al P onz i sc he m e a co rp or at ionope rate s and continu e[s] to operate at a loss. T he corporation gives th e appearance of be ing pr of

ita ble by obt ai nin g ne winv es tor s and u sin g th ose inv es tor s to pay

f or the hig h r et

ur ns p ro m ise d to e ar lie r inv es tor s. The e ffec t of such a schem e is to put th e corporation further an d f urthe r int o de bt b y

inc ur ri ng m or e an d m or e lia

bil ity , but to giv e the f al se appe ar an ce of

pr of ita bil ity in or de r to o bta in n ewinv es tor s. E dw ar ds arg ue s th at

by de fi nin g aP onz i sc he m e, the c ourt c onstru ct ive ly
expande d th e ind ic tm en t by r em ovi ng the e le m en t of c ri m ina l i nte nt and a llo w ingThe district cour t entere d a for feiture order as par t of Edwar ds’s sentenc e. He does not 37 challeng e that orde r in this appeal. It theref ore r emains intact. 31 the j ur y to inf er int en t i f it fo und that the E T S sa le and l ea se -b ac k pr ogr am w as a Ponzi schem e. W e disagree. T o begin, the openin g paragraph of the j ury instructio n clearly

states that Edw ards could onl y be found gu ilty

if he possessed the “ intent to defra

ud.” What Edw ards cites as off ending language did n ot speak to the e le m en t of

int en t at a ll. R athe r, the dis cu ssi on o f a Po nz i sc he m e m er el y served to define the particular ty pe of “ schem e to defra

ud” that Edwards was al le ge d to have pe rp etrate d. Mo re ove r, the c ourt w en t onto re em pha siz e the m en s rea requirem ent in defining what it m eant to “ act w ith an intentto defraud”: N ow , to ac t w ith“ int en t t o de fr au d” m eans t o a ct kno w ing ly

and w ith the spe ci fi c int en t t o de ce ive or c he at som eo ne , or din ar ily

f or the pur pose of c au sin g so m e fi nanc ia l l oss to an oth er or br ing ing about fi nanc ia l ga in t o on e’ s se lf
. . . . Wha t m

ust be pr ove d be y ond a re as ona ble doubt i s th at

the de fe ndant, w iththe int en t t o de fr au d, know ing ly

and w ill fu lly

de vis ed , int en de d to de vis e, or part ic ipate d in a sc he m e to d ef

ra ud s ubst an tia lly

the sam e as the one a lle ge d inthe in di ct m en t . . . . A s th e j ur y ins tr uc tio ns d id n ot a lte r the m en s r ea e le m en t of

the w ir e fr au d offense, a constructive am endm ent did no t occur. III
. W e do n ot r ea chE dw ar ds’ s c ha lle nge s to his se nte nc e be ca use , w iththe exception of the dist rict court’ s restitution order, we m ust vacate his sentence 37There is nothing in the transc ript of the sente ncinghear ing indica ting that the c ourt 38 imposed the 156 month prison term for the c onspiracy offe nse. The pre sentenc e investig ation repor t states that the maxim um incarc eration penalty for 39 wire f raud is twenty

y ear s’ imprisonment. The twenty -year term wa s provided by

a 2002 ame ndme nt t o th e statut e . A c t of July 30 , 2 00 2, Pub . L . 1 07 -2 04 , T itl e IX, § 9 03 (b ), 11 6 St at. 745, 805. The ter

m in effe ct at the time Edwa rds committed the wire fra ud offe nses was f

ive y ear s (thirty

y ear s if the violation affe cted a financ ial institution). 18 U.S.C. § 1343 (2000) We of course intimate no view as to the sente nces that would be appr opriate. 40 32 and rem and the case for a newsentencing hearing. A lthou gh Edwards was convicted on fifty -seven counts of wire f raud, tw enty -five counts of m oney laundering, and one count of conspiracy to com m it m oney

laundering, he rec eived onl y one se nte nc e – apr iso n te rm of 156 m onths. T he onl y

sin gle of fe nse f or w hic h he c oul d have r ec ei ve d apr iso n te rm of that l en gthis the c onsp ir ac y to launde r m one y

of fe nse . T he m ax im

um inc ar ce ratio n pe na lty

f or that of fe nse is 38 tw en ty y ears ’ im pr iso nm en t. 18 U
. S. C. § 19 56 ( 2000 ). T he m ax im um inc ar ce ratio n pe na lty

f or m one y launde ri ng i s te n y ears , and f or w ir e fr au d f

ive y ears. 18 U. S. C. § 195 7 (2000); 18 U. S. C. § 134 3 (2000). O n rem and, the court

39
m ust im pose ase nte nc e fo r ea chc ount of c onvi ct ion
. 40 E dw ar ds c ha lle nge s th e re sti tut ionor de r on the gr ound that Unit ed

S ta te s v. Bo oke r, 543 U
. S. 220 , 125 S
. Ct
. 738 , 160 L
. E d. 2d 6 31 ( 2005 ), r equir es that the fa ct ua l pr ed ic at e fo r re sti tut ionbe f ound by the j ur y be y ond a re as ona

ble doubt (unle ss tri al by

j ur y is w ai ve d or

the de fe ndant a dm its to the pr ed ic at e)
. E dw ar ds33

ac know le dge s inhis br ie f, how ev er , that hi s c ha lle nge is fo re cl ose d by apr ior decision of thi s court, United States v. W illiam s, 445 F. 3d 13 02 (11th Cir. 2006 ), abrogated on oth er grounds byUnited State s v. L ew is, 492 F.3d 1219 (11t h Cir. 20 07 ). IV. Fo r th e fo reg oi ng reas on s, we AFFI RM Ed ward s’s co nv ic ti on s, VACATE Edwar ds ’s sen te nc e, wit h t he ex cep ti on of t he res ti tu ti on an d fo rfei tu re o rd ers , an d R E MA

N D the c as e fo r a ne wse nte nc ing he ar ing
. SO ORDERED.