United States Court of Appeals

Fifth Circuit

FILED

June 18, 2004

Charles R. Fulbruge III

Clerk

UNITED STATES COURT OF APPEALS

For the Fifth Circuit

___________________________

No. 03-10228

___________________________

UNITED STATES OF AMERICA,

Plaintiff - Appellee,

VERSUS

LISA L. DALE; KEVIN DEWAYNE SPENCER, 

Defendants - Appellants.

_________

Appeals from the United States District Court 

for the Northern District of Texas

Before DAVIS, PRADO and PICKERING, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Defendant Kevin Spencer appeals his conviction and defendant Lisa Dale appeals her

sentence on charges of securities fraud, wire fraud, money laundering and related charges. Based

on our conclusion that the district court did not err in its disposition of trial matters raised by

Spencer, nor did it err in applying the Sentencing Guidelines to Dale, we AFFIRM. 

I. 

Lisa Dale and Kevin Spencer, along with two co-defendants, were indicted on charges

relating to a Ponzi scheme they ran. The two co-defendants pled guilty. Spencer was found

guilty by a jury of one count of securities fraud (in violation of 15 U.S.C. §§ 1(a) & 77x and 18

U.S.C. § 2), one count of interstate transportation of stolen property (in violation of 18 U.S.C. §§

2314 & 2), several counts of wire fraud (in violation of 18 U.S.C. §§ 1343 & 2), several counts of

money laundering (in violation of 18 U.S.C. §§ 1956(a)(1)(A)(I) & 2) and several counts of
2

engaging in monetary transactions in property derived from specified unlawful activity (in

violation of 18 U.S.C. §§ 1957 & 2). Dale was found guilty by a jury of two counts of securities

fraud (in violation of 15 U.S.C. §§ 1(a) & 77x and 18 U.S.C. § 2), two counts of interstate

transportation of stolen property (in violation of 18 U.S.C. §§ 2314 & 2), several counts of wire

fraud (in violation of 18 U.S.C. §§ 1343 & 2), and several counts of money laundering (in

violation of 18 U.S.C. §§ 1956(a)(1)(A)(I) & 2). 

The charges arose from a Ponzi scheme. We focus on Spencer’s role in the transaction

because only he raises sufficiency of the evidence issues on appeal. Dale and a co-defendant

started Progressive Financial Services and Group (“Progressive”) as a check cashing company. 

Progressive was used to solicit investors for the check cashing business and later for trading

programs promising investment in foreign capital markets and various commodities. Few

investments were made and most of the funds were used on personal luxuries and to perpetuate

the Ponzi scheme. Eventually Progressive filed bankruptcy, listing the principal and interest owed

to the investors as liabilities. 

Spencer owned and ran Spencer Mortgage, a company specializing in serving people with

bad credit. After Spencer and Dale became acquainted through one of the other co-defendants,

Spencer agreed to let Progressive use its Spencer Mortgage bank accounts for a fee. Before

Progressive funds from investors were deposited, the Spencer Mortgage account had a negative

balance. Spencer made deposits, gave Progressive investors wiring instructions over the phone

and sent confirmations that he had received wire transfers. Over $5 million in investors’ funds

went into the Spencer Mortgage accounts. Spencer wrote checks to investors for false returns

out of the accounts. He also wrote checks for cars, boats and houses using these funds. Spencer
3

took $581,865.20 of the investors’ funds for himself, including $200,000 for a house after

investors began questioning why they had not been paid as promised. Spencer also used $17,200

of the funds to pay an old business debt. Spencer prepared a letter containing false information

about Spencer Mortgage for a co-defendant to use for marketing purposes. He attended sales

pitches by the co-defendant and did not correct the lies told to investors. 

Dale and Spencer were sentenced to 78 months in prison and 3 years supervised release

and ordered to pay special assessments. Dales’s Presentence Report did not include an

enhancement under U.S.S.G. § 2F1.1(b)(6)(A), which applies to a defendant whose offense

substantially jeopardizes the safety and soundness of a financial institution. The government

objected to the PSR and Addendum because this enhancement was omitted. The district court

sustained the objection noting that although the court was unable to find any federal case law

addressing the issue, it concluded that Progressive appears to fall within the definition of a

financial institution. 

Spencer and Dale appeal. 

II.

Spencer raises several trial related issues as a challenge to his conviction. 

A.

Spencer argues first that the district court erred in denying his motion to sever his trial

from that of Lisa Dale. We review that decision for abuse of discretion. United States v. Nutall,

180 F.3d 182, 186 (5th Cir. 1999). In order to prevail, Spencer must show that “(1) the joint

trial prejudiced him to such an extent that the district court could not provide adequate

protection; and (2) the prejudice outweighed the [G]overnment’s interest in economy of judicial
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administration.” United States v. Solis, 299 F.3d 420, 440 (5th Cir. 2002), cert. denied, 537 U.S.

1060 (2002) (quoting United States v. Richards, 204 F.3d 177, 193 (5th Cir.), cert. denied, 531

U.S. 826 (2000)). Spencer claims that the jury was exposed to a significant amount of testimony

dealing with his co-defendant whose role in the crime was broader than his. However, joinder is

proper where a single scheme to defraud is carried out through the operations of different

companies, even if a defendant not connected with all of the companies is charged on only some

of the substantive counts. United States v. Chavis, 772 F.2d 100, 111 (5th Cir. 1985). Also,

disparity in the amount of evidence presented against co-defendants does not justify severance in

the absence of a showing of prejudice. United States v. Hogan, 763 F.2d 697, 705 (5th Cir.

1985). Spencer makes only a general claim of prejudice by spill-over effect. This does not rise to

the level to outweigh the government’s interest in judicial economy. The district court did not

abuse its discretion in denying Spencer’s motion to sever. 

B.

Spencer argues next that the district court abused its discretion in admitting, as extrinsic

evidence, evidence that Spencer used investors’ money to repay an overdue business debt. The

district court admitted the testimony of Sharon Brock concerning a $17,200 wire transfer she

received from Spencer from investor funds. Brock also testified that Spencer sent her the money

because she had invested the funds with Spencer and that Spencer offered her a 200% return on

her investment. These facts were not part of the scheme charged in the indictment. Spencer

contends that this is extrinsic evidence because Spencer was not charged with defrauding Brock. 

The government contends that this is not extrinsic evidence because it was presented to show that

Spencer was using the investor’s funds, which should have been invested as promised, to instead
5

repay a loan unrelated to the investment programs. The admission of this evidence is reviewed for

abuse of discretion. United States v. Buck, 324 F.3d 786, 790 (5th Cir. 2003).

Brock’s testimony is not extrinsic evidence. Rather it is intrinsic as it was presented to

show the nature of the Ponzi scheme in that Spencer used investors’ funds to repay a loan

unrelated to the investment programs. Evidence is intrinsic and admissible when it and the crime

charged are intertwined, both acts are part of the same criminal episode or the other act was a

necessary preliminary to the crime charged. United States v. Torres, 685 F.2d 921, 924 (5th Cir.

1982). The district court appropriately limited this testimony to avoid the mention of fraud. No

error resulted from the admission of this testimony. 

C.

Spencer argues that the district court erred in failing to compel the government to disclose

FBI Form 302s to Spencer under the Jencks Act, Brady or Giglio. Before and during the trial

Spencer made requests for FBI Form 302s under its request for Brady, Giglio and Jencks Act

material. Brady v. Maryland, 373 U.S. 83 (1963)(exculpatory material); Giglio v. United States,

405 U.S. 150 (1972)(material that would impeach a government witness); Jencks Act, 18 U.S.C.

§ 3500 (statements of any witness). At trial Spencer asked that the forms for each witness be

reviewed in camera to see if they contained any such material. The court reviewed them and

determined (with one small exception) that they contained no material required to be disclosed. 

Spencer now requests that this court review the sealed Form 302s to determine whether they

contain Jencks, Brady or Giglio material and thus whether the district court erred in refusing the

compel the government to produce them to the defense. If the district court erred, Spencer

submits that reversal of his conviction is required. 
6

The district court’s conclusion that a document does not contain a Jencks Act “statement”

is reviewed for clear error. 18 U.S.C. § 3500. United States v. Brown, 303 F.3d 582, 591 (5th

Cir. 2002), cert. denied, 537 U.S. 1173 (2003). A denial of a discovery request is reviewed for

abuse of discretion. United States v. Gonzalez, 466 F.2d 1286, 1288 (5th Cir. 1972). 

The government argues that a defendant seeking in camera inspection to determine

whether documents contain Brady material must make a “plausible showing” that the file will

produce material evidence. United States v. Lowder, 148 F.3d 548, 550-551 (5th Cir. 1998);

United States v. Martin, 565 F.2d 362, 364 (5th Cir. 1978). Also, to obtain production of a

statement under the Jencks Act, the defendant must make a preliminary showing that there is a

producible document. United States v. Edwards, 702 F.2d 529, 531 (5th Cir. 1983). Spencer

makes no claims as to what the forms may contain. The district court nevertheless carefully

reviewed the documents in question and determined, with minor exceptions, that they did not

qualify as Jencks Act material and did not contain material required to be disclosed under Brady

or Giglio. Our own independent review confirms these conclusions and we find no error in the

district court’s disposition of this issue. 

D.

Spencer asserts that the evidence was insufficient to convict him of the crimes charged.

Specifically, Spencer argues that the evidence was insufficient to prove that he knew of the

fraudulent scheme, that he knew that the money in the Spencer Mortgage account was obtained

by fraud or that he intended to participate in the fraudulent scheme. Lack of proof of these

elements would negate his convictions. Essentially, Spencer is claiming that he had no knowledge

of the fraudulent nature of his co-defendants’ activities and that he simply acted on the orders of
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the others whom he viewed as his superiors in a legitimate business. He also claims that he did

not lie to investors and that the co-defendants gave instructions to investors to wire funds into his

account without his authorization. 

The following evidence in the record supports Spencer’s convictions. Spencer made the

first deposit of investors’ funds into his account. He took no steps to prevent the co-defendants

from using his account. Spencer also did not return the money that “appeared in his account”

without his permission. Rather he was paid a fee and used the money in the account for personal

luxuries including a home and a car. Spencer lied about the size and success of Spencer

Mortgage and did not correct lies told to investors by his co-defendants. Spencer was in a

position to see the investors’ funds going into the account with no investment income. He wrote

checks to investors which led them to believe they were earning a return on their money. Spencer

also took $100,000 from money that an investor asked him to return. 

The above outlined evidence is clearly sufficient to support a conclusion that Spencer

knew of the fraudulent nature of the scheme and intended to participate. Accordingly, we find no

merit to Spencer’s claim of insufficient evidence. 

E. 

Spencer’s final complaint is that the district court improperly instructed the jury in

conjunction with the wire fraud counts that a defendant is criminally liable for acts he did not

engage in based on participation in a joint scheme where the extraneous acts are a reasonably

foreseeable consequence of the scheme. As Spencer objected to the instruction, this court

reviews for abuse of discretion. United States v. Daniels, 281 F.3d 168, 183 (5th Cir. 2002), cert.

denied, 535 U.S. 1101 (2002). The question is whether the “charge, as a whole is a correct
8

statement of the law and whether it clearly instructs jurors as to the principles of the law

applicable to factual issues confronting them.” Id. 

There is no merit to the claim. As Spencer acknowledges, the challenged instruction

follows the Fifth Circuit Pattern Criminal Jury Instruction for “Conspirator’s Liability for

Substantive Count.” Spencer’s complaint is that the second prong of the instruction, covering

acts (presumably use of wires) that are a reasonably foreseeable consequence of the scheme, goes

beyond the principle that co-conspirators are responsible for acts in furtherance of the scheme. 

However, the instruction given is a correct statement of the law. “One ‘causes’ the mail to be

used when one does an act with knowledge that the use of the mails will follow in the ordinary

course of business, or where such use can reasonably be foreseen, even though not actually

intended.” United States v. Finney, 714 F.2d 420, 423 (5th Cir. 1983), citing United States v.

Kenofskey, 243 U.S. 440, 37 S. Ct. 438, 61 L. Ed. 836 (1917). The charge as given was proper. 

III. 

Dale’s sole issue on appeal relates to a four-level increase imposed pursuant to U.S.S.G. §

2F1.1(b)(6)(A) (1997). Under that provision, if the offense “substantially jeopardized the safety

and soundness of a financial institution,” the defendant’s offense level is increased by 4 levels and

if the resulting offense level is less than 24, the offense level is increased to 24. Application Note

14 defines “financial institution” as follows:

“Financial institution,” as used in this guideline, is defined to include any institution

described in 18 U.S.C. § § 20, 656, 657, 1005-1007, and 1014; any state or

foreign bank, trust company, credit union, insurance company, investment

company, mutual fund, saving (building and loan) association; union or employee

pension fund; any health, medical or hospital insurance association; brokers and
9

dealers registered, or required to be registered, with the Securities and Exchange

Commission, futures commodity merchants and commodity pool operators

registered, or required to be registered, with the Commodity Futures Trading

Commission; and any similar entity, whether or not insured by the federal

government. (Emphasis added).

Dale argues that Progressive is not a “financial institution” and that the Sentencing Commission

exceeded the Congressional directive in FIRREA by including nonfederally insured entities in the

definition of “financial institution.” 

A.

Dale’s Presentence Report did not include the enhancement because the probation office

concluded that Progressive was simply a vehicle used to commit the securities fraud and was not a

legitimate investment company making legitimate investments. The government objected and the

district court sustained the objection upon finding that Progressive falls within the definition of a

financial institution. The district court stated its belief that whether or not the company

conducted itself as a legitimate investment company was irrelevant. It found that Progressive was

an investment company and sold or attempted to sell securities nationwide. The district court also

found that one of the co-defendants qualified as a broker/dealer and that the misapplication of the

funds received from those sales resulted in the insolvency of Progressive. We review the district

court’s factual findings for clear error, United States v. Texas, 168 F.3d 741, 752 (5th Cir. 1999),

and its application and interpretation of the Sentencing Guidelines de novo. United States v.

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

Dale makes three arguments that Progressive is not a financial institution. First, she

argues that Progressive was not a legitimate organization, it was merely a Ponzi scheme and the

guideline was meant to punish those who harm legitimate, sound financial institutions by their
10

fraudulent conduct. The Seventh Circuit rejected this argument in United States v. Randy, 81

F.3d 65, 67-68 (7th Cir. 1996). In Randy, the defendant had founded a phony (unlicensed) bank

and used it as a vehicle to defraud his investors. Finding it to be a financial institution for

purposes of this sentencing guideline, the Seventh Circuit said “when it walks and talks like a

financial institution, even if it’s a phony one, it is, in our view, covered by § 2F1.1(b)(6).” Id. 

We agree. In connection with this argument, Dale argues that because the co-defendants owned

Progressive, the purpose of the provision does not apply because it was victimized by their own

conduct. This court has rejected that position. United States v. McDermot, 102 F.3d 1379, 1384

(5th Cir. 1996), states that there is “no conceivable basis” for a conclusion that “the Sentencing

Commission did not intend for § 2F1.1(b)(6) to apply to a defendant who jeopardized the safety

and soundness of an institution he himself established.” McDermott also points out that the focus

is not “only on the institution qua institution” but also on others who fail to receive the benefits

for which they contracted. Application Note 15 to 2F1.1(b)(6) notes that an offense shall be

deemed to have substantially jeopardized the safety and soundness of a financial institution if as a

consequence of the offense, the institution was “unable to refund fully any deposit, payment or

investment.” That is certainly the case with Progressive. 

Dale also argues that Progressive was not an investment company because it did not make

any investments. There is no definition of investment company in the guidelines or related

statutes. However, Progressive held itself out as an investment company. It solicited investments

for the check cashing business and for trading programs involving investments in foreign capital

markets and various commodities. We agree with the district court that whether the company

actually made any investments is irrelevant. 
11

Dale argues finally that Progressive was not a financial institution because it was not, as

the government argued, a “broker or dealer . . . required to be registered with the Securities and

Exchange Commission.” Because we conclude that Progressive qualifies as a financial institution

for purposes of this guideline provision because it was an investment company, we need not

consider this argument. However, we note that the definition of broker and the underlying

definition of security are broad enough to encompass Progressive. Under the Security Exchange

Act, the “term ‘broker’ means any person engaged in the business of effecting transactions in

securities for the account of others.” 15 U.S.C. § 78c(a)(4). A “security” is broadly defined to

include a long list of investment devices. 15 U.S.C. § 78c(a)(11). The basic test laid down by the

Supreme Court in SEC v. W. J. Howey Co., 328 U.S. 293 (1946), is whether “the person invests

his money in a common enterprise and is led to expect profits solely from the efforts of the

promoter or a third party.” As described by Dale, Progressive solicited persons throughout the

United States and Puerto Rico to invest money in trading programs. They represented to

investors that Progressive was a lucrative check cashing business, obtaining profits of 50 percent

for short term loans to individuals and that it could pay investors 25 to 50 percent per month from

its profits from the loans to individuals. Progressive represented that these returns were

guaranteed. The investment programs Progressive offered to investors, although fraudulent,

clearly fall within the definition of a security. Since Progressive sold securities for the account of

others, its investors, it was a broker. Section 15(a)(1) of the Securities Exchange Act requires

brokers to register with the SEC. 15 U.S.C. § 78c(a)(1). An expert testified on these points at

the sentencing hearing. The district court’s conclusion that Progressive was a financial institution

on this basis was correct. 
1 Dale’s argument against the application of this enhancement based on recent

amendments to the 2B1.1(b)(12)(B), the successor guideline to U.S.S.G. § 2F1.1(b)(6)(A), are

without merit. 

12

In summary, Progressive presented itself as an investment company to its victims. Also,

the trading programs it offered were securities and Progressive was a broker under securities

laws. These facts provide two separate bases under which the company falls squarely within the

definition of a financial institution as set forth above. The fact that the investment company was a

sham and that the financial institution victimized was owned by the defendants does not prevent it

from falling within the enhancements called for in § 2F1.1. The harm caused by Progressive,

losses to its investor victims, was the type of harm contemplated by the phrase “jeopardized the

safety and security of the financial institution” as set forth in the Application Notes. This

enhancement was correctly applied. 1

B.

Dale also argues that the Sentencing Commission exceeded the Congressional directive in

FIRREA by including nonfederally insured entities in the definition of “financial institution” in

U.S.S.G. § 2F1.1(b)(6)(A). In Section 961(m) of the Financial Institutions Reform, Recovery and

Enforcement Act of 1989 (FIRREA), Pub.L. 101-73, Congress directed the Sentencing

Commission to promulgate guidelines to provide for a “substantial period of incarceration for a

violation of, or a conspiracy to violate, section 215, 656, 657, 1005, 1006, 1007, 1014, 1341,

1343 or 1344 of title 18, United States Code, that substantially jeopardizes the safety and

soundness of a federally insured financial institution.” (Underlining added.) The guideline

enacted in response to this directive, § 2F1.1 specifically covers non-federally insured financial

institutions in the definition of financial institution. The Background of U.S.S.G. §
13

2F1.1(b)(6)(A) (1997), states that “Subsection (b)(6)(A) implements, in a broader form, the

instruction to the Commission in Section 961(m) of Public Law 101-73.” Two cases from other

circuits have held that given the Sentencing Commission’s broad authority to promulgate

guidelines for sentences and its specific statement that it was exercising it in this situation to enact

a rule that was broader than the Congressional referenced directive, the Commission did not

exceed its authority in enacting the definition of financial institution in § 2F1.1. United States v.

Lauer, 148 F.3d 766, 769 (7th Cir. 1998); United States v. Ferrarini, 219 F.3d 145, 160 (2d Cir.

2000). This circuit has noted that the language in the Background Note (“in broader form”)

indicates that the Commission is exercising its authority to define an offense beyond a specific

directive of Congress. United States v. Soileau, 309 F.3d 877, 881 (5th Cir. 2002). Accordingly,

we conclude, following the 7th and 2d Circuits, that the promulgation of this provision was within

the authority of the Sentencing Commission. 

IV.

For the foregoing reasons, Spencer’s conviction and Dale’s sentence are AFFIRMED.