IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

 

No. 96-50958

 

UNITED STATES OF AMERICA

Plaintiff-Appellee,

versus

TAMMY DENISE MORROW; LARRY WAYNE MEINZER;

ALICE MARIE BARBER, also known as Alice 

Marie Turner, also known as Alice Marie 

Rogers; SAMANTHA GRAHAM DAVIS, also known 

as Sammie Davis, also known as Samantha 

L. Davis, also known as Sammie L. Davis; 

ARNOLD GENE TROUT, also known as Gene 

Trout; MASON LONG; DARRELL PAUL FREEMAN, 

also known as Paul Freeman; JAMES MICHAEL 

CALDWELL, also known as Mike Caldwell; 

PATRICK GENE MALMSTROM, also known as Rick 

Malmstrom; BILLY WAYNE COX, JR., also known 

as Billy Cox; MAX WAYLAN CAIN, SR.

Defendants-Appellants

 

Appeals from the United States District Court

for the Western District of Texas

 

May 25, 1999

Before HIGGINBOTHAM, JONES, and WEINER, Circuit Judges.

PER CURIAM:

Eleven defendants appeal convictions of conspiring and aiding

and abetting bank fraud in the financing of A-1 mobile homes. The
2

central purpose of the scheme was to obtain bank financing for

customers who had not made adequate cost down payments. We affirm

all the judgments of conviction but vacate the sentence of eight

defendants and remand for resentencing. 

I 

Count 1 of the indictment charged that from about November 3,

1986 until about February 1, 1990 the defendants conspired to

commit bank fraud in violation of 18 U.S.C. §§ 371 and 1344(2).

The indictment listed 43 overt acts relating to various mobile home

sales transactions by the defendants. These overt acts were also

alleged under Counts 2 through 13 in the indictment as substantive

counts of bank fraud against each of the defendants. Count 14

alleged that Mason Long committed bank fraud in an effort to obtain

financing for the purchase of mobile homes, in violation of 18

U.S.C. §§ 371 and 1344(2). Count 15 alleged that Mason Long, Billy

Cox, and Max Cain participated in the financing bank fraud scheme

in violation of 18 U.S.C. §§ 371 and 1344(2). Count 16 alleged

that Billy Cox and Max Cain defrauded a bank of $15,000 to start a

company called “Slow and Easy,” in violation of 18 U.S.C. §§ 371

and 1344(1). 

The defendants were tried together and all were convicted of

one or more counts. We summarize the convictions:

Alice Barber, an A-1 sales representative and manager in

Bryan, Texas, was convicted of conspiracy to commit bank fraud

(Count 1) and aiding and abetting bank fraud (Count 4). 
3

Max Cain, the vice-president of Home Savings, Banc Home, and

HSA Mortgage Company, was convicted of bank fraud (Count 1) and two

counts of bank fraud and aiding and abetting bank fraud (Counts 2

and 15). 

James Caldwell, an A-1 sales representative in Nacogdoches,

Texas, was convicted of conspiracy to commit bank fraud (Count 1)

and aiding and abetting bank fraud (Count 10).

Billy Cox, owner of A-1 mobile home franchises, was convicted

of bank fraud (Count 1) and two counts of bank fraud and aiding and

abetting bank fraud (Counts 3 and 15).

Sammy Davis, an A-1 sales representative in Bryan, Texas, was

convicted of aiding and abetting bank fraud (Count 7).

David Freeman, an A-1 sales representative in Bryan, Texas,

was convicted of conspiracy to commit bank fraud (Count 1) and

aiding and abetting bank fraud (Count 8).

Mason Long, partner to Billy Cox, was convicted of bank fraud

(Count 1) and two counts of bank fraud and aiding and abetting bank

fraud (Counts 14 and 15).

Pat Malmstrom, an A-1 sales representative in Waco, Texas, was

convicted of conspiracy to commit bank fraud (Count 1) and aiding

and abetting bank fraud (Count 12).

Tammy Morrow, an A-1 sales representative in Nacogdoches,

Texas, was convicted of aiding and abetting bank fraud (Count 11).

Larry Meinzer, an A-1 sales representative in Waco, Texas, was

convicted of aiding and abetting bank fraud (Count 13).

Gene Trout, an A-1 sales representative in Bryan, Texas, was

convicted of conspiracy to commit bank fraud (Count 1) and aiding

and abetting bank fraud (Count 9).

II

Bank fraud under 18 U.S.C. § 1344 requires proof beyond a

reasonable doubt that the defendants knowingly executed or

attempted to execute "a scheme or artifice – (1) to defraud a

financial institution; or (2) to obtain any of the moneys, funds,
4

credits, assets, securities, or other property owned by, or under

the custody or control of, a financial institution, by means of

false or fraudulent pretenses, representations or promises." To

establish a conspiracy violation under 18 U.S.C. § 371, the

Government had to prove beyond a reasonable doubt: "(1) an

agreement between two or more people, (2) to commit a crime against

the United States, and (3) an overt act by one of the conspirators

to further the objectives of the conspiracy." United States v.

Dupre, 117 F.3d 810, 820 (5th Cir. 1997) (holding evidence of

cooperative effort sufficient to support convictions for conspiracy

to commit bank fraud), cert. denied, --- U.S.---, 118 S. Ct. 857

(1998). A defendant may be convicted for aiding and abetting the

commission of a crime if he was “‘associated with a criminal

venture, participated in the venture, and sought by his action to

make the venture succeed.’” United States v. Parekh, 926 F.2d 402,

406 (5th Cir. 1991) (quoting United States v. Holcomb, 797 F.2d

1320, 1328 (5th Cir. 1986)). 

III

The Government urges that it proved that Cox, Long, and Cain

directed a “far reaching scheme to fraudulently obtain the funds of

the Bank.” Billy Cox directed the activities at the various A-1

lots, and Max Cain worked to keep the fraudulent loan practices

hidden. Mason Long delivered the mobile homes and instructed

customers not to tell the bank that their reported down payments

had been inflated. The other defendants, managers and sales
5

representatives from different lots, collected information from

customers with the knowledge that the information would be used to

prepare fraudulent loan packages for the sale of mobile homes.

Defendants Max Cain, James Caldwell, Samantha Davis, David

Freeman, Mason Long, Pat Malmstrom, Tammy Morrow, Larry Meinzer,

and Gene Trout argue insufficiency of the evidence. We apply the

familiar standard, asking whether a "reasonable trier of fact could

have found that the evidence established guilt beyond a reasonable

doubt." United States v. Mergerson, 4 F.3d 337, 341 (5th Cir.

1993). 1

Max Cain argues that there is insufficient evidence to support

his conviction of Count 2; that while he may have violated 18

U.S.C. § 656 (theft, embezzlement, or misapplication by a bank

officer) by selling mobile homes out of trust (pocketing the loan

repayment), there was no evidence that he defrauded the bank or

misrepresented any facts to it. Cain also argues that the evidence

was insufficient to support his conviction to aid and abet bank

fraud in Counts 2 and 15 because the Government did not prove that

he shared any criminal intent with Richard White or Billy Cox,

purchasers of trailers. 

The Government produced evidence showing that Cain actively

and knowingly participated in the scheme to defraud the bank by

hiding A-1's fraudulent practices. It urges that Max Cain

instructed Richard White to falsely complete various financing

forms used in sales of mobile homes. The evidence also showed that
6

Cox, Cain, and Long worked together to obtain money to purchase a

set of mobile homes under a floor plan. The request for funds

exceeded the actual cost of the homes. The three split the excess

money. Viewing this evidence in the light most favorable to the

Government, a rational jury could conclude beyond a reasonable

doubt that Max Cain conspired and aided and abetted the commission

of such fraud.

James Caldwell was a sales representative in Nacogdoches from

February 4, 1988 until September 1, 1988. He argues that the

evidence against him was insufficient to support his convictions;

that the Government failed to prove a single conspiracy as alleged

in the indictment, or that he joined any conspiracy.

The Government presented evidence showing that Caldwell

participated in the preparation of false down payments and credit

applications. For instance, Tim Howard, the sales manager at the

lot at which Caldwell worked, testified that Caldwell reported

document falsification to him pertaining to sales Caldwell made

because Howard would handle any calls from the bank regarding the

applications. Janna Kimbrough also testified that Caldwell

participated in the scheme to defraud the bank. Viewing this

evidence in the light most favorable to the Government, a rational

jury could conclude beyond a reasonable doubt that James Caldwell

conspired and aided and abetted the commission of fraud.

Billy Cox contends that the evidence was insufficient to prove

a violation of 18 U.S.C. § 1344(2) in Count 15 pertaining to 16
7

mobile homes purchased from the Stark Brothers under a bank floor

plan, a plan for financing of mobile homes. Cox argues that this

court has held that § 1334(2) requires “a material

misrepresentation to the bank.” United States v. Campbell, 64 F.3d

967, 975 (5th Cir. 1995). He asserts there were no

misrepresentations. He admits funds may have been misapplied

contrary to 18 U.S.C. § 656, or that there was evidence of a scheme

to defraud a financial institution, prohibited by § 1334(1). 

The Government accepts Cox’s legal reasoning regarding any

variance between the indictment and the proof at trial. The

indictment alleges that Cox, Cain, and Long lied about the actual

cost of the floor plan in order to split the excess loan proceeds.

The Government’s evidence, however, did not demonstrate that these

defendants lied about the cost of the 16 mobile homes purchased

from Stark Brothers. It does show that the bank loaned $122,899,

which was 60% of the wholesale value, otherwise known as N.A.D.A.

cost of the homes, and not $93,176, the dealer cost amount. Bank

policy required loans be made at the lower of these two amounts. 

Specifically, Kenneth Starks of Starks Brothers testified that

he sold 16 mobile homes to A-1 for $93,176, the dealer cost. The

testimony of Shirley Henderson also indicates that the cost of

these homes was $93,176 and that 60% of the N.A.D.A. wholesale

price (approx. $205,000) was $122,899. Henderson explained that it

was the bank’s policy in a floor plan transaction to calculate 60%

of the N.A.D.A. cost and compare that to the dealer cost.
8

According to the bank policy, these homes should have been floor

planned at $93,176, not at $122,899, the higher 60% N.A.D.A. value.

Once Starks was paid the $93,176, the remaining $29,722 was sent to

A-1 Mobile Homes and allegedly split between Max Cain, Billy Cox,

and Mason Long. 

We conclude that a reasonable member of the jury could

conclude that Max Cain engaged in fraud in approving the loan at

the higher N.A.D.A. amount in violation of bank policy; that he

made a fraudulent representation to obtain funds from the bank.

See United States v. Briggs, 965 F.2d 10, 11 (5th Cir.

1992)(holding that despite no evidence of overt misrepresentations,

false promises, or false statements to a financial institution, the

defendant’s implicit misrepresentation that she had authority to

transfer money was sufficient to establish misrepresentation

element of § 1344(2)). The evidence was sufficient to support the

convictions of Max Cain, Billy Cox, and Mason Long of bank fraud

under § 1344(2), as alleged in Count 15 of the indictment. 

Samantha Davis worked for about four weeks as an A-1 sales

representative at the Bryan, Texas lot. The jury found her guilty

of aiding and abetting bank fraud, Count 7 of the indictment.

While she concedes that a reasonable juror could find a scheme to

commit bank fraud, Davis denies that there is sufficient evidence

of her knowing and intentional participation. She denies

falsifying documents, urging that she was too new and in too low a
9

position in the A-1 hierarchy to direct others to falsify

documents.

Tim Howard, a Government witness, testified that he discussed

the short down payment scheme with Sammie Davis and that she

expressed concern about “getting in trouble” after reading an

article about mobile home salesmen who were arrested in Florida for

making short down payments. Howard also testified that Davis had

previous experience with short down payments from a former job at

another mobile home company. The evidence was also that Alice

Barber, the manager at the Bryan lot, instructed Davis on how to

place false information in the loan documents. Viewing this

evidence in the light most favorable to the Government, a rational

jury could conclude beyond a reasonable doubt that Sammie Davis

aided and abetted commission of such fraud.

David Freeman argues that there is insufficient evidence to

support his convictions for conspiracy to commit bank fraud and

aiding and abetting bank fraud because the Government witnesses

called to testify against him could not identify him as the

salesman involved in their falsified mobile home purchase

transactions. He asserts that the Government failed to show that

he caused any false documents to be submitted to the bank or that

he even knew such things were happening at A-1. 

The Government replies that Freeman’s name was listed on the

false documents as a participant. A handwriting expert testified

that Freeman prepared the falsified documents in sales to A-1
10

customers Kearney, Gurka, and Nix. The evidence also showed that

salesmen, including David Freeman, openly discussed the inflated

down payment scheme. This was sufficient.

Mason Long moved for a judgment of acquittal on Counts 1, 14,

and 15, arguing that the evidence was insufficient to support his

convictions. He urges that no evidence linked him to the

falsification of customers’ loan information. Long’s job was to

deliver and set up A-1 mobile homes. He argues that the

government’s evidence was only that he must have known about the

fraud because he was around the office; that he once told another

employee, who took drugs, that customers must be reminded that if

asked, they are to deny any inflated down payment. Specifically,

Long challenges his conviction on Count 14, charging falsifying

information to secure a floor plan loan. In addition, Long claims

the Government provided no evidence that he knew about or

participated in the Starks Brothers transactions with Cox and Cain

or that he knowingly submitted any false statements.

The Government asserts that Long’s overt actions showed that

he knowingly participated in the scheme and that he promoted the

falsification of documents to obtain loan funds. The Government

presented direct evidence that Long instructed customers not to

reveal the inflated down payment information if bank investigators

called them. The Government offered financial statements prepared

by Long to be submitted to the bank for the purpose of obtaining

floor planning finance for A-1. These statements contained large
11

discrepancies between listed assets’ declared values and the actual

value of the properties. The evidence also demonstrated that Long

conspired with Max Cain and Billy Cox and split the proceeds of the

excess loan in the Stark Brothers’ mobile homes transaction.

Viewing this evidence in the light most favorable to the

Government, a rational jury could conclude beyond a reasonable

doubt that Mason Long conspired and aided and abetted the

commission of such fraud.

Pat Malmstrom argues the evidence was insufficient to support

his convictions for conspiracy to commit bank fraud and aiding and

abetting bank fraud. He argues that the Government attempted to

make his conduct appear deceptive, but that there was no

falsification or wrongdoing involved. 

The Government maintains that Malmstrom knew about the

fraudulent activities and participated in the scheme to prepare

false documents. The evidence showed Malmstrom discussed the

practice of falsely stating down payments with his manager and

another salesman. There was also evidence that he prepared false

documents about customers’ down payments or income information.

Viewing this evidence in the light most favorable to the

Government, a rational jury could conclude beyond a reasonable

doubt that Pat Malmstrom conspired and aided and abetted the

commission of such fraud.

Larry Meinzer argues the evidence was insufficient to support

his conviction for aiding and abetting. While Meinzer does not
12

dispute that the loan packages connected to the sales he made

contained false documents, Meinzer argues that the evidence did not

show that he was personally involved in the falsified sales. The

Government argues that the evidence supported the jury’s inference

that Meinzer knew the information he submitted would be falsified

considering the overall fraudulent practices at A-1. The evidence

also showed that Meinzer was involved in preparing false documents.

His argument that the bank was never induced to extend funds on the

basis of the documents he prepared, some of which contained false

information, does not vitiate the proof that he purposefully

participated in a criminal venture to obtain funds falsely.

Viewing this evidence in the light most favorable to the

Government, a rational jury could conclude beyond a reasonable

doubt that Larry Meinzer aided and abetted the commission of bank

fraud.

Tammy Morrow argues the evidence was insufficient to support

her conviction for aiding and abetting. She argues that her

acquittal of conspiracy should show that the evidence did not

support a conclusion of aiding and abetting. She asserts there is

no evidence that she acted in any affirmative manner to aid the

venture. The Government contends that the jury could infer that

she knowingly and voluntarily participated in the scheme to defraud

the bank by submitting loan information that she was aware would be

fraudulently altered. The testimony of the Government’s witnesses

against Morrow demonstrated that Morrow knew of the short down
13

payment practice, and that she told her customers to lie to the

bank about the down payment if contacted by the bank. This was

enough. 

Gene Trout maintains that there was no evidence to show his

intent to defraud the banks or to participate in a conspiracy to do

so; that the Government’s witness, Janet Dees, testified that she

had no knowledge of whether Trout was ever told about the short

down payment technique. Trout argues that he was so ignorant of

what was happening that A-1 cheated him on his commissions.

According to Trout, because the other Government witnesses never

testified directly that Trout prepared or talked about falsified

documents, or that he knew about the practice of falsifying

documents, the evidence did not prove beyond a reasonable doubt

that he committed or aided and abetted bank fraud or conspiracy to

commit it.

The Government maintains that the evidence showed that false

documents were submitted in connection with Trout’s sale of three

mobile homes. Although Trout was “in and out” of the office during

the closing transactions, the jury could infer that he had full

knowledge that the packages would be submitted to the bank with

fraudulent information. Also, there was testimony by one of

Trout’s customers that Trout told her about the inflated down

payment practice and directed her to submit a falsified gift letter

to secure the financing on their mobile home purchase. This was

enough.
14

IV

1

Defendants Barber, Cain, Cox, Davis, Freeman, Long, Malmstrom,

Meinzer, and Morrow argue that they were improperly joined in the

indictment and that the trial court abused its discretion by

denying their motions for severance. Proper joinder requires that

the offenses charged "must be shown to be part of a single plan or

scheme," and that "[p]roof of such a common scheme is typically

supplied by an overarching conspiracy from which stems each of the

substantive counts." United States v. Faulkner, 17 F.3d 745, 758

(5th Cir. 1994)(quoting United States v. Lane, 735 F.2d 799, 805

(5th Cir. 1984), rev'd in part on other grounds, 474 U.S. 438

(1986)). Each of the counts charged in the indictment here stems

from a common conspiracy to defraud the Home Savings Association

and related bank institutions. Joinder in a single indictment was

proper. 

Federal Rule of Criminal Procedure 14 provides that a court

may order a severance "[i]f it appears that a defendant or the

Government is prejudiced by a joinder of offenses or of defendants

in an indictment or information or by such joinder for trial

together." Assuming joinder is proper under Rule 8, denial of a

motion for severance is reviewable only for an abuse of discretion.

See United States v. Bullock, 71 F.3d 171, 174 (5th Cir. 1995). To

demonstrate an abuse of discretion, the defendant “‘bears the

burden of showing specific and compelling prejudice that resulted
15

in an unfair trial,’" and such prejudice must be of a type

“‘against which the trial court was unable to afford protection.’"

Faulkner, 17 F.3d at 759 (quoting United States v. Pofahl, 990 F.2d

1456, 1483 (5th Cir. 1993)). 

The defendants’ large broadside is a claim of guilt by

association -- prejudice from a large volume of evidence admitted

without limiting instructions to insulate them from spillover

prejudice. The trial was lengthy, but nothing suggests that the

jury was unable to follow the evidence, distinguish the various

charges, and independently assess each defendant. As much as we

know points in the opposite direction. The jury acquitted Davis,

Morrow, and Meinzer of conspiracy to commit bank fraud, and Cox and

Cain of bank fraud under Count 16. This suggests that the jury

considered separately the evidence as to each defendant and each

count. Further, the court instructed the jury that “[t]he fact

that these defendants are tried together is not and should not be

considered by you as evidence of the guilt of them or any of them.”

The district court also instructed the jury not to consider the

fact that the defendants may have presented evidence, objected, or

cross-examined witnesses together. The district court instructed

the jury that evidence of similar acts by defendants Billy Cox and

Mason Long committed on other occasions should not be considered as

to the other defendants; that evidence that related to Counts 14,

15, and 16 was to be considered only as to those counts; and that

no defendant was on trial for any other act not alleged in the
16

indictment. Similar instructions have been held sufficient to cure

prejudice, and juries are presumed to follow their instructions.

See Zafiro v. United States, 506 U.S. 534, 540-41 (1993). 

2

The defendants also argue that the district court abused its

discretion by refusing to sever because Cox admitted the fact of

the scheme but contended that the bank was aware of it -- directly

at odds with their defense that no scheme was to be proved. The

Government sticks with the mantra that the defendants have failed

to articulate specific instances of prejudice and argues that they

are not entitled to severance merely because they would have had a

better chance of acquittal. See id. at 538-39. We have held that

“instructions to consider the evidence as to each defendant

separately and individually and not to consider comments made by

counsel as substantive evidence sufficed ‘to cure any prejudice

caused when co-defendants accuse each other of the crime.’" United

States v. Mann, 161 F.3d 840, 863 (5th Cir. 1998)(quoting United

States v. Stouffer, 986 F.2d 916, 924 (5th Cir. 1993)). The

district court gave appropriate instructions. There is then the

matter of the individual defendant’s arguments that they ought to

have had separate trials. 

3

We find Larry Meinzer and Caldwell waived their severance

arguments because they cannot adopt their co-defendants’ arguments

without specifically showing how they were prejudiced. Their
17

contentions would equally fail for want of a showing of specific

prejudice. That is, they waived their contentions, but they were

plainly without merit, so they lost nothing for any inaction or

improper acts of their counsel. 

4

Alice Barber, Pat Malmstrom, and Mason Long argue that their

cases should not have been joined; that there was a fatal variance

between the indictment, with its single conspiracy, and the proof

at trial of multiple and independent conspiracies. To prevail on

a material variance claim, these defendants must prove (1) a

variance between the indictment and the proof at trial, and (2)

that the variance affected their substantial rights. See United

States v. Morgan, 117 F.3d 849, 858 (5th Cir.), cert. denied, 118

S. Ct. 454 (1997). Whether the evidence shows one or multiple

conspiracies is a question of fact for the jury. See id. The

principal considerations in counting the number of conspiracies are

(1) the existence of a common goal; (2) the nature of the scheme;

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

dealings. See id. We will “affirm the jury's finding that the

Government proved a single conspiracy unless the evidence and all

reasonable inferences, examined in the light most favorable to the

Government, would preclude reasonable jurors from finding a single

conspiracy beyond a reasonable doubt." Id. 

The "common goal" factor used to count conspiracies has been

defined broadly by this court. See United States v. Morris, 46
18

F.3d 410, 415 (5th Cir. 1995)(holding that the common goal of

deriving personal gain from the illicit business of buying and

selling cocaine constituted a single conspiracy). The jury could

reasonably have concluded that the common goal of the charged

conspiracy in this case was to derive personal gain from the sale

of mobile homes through the submission of false loan information.

The nature of the scheme and the overlap of participants also

support a single conspiracy. There was evidence that Billy Cox,

Max Cain, and Mason Long were "key men" who orchestrated the

practice of short down payments and falsifying customer information

to obtain loan funds for the sale of A-1 mobile homes. The

managers and the salesmen at each A-1 lot were the cogs necessary

to spin this wheel. Viewed in the light most favorable to the

verdict, the efforts of all the defendants convicted of conspiracy

were necessary to the overall success of the criminal venture. 

Even if we were to conclude that there was a variance, we find

that Alice Barber, Pat Malmstrom, and Mason Long have failed to

show how the alleged variance affected their substantial rights.

We find that the evidence is sufficient to prove each convicted

defendant’s participation in at least one conspiracy, and none has

shown reversible error under joinder and severance principles.

“[W]hen the indictment alleges the conspiracy count as a single

conspiracy, but the government proves multiple conspiracies and a

defendant's involvement in at least one of them, then clearly there

is no variance affecting that defendant's substantial rights."
19

United States v. Davis, 132 F.3d 1092, 1095 (5th Cir. 1998) (citing

Faulkner, 17 F.3d at 762). Finally, as a safeguard against

prejudice, the jurors were cautioned in the instructions from

finding guilt if the proof presented by the Government established

any conspiracy other than that charged in the indictment.

5 

Tammy Morrow contends that she was prejudiced by the district

court’s refusal to sever her case because James Caldwell would then

have testified that neither of them knew of any false documentation

scheme for financing A-1 mobile homes. The Government replies that

she did not provide the trial court with any substantive

information about Caldwell’s potential testimony. The Government

also argues that the trial court did not abuse its discretion by

refusing to accept Morrow’s attempt at the close of trial to use

Caldwell’s affidavit. The affidavit stated that Caldwell and

Morrow were unaware of any false documentation scheme at A-1 mobile

homes. We find no abuse of discretion by the district court in

denying Morrow’s motion to sever.

6

Billy Cox argues that the district court abused its discretion

by denying his motion to sever because the Government presented

evidence of witness Robert Harvey’s guilty plea. As Cox concedes,

this issue has been foreclosed by this court’s opinion in United

States v. Manges, 110 F.3d 1162, 1176 (5th Cir. 1997), which held

that the district court did not abuse its discretion by admitting
20

evidence of a co-defendant’s guilty plea which related solely to

the co-defendant’s credibility. Moreover, the district court

instructed the jury that the “fact that an accomplice has entered

a plea of guilty to the offense charged is not evidence in and of

itself of the guilt of any other person.” Id. We find no abuse of

discretion by the district court in denying Cox’s motion to sever.

V

Defendants Barber, Cain, Caldwell, Cox, Davis, Long, and

Malmstrom challenge the district court’s refusal to include their

proffered jury instructions. We review the refusal to provide a

requested instruction for abuse of discretion. See United States

v. Asibor, 109 F.3d 1023, 1034 (5th Cir.), cert. denied, 118 S. Ct.

254 (1997). District courts enjoy substantial latitude in

formulating jury instructions. We reverse only if the requested

jury instruction “(1) was a substantially correct statement of the

law, (2) was not substantially covered in the charge as a whole,

and (3) concerned an important point in the trial, the omission of

which seriously impaired the defendant's ability to present an

effective defense.” Id.

1

Defendants Barber, Cox, and Long contend that the district

court should have given their requested jury instruction regarding

their “good faith” defense. The Government argues that the

district court did not abuse its discretion because it allowed the
21

defendants to argue good faith to the jury and substantially

covered the defense of good faith in the instruction on requisite

knowledge. Defendants, however, maintain that the trial court’s

instruction that the knowledge and complicity of bank officers is

not a defense to the charge of bank fraud undermined their

contentions of good faith. 

We are persuaded that the jury charge covered the good faith

defense. The district court instructed the jury that “the

requisite intent to defraud is the defendant acted knowingly and

with specific intent to deceive ordinarily for the purpose of

causing financial loss to another or bringing about some financial

gain to himself.” The district court defined the term "knowingly"

as an “act [ ] done voluntarily and intentionally and not because

of mistake or accident." The district court added that “the

purpose of adding the word ‘knowingly’ is to ensure that no one

will be convicted of an act done because of mistake, or accident,

or other innocent reason.” While the district court did instruct

that “[k]nowledge or complicity of bank officers, even all bank

officers, is not a defense to a charge of bank fraud,” the court

explained:

Still, knowledge or complicity of the officers and board

of directors of a financial institution may be considered

by the jury along with other factors as a part of a

defendant’s defense that he or she had no intent to

defraud a financial institution. Some defendants in this

case have raised such a defense. Some defendants have

not. You must consider each defendant separately and

individually. 
22

2

James Caldwell and Billy Cox argue that 18 U.S.C. § 1014

(knowingly making false statements to a federally insured lending

institution) is a lesser included offense of 18 U.S.C. § 1344 (bank

fraud) and that the jury should have been instructed accordingly.

The Government argues that because this court has determined that

§ 1014 and § 1344 each require proof of an additional fact, see

Dupre, 117 F.3d at 818, § 1014 is not a lesser included offense.

We agree. See also United States v. Fraza, 106 F.3d 1050, 1053

(1st Cir. 1997)(recognizing that “on the plain language of these

statutes, the requirements of Blockburger are satisfied”); United

States v. Wolfwinkel, 44 F.3d 782, 785 (9th Cir. 1995)(concluding

that bank fraud and misapplication of bank funds do not constitute

the same offense). There was no error. 

3

Billy Cox argues that the district court abused its discretion

by refusing to instruct the jury that a mere violation of bank

policy was insufficient to convict him of bank fraud as alleged in

Count 15. The Government argues that the district court’s charge

substantially covered the requested instruction. 

The charge directed the jury that it must find all the

elements of bank fraud. The proffered instruction was

substantially covered by the trial court’s charge.

4
23

Pat Malmstrom and Samantha Davis requested that the jury be

instructed that it must unanimously find beyond a reasonable doubt

that the defendants submitted false or fraudulent documentation in

connection with all the loan transactions referred to in each count

in order to convict the defendant of that count. The district

court’s instruction required that the jury unanimously find that

the defendant committed at least one and the same materially false

or fraudulent pretense or representation. The charge explained

that “all of you must agree unanimously that the same false of

fraudulent pretense, representation, or promise alleged in a

particular count was in fact employed by the particular defendant

charged in that count.” We find that the district court’s

instruction was proper because each respective count alleged only

one offense under § 1344(2). This was not a situation where a jury

could find a defendant guilty on a single count under multiple

theories of liability; rather, each respective count alleged only

one offense under 18 U.S.C. § 1344(2). We find no abuse of

discretion by the district court.

5

Pat Malmstrom argues that the district court erred by giving

a Pinkerton instruction. According to Malmstrom, “[t]he evidence

did not support the giving of the Pinkerton charge because of the

scope of the alleged agreement in this case.” The district court

instructed the jury in accordance with § 2.22 of this circuit’s

Pattern Criminal Jury Instructions, Conspirator’s Liability for
24

Substantive Count. Furthermore, we find the district court

properly instructed the jury that someone who jointly undertakes a

criminal activity with others is accountable for their reasonably

foreseeable conduct in furtherance of the joint undertaking.

VI

Defendants Billy Cox, Pat Malmstrom, and Gene Trout assert

that the district court committed clear error by upholding the

Government’s peremptory challenge of juror Joyce Jean Jones, a

black woman. The Government explained that it struck Jones

because she had indicated on a questionnaire reviewed before voir

dire that she never read magazines, books other than the Bible, and

did not watch television. The Government explained that it rated

Jones low before it knew she was black. The district court

accepted the Government’s answer as race-neutral stating that it

was “legitimately appropriate and in good faith.” We give

deference to a district court’s finding and evaluation of

credibility of the Government’s offered reasons for striking a

juror. See Hernandez v. New York, 500 U.S. 352, 364 (1991). 

The defendants argue that the Government’s proffered reasons

for striking Jones were pretextual given that other jurors who

preferred religious information were not struck. In addition, Cox

argues that the alleged neutral explanation offered here does not

relate to the case. See Batson v. Kentucky, 476 U.S. 79, 98

(1986)(requiring that the prosecutor articulate a neutral

explanation related to the particular case to be tried). Cox also
25

contends that a Batson challenge cannot be satisfied by a

prosecutor’s denial of discriminatory intention or affirmation of

good faith. See Purkett v. Elem, 514 U.S. 765, 840 (1995). The

contentions are without merit. We find no clear error.

VII

Tammy Morrow argues that the district court erred by denying

her motion to dismiss the indictment because the prosecution for

bank fraud was barred by the statute of limitations. She contends

that, at the time of her indictment, 18 U.S.C. § 3282's five-year

statute of limitations period applied and had expired; that 18

U.S.C. § 3293, enacted August 9, 1989 and providing a ten-year

statute of limitations for prosecutions of violations of § 1344,

cannot be applied under the Ex Post Facto Clause.

Congress provided that “the amendments made to this subsection

(§ 3293) shall apply to an offense committed before the effective

date of this section [August 9, 1989], if the statute of

limitations applicable to that offense under this chapter had not

run as of such date.” 18 U.S.C. § 3292 (noting § 961(l)(3) of Pub.

L. No. 101-73). On August 9, 1989, when § 3293 was enacted, the

initial five-year statute of limitations provided by § 3282 had not

run. The ten-year statute of limitations was properly applied. 

We have held that the Ex Post Facto Clause does not preclude

the application of § 3293's ten-year statute of limitations for

violations of § 1344 committed before § 3293's enactment and

prosecuted before the previously applicable limitations period
26

expired. See United States v. Baker, 61 F.3d 317, 326 (5th Cir.

1995); United States v. Bretchel, 997 F.2d 1108, 1112-13 (5th Cir.

1993). While Morrow concedes that her argument is foreclosed by

Bretchel, she contends Bretchel was wrongly decided and that the

revised statute of limitations is in fact violative of the Ex Post

Facto Clause. She maintains that the counts in the indictment

against her should have been dismissed because she was not indicted

within five years of any relevant conduct. We reject Morrow’s

arguments and find that the district court correctly denied her

motion to dismiss on the basis of the statute of limitations.

VIII

Max Cain maintains that the district court erred by admitting

the following evidence: (1) business records lacking a proper

predicate, (2) statements about “feelings and suspicions” lacking

a proper predicate, and (3) statements admitted as co-conspirator

statements but not made to further a conspiracy.

Our standard of review is abuse of discretion, and under Fed.

R. Evid. 103(a), an erroneous evidentiary ruling is reversible

error only if a party’s substantial rights are affected. See

Carroll v. Morgan, 17 F.3d 787, 790 (5th Cir. 1994). 

1

Cain argues that approximately 300 documents from Home Savings

were improperly admitted through Wilma York, the records custodian

for First American, the successor of First America. Cain asserts

that York admitted that she had no personal knowledge as to how the
27

record-keeping system worked at Home Savings and thus could not

meet the requirements of Federal Rule of Evidence 803(6). 

Rule 803(6) turns on the reliability or trustworthiness of the

records. See United States v. Box, 50 F.3d 345, 356 (5th Cir.

1995). We are persuaded that York’s testimony established that the

documents had sufficient indicia of reliability. The district

court found the records authentic, and York explained how she came

to possess them and how they were maintained. We find no

reversible error in the admission of these records.

Next, Cain contends that the testimony of Government witness

Gwendolyn Williams, who had worked at the Bryan A-1 for two months

in 1987, that she was suspicious that “something was wrong” at the

A-1 lot was inadmissible. She also testified that after being

warned by James Alford about A-1, she left her employment there.

Cain argues that Alford was never mentioned as a co-conspirator so

anything he said was impermissible hearsay.

Cain did not object to Williams’ testimony as improper lay

opinion under Federal Rule of Evidence 702. Cain claims that there

was a “running objection to her testimony,” but the record is

unclear as to the basis of that running objection. Rather, Cain

objected on grounds of relevancy and hearsay, objections overruled

by the district court. Cain’s substantial rights were not

affected. 

Cain also argues that the district court improperly admitted

the testimony of Tim Howard, an A-1 salesman from 1987 until 1990.
28

Howard testified that on one occasion the bank discovered three

short down payments in a one week period. Howard also testified

that Cain’s disapproval of short down payments made during a phone

conference with Cox, Howard, and Tim Matthews was “just a show.”

Cain contends that Howard lacked personal knowledge and that his

statements were speculations about A-1 based on a conversation with

Cain in which Cain told him “they were not doing these things.”

The Government argues that Howard’s testimony about Cain’s

telephone conversation being “just a show” was not speculation. It

was based on the fact that Billy Cox told Howard that Cain already

knew about the short “downs” because Cain was aware of the fraud at

A-1. Howard’s testimony was admissible. It was based on personal

knowledge of events and conversations with co-conspirators. 

Cain complains that the statements by Tim Howard and Janna

Kimbrough were inadmissible hearsay because they did not fall

within the co-conspirators exception of Federal Rule of Evidence

801(d)(2)(E). Cain challenges Howard’s testimony concerning a

conversation Howard had with Billy Cox in which Cox talked of a

customer who had purchased a mobile home but had no heat. Cox

allegedly said that Max Cain had gotten all the money. Cain argues

that this statement was not made in furtherance of the conspiracy.

There was no objection to this testimony. Absent a timely

objection, we review for plain error. See Marceaux v. Conoco, 124

F.3d 730, 734 (5th Cir. 1997). Reversal for plain error is

appropriate only where the alleged error was obvious, substantial,
29

and, if not corrected, would “‘seriously affect the fairness,

integrity, or public reputation of judicial proceedings.’” Id.

(quoting Highlands Ins. Co. v. Nat’l Union Fire Ins. Co., 27 F.3d

1027, 1032 (5th Cir. 1994)). The district court's admission of Tim

Howard’s testimony was not plain error. 

Cain protests the admission of Janna Kimbrough’s testimony. 

Before she testified, Cain objected that any statements made by

Howard to Kimbrough had nothing to do with Cain and did not further

the conspiracy. The district court overruled this objection.

Kimbrough then testified to the following: “Tim told me if he would

have a problem on a house that was already delivered and he

absolutely could not get a loan officer to approve, then he told me

that he would call Billy and Billy would call Max and just go over

the loan officer’s head.” The district court properly admitted

this testimony under Federal Rule of Evidence 801(d)(2)(E).

IX

Pat Malmstrom argues the district court abused its discretion

by denying his motion to dismiss. He contends that the indictment

failed to state an offense, was vague, duplicitous, and that

striking language from one of the counts resulted in a constructive

amendment. 

1

Malmstrom claims that Count 12 failed to allege false

representations with sufficient specificity to provide him adequate

notice; that the government referred only to general “false
30

information and documents.” Pointing to United States v. Lang, 766

F. Supp. 389, 395-96 (D. Md. 1991), he urges that the indictment

must identify some of the alleged false statements. 

The Government responds that the charged crimes were clear.

The Government asserts that Lang, which dealt with a violation of

18 U.S.C. § 1001 (making a false statement), is inapplicable

because the court held failure to set forth the false entries with

particularity did not require dismissal of the indictment. In

addition, the Government claims that Malmstrom cites no authority

for his contention that counts of an indictment for conspiracy and

bank fraud must specify each false document and what portion is

false.

We review the sufficiency of an indictment de novo. See

Asibor, 109 F.3d at 1037. The purpose of the indictment is “to

allege each essential element of the offense charged so as to

enable the accused to prepare his defense and to allow the accused

to invoke the double jeopardy clause in any subsequent proceeding."

United States v. Cluck, 143 F.3d 174, 178 (5th Cir. 1998), cert.

denied, 119 S. Ct. 808 (1999) (quoting United States v. Webb, 747

F.2d 278, 284 (5th Cir. 1984)). The proper test for determining

the validity of the indictment is whether the defendant has been

prejudiced by the alleged deficiency. See United States v. Crow,

164 F.3d 229, 234 (5th Cir. 1999). 

The indictment cites § 1344(2) and tracks the statutory

language for bank fraud. It outlines the facts of the offense by
31

describing the kind of false information submitted, the approximate

date, and the A-1 customer involved. We find that the indictment

was not vague and provided adequate notice to Malmstrom of the

charges against him. 

2

Malmstrom argues that the indictment was duplicitous.

“‘Duplicity’ is the joining in a single count of two or more

distinct and separate offenses." United States v. Elam, 678 F.2d

1234, 1250 n.27 (5th Cir. 1982). See generally 1 Charles Alan

Wright, Federal Practice and Procedure § 142 (1982). Rule 12(f) of

the Federal Rules of Criminal Procedure requires a party to raise

defenses and objections based on defects in the indictment before

trial or waive them absent good cause shown. Even if Malmstrom did

object, the six overt acts alleged in the indictment arise from the

same offense of bank fraud. 

3

Malmstrom argues that the district court erred in allowing the

Government to strike paragraph 3 of Count 12 relating to false

documents for the Michelle Henry purchase. Malmstrom moved to

dismiss Count 12 on the basis that striking paragraph 3 was an

unconstitutional amendment of the indictment and violated his Fifth

Amendment right to be tried on charges returned by the grand jury.

Malmstrom contends that the grand jury might not have indicted him

without the Henry transaction. 
32

The Fifth Amendment guarantees that a criminal defendant will

be tried only on charges presented in a grand jury indictment.

"Incident to this constitutional guarantee is the longstanding

principle of our criminal justice system that the charges contained

in an indictment may not be broadened or altered through amendment,

except by the grand jury itself." United States v. Restivo, 8 F.3d

274, 279 (5th Cir. 1993). A constructive amendment occurs "when

the jury is permitted to convict the defendant upon a factual basis

that effectively modifies an essential element of the offense

charged." United States v. Holley, 23 F.3d 902, 912 (5th Cir.

1994). If an instruction constructively amends the indictment, we

must reverse the conviction. See Restivo, 8 F.3d at 279.

The deletion of one of the alleged acts did not modify the

essential elements of the charged offense or broaden the

indictment. There was no evidence presented to the jury about the

Henry transaction, and the indictment was read with any language

related to that transaction eliminated. This “amendment” neither

subjected Malmstrom to trial on charges not made in the indictment

nor effectively changed the factual basis of the indictment. 

4

Pat Malmstrom argues that the district court should have

permitted him to call as a witness the deputy district court clerk

to substantiate his allegation that there was a secret agreement

between the Government and one of its witnesses, Scott Brill, to

delay Brill’s sentencing. Brill, an alleged co-conspirator,
33

testified on direct examination that the Government made no

promises to him outside the plea agreement to delay his sentence.

On cross-examination, however, Brill acknowledged that the

Government promised to request the court to delay his sentencing

until after he testified at trial. The Government called Special

Agent Terry Lane who testified no such promises were made to Brill

outside the plea bargain agreement. 

Consequently, Malmstrom requested the Deputy District Court

Clerk testify as to the relevant dates that Brill pleaded guilty

and the various orders continuing his sentence. According to

Malmstrom’s appeal brief, the evidence was being offered to

demonstrate Brill’s bias and to impeach Agent Lane’s testimony. A

review of the record, however, shows that Malmstrom argued that he

was not trying to impeach Agent Lane. Malmstrom’s counsel stated:

[T]his doesn’t have anything to do with impeaching Mr.

Lane. This goes to prove that Mr. Brill was promised

that his sentencing was going to be delayed until after

he testified in this trial which goes to his bias in

testifying for the Government. It’s not to impeach

anybody. 

The Government objected on grounds that it would be highly

prejudicial and improper collateral impeachment to have the Deputy

District Court Clerk testify. The district court denied

Malmstrom’s request. 

Malmstrom argues that the district court’s ruling prevented

him from showing bias by Scott Brill and prevented him from

impeaching Agent Terry Lane. Although "[t]he partiality of a
34

witness is subject to exploration at trial, and is always relevant

as discrediting the witness and affecting the weight of his

testimony," United States v. Landerman, 109 F.3d 1053, 1062 (5th

Cir. 1997) (quoting Davis v. Alaska, 415 U.S. 308, 316 (1974)), it

is well-established that a district court is afforded broad

discretion in determining the probative value of evidence to

determine its admissibility. See id. (citing United States v.

Abel, 469 U.S. 45, 50 (1984)). In this situation, the district

court considered Malmstrom’s allegation that there was a secret

agreement between the Government and Brill, but concluded that the

several continuations of Brill’s sentencing were not part of a

“secret agreement” because on some occasions the delays were

initiated at the direction of the probation officer and through the

court. The district court offered Malmstrom the opportunity to

make his record by questioning the probation officer outside the

presence of the jury, but Malmstrom declined. It was clear from

Brill’s testimony that, at the time of the trial, he had not yet

been sentenced. Given these circumstances, we find no abuse of

discretion by the district court.

X 

Defendants Caldwell, Cox, Davis, Freeman, Long, Malmstrom,

Morrow, Meinzer, and Trout argue that the district court erred by

denying their motions for a new trial based on prosecutorial
1Max Cain’s attempt to adopt by reference, pursuant to Fed. R.

App. P. 28(I), the arguments of his co-defendants fails because the

issue of prosecutorial misconduct is fact specific. 

35

misconduct.1 Our "task in reviewing a claim of prosecutorial

misconduct is to decide whether the misconduct casts serious doubt

upon the correctness of the jury's verdict." United States v.

Kelley, 981 F.2d 1464, 1473 (5th Cir. 1993). We consider the

following: "(1) the magnitude of the statement's prejudice, (2) the

effect of any cautionary instructions given, and (3) the strength

of the evidence of the defendant's guilt." United States v.

Tomblin, 46 F.3d 1369, 1389 (5th Cir. 1995). A defendant must show

that the prosecutor’s statements affected his substantial rights.

See id. The district judge's assessment of the prejudicial effect

carries considerable weight. See United States v. Munoz, 150 F.3d

401, 415 (5th Cir. 1998), cert. denied, ---S. Ct.---, 1999 WL

16207, 67 USLW 3458 (U.S. Jan 19, 1999) (No. 98-7239).

1

The district court was concerned about generalizations made

about A-1 salesmen and their knowledge. It granted defendants’

motion in limine prohibiting the Government from presenting

evidence that implied that “it would be impossible to work for A-1

for a week and not know crimes were being committed.” The

defendants objected approximately 49 times based on alleged

violations of this limine restriction, and the district court
36

sustained approximately 23 objections. The defendants argue that

the Government’s repeated violations severely prejudiced them.

On several occasions, the district court noted it did not find

the Government’s comments to be violations of the limine motion.

For example, the district court explained, “I do not accept the

fact that the Government is trying to get away with stuff here,”

and, “My view is that the Government has been scrupulous in its

efforts to abide by my limine motions and my other restrictive

orders,” as well as, “I do not believe the Government’s violation

of limine motions when objections have been sustained have in any

way caused this case to be unfair.” We find no abuse of

discretion.

2

Defendants Davis, Freeman, Long, Malmstrom, and Meinzer also

claim that the Government grossly misstated the evidence during its

rebuttal; that the Government mischaracterized testimony to bolster

its argument that everyone at A-1 knew about the fraud; that they

were unfairly prejudiced by the Government’s conduct.

After reviewing the relevant testimony, we reject the

contention. We do not find that any misstatements were of such a

magnitude as to impact the defendants’ substantial rights or to

undermine the correctness of the jury’s verdict. The district

court here correctly denied the motion for a new trial. 

3 
37

Gene Trout complains about the prosecutor’s remark during

rebuttal that the jury “should be insulted” by Trout’s counsel’s

reading of an FBI 302 statement which Agent Terry Lane took from

some mobile home consumers. Trout objected but was overruled. The

district court addressed the jury and explained that the “attorneys

have acted properly in this case in their efforts to represent

their clients.” The district court also noted attorneys sometimes

use hyperbole and that the rebuttal remarks by the prosecutor were

argument, not evidence. The district court determined that Trout’s

counsel was not personally attacked and reiterated that Trout’s

counsel “conducted himself properly in all respects.” We find no

basis for reversal for prosecutorial misconduct on this issue.

4

Billy Cox complains that the Government’s argument as a whole

deprived him of a fair and impartial trial. He lists 24 passages

that allegedly demonstrate prejudicial prosecutorial misconduct.

Cox did not object to 14 of the items listed and some of the other

items do not pertain to him. If a defendant fails to object to an

improper argument, we will reverse only for plain error. See

United States v. Livingston, 816 F.2d 184, 195 (5th Cir. 1987). We

find no plain error in any of the passages to which Cox failed to

object. As to the remaining 10 passages, we find no basis for

reversal because of improper prosecutorial remarks. The district

court maintained admirable control over this long, complicated

trial and effectively cured any questionable or improper comments
38

by the prosecutor with an instruction to the jury. We are not

persuaded that the alleged prosecutorial misconduct substantially

affected the defendants’ rights to a fair trial. See United States

v. Diaz-Carreon, 915 F.2d 951, 956 (5th Cir. 1990).

5

During its final argument, the Government made generalized

comments that it was going to talk about “some undisputed points”

and argued those included massive fraud, intent to defraud,

conspiracy, and open discussions about short down payments and

other falsifications. James Caldwell objected, arguing that these

statements by the Government indirectly commented on his failure to

testify by labeling the evidence as undisputed. Caldwell avers

that the Government’s comments were meant to remind the jury that

he had remained silent. He also asserts that the Government’s

comments shifted the burden of proof to him. 

We review de novo whether a prosecutor's argument is an

impermissible comment on the defendant's right not to testify. See

United States v. Martinez, 151 F.3d 384, 392 (5th Cir.), cert.

denied, 119 S.Ct. 572 (1998). A prosecutor's remarks constitute

impermissible comment on a defendant's right not to testify if the

prosecutor's manifest intent was to comment on the defendant's

silence or if the character of the remark was such that the jury

would naturally and necessarily construe it as a comment on the

defendant's silence. See id. (citing United States v. Mackay, 33

F.3d 489, 495 (5th Cir. 1994)). Intent is not considered
39

"manifest" if there is an equally plausible explanation of the

prosecutor's remark. See United States v. Johnston, 127 F.3d 380,

396 (5th Cir. 1997), cert. denied, 118 S. Ct. 1174 (1998) (citing

United States v. Collins, 972 F.2d 1385, 1406 (5th Cir. 1992)).

Also, the challenged remarks must be considered in the context of

the case in which they are made. See id. (citing United States v.

Montoya-Ortiz, 7 F.3d 1171, 1179 (5th Cir. 1993)). Reversal is

warranted if the improper comment had "a clear effect on the jury."

United States v. Rocha, 916 F.2d 219, 232 (5th Cir. 1990).

After reviewing the record, we find that none of the

prosecution's comments expressly discussed Caldwell’s failure to

testify. Viewed in context, the prosecution's comments neither

manifest an intent to comment on the defendant's failure to testify

nor would they naturally and necessarily have been interpreted by

the jury as a comment on the defendant's failure to testify. See

Johnston, 127 F.3d at 396. Further, “commenting on the absence of

specific evidence in the record does not constitute a comment on

the defendant's failure to testify when witnesses other than the

defendant could have testified to such information.” Green v.

Johnson, 160 F.3d 1029, 1042 (5th Cir. 1998), cert. denied, 119 S.

Ct. 1107 (1999) (citing Nichols v. Scott, 69 F.3d 1255, 1284 (5th

Cir. 1995); United States v. Fierro, 38 F.3d 761, 772 (5th Cir.

1994)). We hold that the prosecutor’s remarks about the undisputed

evidence were not improper. 

XI
2Defendants Freeman, Meinzer, and Long do not raise any

sentencing issues in their briefs and attempt to adopt, pursuant to

Rule 28(I), the arguments of their co-defendants. 

40

Defendants Barber, Cain, Caldwell, Cox, Davis, Malmstrom,

Morrow, and Trout challenge the district court’s application of the

Sentencing Guidelines.2 This court reviews a district court's

application of the sentencing guidelines de novo and findings of

fact under a clearly erroneous standard. See United States v.

Lucas, 157 F.3d 998, 1000 (5th Cir. 1998). But cf. United States

v. Koon, 518 U.S. 81, 96-100 (1996) (holding that a district

court's decision to depart from applicable sentencing range under

Sentencing Guidelines should be reviewed for abuse of discretion,

rather than de novo). A defendant’s sentence must be upheld unless

she demonstrates that it was imposed in violation of the law, was

imposed because of an incorrect application of the guidelines, or

is outside the range of applicable guidelines and is unreasonable.

See United States v. Parks, 924 F.2d 68, 71 (5th Cir. 1991); see

also 18 U.S.C.A. § 3742(f). 

1

Section 2F1.1 of the Sentencing Guidelines governs sentence

enhancements for offenses involving fraud or deceit. In

determining the loss, the application notes provide: 

In fraudulent loan application cases ... the loss is the

actual loss to the victim.... For example, if a

defendant fraudulently obtains a loan by misrepresenting

the value of his assets, the loss is the amount of the

loan not repaid at the time the offense is discovered,

reduced by the amount the lending institution has
41

recovered (or can expect to recover) from any assets

pledged to secure the loan. However, where the intended

loss is greater than the actual loss, the intended loss

is to be used. U.S.S.G. § 2F1.1, comment. (n.8(b)). 

Relying on U.S.S.G. § 2F1.1 and the presentence report, the

district court calculated the loss to the bank as the total loan

amounts that were fraudulently procured at each lot. Various

amounts were attributed to each defendant based on the dates the

individuals started working at A-1 and the loan amount incurred at

a specific lot. 

The district court concluded that each applicable loan amount

manifested “intended loss” because the defendants acted with

indifference or reckless disregard by exposing the bank to a loss

of the total loan without considering whether repayment could ever

be made. The district court relied on United States v. Wimbesh,

980 F.2d 312, 316 (5th Cir. 1993), abrogated on other grounds,

Stinson v. United States, 508 U.S. 36, 40 (1993), which held that,

even though the banks did not lose the full value, the face value

of stolen and forged checks was properly used as intended loss

because that was the amount at risk.

Defendants Barber, Cain, Cox, Morrow, and Trout argue that the

district court erred in its calculation of loss under U.S.S.G. §

2F1.1 by using the “intended loss” instead of the “actual loss.”

The district court's calculation of loss under § 2F1.1 is a finding

of fact reviewable only for clear error. See United States v.

Randall, 157 F.3d 328, 330 (5th Cir. 1998) (citing United States v.
42

Tedder, 81 F.3d 549, 550 (5th Cir. 1996)); United States v. Hill,

42 F.3d 914, 919 (5th Cir. 1995)(applying clear error standard of

review to an amount of loss finding and specifically rejecting

defendant’s argument for de novo review based on the legal

significance of the facts). Given this standard of review, the

only question we must address is whether the record supports the

district court's determination that the defendants did in fact

intend to inflict a loss in the total amount of the fraudulently

obtained loans. 

While not fully developed, the record strongly indicates that

the “actual loss” to the bank was less than the “intended loss.”

The defendants argue that they did not intend to defraud the bank

of the entire loan amount and that deductions should have been made

to account for the loans the bank had been repaid and the amounts

that could have been recouped in foreclosures or similar remedies.

When reviewing the calculation of an intended loss, we look to

actual, not constructive, intent, and distinguish between cases in

which "the intended loss for stolen or fraudulently obtained

property is the face value of that property" and those in which the

intended loss is zero because "the defendant intends to repay the

loan or replace the property." United States v. Hill, 42 F.3d 914,

919 (1995)(quoting United States v. Henderson, 19 F.3d 917, 928

(5th Cir. 1994)). The case at hand illustrates a situation in

which there is neither evidence of actual intent to cause the loss

of the entire loan nor evidence of an actual intent to repay the
43

loan. Here, the repayment of the loans was in the control not of

the defendants, but of the mobile home consumers. There was no

evidence that the defendants intended to repay the loans if the

mobile home consumers failed to make their payments. The district

court accurately characterized the defendants as “consciously

indifferent or reckless” about the repayment of the loans. 

In Tedder, a fraudulent loan application case where there was

no evidence that the defendant had any control over the repayments,

we held that the intended, rather than the actual, amount of loss

was the appropriate measure for sentencing purposes. See Tedder,

81 F.3d at 551 (“[W]here the defendant does not intend to repay,

and the actual loss is less than the intended loss, . . . then the

full intended loss is the appropriate basis for calculation.”).

Likewise, we cannot say that the district court erred by using the

intended, rather than the actual, amount of loss because the

defendants in this case had no control over whether the mobile home

consumers would repay the loans. Further, we find no basis for

finding the district court’s reliance on the presentence report

clearly erroneous. 

2

Under the Sentencing Guidelines, the sentencing range for a

particular offense is determined on the basis of all "relevant

conduct" in which the defendant was engaged and not just with

regard to the conduct underlying the offense of conviction. See

U.S.S.G. § 1B1.3. The scope of relevant conduct attributable to a
44

defendant for sentencing purposes is "all reasonably foreseeable

acts and omissions of others in furtherance of ... jointly

undertaken criminal activity." "Jointly undertaken criminal

activity" is defined as "a criminal plan, scheme, endeavor, or

enterprise undertaken by the defendant in concert with others,

whether or not charged as a conspiracy." Id. Each of these

determinations ("reasonable foreseeability," "in furtherance," and

the existence of "jointly undertaken criminal activity") is factual

and therefore is reviewed under the clearly erroneous standard.

See United States v. Hull, 160 F.3d 265, 268-69 (5th Cir. 1998),

cert. denied, 119 S. Ct. 1091 (1999).

Co-conspirator liability under § 1B1.3 does not automatically

arise because of participation in a conspiracy. See id. at 269.

A court must make particularized findings that the elements of

foreseeability and scope of agreement have been met. See id. “The

scope of jointly undertaken criminal activity for which a defendant

is held responsible encompasses ‘the specific conduct and

objectives embraced by the defendant's agreement.’" Id. (citing

U.S.S.G. § 1B1.3(a)(1)(B), comment. (n. 2)). Commentary Note 2

provides:

In order to determine the defendant’s accountability for

the conduct of others..., the court must first determine

the scope of the criminal activity the particular

defendant agreed to jointly undertake.... In determining

the scope of the criminal activity that the particular

defendant agreed to jointly undertake, the court may

consider any explicit agreement or implicit agreement

fairly inferred from the conduct of the defendant and

others. U.S.S.G. § 1B1.3(a)(1)(B), comment. (n. 2). 
45

 

We note that “‘the scope of criminal activity jointly undertaken by

the defendant ... is not necessarily the same as the scope of the

entire conspiracy.’” United States v. Hull, 160 F.3d 265, 270,

cert. denied, 119 S.Ct. 1091 (1999) (quoting U.S.S.G. § 1B1.3,

comment. (n. 2)). Thus, the question we must review is whether the

district court clearly erred in its determination about the

existence of "jointly undertaken criminal activity," the actions

taken in furtherance of it, and whether those actions were

reasonably foreseeable.

The facts of this case show that Max Cain, Billy Cox, and

Mason Long acted as the “key men” in the overall conspiracy to

defraud the bank in order to obtain loans for A-1 mobile homes. We

find that the district court’s determination of relevant conduct as

to these three defendants was not clearly erroneous. 

The district court’s assessment of relevant conduct as to the

remaining defendants, however, was clearly erroneous. The

remaining defendants, Alice Barber, James Caldwell, Sammy Davis,

David Freeman, Pat Malmstrom, Tammy Morrow, Larry Meinzer, and Gene

Trout, were employed at an A-1 lot (or lots) for a particular

amount of time. While the indictment alleged the conspiracy ended

on February 1, 1990, the district court attributed losses to these

employee defendants from the day they commenced employment with A-1

until April 3, 1990. We note that each employee defendant appealed
3Although challenges to the application of the Sentence

Guidelines are generally fact-specific and cannot be adopted by

reference pursuant to Fed. R. App. P. 28(I), we find in this

instance that the challenge to the district court’s loss

calculations are not fact-specific. The challenge raises the

general question of whether to assess the defendants with losses

occurring at time periods other than those during which they were

employed and does not require us to make any fact-specific

inquiries.

46

the district court’s loss calculations,3 and we conclude that given

the facts of this case, the district court committed clear error by

including losses beyond the employment period of these individual

defendants. 

The employee defendants, convicted for fraudulent loan

applications, gathered and submitted the false information as a

function of their jobs at their particular A-1 lots. Thus,

employment was a prerequisite for participation in this conspiracy.

Given these circumstances, we find that the scope of the criminal

activity each employee defendant agreed to jointly undertake could

include only those loans that were processed at the particular lot

(or lots) at which that defendant was employed. 

The Sentencing Guidelines offer an analogous illustration:

Defendant O knows about her boyfriend's ongoing

drug-trafficking activity, but agrees to participate on

only one occasion by making a delivery for him at his

request when he was ill. Defendant O is accountable

under subsection (a)(1)(A) for the drug quantity involved

on that one occasion. Defendant O is not accountable for

the other drug sales made by her boyfriend because those

sales were not in furtherance of her jointly undertaken

criminal activity (i.e., the one delivery). U.S.S.G. §
4We note that illustrations, like commentary, are generally

binding on the courts. See U.S.S.G. § 1B1.7, comment. (“Portions

of [the Guidelines Manual] not labeled as guidelines or commentary

... are to be construed as commentary and thus have the force of

policy statements."); Stinson v. United States, 508 U.S. 36, 38

(1993) (holding that the "commentary in the Guidelines Manual that

interprets or explains a guideline is authoritative unless it

violates the Constitution or a federal statute, or is inconsistent

with, or a plainly erroneous reading of, that guideline"). 

47

1B1.3, illus. (5); see also U.S.S.G. § 1B1.3, illus.

(7).4

Like the girlfriend in the illustration, each defendant

engaged in “jointly undertaken criminal activity” consisting only

of those transactions that occurred while the defendant worked for

A-1. Once the employment ended, the criminal activity ceased being

“jointly undertaken.” Just as the girlfriend, who was aware of her

boyfriend’s on-going drug enterprise, was “not accountable” for her

boyfriend’s other drug sales because the other sales were not in

furtherance of her jointly undertaken criminal activity (the one

delivery), on the unique facts before us these particular

defendants ought not have charged to their sentencing account

fraudulent loans “made after leaving the employ of A-1.” They were

sufficiently aware of the ongoing activity to be found guilty of

joining a conspiracy. Their employment was the door to that

participation.

Accordingly, we must vacate the sentences of Alice Barber,

James Caldwell, Sammy Davis, David Freeman, Pat Malmstrom, Tammy

Morrow, Larry Meinzer, and Gene Trout and remand for resentencing

using each defendant’s date of employment as the outside boundary
48

in which to calculate the losses attributable to each one. That

calculation must keep the inside boundaries in mind. Specifically,

a defendant’s relevant conduct does not include conduct of others

occurring before a defendant joined the criminal venture because it

is not "reasonably foreseeable." U.S.S.G. § 1B1.3(a)(1)(B)

comment. 2; see also United States v. Carreon, 11 F.3d 1225,

1235-38 (5th Cir. 1994). The district court must determine, by a

preponderance of the evidence, the date that each defendant joined

and left the criminal venture. See U.S.S.G. § 6A1.3, comment.

(explaining that due process requires that facts relevant to

sentencing be proved by a preponderance of the evidence). After

determining the proper dates, the district court should again apply

the intended loss findings based on the amount of loans

fraudulently procured at each lot. In other words, the losses

attributed to each defendant will be the total amount of fraudulent

loans procured during the defendant’s applicable dates and at the

particular lot(s) at which the defendant was employed or a lesser

period in which he was employed but had not joined the illegal

activity. 

3

James Caldwell argues that the district court attributed

losses to him that occurred before the date of his first alleged

overt act in the conspiracy, which was June 8, 1988. The district

court found him responsible for losses incurred from February 16,

1988 (his employment began on February 4) until the end of the
5The prosecution explained to the sentencing court that each

of the loans listed in the probation report was determined to be

fraudulent due to short down payments according to interviews with

other defendants or purchasers.

49

conspiracy. The Government argues that the district court did not

err because Caldwell’s presentence report offered evidence to

support the conclusion that Caldwell was a knowing participant in

the bank fraud scheme throughout his employment. 

We have held that a district court can adopt facts contained

in a presentence report without inquiry, if those facts had an

adequate evidentiary basis and the defendant does not present

rebuttal evidence. See United States v. Puig-Infante, 19 F.3d 929,

943 (5th Cir. 1994). The defendant has the burden of showing that

information that the district court relied on in sentencing is

materially untrue. See id. We find that Caldwell has failed to

meet his burden. Moreover, the district court did not clearly err

in its determination that Caldwell joined the conspiracy shortly

after he began working for A-1. 

4

Malmstrom’s presentence report contained statements about FBI

records documenting fraudulent activity which the probation officer

researched on microfiche and determined were in fact fraudulent.5

Malmstrom argues that the district court improperly used these

findings, which were not elements of the charged offenses, and

deprived him of the right to confront witnesses and cross-examine

them on these alleged facts. As Malmstrom concedes, the Supreme
50

Court has not decided whether the Sixth Amendment Confrontation

Clause applies to sentencing proceedings.

Confrontation rights at sentencing hearing are restricted.

See United States v. Rodriguez, 897 F.2d 1324, 1328 (5th Cir.

1990). In this case, the findings of the presentence report, which

the court adopted, were supported by evidence from the trial and

investigative research by the FBI and the probation office. "If

information is presented to the sentencing judge with which the

defendant would take issue, the defendant bears the burden of

demonstrating that the information cannot be relied upon because it

is materially untrue, inaccurate or unreliable." United States v.

Angulo, 927 F.2d 202, 205 (5th Cir. 1991). Malmstrom failed to

rebut the presentence report with any evidence other than an

argument that all the loans listed were not fraudulent. Objections

in the form of unsworn assertions do not bear sufficient indicia of

reliability to be considered. See United States v. Lghodaro, 967

F.2d 1028, 1030 (5th Cir. 1992). Because any information may be

considered, so long as it has "sufficient indicia of reliability to

support its probable accuracy," and because Malmstrom was given the

opportunity at the sentencing hearing to present evidence to the

contrary, we find that Malmstrom’s confrontation rights were not

abridged. United States v. Marshall, 910 F.2d 1241, 1244 (5th Cir.

1991).

5
51

Pat Malmstrom worked at the Waco A-1 for three months as a

salesman while he was in college. Gene Trout worked at the Bryan

A-1 for three months as a salesman. They argue that the district

court erred by refusing to grant them a two level reduction

pursuant to U.S.S.G. § 3B1.2(b) for being minor participants.

Samantha Davis, who worked only 4 weeks at the Bryan A-1 and was

acquitted of the conspiracy charge, argues that she deserved a four

level reduction as a minimal participant. The Government argues

that the district court did not err in evaluating each of these

defendants’ fraudulent activity as “average” and determining that

these defendants were not less culpable than most of the others. 

Section 3B1.2 of the Sentencing Guidelines is designed to

reduce a sentence when the defendant is substantially less culpable

than the average participant in the offense. See United States v.

Edwards, 65 F.3d 430, 434 (5th Cir. 1995). Section 3B1.2 provides:

Based on the defendant's role in the offense, decrease

the offense level as follows:

(a) If the defendant was a minimal participant

in any criminal activity, decrease by 4

levels. 

(b) If the defendant was a minor participant

in any criminal activity, decrease by 2

levels.

In cases falling between (a) and (b), decrease by 3

levels. 

A judicial fact-finding that a defendant is not a minimal or minor

participant is reviewed under the clearly erroneous standard. See

United States v. Pofahl, 990 F.2d 1456, 1485 (5th Cir. 1993).
52

Given this standard and § 3B1.2's comment that "a downward

adjustment for a minimal participant will be used infrequently,"

U.S.S.G. § 3B1.2, comment. 2, we must affirm the district court’s

determination.

Davis also argues that the district court erred by including

a two level upward adjustment for involvement with more than

minimal planning under U.S.S.G. § 2F1.1(b)(2)(A). The guidelines

define "more than minimal planning" as "more planning than is

typical for commission of the offense in a simple form," or

"[taking] affirmative steps . . . to conceal the offense."

U.S.S.G. § 1B1.1, comment. (n. 1(f)). She claims that the district

court failed to make adequate findings to support this upward

adjustment. 

A district court can adopt facts contained in a presentence

report without inquiry, if those facts had an adequate evidentiary

basis and the defendant does not present rebuttal evidence. See

Puig-Infante, 19 F.3d at 943. Here, we find that the presentence

report was sufficiently reliable and Davis failed to present any

rebuttal evidence. Therefore, we review the district court’s

determination of “more than minimal planning” for clear error. See

United States v. Brown, 7 F.3d 1155, 1159 (5th Cir. 1993). We find

none.

6

James Caldwell argues that the district court should not have

included in its calculation of his criminal history category his
6In Scott, the Supreme Court held that as long as no

imprisonment was actually imposed, a defendant’s Sixth Amendment

right to counsel did not apply. See Scott v. Illinois, 440 U.S.

367, 373-74 (1979).

7At the sentencing hearing, Caldwell argued that his waivers

were involuntary, but he makes no such argument on appeal. 

53

three uncounseled misdemeanor convictions for DWI and theft

offenses that each resulted in actual imprisonment. He relies on

Nichols v. United States, 511 U.S. 738, 748-49 (1994), which

provides, “[A]n uncounseled misdemeanor conviction, valid under

Scott [v. Illinois],6 because no prison term was imposed, is also

valid when used to enhance punishment at a subsequent conviction .

. . .” Caldwell reasons from Nichols that because he was

imprisoned, his misdemeanor convictions cannot be used to enhance

his punishment. We find Caldwell’s reasoning flawed because the

focus of the Nichols holding is not on whether the defendant was

imprisoned, but on whether the conviction was validly obtained.

See, e.g., United States v. Hoggard, 61 F.3d 540, 543 (7th Cir.

1995). 

The Sixth Amendment protects the principle that no

imprisonment may be imposed on the basis of an uncounseled

conviction, unless the defendant waives his right to counsel. The

record demonstrates that Caldwell signed a waiver of counsel for

each of his prior convictions that resulted in jail time.7

Therefore, the three uncounseled convictions were validly obtained.

We find that the district court did not err by including Caldwell’s
54

three uncounseled convictions in its calculation of his criminal

history category.

XII

The judgments of conviction are affirmed. The sentences of

Max Cain, Billy Cox, and Mason Long are affirmed. The sentences of

Alice Barber, James Caldwell, Sammy Davis, David Freeman, Pat

Malmstrom, Tammy Morrow, Larry Meinzer, and Gene Trout are vacated,

and the case is remanded to allow the district court to impose new

sentences in accordance with this opinion. 

AFFIRMED IN PART and VACATED IN PART.