## No. PD-1636-14



# In the Court of Criminal Appeals of Texas

W ALTER 

## D EMOND 

## ,

Petitioner

,

v.

T HE 

## S TATE OF 

## T EXAS 

## ,

Respondent.

On Petition for Discretionary Review from the Third Court of Appeals at Austin, Texas

STATE’S CROSS-PETITION FOR DISCRETIONARY REVIEW

K EN 

## P AXTON 

## Attorney General of Texas

C HARLES 

## E. R OY 

## First Assistant Attorney General S COTT 

## A. K ELLER 

## Solicitor General

D USTIN 

## H OWELL 

## Assistant Solicitor General State Bar No. 24050169

O FFICE OF THE 

## A TTORNEY 

## G ENERAL 

## P.O. Box 12548 (MC 059) Austin, Texas 78711-2548 Tel.: (512) 936-0826 Fax: (512) 474-2697 dustin.howell@texasattorneygeneral.gov

C OUNSEL FOR 

## T HE 

## S TATE 

### PD-1636-14 COURT OF CRIMINAL APPEALS

AUSTIN, TEXAS Transmitted 2/2/2015 11:48:22 AM Accepted 2/4/2015 10:50:53 AM

ABEL ACOSTA CLERK

## i I DENTITY OF 

## J UDGES 

## , P ARTIES 

## , AND 

## C OUNSEL



## Trial Court Judges The Honorable Dan Mills The Honorable Bert Richardson (by assignment) 1 

## 424th District Court, Blanco County

Counsel for Petitioner Walter Demond Counsel in This Court James C. Ho Kyle Hawkins Prerak Shah G IBSON 

## , D UNN 

## & C RUTCHER 

## LLP 2100 McKinney Avenue Suite 1100 Dallas, Texas 75201 jho@gibsondunn.com

Counsel in the Court of Appeals James C. Ho G IBSON 

## , D UNN 

## & C RUTCHER 

## LLP 2100 McKinney Avenue Suite 1100 Dallas, Texas 75201 jho@gibsondunn.com Daniel L. Geyser M C 

## K OOL 

## S MITH 

## 300 Crescent Court Suite 1500 Dallas, TX 75201 dgeyser@mckoolsmith.com

Trial and Additional Appellate Counsel E.G. (Gerry) Morris L AW 

## O FFICE OF 

## E.G. M ORRIS 

## 608 W. 12th Street, Suite B Austin, Texas 78701 egm@egmlaw.com Warren L. “Rip” Collins M INTON 

## , B URTON 

## , B ASSETT 

## & C OLLINS 

## 1100 Guadalupe Street Austin, Texas 78701 rcollins@mbfc.com

1 

### Judge Richardson ruled on the disqualification and recusal issues.

## ii

Counsel for the State Counsel in This Court and the Court of Appeals Dustin M. Howell Assistant Solicitor General O FFICE OF THE 

## A TTORNEY 

## G ENERAL 

## P.O. Box 12548 (MC 059) Austin, Texas 78711-2548 dustin.howell@texasattorneygeneral.gov

Trial Counsel Harry E. White Tom Cloudt Assistant Attorneys General O FFICE OF THE 

## A TTORNEY 

## G ENERAL 

## P.O. Box 12548 (MC 048) Austin, Texas 78711-2548 harry.white@texasattorneygeneral.gov

## iii T ABLE OF 

## C ONTENTS



## Identity of Judges, Parties, and Counsel .......... ......................................... i

Index of Authorities ..............................

................................................... . iv

Statement of the Case ............................. ................................................. v i

Statement of Procedural History ................... .......................................... vi

Statement Regarding Oral Argument ................. .................................... vi

Cross-Ground for Review ........................... ............................................. vii

Argument ..........................................

................................................... ...... 1

I. The Court of Appeals Placed Too High a Burden on th e State to Prove Theft by Deception. ................ ......................... 2

II. The Court of Appeals Ignored the Law of Parties as an Alternative Means of Upholding Demond’s Theft Conviction. ....................................... ........................................ 8

Prayer ............................................

................................................... ....... 13

Certificate of Service ............................

................................................... 14

Certificate of Compliance ......................... ............................................... 14

Appendix Demond v. State , No. 03-11-00553-CR, 2014 WL 6612510 (Tex. App.—Austin Nov. 21, 2014, pets. filed).

## iv I NDEX OF 

## A UTHORITIES



## Cases

Clayton v. State

, 235 S.W.3d 772 (Tex. Crim. App. 2007) ............. .............................. 2

Daugherty v. State

, 387 S.W.3d 654 (Tex. Crim. App. 2013) ............. .............................. 5

Demond v. State , No. 03-11-00553-CR, 2014 WL 6612510 (Tex. App.—Austin Nov. 21, 2014, pets. filed) ......................................

......................................... passim

Fuelberg v. State

, 447 S.W.3d 304 (Tex. App.—Austin 2014, pet. filed) .................... 10

Hooper v. State

, 214 S.W.3d 9 (Tex. Crim. App. 2007) ............... ................................ 2

King v. State

, 17 S.W.3d 7 (Tex. App.—Houston [14th Dist.] 2000, pet. ref’d) ....................................... ............................................... 9-1 0

Matchett v. State

, 941 S.W.2d 922 (Tex. Crim. App. 1996) (en banc) ... ........................ 2

Ragan v. State

, No. 14-99-00020-CR, 2000 WL 1676060 (Tex. App.—Houston [14th Dist.] Nov. 9, 2000, pet. ref’d) (not designated for publication) ...... ................................ 9

Roberts v. State

, 319 S.W.3d 37 (Tex. App.—San Antonio 2010, pet. ref’d) .......................................

................................................... . 9

Swope v. State

, 805 S.W.2d 442 (Tex. Crim. App. 1991) ............. .............................. 9

## v

Statutes and Rules

T EX



## . P ENAL 

## C ODE 

## § 7.01(a) ........................................ ................................ 9

T EX



## . P ENAL 

## C ODE 

## § 7.02(a)(2) ..................................... ......................... 9, 11

T EX



## . P ENAL 

## C ODE 

## § 7.03(2) ........................................ .............................. 10

T EX



## . P ENAL 

## C ODE 

## § 31.01 .......................................... ...................... 4, 10-11

T EX



## . P ENAL 

## C ODE 

## § 31.01(1)(A) .................................... ............................. 3

T EX



## . P ENAL 

## C ODE 

## § 31.01(1)(B) .................................... ............................. 3

T EX



## . P ENAL 

## C ODE 

## § 31.01(1)(C) .................................... ............................. 3

T EX



## . P ENAL 

## C ODE 

## § 31.01(2)(A) .................................... ............................. 4

T EX



## . P ENAL 

## C ODE 

## § 31.01(3)(A) .................................... ............................. 3

T EX



## . P ENAL 

## C ODE 

## § 31.01(4) ....................................... ............................... 3

T EX



## . P ENAL 

## C ODE 

## § 31.03(a) ....................................... ............................... 2

T EX



## . P ENAL 

## C ODE 

## § 31.03(b)(1) .................................... .............................. 2

T EX



## . R. A PP



## . P. 9.4(i)(1) ...................................... ...................................... 14

T EX



## . R. A PP



## . P. 9.4(i)(2) ...................................... ...................................... 14

T EX



## . R. A PP



## . P. 66.3(a) ........................................ ....................................... 1

T EX



## . R. A PP



## . P. 66.3(c) ........................................ ........................................ 1

## vi S TATEMENT OF THE 

## C ASE



## This petition arises from Petitioner Walter Demond’ s convictions

for misapplication of fiduciary property, theft, an d money laundering in

connection with his role as an attorney for the Ped ernales Electric

Cooperative (“PEC”). 2.CR.761-66; 19.RR.4-5. 2



## S TATEMENT OF 

## P ROCEDURAL 

## H ISTORY



## The court of appeals’ opinion issued on November 21 , 2014.

Demond v. State , No. 03-11-00553-CR, 2014 WL 6612510 (Tex. App.—

Austin Nov. 21, 2014, pets. filed) (Field, J., join ed by Jones, C.J., and

Pemberton, J.). The court affirmed the trial court ’s judgment in part,

reversed and vacated in part, and modified the cond itions of Petitioner’s

community supervision. Id. at *1. Neither Petitioner nor the State

filed a motion for rehearing.

S TATEMENT 

## R EGARDING 

## O RAL 

## A RGUMENT



## The State does not believe that oral argument is ne cessary for any

of the issues in this case. If, however, the Court chooses to hear oral

argument, the State requests the opportunity to par ticipate.

2 

### “CR” refers to the clerk’s record, and “RR” to the reporter’s record.

## vii C ROSS 

## -G ROUND FOR 

## R EVIEW



## The State asserts a single cross-ground for review:

1. The court of appeals erred when it concluded tha t

Petitioner’s theft-by-deception conviction rested o n legally insufficient

evidence. The court’s reasoning—that only explicit testimony indicating

that the victim organization’s board members would not have approved

of certain hires had they known of Petitioner’s and his accomplice’s

fraudulent scheme, Demond , 2014 WL 6612510, at *12-14—misstated

the State’s burden and ignored the law of parties.

## T O THE 

## H ONORABLE 

## C OURT OF 

## C RIMINAL 

## A PPEALS OF 

## T EXAS 

## :

The court of appeals correctly affirmed Petitioner’ s convictions for

misapplication of fiduciary property and money laun dering. His

petition for discretionary review should therefore be denied. The court

below, however, erred in overturning Petitioner’s t heft-by-deception

conviction, holding the State to a burden that has no basis in this

Court’s interpretation of the elements of the crime , and ignoring

Petitioner’s responsibility, under the law of parti es, for his accomplice’s

theft. See T EX



## . R. A PP



## . P. 66.3(a), (c) (discretionary review in this Court

appropriate when the decision of the court of appea ls conflicts with

decisions of this Court or other courts of appeal). The Court should

grant the State’s cross-petition and reverse the er roneous portion of the

court of appeals’ judgment.

A RGUMENT



## Petitioner challenged the legal sufficiency of his convictions on

appeal. See Demond , 2014 WL 6612510, at *4. “[I]n analyzing legal

sufficiency, [courts] ‘determine whether the necess ary inferences are

reasonable based upon the combined and cumulative f orce of all the

evidence when viewed in the light most favorable to the verdict.’”

## 2

Clayton v. State , 235 S.W.3d 772, 778 (Tex. Crim. App. 2007) (quoti ng

Hooper v. State , 214 S.W.3d 9, 16-17 (Tex. Crim. App. 2007)). Rat her

than apply this settled standard of review to Petit ioner’s challenge to

his theft conviction, the court of appeals usurped the role of the jury,

reweighing the evidence and refusing to acknowledge key facts

supporting the conviction. See Demond , 2014 WL 6612510, at *12-14.

“[A] reviewing court does not sit as a thirteenth j uror reweighing the

credibility or weight of evidence, but asks only wh ether the evidence

exists to support the jury’s finding.” Matchett v. State , 941 S.W.2d 922,

936 (Tex. Crim. App. 1996) (en banc). The court of appeals did just that

when it overturned Petitioner’s theft conviction. If left to stand, the

decision will make it more difficult for prosecutor s to rely on

circumstantial evidence or the law of parties to es tablish theft by

deception.

I. T HE 

## C OURT OF 

## A PPEALS 

## P LACED 

## T OO 

## H IGH A 

## B URDEN ON THE 

## S TATE TO 

## P ROVE 

## T HEFT BY 

## D ECEPTION



## . An individual commits theft “if he unlawfully appro priates

property with intent to deprive the owner of proper ty.” T EX



## . P ENAL



## C ODE 

## § 31.03(a). “Appropriation of property is unlawfu l if . . . it is

without the owner’s effective consent.” Id. § 31.03(b)(1). “Appropriate”

## 3

means “to bring about a transfer or purported trans fer of title to or

other nonpossessory interest in property, whether t o the actor or

another; . . . or to acquire or otherwise exercise control over property

other than real property.” Id. § 31.01(4). The statute defines “effective

consent” as “consent by a person legally authorized to act for the owner”

and notes that “[c]onsent is not effective if . . . induced by deception or

coercion.” Id. § 31.01(3)(A). The statute defines “deception” as , among

other things, “creating or confirming by words or c onduct a false

impression of law or fact that is likely to affect the judgment of another

in the transaction, and that the actor does not bel ieve to be true,” id.

§ 31.01(1)(A), “failing to correct a false impressi on of law or fact that is

likely to affect the judgment of another in the tra nsaction, that the

actor previously created or confirmed by words or c onduct, and that the

actor does not now believe to be true,” id. § 31.01(1)(B), or “preventing

another from acquiring information likely to affect his judgment in the

transaction,” id. § 31.01(1)(C).

Petitioner, an attorney for PEC, carried out a year s-long scheme

in which he and Bennie Fuelberg (PEC’s general mana ger) funneled

PEC money through Petitioner’s law firm (Clark Thom as) to Bennie’s

## 4

brother Curtis and to Bill Price, the son of a prom inent PEC board

member. E.g. , 9.RR.53; 10.RR.123-24; 13.RR.49, 73-74. Petition er was

able to successfully perpetrate this scheme against his client for years

because of the misleading bills he sent to PEC from his firm—which

prevented anyone, other than Bennie Fuelberg, from discovering the

sham arrangements with Curtis and Price. E.g. , 9.RR.163; 11.RR.197;

16.RR.155. Indeed, the court of appeals acknowledg ed that the jury

heard “evidence that his deceptive billing practice s induced the PEC to

unknowingly reimburse Clark Thomas for Curtis’s sal ary and Price’s

retainer.” Demond , 2014 WWL 6612510, at *13.

In so doing, Petitioner “creat[ed] . . . a false im pression of . . . fact,”

“fail[ed] to correct a false impression of . . . fa ct,” and “prevent[ed] [the

PEC board] from acquiring information,” all of whic h was “likely to

affect the judgment of [the PEC board],” and all of which Appellant

knew to be dishonest. See T EX



## . P ENAL 

## C ODE 

## § 31.01. And because there

was also evidence that PEC did not receive value fr om the sham hires of

Curtis and Price, e.g. , 10.RR.106; 11.RR.37, 104, 117; 12.RR.48;

16.RR.118, it was reasonable for the jury to conclu de that PEC was

“deprived” of its property. See id. § 31.01(2)(A) (defining “deprive” as

## 5

“dispos[ing] of property in a manner that makes rec overy of the

property by the owner unlikely”). Viewing this evi dence in a light most

favorable to the verdict, the court of appeals shou ld have affirmed

Petitioner’s theft conviction.

But the court of appeals reversed the conviction, n oting the lack of

“direct testimony that if Clark Thomas’s bills had accurately reflected

that payments were being made to Curtis and Price, the PEC would not

have consented to reimburse Clark Thomas for those payments.”

Demond , 2014 WL 6612510, at *13. The court went on to fr ame the

question presented as whether “there [was] sufficie nt circumstantial

evidence from which the jury could infer that the P EC’s decision to

reimburse Clark Thomas for Curtis’s and Price’s inc ome was materially

affected by Demond’s deceptive billing.” Id. (citing Daugherty v. State

,
387 S.W.3d 654, 659 n.18 (Tex. Crim. App. 2013)).

The court of appeals’ analysis, however, demonstrat ed an

unwillingness to consider the evidence supporting t he jury’s verdict.

For example, the court minimized testimony from PEC ’s assistant

general manager that he would have been concerned i f he had known of

the billing arrangement for Curtis and Price and th at he would have

## 6

reported them to Fuelberg and possibly to the board itself, as well as his

testimony that if employees had known of these sham arrangements,

“‘all hell would have broken loose.’” Id. (discussing testimony of Will

Dahmann, 11.RR.35, 60). The court also diminished the importance of

the testimony of multiple directors that they would have wanted to

know about these arrangements in deciding whether t o approve them.

Id. (discussing testimony of E.B. Price, 10.RR.133-34; O.C. Harmon,

10.RR.194-96; Edwin Smith, 12.RR.14-15; Vi Cloud, 1 3.RR.41-42; R.B.

Felps, 13.RR.191). 3 

## Moreover, the court ignored testimony, for exampl e,

that, in an effort to disguise them from the board, the arrangements for

Curtis and Price were structured unlike any other l obbying or attorneyretainer arrangement PEC held. See, e.g. , 9.RR.155, 186, 188, 231;

10.RR.23; 15.RR.39-40; 17.RR.35, 52-53 (bills were invoiced in advance

and prepaid into a Clark Thomas trust account); 10. RR.109, 111, 133-

34; 11.RR.263-64; 14.RR.68 (Curtis was the only lob byist “hired”

through a law firm); 11.RR.63-66 (Price was the onl y attorney whose

payments were not disclosed to the board); 13.RR.15 8 (Curtis was the

3 

### The opinion references three directors who testifi ed that they would have wanted to know about the arrangements, though, as reflecte d above, there were at least five who indicated they would have wanted to know.

## 7

only PEC lobbyist who did not register with the Tex as Ethics

Commission).

Had the court below viewed this evidence in a light most favorable

to the verdict, it would have upheld Petitioner’s t heft-by-deception

conviction. The evidence was more than enough to c onclude that

Petitioner’s deceptive billing practices were “like ly to affect” PEC’s

decision to part with its property to pay for Curti s’s and Price’s

arrangements. By covering up these arrangements, D emond prevented

the board from having any knowledge of their existe nce, and thus he

cannot correctly assert, and the court of appeals w as incorrect to

conclude, that his deception did not materially affect their decisionmaking.

Although the court of appeals acknowledged that the ft by

deception can be proven with circumstantial evidenc e, the court’s

reasoning demonstrates that it would affirm the con viction only if it

were supported by direct testimony that the board d efinitely would not

have agreed to the arrangements had it known of the m. See, e.g.

,

Demond , 2014 WL 6612510, at *13-14 (holding evidence lega lly

insufficient where “none of the directors testified that the board would

## 8

have stepped in and blocked these payments,” “none of the directors

testified [that] they would have recommended that t he PEC’s nepotism

policy be modified,” and “no witness testified that . . . [the board of

directors or PEC accounting department] would have considered

terminating Fuelberg’s employment or reining in his authority” had

they known of the arrangements). This sets an impo ssibly high bar for

prosecutors to meet. The Court should grant the St ate’s cross-petition

for review and reverse the erroneous portion of the court of appeals’

judgment.

II. T HE 

## C OURT OF 

## A PPEALS 

## I GNORED THE 

## L AW OF 

## P ARTIES AS AN 

## A LTERNATIVE 

## M EANS OF 

## U PHOLDING 

## D EMOND 

## ’ S 

## T HEFT 

## C ONVICTION



## . In its discussion of Petitioner’s misapplication-of-fiduciaryproperty conviction, the court of appeals correctly recognized that

Petitioner was guilty both for his own criminal con duct and as a party

to Bennie Fuelberg’s criminal conduct. Id. at *12. Yet the court, for

reasons unexplained, explicitly declined to apply t he law of parties

when reviewing Petitioner’s theft conviction. See id. at *6 (“Our

analysis will focus on whether the evidence is suff icient to prove that

Demond is liable as a party to Fuelberg’s misapplic ation of fiduciary

## 9

property. However, we will primarily consider whet her Demond is

guilty of theft by deception based on his own condu ct.”). The court

ignored this basis for Petitioner’s conviction desp ite the fact that the

jury was instructed to consider the law of parties in reaching its verdict

for all three crimes. 2.CR.723-24 (misapplication) , 727 (theft), 731

(money laundering).

“A person is criminally responsible as a party to a n offense if the

offense is committed by his own conduct, by the con duct of another for

which he is criminally responsible, or by both.” T EX



## . P ENAL 

## C ODE



## § 7.01(a). “A person is criminally responsible for an offense committed

by the conduct of another if . . . acting with inte nt to promote or assist

the commission of the offense, he solicits, encoura ges, directs, aids, or

attempts to aid the other person to commit the offe nse.” Id. § 7.02(a)(2).

Multiple courts, including this one, have upheld th eft-by-deception

convictions under the law of parties. See, e.g.

, Swope v. State , 805

S.W.2d 442, 445 (Tex. Crim. App. 1991); Roberts v. State , 319 S.W.3d

37, 50 (Tex. App.—San Antonio 2010, pet. ref’d); Ragan v. State , No. 14-

99-00020-CR, 2000 WL 1676060, at *4-5 (Tex. App.—Ho uston [14th

Dist.] Nov. 9, 2000, pet. ref’d) (not designated fo r publication); King v.

## 10

State , 17 S.W.3d 7, 14-15 (Tex. App.—Houston [14th Dist. ] 2000, pet.

ref’d).

Petitioner was a party to Bennie Fuelberg’s theft. 4 

## Fuelberg

successfully induced the PEC to part with the funds for the Curtis and

Price arrangements by, among other things, instruct ing Petitioner to

list Curtis’s services anonymously on Clark Thomas’ s bills as “legal

services rendered in connection with regulatory and legislative

services,” though Curtis was not an attorney, 16.RR .155; instructing

Petitioner to inflate PEC’s general monthly bill wi thout listing Curtis’s

or Price’s arrangements, 9.RR.123-27, 163, 235-39; and assuming sole

responsibility for approving Clark Thomas’s bills a fter Luis Garcia,

PEC’s human resources manager, 5 

## questioned several entries,

10.RR.37, 256-57. In these ways, Fuelberg prevente d the PEC board

from acquiring information that was “likely to affe ct [its] judgment,”

and he was therefore guilty of theft by deception. See T EX



## . P ENAL 

## C ODE

4 

### Fuelberg was convicted of theft (along with misapp lication of fiduciary property and money laundering) for his role in this scheme, and the Third Court of Appeals recently affirmed the conviction. See Fuelberg v. State , 447 S.W.3d 304, 319 (Tex. App.—Austin 2014, pet. filed). Fuelberg’s convicti on, however, is not necessary to establish Petitioner’s liability under the law of p arties. T EX



### . P ENAL 

### C ODE 

### § 7.03(2).

5 

### Garcia was later made PEC’s general counsel. 10.R R.235; 20.RR.42.

## 11

§ 31.01. And because Petitioner helped Fuelberg ca rry out this scheme

by utilizing falsified bills issued from his law fi rm, Petitioner

“encourage[ed]” and “aid[ed]” Fuelberg in the schem e, and thus was

liable as a party to Fuelberg’s theft. Id. § 7.02(a)(2).

As it did in assessing Petitioner’s guilt as a prin cipal actor, the

court of appeals noted that there was no direct tes timony that the PEC

board would have reined in Fuelberg’s authority had it known about the

Curtis and Price arrangements and that, therefore, the jury would have

to “make some inferences about the PEC board’s pote ntial reaction to

the deception” to hold Petitioner liable as a party to Fuelberg’s theft.

Demond , 2014 WL 6612510, at *12. After making this obser vation,

however, the court of appeals turned to Petitioner’ s guilt as a principal

actor and never addressed the permissible inference s arising from the

evidence the jury heard. See id. at *13. The court concluded by noting

that “the evidence is insufficient to support a fin ding that either

Demond’s or Fuelberg’s deception induced the PEC to make payments it

otherwise would not have made.” Id. at *14 (emphasis added).

Significantly, however, the court of appeals never actually discussed

## 12

any of Fuelberg’s deceptions that gave rise to Demo nd’s liability under

the law of parties. Id. at *13.

As with its reformulation of the burden to prove th eft by

deception, the court of appeals’ failure to fully c onsider the law of

parties as an alternative basis for affirming Petit ioner’s theft conviction

conflicts with the decisions of this Court and of m ultiple courts of

appeals that have upheld theft-by-deception convict ions on that basis.

The Court should reverse the erroneous portion of t he court of appeals’

judgment.

## 13 P RAYER



## The Court should deny Petitioner’s petition for dis cretionary

review, grant the State’s cross-petition, reverse t he portion of the court

of appeals’ judgment reversing Petitioner’s theft c onviction, and render

judgment affirming the trial court’s judgment in wh ole.

Respectfully submitted.

K EN 

## P AXTON 

## Attorney General of Texas

C HARLES 

## E. R OY 

## First Assistant Attorney General

S COTT 

## A. K ELLER 

## Solicitor General

/s/ Dustin M. Howell D USTIN 

## M. H OWELL 

## Assistant Solicitor General State Bar No. 24050169

O FFICE OF THE 

## A TTORNEY 

## G ENERAL 

## P.O. Box 12548 (MC 059) Austin, Texas 78711-2548 Tel.: (512) 936-0826 Fax: (512) 474-2697 dustin.howell@texasattorneygeneral.gov

C OUNSEL FOR 

## T HE 

## S TATE

## 14 C ERTIFICATE OF 

## S ERVICE



## On February 2, 2015, this Cross-Petition for Discr etionary Review

was served via File & Serve Xpress on:

James C. Ho G IBSON 

## , D UNN 

## & C RUTCHER 

## LLP 2100 McKinney Avenue Suite 1100 Dallas, Texas 75201 jho@gibsondunn.com Lisa C. McMinn S TATE 

## P ROSECUTING 

## A TTORNEY 

## P.O. Box 13406 Austin, Texas 78711-3046 lisa.mcminn@spa.texas.gov

/s/ Dustin M. Howell D USTIN 

## M. H OWELL



## C ERTIFICATE OF 

## C OMPLIANCE



## In compliance with Texas Rule of Appellate Procedu re 9.4(i)(2),

this brief contains 2,322 words, excluding the port ions of the brief

exempted by Rule 9.4(i)(1).

/s/ Dustin M. Howell D USTIN 

## M. H OWELL

# AppendixPage 1

--- S.W.3d ----, 2014 WL 6612510 (Tex.App.-Austin) (Cite as: 2014 WL 6612510 (Tex.App.-Austin))

© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. Only the Westlaw citation is currently available.OP INION

Court of Appeals of Texas,
Austin. Walter Demond, Appellant

v. The State of Texas, Appellee

NO. 03–11–00553–CR Filed: November 21, 2014

Background: Defendant was convicted in the 424th Judicial Dist rict Court, Blanco County, Daniel H. Mills , J., of misapplication of fiduciary property, theft by dece ption, and money laundering. Defendant appealed.

Holdings: The Court of Appeals, Scott K. Field , J., held that: (1) indictment on charge for misapplication of fiducia ry property did not have to allege liability as par ty in order to support conviction for same as party; (2) evidence supported conviction for misapplication o f fiduciary property; (3) finding that consultant and attorney hired by defe ndant's law firm provided some benefit to client di d not preclude charge for misapplication of fiduciary property; (4) evidence was insufficient to support conviction fo r theft by deception; (5) evidence supported conviction for money laundering ; (6) variance between evidence presented and indictment on charge for misapplication of fiduciary property involved non-statutory allegations that were immaterial to d etermination of sufficiency of evidence to support charge for money laundering; (7) trial court had authority to order that defendant serve consecutive periods of jail time, as conditio n of community supervision for misapplication of fiduciary propert y and money laundering, for total of 320 days; and (8) trial court's determination that juror had become “disabled,” as basis for removal, was not abuse of discretion.

Affirmed in part; reversed and vacated in part, and modified in part.

West Headnotes

[1] Indictment And Information 210 83

210 Indictment and Information
210V Requisites and Sufficiency of AccusationPage 2

--- S.W.3d ----, 2014 WL 6612510 (Tex.App.-Austin) (Cite as: 2014 WL 6612510 (Tex.App.-Austin))

© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. 210k83 k. Principals in second degree; aiders and abettor s. Most Cited Cases

Indictment on charge for misapplication of fiduciar y property did not have to allege culpability under law of parties in order for defendant's conviction to be b ased on evidence showing that he encouraged, direct ed, aided, or attempted to aid codefendant's misapplication of th at property. Tex. Penal Code Ann. §§ 7.01

, 7.02

, 32.45

.

[2] Indictment And Information 210 171

210 Indictment and Information
210XII Issues, Proof, and Variance
210k170 Variance Between Allegations and Proof
210k171 k. In general. Most Cited Cases

A “variance” occurs whenever there is a discrepancy between the allegations in the indictment and the proof
offered at trial.

[3] Criminal Law 110 1167(1)

110 Criminal Law
110XXIV Review 110XXIV(Q) Harmless and Reversible Error
110k1167 Rulings as to Indictment or Pleas 110k1167(1) k. Indictment or information in general. Most Cited Cases

Indictment And Information 210 171

210 Indictment and Information
210XII Issues, Proof, and Variance
210k170 Variance Between Allegations and Proof
210k171 k. In general. Most Cited Cases

A variance between the allegations of an indictment and the evidence offered at trial is “material,” a nd thus reversible error, only if it fails to give the defend ant sufficient notice of the offense alleged or wou ld not bar a second prosecution for the same crime.

[4] Indictment And Information 210 83

210 Indictment and Information
210V Requisites and Sufficiency of Accusation
210k83 k. Principals in second degree; aiders and abettor s. Most Cited CasesPage 3

--- S.W.3d ----, 2014 WL 6612510 (Tex.App.-Austin) (Cite as: 2014 WL 6612510 (Tex.App.-Austin))

© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. An indictment need not include notice that the Stat e will attempt to prove its case under the law of p arties, and therefore, an accused may be convicted as a party t o the offense even if the indictment does not expli citly charge him
as a party.

[5] Criminal Law 110 80

110 Criminal Law
110VII Parties to Offenses
110k79 Prosecution and Punishment of Principals and Acces sories
110k80 k. In general. Most Cited Cases

Circumstantial evidence may be used to prove the de fendant is a party to an offense, and a factfinder may look to events occurring before, during, and after the comm ission of the offense that show an understanding or common design to do the prohibited act.

[6] Embezzlement 146 44(6)

146 Embezzlement
146k44 Weight and Sufficiency of Evidence 146k44(6) k. Conversion or appropriation of property. Most Cited Cases

Evidence was sufficient to show that general manage r for defendant's client knew that his brother and other consultant would provide little or no benefit to cl ient, and therefore, that general manager lacked au thority to order defendant to make monthly payments and retainer fee s to brother and other consultant, and then be reim bursed by client, contrary to agreement under which general m anager held client's property, as required to suppo rt defendant's conviction for misapplication of fiduciary property , on theory of party liability. Tex. Penal Code Ann. § 32.45(a)(2)(A)

.

[7] Embezzlement 146 11(1)

146 Embezzlement
146k3 Elements of Offenses
146k11 Conversion or Appropriation of Property 146k11(1) k. In general. Most Cited Cases

Finding that lobbyist consultant and attorney, who were hired and retained by defendant's law firm at direction of general manager of defendant's client, provided som e benefit to client did not preclude jury determina tion that defendant, at direction of general manager, used clie nt funds to pay monthly salary and retainer fees in excess of value of services, for purposes of showing that defendant in tentionally misapplied or stole client's money, as required to support charge for misapplication of fiduciary prop erty. Tex. Penal Code Ann. § 32.45(b)

.Page 4

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. [8] Embezzlement 146 44(6)

146 Embezzlement
146k44 Weight and Sufficiency of Evidence 146k44(6) k. Conversion or appropriation of property. Most Cited Cases

Evidence was sufficient to show that defendant, who was law partner for firm that represented client, never intended for client to receive any benefit from clien t's payment of attorney's $2,000 monthly retainer f ee, as required to support conviction for misapplication of fiduciary property; attorney testified that he never knew cli ent was paying his retainer, he was never advised that he would be per forming work for client, and he was never given wor k to perform for client, and defendant admitted that during year s that attorney was on retainer, defendant's firm p erformed work for client that attorney was qualified to handle and wo rk would have cost less than monthly retainer paid to attorney, meaning that attorney could have performed work at no additional cost to client. Tex. Penal Code Ann. § 32.45

.

[9] Embezzlement 146 44(6)

146 Embezzlement
146k44 Weight and Sufficiency of Evidence 146k44(6) k. Conversion or appropriation of property. Most Cited Cases

Evidence was sufficient to show that defendant, who was partner of law firm that represented client, d id not intend for client to receive any benefit from hiring, at d irection of client's general manager, of consulting lobbyist, whose salary was paid mostly from client funds, as requir ed to support conviction, based on party theory of liability, for misapplication of fiduciary property; consultant, w ho was not registered lobbyist, did not participate in client's negotiations concerning deregulation 1997 and 1999 legi slative sessions, consultant was paid same salary r egardless, and defendant and general manager went to great lengths to conceal consultant's employment from client. Tex. Penal Code Ann. § 32.45 ; Tex. Gov't Code Ann. § 305.003(b)

.

[10] False Pretenses 170 9

170 False Pretenses
170k3 Elements of Offenses
170k9 k. Reliance on pretense and inducement to act. Most Cited Cases

The victim's reliance on a defendant's deceptive ac t in giving the defendant consent to exercise contr ol over the victim's property, for the purpose of a charge for theft by deception, need not be the sole, or even c ontrolling, reason why the victim decided to provide his consent, but it must be a substantial or material factor in the decision-making

process. Tex. Penal Code Ann. § 31.01(3)(A)

.

[11] False Pretenses 170 49(1)Page 5

--- S.W.3d ----, 2014 WL 6612510 (Tex.App.-Austin) (Cite as: 2014 WL 6612510 (Tex.App.-Austin))

© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. 170 False Pretenses
170k49 Weight and Sufficiency of Evidence 170k49(1) k. In general. Most Cited Cases

Evidence supported finding that defendant, who was partner of law firm that represented client, deceiv ed client with respect to hiring of lobbyist consultant and a ttorney, and payment of consultant's salary and att orney's monthly retainer fee, as required to support charge for the ft by deception; defendant testified that client's general manager
instructed him to hire and retain consultant and at torney, and then have client reimburse law firm for payment of salary/retainer fee, and that general manager instr ucted him to change law firm's bills to client so t hat client would not be able to determine that it was indirectly paying consultant and attorney. Tex. Penal Code Ann. § 31.01(1)(A), (C)

.

[12] False Pretenses 170 9

170 False Pretenses
170k3 Elements of Offenses
170k9 k. Reliance on pretense and inducement to act. Most Cited Cases

Evidence was insufficient to show that client repre sented by law firm for which defendant was partner would have terminated its general manager's employment or woul d have refused to consent to reimbursing law firm f or large percentage salary and retainer fees of consultant a nd attorney hired and retained by firm, had it know n about hiring of consultant and retention of attorney, as required t o support defendant's conviction for theft by decep tion; although client's board members testified that they would li ke to have known that client was indirectly paying consultant's salary and attorney's retainer, none of them testif ied that board would have stepped in and blocked th ese payments, and there was no witness testimony that, had either cli ent's accounting department or board of directors k nown about these payments, they would have considered terminating em ployment of general manager, who directed defendant to hire consultant and attorney and to seek reimbursement o f salary/retainer fee from client, or would have re ined in his authority. Tex. Penal Code Ann. § 31.01(1)(A), (C)

.

[13] United States 393 34

393 United States
393I Government in General
393k34 k. Mints, assay offices, coinage, and money. Most Cited Cases

Evidence supported defendant's conviction for money laundering arising out of scheme with client's gen eral manager, pursuant to which general manager instruct ed defendant, who was partner of law firm that repr esented client, to hire lobbying consultant and retain attorney, an d then have client reimburse law firm for salary an d retainer fee, all without client's knowledge; client's funds became p roceeds of criminal activity, namely, misapplicatio n of client property, when funds were received by law firm, and defendant's subsequent transfer of funds to consul tant and attorney, who essentially provided no services or ben efit to client, was transaction that involved proce eds of criminal activity. Tex. Penal Code Ann. §§ 32.45(b)

, 34.02(a)(2)

.Page 6

--- S.W.3d ----, 2014 WL 6612510 (Tex.App.-Austin) (Cite as: 2014 WL 6612510 (Tex.App.-Austin))

© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. [14] Embezzlement 146 11(1)

146 Embezzlement
146k3 Elements of Offenses
146k11 Conversion or Appropriation of Property 146k11(1) k. In general. Most Cited Cases

To prove misapplication of fiduciary property, the State was required to show that defendant (1) faile d to hold victim's property according the terms of the agreem ent under which the property was held, and (2) the misapplication
created a substantial risk of loss to the victim. Tex. Penal Code Ann. § 32.45(b)

.

[15] Embezzlement 146 11(1)

146 Embezzlement
146k3 Elements of Offenses
146k11 Conversion or Appropriation of Property 146k11(1) k. In general. Most Cited Cases

On a charge for misapplication of fiduciary propert y, the actual disposition of the victim's property is immaterial, and the State is not required to prove how the defe ndant fiduciary disposed of the property, if the St ate has proved that the fiduciary failed to dispose of the property acc ording to the terms of the agreement under which th e property was
held. Tex. Penal Code Ann. § 32.45(b)

.

[16] Indictment And Information 210 171

210 Indictment and Information
210XII Issues, Proof, and Variance
210k170 Variance Between Allegations and Proof
210k171 k. In general. Most Cited Cases

Immaterial variances between the allegations in the indictment and the evidence introduced are to be d isregarded when considering the sufficiency of the evidence to support a conviction.

[17] United States 393 34

393 United States
393I Government in General
393k34 k. Mints, assay offices, coinage, and money. Most Cited Cases

Variance between indictment on charge for misapplic ation of fiduciary property, which alleged that def endant, who was partner for law firm that represented clien t, caused client funds to be used to pay salary and retainer fee ofPage 7

--- S.W.3d ----, 2014 WL 6612510 (Tex.App.-Austin) (Cite as: 2014 WL 6612510 (Tex.App.-Austin))

© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. lobbyist consultant and attorney respectively, who were hired and retained without client's knowledge, and evidence presented, was not variance involving element that defined or helped define allowable unit of prosecut ion for misapplication of fiduciary property, for purposes of determining when crime was complete, and therefore, whether funds were proceeds of criminal activity, as required to support conviction for money laundering, where mann er in which defendant misapplied client's property was immateri al and did not describe element of offense. Tex. Penal Code Ann. §§ 32.45(b)

, 34.02(a)(2)

.

[18] Indictment And Information 210 171

210 Indictment and Information
210XII Issues, Proof, and Variance
210k170 Variance Between Allegations and Proof
210k171 k. In general. Most Cited Cases

There are three categories of variances between the allegations of an indictment and the evidence pres ented at trial in support of the charge: (1) a variance involving statutory language that defines the offense; (2) a variance involving a non-statutory allegation that describes an allowa ble unit of prosecution' element of an offense; and (3) other types of variances involving immaterial non-statutory allega tions.

[19] Criminal Law 110 1167(1)

110 Criminal Law
110XXIV Review 110XXIV(Q) Harmless and Reversible Error
110k1167 Rulings as to Indictment or Pleas 110k1167(1) k. Indictment or information in general. Most Cited Cases

Indictment And Information 210 171

210 Indictment and Information
210XII Issues, Proof, and Variance
210k170 Variance Between Allegations and Proof
210k171 k. In general. Most Cited Cases

A variance between an indictment's allegations invo lving statutory language that defines the offense a nd the evidence presented is always “material,” and thus, reversible error; when an indictment alleges a spec ific statutory manner and means of committing an offense, then the State must prove that specific manner and means.

[20] Criminal Law 110 1167(1)

110 Criminal LawPage 8

--- S.W.3d ----, 2014 WL 6612510 (Tex.App.-Austin) (Cite as: 2014 WL 6612510 (Tex.App.-Austin))

© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. 110XXIV Review 110XXIV(Q) Harmless and Reversible Error
110k1167 Rulings as to Indictment or Pleas 110k1167(1) k. Indictment or information in general. Most Cited Cases

Indictment And Information 210 171

210 Indictment and Information
210XII Issues, Proof, and Variance
210k170 Variance Between Allegations and Proof
210k171 k. In general. Most Cited Cases

A variance between an indictment involving a non-st atutory allegation that describes an allowable unitof prosecution element of an offense and the evidence pres ented can be “material,” and therefore, reversible error, if it is significant enough that a reviewing court could not conclude whether the State had proved the same off ense alleged in
the indictment.

[21] Indictment And Information 210 171

210 Indictment and Information
210XII Issues, Proof, and Variance
210k170 Variance Between Allegations and Proof
210k171 k. In general. Most Cited Cases

Variances between immaterial non-statutory allegati ons in an indictment and the evidence presented are always immaterial, and therefore, do not affect the suffic iency of the evidence to support a conviction.

[22] United States 393 34

393 United States
393I Government in General
393k34 k. Mints, assay offices, coinage, and money. Most Cited Cases

Variance between evidence presented and indictment on charge for misapplication of fiduciary property, which alleged that defendant, who was partner for law fir m that represented client, caused client funds to b e used to pay salary and retainer fee of lobbyist consultant and attorney respectively, who were hired and retained without client's knowledge, was variance involving immaterial non-st atutory allegations, and therefore, was immaterial to determination when crime was completed, for purposes of de termining whether funds used by defendant were proc eeds of criminal activity, as required to support convictio n for money laundering. Tex. Penal Code Ann. §§ 32.45(b)

, 34.02(a)(2)

.Page 9

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. [23] Sentencing And Punishment 350H 1937

350H Sentencing and Punishment
350HIX Probation and Related Dispositions 350HIX(F) Disposition of Offender
350Hk1933 Confinement and Probation
350Hk1937 k. Different offenses or convictions. Most Cited Cases

Trial court had authority to order that defendant s erve jail time, as condition of community supervisi on, of 140 days for misapplication of fiduciary property, and 180 days for money laundering, and that they be ser ved consecutively for total of 320 days, under article authori zing trial court to order maximum confinement in ja il of 180 days as condition of community supervision for felony offen se, “per felony conviction.” Tex. Code Crim. Pro. Ann. art. 42.12 § 12(a)

.

[24] Jury 230 149

230 Jury
230VI Impaneling for Trial, and Oath
230k149 k. Discharge of juror or jury pending trial. Most Cited Cases

Trial court's determination that juror had become “ disabled,” as basis for removal, due to significant pain and what juror believed might be bladder infection, was not abuse of discretion, in trial for misapplicati on of fiduciary property, theft by deception, and money laundering; although juror stated that she generally took medi cation for this type of pain and that medication was suppose to cle ar up infection, juror did not know if condition wa s minor infection
and was not certain that she would be better on fol lowing day. Tex. Crim. Proc. Code Ann. art. 36.29(a)

.

[25] Jury 230 149

230 Jury
230VI Impaneling for Trial, and Oath
230k149 k. Discharge of juror or jury pending trial. Most Cited Cases

“Disabled,” as used the article authorizing the rem oval of a juror who becomes disabled from sitting, means any condition that inhibits the juror from fully and fa irly performing the functions of a juror. Tex. Crim. Proc. Code Ann.
art. 36.29

.

[26] Jury 230 149

230 Jury
230VI Impaneling for Trial, and Oath
230k149 k. Discharge of juror or jury pending trial. Most Cited CasesPage 10

--- S.W.3d ----, 2014 WL 6612510 (Tex.App.-Austin) (Cite as: 2014 WL 6612510 (Tex.App.-Austin))

© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. A condition that can render a juror disabled from s itting can include physical illness, mental conditi on, or emotional state which hinders one's ability to perform one's duties as a juror. Tex. Crim. Proc. Code Ann. art. 36.29(a)

.

[27] Jury 230 149

230 Jury
230VI Impaneling for Trial, and Oath
230k149 k. Discharge of juror or jury pending trial. Most Cited Cases

The determination as to whether a juror is disabled from sitting on the jury, as the basis for the jur or's removal, is
within the discretion of the trial court. Tex. Crim. Proc. Code Ann. art. 36.29(a)

.

FROM THE DISTRICT COURT OF BLANCO COUNTY, 424TH JUD ICIAL DISTRICT, NO. CR–1016, HONORABLE DANIEL H. MILLS, JUDGE PRESIDING James C. Ho , Gibson, Dunn & Crutcher LLP, Daniel L. Geyser

, McKool Smith, PC, Dallas, TX, E.G. (Gerry) Morris , Law Office of E.G. Morris, Austin, TX, for appell ant.

Bill Davis

, Dustin M. Howell , Assistant Solicitor General, Office of the Attorn ey General, Austin, TX, for Appellee.

Before Chief Justice Jones , Justice Pemberton and Field

OPINION
Scott K. Field , Justice
*1 A jury found appellant Walter Demond guilty of mis application of fiduciary property, theft by decepti on, and money laundering. See Tex. Penal Code §§ 31.03

, 32.45

, 34.02 . The jury assessed punishment at ten years' impris

onment for each offense, but recommended that the s entences be suspended and Demond be placed on commu nity supervision. Demond raises eight issues on appeal. We affirm the trial court's judgments in part, reve rse and vacate in part, and modify the conditions of Demond's communi ty supervision.

BACKGROUND The Pedernales Electric Cooperative (PEC) is a memb er-owned utility that provides electrical service t o twenty-four counties in Central Texas. See Tex. Util.Code §§ 161.001–.254 (describing formati on and operation of utility cooperatives). Any resident in the PEC's service ar ea is required to join the PEC in order to receive electric service, and as of 2008 the PEC had over 225,000 members.

Demond was a partner at Clark, Thomas & Winters, PC (Clark Thomas), a law firm that had represented th e PEC
for several decades. Demond was the head of Clark T homas's “energy group,” which was the section of th e firm that handled the PEC's representation. Demond's primary contact at the PEC was Bennie Fuelberg, who was the PEC's general manager from 1976 until 2008. Fuelberg was given broad authority to oversee the PEC's day-to-d ay operations, including expenditures on outside consultant s.Page 11

--- S.W.3d ----, 2014 WL 6612510 (Tex.App.-Austin) (Cite as: 2014 WL 6612510 (Tex.App.-Austin))

© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. The parties' theories of the case The State alleges that between November 1996 and Ma rch 2007, Fuelberg conspired with Demond to funnel over $200,000 in PEC funds to Fuelberg's brother, Curtis , and William Price, the son of a former PEC board member. FN1 According to the State, Fuelberg instructed Demond to hire Curtis as a consulting lobbyist for Clark T homas and then have Clark Thomas bill the PEC $5,000 per month to pay the majority of Curtis's salary. Similarly, the State asserts that beginning in 2003, Fuelberg instructed Demond to have Clark Thomas pay Price a $2,000 monthly ret ainer and
then bill the PEC for the cost of the retainer. All told, the State's forensic accountant testified th at the PEC paid Clark Thomas $630,000 for Curtis's salary and $86,000 for Price's retainer.

FN1. We refer to Curtis Fuelberg by his first name to a void confusion.

The State contends that the PEC received no benefit from Curtis's and Price's employment. The State no tes that Price did not know that his retainer was being paid by the PEC and that Price never performed any lega l work for the PEC even though there was work available. Similarly , the State emphasizes that Curtis did not register as a lobbyist for the PEC, and therefore he was prohibited from direc tly communicating with “the legislative or executiv e branch to influence legislation or administrative action on b ehalf of” the PEC. See Tex. Gov't Code §§ 305.003(b) (requiring lobbyists to register with Texas Ethics Commission) , .031 (making violation of registration requiremen t a Class A misdemeanor). Thus, the State contends that Price a nd Curtis were “sham hires,” meaning Fuelberg and D emond intentionally paid Price and Curtis with PEC funds, all the while knowing that the PEC would receive l ittle or no benefit from Price's or Curtis's employment.

*2 Furthermore, according to the State, Fuelberg and Demond went to great lengths to hide these payments from the PEC and Clark Thomas. Through a complex “billin g scheme,” Fuelberg allegedly instructed Demond to have Clark Thomas bill the PEC $30,000 every six months between 1996 and 2003, identify these payments as “ legal services rendered in connection with regulatory and legislative services,” then have Clark Thomas pay Curtis $6,000 per month—$5,000 of which came from the PEC. FN2 Similarly, when Clark Thomas began paying Price's $2,000 monthly retainer, Demond personally added $7,000 pe r month to the PEC's bill to cover both the PEC's s hare of Curtis's salary and Price's retainer. This $7,000 “ mark up” in the PEC's bill did not include an expla nation of what these payments were for, which the State asserts ma de it impossible for the PEC to determine how its m oney was being spent. When the PEC's “legal services manager ” contacted Demond to get an explanation for these $7,000 payments, Fuelberg instructed Demond to ignore that request and direct all of Clark Thomas's bills to Fuelberg for approval. Similarly, when another partner at Clark Thomas asked Demond if the PEC was paying for Curti s's salary, Demond initially said no, but then said that the PE C's board of directors knew about and had approved the $7,000 monthly payments to Curtis and Price.

FN2. Demond would later testify that Fuelberg suggested that Clark Thomas should also contribute to Curtis's salary but that the PEC's “share” of Curti s's salary was always $5,000 per month.

Fuelberg retired from the PEC in February 2008. One month later, the PEC's new general manager hired N avigant Consulting to investigate and prepare a report abou t the PEC's outside consulting expenditures during Fuelberg's tenure. Part of Navigant's investigation included P EC's payments to Clark Thomas. On December 15, 2008 , Navigant issued its report (the Navigant Report), detailing Fuelberg and Demond's alleged scheme to transfer PE C funds toPage 12

--- S.W.3d ----, 2014 WL 6612510 (Tex.App.-Austin) (Cite as: 2014 WL 6612510 (Tex.App.-Austin))

© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. Curtis and Price through Clark Thomas.

At trial, and again on appeal, Demond asserts that Fuelberg had the authority to hire any outside cons ultant he deemed appropriate, and therefore there was nothing unlawful about Fuelberg's hiring Curtis and Price through Clark Thomas. Demond, in fact, testified that Fuelberg in formed him that the PEC board was aware of and appr oved this arrangement. Demond contends that Curtis provided v aluable lobbying services for the PEC and that havi ng Price on retainer was inherently valuable for both the PEC a nd Clark Thomas. According to Demond, both he and F uelberg
believed that Curtis and Price were worth what the PEC paid them, and therefore Demond should not be s ubject to criminal liability merely because the State or the jury, in hindsight, disagreed with their valuation of Curtis's and
Price's services.

Procedural history Seven months after the Navigant Report was issued, Fuelberg and Demond were each indicted for first-de gree felony misapplication of fiduciary property, first- degree felony theft by deception, and second-degree felony money laundering. See Tex. Penal Code §§ 31.03(e)(7) (making theft a first-degree felony if value of pr operty stolen was more than $200,000), 32.45(c)(7) (same punishment r ange for misapplication of fiduciary property), 34. 02(e)(3) (making money laundering a second-degree felony if value of fund is more than $100,000 but less than $ 200,000). Prior to trial, Fuelberg and Demond filed motions t o disqualify or, alternatively, recuse the Honorabl e Daniel H. Mills from their respective cases. The motions asserted t hat as a PEC member, Judge Mills had a personal and pecuniary interest in this case and that a reasonable person might question Judge Mills's impartiality. Judge Mi lls declined to voluntarily recuse himself and referred the motions to the presiding judge, who assigned the motions t o the Honorable
Bert Richardson. See Tex.R. Civ. P. 18a (prescribing procedure for resolving motions to di squalify and recuse). Judge Richardson conducted a hearing, after which he deni ed Fuelberg's and Demond's motions.

Fuelberg and Demond were tried separately, with Dem ond's trial taking place three months after Fuelber g's. In Demond's trial, the State called a total of eightee n witnesses. Demond called a total of twenty-one wi tnesses, many of whom testified about the value of Curtis's lobbying work, including work on behalf of the PEC. Finally , Demond testified in his own defense, asserting that he bel ieved Fuelberg had the authority to hire outside co nsultants of his choosing, that Fuelberg told him the PEC board was aware of these hires, and that Curtis and Price pro vided real value
to the PEC.

*3 The jury found Demond guilty of the lesser-include d offense of second-degree felony misapplication offiduciary property, first-degree felony theft by dece ption as alleged, and second-degree felony money la undering as alleged. The jury assessed punishment at ten years' imprisonment for each offense, but recommended tha t the sentences be suspended and that Demond be placed on co mmunity supervision. The trial court rendered judgm ent consistent with the jury's verdict and ordered Demond to serve a total of 500 days in jail as a condition of his community supervision. This appeal followed.

DISCUSSION Demond raises eight issues on appeal, which we grou p into the following six complaints. First, Demond asserts that the evidence is insufficient to support his co nvictions. Second, he claims that there is a materi al variance between
the indictment and the evidence adduced at trial. T hird, he contends that the trial court could not re quire him to spendPage 13

--- S.W.3d ----, 2014 WL 6612510 (Tex.App.-Austin) (Cite as: 2014 WL 6612510 (Tex.App.-Austin))

© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. more than 180 days in jail as a condition of his co mmunity supervision. Fourth, Demond argues that his convictions for misapplication of fiduciary property and theft violate the prohibition against double jeopardy. Fi fth, Demond asserts that Judge Mills should have been disqualif ied or recused from presiding over his case. Finall y, Demond asserts that the trial court erred in dismissing a juror as disqualified based on the juror's temporar y medical condition. We address Demond's material-variance argument firs t.

Variance between indictment and evidence at trial [1] In his third appellate issue, Demond asserts that t here is a material variance between the indictment and the evidence produced at trial. Specifically, Demond ar gues that the indictment cannot support the State's theory that he was a party to Fuelberg's misapplication of fiducia ry property. See Tex. Penal Code § 32.45 . Under the law of parties, the defendant is culpable only if the State proves that (1) a principal actor committed the charged of fense and (2) the defendant encouraged, directed, aided, or attempted to aid that offense. See id. §§ 7.01–.02(a)(2). According to Demond, however, the indictment alleges that he mis applied property which he held as a fiduciary, and thus it was a material variance for the State to prove that he he lped Fuelberg misapply property that Fuelberg held as a fiduciary.

[2][3][4] “A ‘variance’ occurs whenever there is a discrepanc y between the allegations in the indictment and the proof offered at trial.” Byrd v. State, 336 S.W.3d 242, 246 (Tex.Crim.App.2011) (citing Gollihar v. State, 46 S.W.3d 243, 246 (Tex.Crim.App.2001) ). However, a variance is material—and thus reversi ble error—only if it “fails to give the defendant sufficient notice [of the offense all eged] or would not bar a second prosecution for the same” crime. See
id. at 247–48 . It is well established that the indictment need n ot “include notice that the State will attempt to p rove its case under the law of parties.” Marable v. State, 85 S.W.3d 287, 292 (Tex.Crim.App.2002) (Cochran, J., concurring) (internal citations omitted); see also Powell v. State, 194 S.W.3d 503, 506 (Tex.Crim.App.2006) (unanimous opinion citing Marable, 85 S.W.3d at 288 , for same proposition). Therefore, an accused may be convicted as a party to the offense even if the indictment does not explicitly charge him as a party. See Boston v. State, 373 S.W.3d 832, 837 (Tex.App.—Austin 2012)

, aff'd, 410 S.W.3d 321, 327 (Tex.Crim.App.2013)

.

In this case, the indictment alleges, in relevant p art, that:

[Demond] intentionally or knowingly misapplied prop erty, that being: money of the [PEC], contrary to a n agreement under which the Defendant held the property as a fiduciary and in a manner that involved substant ial risk of loss to PEC, the owner of the property and the pers on for whose benefit the property was held, by maki ng or causing payments to be made to Curtis Fuelberg, who is Benn ie Fuelberg's brother, and to William Price, and th e aggregate value of the property misapplied was more than $200 ,000.

*4 Demond asserts that because the indictment alleges that he misapplied property that he held as the PE C's fiduciary, the State could not assert at trial that h e was a party to misapplication of property that Fu elberg held as a fiduciary. See Tex. Penal Code §§ 7.01 –.02(a)(2) (defining criminal liability for parties to an offense). This Court recently rejected a nearly identical argument in Rainey v. State, No. 03–11–00741–CR, 2013 WL 692477, at *3–5 (Tex.App.—Austin Feb. 22, 2013, pet. ref'd) (mem. op., not designated for publication).

In Rainey, a defendant convicted of aggravated sexual assault asserted that “because the indictment allege[d] th at
his sexual organ penetrated [the victim's] mouth, it w as a material variance for the State to prove that [the victim's]Page 14

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. mouth was actually penetrated by the sexual organ o f” another. Id. at *4 . We disagreed, explaining that “there is no reason why the indictment needs to provide notice t hat the law of parties as applied to the charged of fense necessarily involved the use of another assailant's sexual orga n.” Id. at *5 . Given that “there is nothing in the language of t he penal code to indicate that ‘party liability is inappropr iate’ with respect to aggravated sexual assault,” w e concluded that the defendant's material-variance argument was inconsis tent with both the sexual-assault statute and the l aw of parties. Id. (quoting McIntosh v. State, 52 S.W.3d 196, 200 (Tex.Crim.App.2001) ).

Similarly here, for a defendant to be guilty as a p arty to misapplication of fiduciary property, anoth er principal actor—in this case Fuelberg—would have to hold the property as a fiduciary, and the defendant would ha ve to encourage, direct, aid, or attempt to aid the princip al's misapplication of that property. Given that th ere is nothing in the language of the Penal Code to indicate that party l iability is inappropriate with respect to misapplic ation of fiduciary property, the indictment did not need to specifical ly inform Demond that, under the law of parties, he would be liable for helping Fuelberg misapply property that Fuelber g held as a fiduciary. Therefore, we conclude that there is not a
material variance between the indictment in this ca se and the evidence adduced at trial. We overrule D emond's third appellate issue.

Sufficiency of the evidence In his first, second, and fifth issues on appeal, D emond argues that the evidence is insufficient to s upport his convictions in three respects. First, Demond claims that the evidence established that Fuelberg had th e authority to hire any outside consultant he deemed appropriate withou t the need to seek the PEC board's approval. Second , Demond asserts that if the PEC received any benefit from C urtis's or Price's services, then the PEC's money w as not stolen or misapplied as a matter of law. Third, Demond conten ds that he cannot be convicted of money laundering because the PEC's money did not become the “proceeds of crimina l activity” until Curtis and Price received payment from Clark Thomas, which was the last transaction in this offe nse, and thus Demond never transferred the proceeds of criminal activity. We will briefly discuss the applicable st andard of review and elements of each offense befor e addressing Demond's arguments.

Standard of review and elements of each offense In reviewing the sufficiency of the evidence to sup port a conviction, we determine whether a rational trier of fact
could have found that the essential elements of the crime were proven beyond a reasonable doubt. Brooks v. State, 323 S.W.3d 893, 895 (Tex.Crim.App.2010) . In making this determination, we consider all evi dence that the trier of fact was permitted to consider, regardless of whether it was rightly or wrongly admitted. Clayton v. State, 235 S.W.3d 772, 778 (Tex.Crim.App.2007) ; Allen v. State, 249 S.W.3d 680, 688–89 (Tex.App.—Austin 2008, no p et.) . We view this evidence in the light most favorable to the verdict

. Clayton, 235 S.W.3d at 778 . The jury, as the trier of fact, is the sole judge of the credibility of the witnesses and the w eight to be given to their testimony. Id. Therefore, we presume that the jury resolved any conflicting inferences and is sues of credibility in favor of the judgment. Id.

*5 To prove misapplication of fiduciary property, the State was required to show beyond a reasonable dou bt that Demond intentionally or knowingly FN3 (1) misapplied property (2) that he held as a fidu ciary (3) in a manner that
involved a substantial risk of loss to the owner of the property or to the person for whose benefit th e property was held.
See Tex. Penal Code § 32.45(b) ; Bowen v. State, 374 S.W.3d 427, 431 (Tex.Crim.App.2012) . “ ‘Misapply’ means deal with property contrary to: (A) an agreement under w hich the fiduciary holds the property; or (B) a law prescribing thePage 15

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. custody or disposition of the property.” Tex. Penal Code § 32.45(a)(2) . A “substantial risk of loss” has been interpreted to mean that it must be “more likely than no t” that the property would be lost. Casillas v. State, 733 S.W.2d 158, 164 (Tex.Crim.App.1986)

.

FN3. Generally, a defendant can be liable for intention ally, knowingly, or recklessly misapplying fiduciar y property. See Tex. Penal Code § 32.45 . However, the indictment in this case alleged only that Demond intentionally or knowingly misapplied the PEC's prope rty and, therefore, he could not be convicted for t he less culpable mental state of recklessness. See Reed v. State, 117 S.W.3d 260, 264–65 (Tex.Crim.App.2003) (concluding trial court erred in instructing jury o n less culpable mental state of recklessness that w as not alleged in indictment).

To establish theft, the State was required to prove that Demond (1) unlawfully appropriated the PEC's property (2) with the intent to deprive the PEC of its property. See Tex. Penal Code § 31.03(a) . In this case, the appropriation was allegedly unlawful because “it [was] without the ow ner's effective consent.” See id. § 31.03(a) . Specifically, the indictment alleges that the PEC's consent was ineffec tive because it was induced by deception. See id. § 31.01(3)(A); see also Geick v. State, 349 S.W.3d 542, 547–48 (Tex.Crim.App.2011) (concluding that when indictment alleges theft by deception, State is limited to that theory of effec tive consent). Thus, the State was required to show that the PEC “actually relied upon the defendant's deceptive act s” when giving its consent. Daugherty v. State, 387 S.W.3d 654, 659 n. 18 (Tex.Crim.App.2013) . A defendant intentionally “deprives” an owner of his property if the defendant “dispose[s] of property in a manner that makes recovery of the property by the owner unlikely.” See Tex. Penal Code § 31.01(2)(C)

.

Finally, to convict Demond of money laundering, the State was required to prove that he knowingly (1) acquired, maintained an interest in, concealed, possessed, or transferred (2) the proceeds of a criminal activit y—to wit, theft of money or misapplication of fiduciary property value d at more than $100,00 but less than $200,000. See id. § 34.02(a)(1)-(2). “ ‘Proceeds' means funds acquired or derived directly or indirectly from, produced th rough, realized through, or used in the commission of an act.” Id. § 34.01(4)(A). “Criminal activity” is defined as “ any offense, including any preparatory offense, that is classified as a felony under the laws of this state or the Un ited States.” Id. § 34.01(1)(A).

At trial, the State primarily asserted that Demond was liable as a party to Fuelberg's criminal conduc t. For a defendant to be guilty as a party to an offense, anot her principal actor—in this case Fuelberg—would hav e to commit the underlying offense, and the defendant would have to intentionally encourage, direct, aid, or attempt t o aid the principal's commission of that offense. See id. § 7.02. Therefore, with respect to this party theo ry of liability, the State was required to prove (1) that Fuelberg committed the a bove offenses; (2) that Demond acted with the inten t to promote or assist the commission of those offenses; and (3) th at Demond encouraged, directed, aided, or attempted to aid Fuelberg's commission of those offenses. See id. §§ 7.01–.02(a)(2).

*6 [5] Our analysis will focus on whether the evidence is sufficient to prove that Demond is liable as a part y to Fuelberg's misapplication of fiduciary property. Ho wever, we will primarily consider whether Demond is guilty of theft by deception based on his own conduct. Circum stantial evidence may be used to prove the defendan t is a party to an offense, and a factfinder may look to events occ urring before, during, and after the commission of the offense thatPage 16

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. show an understanding or common design to do the pr ohibited act. See Gross v. State, 380 S.W.3d 181, 186 (Tex.Crim.App.2012)

.

Fuelberg's authority to hire outside consultants [6] In his first issue on appeal, Demond asserts that F uelberg had the “actual authority” to hire Curtis a nd Price without notifying or seeking the approval of the PE C's board. According to Demond, “[t]here is no such thing as theft or misapplication by spending a company's money wit h the company's permission” and, therefore, Fuelber g could not be guilty of stealing or misapplying the PEC's mone y because he had the authority to hire outside cons ultants as he saw fit. Given that Fuelberg was not guilty of the char ged offenses, Demond asserts that he could not be g uilty as a party to Fuelberg's conduct. See Barnes v. State, 62 S.W.3d 288, 298 (Tex.App.—Austin 2001, pet. ref 'd) (“If the State is to prove the accused's guilt as a party, it must first prove the guilt of another as the primary actor.”)

.

Although not framed in these terms, we understand D emond's argument to be that the evidence is insuffi cient to prove that Fuelberg lacked the authority to hire Cu rtis and Price. With respect to theft by deception, Fuelberg's actual authority to hire outside consultants is not dispos itive because if Fuelberg obtained or retained his authority through deception, then the PEC's grant of authority to Fue lberg would be ineffective. See, e.g., Bender v. State, No. 03–09–00652–CR, 2011 WL 1561994, *9–10 (Tex.App.—Au stin Apr. 19, 2011, pet. ref'd) (mem. op., not designated for publication) (concluding evidence sufficient to show manager obtained investment capital through d eception by promising he would not draw salary until company wa s profitable). With respect to the misapplication-of-fiduciary-property charge, however, Demond' s argument would mean that because Fuelberg had the actual authority to hire Curtis and Price, the evidence is insufficient to establish that Fuelberg dealt with the PEC's property contrary to the fiduciary agreement under which it was held. See Tex. Penal Code § 32.45(a)(2)(A)

.

The undisputed evidence admitted at trial establish ed that Fuelberg had broad authority to hire both P EC employees and outside consultants. As one former PEC director stated, Fuelberg “had the authority to hir e and fire whomever he wanted as long as it wasn't prohibited by the [PEC's] bylaws.” The primary bylaw that was discussed at trial was the PEC's “Nepotism Policy,” which stated that “the employment of close relatives shall be d iscouraged” and that “[c]ompensation, if any, of any officer or an employee who is also a director or close relative o f a director shall be fixed by the board of directors.” However, it is un disputed that Curtis and Price were outside consult ants rather than PEC employees, and as such their salaries were not covered by the Nepotism Policy. There is no evidenc e to indicate that any other PEC bylaw limited Fuelberg's authori ty to hire outside consultants. Thus, although the PEC generally discouraged hiring close relatives, the evidence es tablished that Fuelberg was not required to inform the PEC board or seek its approval before hiring outside consultants —including Curtis and Price.

*7 Nevertheless, there was evidence adduced at trial which demonstrated that Fuelberg did not have the a uthority to spend PEC funds in a way that he knew would not benefit the PEC. Fuelberg's employment contract sta tes that he was required to “perform all of his duties properly and faithfully in the best interest of the PEC.” S imilarly, the PEC's “Causes for Disciplinary Action”—applicable to all PEC employees since 1979—states that “[d]ishonesty, willful damage and/or unauthorized appropriation of Coopera tive funds or property” are grounds for immediately terminating employment. This is consistent with the testimony o f two former PEC board members and Demond's law par tner at Clark Thomas, all of whom stated that Fuelberg's br oad authority to conduct the PEC's day-to-day opera tions did not include the authority to misappropriate PEC funds a s additional income for himself or as gifts to his family andPage 17

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. friends. See Bender, 2011 WL 1561994, at *9 (noting that written partnership agreement provide d that manager could only use company funds for “legitimate business pur poses”).

Therefore, if the jury determined that Fuelberg kne w that the PEC would receive little or no benefit f rom Curtis's and Price's employment, then the jury could have fo und beyond a reasonable doubt that Fuelberg did not have the authority to make these payments to Curtis and Pric e. Thus, if Fuelberg knew that the PEC would receiv e little or no benefit from these hires, then there is sufficient evidence to prove that Fuelberg's transfer of PEC f unds to Curtis and Price was contrary to the agreement under which Fue lberg held the PEC's property. See Tex. Penal Code § 32.45(a)(2)(A) . We overrule Demond's first appellate issue. Next, we will consider whether the evidence is sufficien t to support the jury's determination that Fuelberg k new that the PEC would receive little or no benefit from Curtis's and Price's employment.

Does a finding of any value require acquittal? [7] In his second issue on appeal, Demond asserts that if the PEC received any value from Curtis's work as a lobbyist or Price's retainer, then the misapplicati on-of-fiduciary-property and theft charges fail as a matter of law. Specifically, Demond claims that he should not be h eld criminally liable merely because the jury secon d-guessed his and Fuelberg's determination of what Curtis's and P rice's professional services were worth. According to Demond, this type of “ex post facto” valuation by the jury is in consistent with the traditional deference the law a ffords to an executive's business judgment and would leave executive s uncertain of when their business decisions could result in criminal liability.

Again, although not framed in these terms, Demond e ssentially argues that if the jury found that the P EC received any value from Curtis and Price, there cannot be su fficient evidence to support Demond's misapplication-of-fiduciary-property and theft convictions. D emond's argument can best be understood to mean tha t if Curtis and Price provided any value to the PEC, then Fuelberg and Demond must have believed that their estimation of Curtis's and Price's value was correct, and therefore Curtis and Price were not sham hires. Thus, according to Demond, unless the jury found that Curtis and Price produced no va lue for the PEC, there is no basis for the jury to infer that Fuelberg or Demond intentionally or knowingly misapplied or stole the PEC's money.

This argument relates to the sufficiency of the evi dence to support three essential elements of theft and misapplication of fiduciary property: (1) Fuelberg's and Demond's culpable mental states, (2) Fuelberg's au thority to hire Curtis and Price, and (3) the harm that resulted. FN4 Regardless of which element Demond's argument is a pplied to, however, the ultimate issue is the same—if Curtis a nd Price provided some value to the PEC, could the jury nevertheless infer that Fuelberg and Demond intentionall y stole all or part of Curtis's salary and Price's retainer? Because we conclude that the answer is yes, we find that the e vidence is sufficient to support the jury's verdict

.

FN4. With respect to the culpable mental state, if Fuel berg or Demond believed that Curtis and Price were worth what the PEC paid them, then Fuelberg and Dem ond did not (1) intentionally or knowingly misapply the PEC's property or (2) intentionally deprive the PEC of its property. See Tex. Penal Code §§ 31.03(a)

, 32.45(b) . Similarly, as discussed above, if Fuelberg believ ed that Curtis and Price were worth what he was paying them, then Fuelberg was acting within his au thority to hire the outside consultants that he dee med appropriate and, therefore, he did not deal with th e PEC's property contrary to an agreement under whi ch itPage 18

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. was held. See id. § 32.45(a)(2)(A) . Finally, with respect to harm, if Fuelberg or Dem ond had a good-faith
belief that Curtis and Price were worth what the PE C paid them, then arguably (1) there was not a subs tantial risk of loss of the PEC's money and (2) neither Fue lberg nor Demond disposed of the PEC's money in a manner that made recovery of the money unlikely. See id. §§ 31.01(2)(C)

, 32.45(b)

.

*8 The problem with Demond's argument becomes apparen t when we consider a slightly different set of fact s. Assume that instead of lobbying, Curtis sold office supplies. If Fuelberg bought a $4,000 copy machine from Curtis for the PEC but then paid Curtis $5,000 for that co pier, it would be obvious that Fuelberg misapplied and stole $1,000 from the PEC. Furthermore, if Fuelberg instructed D emond to have Clark Thomas purchase that same copie r for the same $5,000, then have Clark Thomas bill the PEC fo r the expense, Demond could be culpable as a party to Fuelberg's theft and misapplication of PEC funds if Demond kne w that the PEC was overpaying for the copier. Thus, the fact that PEC may have received some benefit from Fuelberg's purchase—and therefore the amount that Fuelberg pai d Curtis was not entirely stolen—does not mean that Fuelberg and Demond cannot be criminally liable for the amo unt that they intentionally overpaid.

Admittedly, the value of professional services may be more open to interpretation than the value of ta ngible goods whose fair-market price is often readily identifiab le. Arguably, this is even more true for lobbying s ervices or legal work because an individual lobbyist or lawyer may b e particularly valuable depending on his or her abi lities, experience, and relationships with relevant legislators or judges, factors that may be difficult for a jur y to evaluate. Thus, it is not enough that the jury simply believed that, i n hindsight, Demond and Fuelberg overestimated Curt is's and Price's value. Rather, there must be sufficient evidence fr om which the jury could infer that Demond and Fuelb erg intended to overpay Curtis and Price throughout the course of t heir alleged scheme. With this framework in mind, w e consider whether the record supports the jury's determinatio n that Fuelberg and Demond intended to overpay Curt is and Price.

Price's retainer [8] There is ample evidence from which the jury could i nfer that Fuelberg and Demond never intended for th e PEC to receive any benefit for Price's $2,000 monthly r etainer. Admittedly, there was testimony that havin g a lawyer on retainer has value regardless of whether the lawyer ultimately performs any work. However, Price testi fied that he never knew that PEC was paying his retainer, was ne ver advised that he might be doing work for the PEC , and was never given any work for the PEC. Furthermore, Demo nd admitted on cross-examination that during the ye ars that Price was on retainer, Clark Thomas performed work for the PEC that Price was qualified to handle and the work would have cost less than $2,000, meaning that Pric e could have performed the work at no additional co st to the PEC. When pressed for an explanation as to why Price was not used on these projects, Demond simply stated “ I wish I had thought of that.”

Based on Price's testimony that he was never inform ed that the PEC was paying his retainer and Demond' s inability to explain why Price was not given PEC work when it was available, the jury could have reasonab ly inferred that Fuelberg and Demond never intended for the PEC to r eceive any benefit from having Price on retainer. T hus, there is sufficient evidence to support the jury's conclusio n that Fuelberg misapplied the entire $86,000 in PE C funds that was used to pay Price's retainer. In reaching this conc lusion, we in no way seek to impugn Price's abiliti es or value as an attorney; we are merely explaining that the jury co uld have reasonably concluded that Demond and Fuelb erg never intended to utilize Price's legal services for the benefit of the PEC.Page 19

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. Curtis's salary [9] There is, admittedly, more conflicting evidence con cerning Curtis's value as a lobbyist for the PEC. M ike Williams is the president and chief executive offic er of Texas Electric Cooperatives (the “Coop Associ ation”), a trade association providing “legislative political advoca cy services” on behalf of electric cooperatives in Texas, including the PEC. Williams testified that during the 1997 an d 1999 legislative sessions, the Texas Legislature was in the process of deregulating electric utilities, which coul d have significantly impacted all utility cooperati ves. See generally Cities of Corpus Christi v. Public Util. Comm'n, 188 S.W.3d 681, 687 (Tex.App.—Austin 2005, pet. de nied) (discussing legislative history and purpose of utility deregulation). According to Williams, Fuelberg cont acted him in 1996 and suggested that Williams hire Curtis to hel p the Coop Association's lobbying team in exchange for the PEC contributing $70,000 to the association. Williams a greed and contracted to pay Curtis $4,000 per month . However,
Williams stated that some of the association's memb ers “were uncomfortable with the fact that we had h ired the brother of one of the managers of one of our system s,” especially after the members learned how much t he PEC had contributed to the association's lobbying efforts. Although the Coop Association intended to honor its contract with Curtis, Curtis voluntarily terminated his relations hip with the association at the end of October 1996 , approximately five months after he was originally retained.

*9 Demond testified that Fuelberg approached him in O ctober 1996—the same month that Curtis stopped working for the Coop Association—and suggested that Demond call Curtis to get his opinion about how de regulation might affect the PEC. Demond recalled that he was i mpressed with Curtis's knowledge and suggested that the PEC or Clark Thomas pay Curtis for his advice. According t o Demond, Fuelberg agreed and suggested that Clark Thomas hire Curtis as a consulting lobbyist, with the PEC contr ibuting $5,000 per month for Curtis's salary and Cl ark Thomas contributing an additional $1,000 or $2,000. Demond hired Curtis, telling him to “keep Pedernales Elec tric happy.”

Curtis testified that he was a “legislative consult ant,” rather than a lobbyist, for the PEC. As Curti s explained, a legislative consultant keeps a client “informed of what's going on legislatively” but does not directl y lobby legislators to “affect the outcome of legislation.” Curtis admi tted that he did not register as a lobbyist for the PEC and, therefore, was legally prohibited from contacting legislators or agency officials on behalf of the PEC. See Tex. Gov't Code § 305.003(b) (requiring lobbyists to register with Texas Ethics Commission). Furthermore, Curtis conceded that apa rt from Clark Thomas, no client had ever paid him more than $4,000 per month and that when he was receivi ng $4,000 per month, it was from large organizations like the Coop Association or American Electric Power during significant legislative sessions. FN5

FN5. Williams testified that the Coop Association “staffed up” by adding Curtis in 1996 because deregulation could mean that all utility cooperatives would no longer be regulated by the Public Utility Commi ssion. Similarly, Curtis explained that American Electric Power paid him $4,000 per month for two years to ma ke sure the legislature did not facilitate a merger be tween two of his employer's main Texas competitors, both of which American Electric Power purchased in that tim e frame.

Several witnesses, including four current and forme r members of the Texas legislature, testified that Curtis was a well-respected and effective lobbyist. Some members of the legislature knew, or at least assumed, that Curtis was representing the PEC during legislative sessions de spite the fact that Curtis was not registered as a lobbyist for thePage 20

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. PEC. However, Williams testified that Curtis did no t participate in the utility cooperatives' negotiat ions concerning deregulation in the 1997 and 1999 legislative sessi ons. Furthermore, Curtis's salary from the PEC—paid indirectly through Clark Thomas—did not change between 1996 an d 2007, despite the fact that the PEC employed othe r lobbyists during this time and that there were no othe r potential legislative matters that would have imp acted the PEC as much as deregulation. The jury could have reasonabl y inferred from this that Fuelberg intended to pay Curtis the same salary regardless of the amount of work he was perf orming for the PEC at any given time.

Arguably the most damning evidence was the consider able testimony and documentation concerning the len gths to which Demond and Fuelberg went in order to conce al Curtis's employment from the PEC. See King v. State, 29 S.W.3d 556, 565 (Tex.Crim.App.2000) (noting that defendant's false statements to conce al crime evidences consciousness of guilt); Alvarez v. State, No. 03–02–00262–CR, 2003 WL 22095777, at *8 (Tex.A pp.—Austin Sept. 11, 2003, no pet.) (mem. op., not designated for publication) (discus sing how “insistence on secrecy” after commission o f crime is strong indication of intent). On cross-exa mination, Demond admitted that he initially include d a “line item for Curtis Fuelberg” in Clark Thomas's bill to the PEC, but Fuelberg called Demond and told him that “he d idn't want his
brother's name on the bill” because “he didn't want every clerk in the [PEC's] accounting department t o know.” Demond suggested that they identify Curtis's salary as “legislative consultant,” but Fuelberg said tha t was also unacceptable. Finally, Demond and Fuelberg agreed to label Curtis's payment as “for legal services rende red in connection with regulatory and legislative matters”—de spite the fact that Curtis was not a lawyer or othe r legal professional and therefore could not provide legal servic es.

*10 Furthermore, there was evidence that Demond evaded the PEC's inquiries into the monthly $7,000 fees t hat were being used to pay Curtis's salary and Price's retainer. Demond testified that when Luis Garcia, t he PEC's legal services manager who was in charge of reviewing the PEC's outside legal fees, called Demond about thes e fees, Demond called Fuelberg to ask whether he should res pond. Fuelberg instructed Demond to ignore Garcia's inquiry and to send all of Clark Thomas's bills directly to Fue lberg for approval. Garcia testified that this form of “block billing” made it impossible for the PEC to determine what it was being charged for.

Demond testified that he and Fuelberg concealed Cur tis's employment from the PEC because Fuelberg was concerned that if other PEC employees knew about th is arrangement, they might try to secure similar PE C consulting positions for their relatives. Assuming that this w as a plausible explanation for not listing Curtis's name in Clark Thomas's bills, the jury could have reasonably dete rmined that it did not explain why Curtis's lobbyin g work was listed as “legal services in connection with regulatory an d legislative matters”—a heading which mischaracter izes the nature of the work being performed. Thus, the record refle cts that Demond and Fuelberg concealed not only who was working for PEC, but also the nature of the work be ing performed, and therefore the jury could have re asonably discredited Demond's explanation of why he and Fuel berg concealed Curtis's employment from the PEC.

Additionally, there was evidence that Demond arguab ly misled other partners at Clark Thomas about the fact that the PEC was paying most of Curtis's salary and all of Price's retainer. David Duggins, a partner at Cl ark Thomas during the years relevant to this case, testified t hat Demond approached him in November of 2007 to as k if Clark
Thomas should allow Curtis's and Price's contracts to expire. Duggins asked Demond if the PEC was payi ng for these contracts, and Duggins testified that Demond “told me no.” Shortly after that conversation, Duggins he ard “something
about the PEC's share” of Curtis's and Price's cont ract. Duggins again asked Demond whether the PEC wa s paying forPage 21

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. these contracts, and it was only after being asked a second time that Demond explained that Fuelberg i nstructed him to pay Curtis and Price in this manner and then bill t he PEC for their services.

Duggins conceded that when he initially asked Demon d about Curtis's and Price's contracts, the PEC act ually had stopped contributing payments for those contracts, and thus Demond's original answer that the PEC was not paying for Curtis and Price was technically true at that time. FN6 Nevertheless, Duggins stated that he “would have p referred to know the whole story” when he asked. The jury could have inferred that Demond's original statement to Duggins denying that the PEC was paying for Curtis's and Pr ice's contracts, although technically true, was int ended to mislead Duggins about Demond's arrangement with Fuelberg. See Bell v. State, 26 S.W.3d 516, 521–22 (Tex.App.—Houston [1st Dist.] 2000, pet. ref'd) (noting that literally true statements can be deli berately misleading and thus support perjury conviction).

FN6. The PEC's contribution for Curtis's salary and Pri ce's retainer ended in March of 2007.

The Court does not lack sympathy for Demond's conce rn that a jury should not be allowed to determine t he value of a business decision made by a company's executiv e. Whether a given business decision is motivated b y an intent to deprive a company of its property is an inherently difficult issue to determine and will inevitably tu rn on the particular facts of a given case. However, juries are required to make such value judgments under the Penal Code, and it is not the Court's place to second-guess the jury so long as its decision is supported by evidence in the rec ord.

*11 In this case, the jury heard testimony that:

• Demond and Fuelberg intentionally concealed Curti s's payments from the PEC's accounting department a nd Garcia;

• Demond misled Duggins about the fact that the PEC had been paying for Clark Thomas's contracts with Curtis and Price;

• Curtis was hired by Clark Thomas the same month t hat he stopped working for the Coop Association, at least in part, because the association's members had concern s about employing the PEC general manager's brother given that the PEC contributed a large sum to the Coop As sociation's lobbying efforts;

• Curtis was not registered as a lobbyist for the P EC, and therefore could only “keep his ear to the g round” rather than directly lobby the legislature;

• Even as a registered lobbyist, Curtis had never b een paid more than $4,000 per month by any other em ployer, despite the fact that he worked for other large com panies on significant legislative issues;

• Curtis's salary remained unchanged regardless of whether there was major legislation affecting the P EC; and

• Demond and Fuelberg used the same payment scheme to bill Curtis's salary as they did to conceal Pric e's retainer,Page 22

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. and thus the jury could infer that Curtis's salary was similarly a sham. See Tex. Penal Code § 31.03(c)(1) (providing that evidence indicating defendant participated in “recent transactions other than, but similar to, th at which the prosecution is based is admissible for the purpose of showing knowledge or intent.”).

Based on this record, the jury could have reasonabl y concluded beyond a reasonable doubt that Fuelberg intentionally and knowingly overpaid Curtis for his serv ices. Furthermore, the jury could have reasonably d etermined that, at a minimum, this intentional overpayment resulted in misapplication of $1,000 per month in PEC funds for 126
months because Curtis's services to the PEC could n ot have been worth more than $4,000 per month. Thus , the jury could have reasonably concluded that Fuelberg inten tionally misapplied $126,000 of the PEC's money to overpay Curtis. See id. § 31.09 (noting that amounts of individual theft m ay be aggregated as one offense if part of “one sch eme or continuing course of conduct”). Having already c oncluded that there is sufficient evidence to find that the entire $86,000 used to pay Price's retainer was misapplied , we conclude that there is sufficient evidence to support the jury's finding that Fuelberg misapplied PEC property value d at more than $100,000 but less than $200,000. FN7

FN7. The jury convicted Demond of second-degree felony misapplication of fiduciary property, indicating that the value of the property misapplied was betwe en $100,000 and $200,000, but convicted him of first-degree felony theft, indicating that the valu e of the money stolen was more than $200,000. This apparent inconsistency does not affect our sufficiency analy sis, however, because “[i]nconsistent verdicts do n ot necessarily imply that the jury convicted the defen dant on insufficient evidence, but may simply stem from the jury's desire to be lenient or to execute its o wn brand of executive clemency.” Thomas v. State, 352 S.W.3d 95, 101 (Tex.App.—Houston [14th Dist.] 2011, pet. ref'd) ; see also Williams v. State, No. 03–11–00598–CR, 2013 WL 6921489, at *6 (Tex.App.—Au stin Dec. 31, 2013, pet. ref'd) (mem. op., not designated for publication) (citing several cases f or same proposition), cert. denied, ––– U.S. ––––, 135 S.Ct. 103, ––– L.Ed.2d –––– (2014)

.

*12 Similarly, the jury heard considerable evidence ab out the lengths that Demond went to in order to ass ist Fuelberg in concealing Curtis's salary and Price's retainer. Demond himself admitted that he mischarac terized Curtis's lobbying work as legal services. Additionally, when Garcia—who was responsible for overseeing the PEC' s expenditures on outside legal work—asked Demond to explai n Clark Thomas's bill, Demond immediately asked Fue lberg if he had to respond and then accepted Fuelberg's inst ruction to ignore Garcia's inquiry and direct all b ills directly to Fuelberg for approval. Based on this evidence, the jury could have reasonably concluded that Demond in tentionally assisted Fuelberg's misapplication of PEC funds, an d therefore Demond was liable as a party to that of fense. See id. § 7.01(a).

Consent induced by deception [10] Because the State alleged that Demond committed the ft by deception, the relevant unlawful conduct for theft is slightly different from that which would support misapplication of fiduciary property. See Geick, 349 S.W.3d at
547–48 (concluding that if indictment alleges theft by de ception, State is limited to that theory of theft). To constitute theft by deception, the victim's consent to the def endant's control over the property is ineffective b ecause the consent was “induced by deception,” meaning that the victim relied on the defendant's deceptive act when givin g his consent. Tex. Penal Code § 31.01(3)(A) ; see also Daugherty, 387 S.W.3d at 659 n. 18 (citing Swope v. State, 723 S.W.2d 216, 223 (Tex.App.—Austin 1986)

, aff'd on other grounds, 805 S.W.2d 442 (Tex.Crim.App.1991) ). “The reliance need notPage 23

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. be the sole, or even controlling, reason why the vi ctim decided to provide [his consent], but it must be a substantial or material factor in the decision-making process.” Daugherty, 387 S.W.3d at 659 n. 18 (internal citations omitted).

[11] Deception is defined as, among other things, “(1) c reating or confirming by words or conduct a false i mpression of law or fact that is likely to affect th e judgment of another in the transaction, and that the actor does not believe to be true or (2) preventing another from a cquiring information likely to affect his judgment in the transaction.” Tex. Penal Code § 31.01(1)(A), (C) . It is clear from the record discussed above that there is sufficient evidence that both Fuelberg and Demond deceived the PEC. Acc ording to Demond's own testimony, Fuelberg instruct ed him to change Clark Thomas's bills to the PEC so that thos e reviewing the PEC's expenses could not determine that it was indirectly paying Curtis and Price. Therefore, the relevant issue is whether there is sufficient evide nce to establish that the PEC relied on Fuelberg's or Demond's deception before giving its consent.

It is somewhat difficult to envision how these dece ptive acts induced the PEC to give Fuelberg broad a uthority to
hire outside consultants. A PEC director testified that Fuelberg was given this broad authority decade s before any of the alleged wrongdoing in this case. Furthermore, t here is no allegation that Fuelberg secured this in itial grant of authority through any express or implied promise, f actual assertion, or other misrepresentation that i s relevant here. FN8

See Daugherty, 387 S.W.3d at 658 (noting that deception must occur before victim pr ovided services to prove theft of services by deception); Swope, 723 S.W.2d at 223 (noting that victim's consent must result from rel iance on deception). Thus, to prove that Demond was guilty as a p arty to Fuelberg's theft by deception, the State wa s required to show that the PEC would have potentially reined in or re voked Fuelberg's authority to hire outside consulta nts had the PEC known that its funds were being paid to Curtis and Price. There is no direct testimony to that effect, and thus the jury
would have had to make some inferences about the PE C board's potential reaction to the deception.

FN8. Even if the PEC's original grant of authority was based on Fuelberg's assurance that he would only us e PEC resources for the PEC's benefit, there was no e vidence that Fuelberg did not intend to honor that assurance at the time.

*13 [12] In considering Demond's liability as a principal ac tor, there is evidence that his deceptive billing p ractices induced the PEC to unknowingly reimburse Clark Thom as for Curtis's salary and Price's retainer. See Higginbotham v. State, 356 S.W.3d 584, 589–90 (Tex.App.—Texarkana 2011, p et. ref'd) (concluding that evidence sufficient to prove theft by deception where contractor billed customer for expenses that contractor did not incur). As di scussed above,
Demond mislabeled Clark Thomas's bill for Curtis's salary as legal services even though Curtis was not a lawyer. Similarly, when Price began his retainer with Clark Thomas, Demond began adding a $7,000 line-item exp ense to
Clark Thomas's bill to the PEC to cover both Curtis 's salary and Price's retainer. There was testimony that because this block-billing did not identify what the PEC was pay ing for, it was impossible for the PEC to discover that these payments were being made for Curtis and Price. Howe ver, there is no direct testimony that if Clark Tho mas's bills had accurately reflected that payments were being made to Curtis and Price, the PEC would not have consent ed to reimburse Clark Thomas for those payments.

Thus, we must consider whether there is sufficient circumstantial evidence from which the jury could i nfer that
the PEC's decision to reimburse Clark Thomas for Cu rtis's and Price's income was materially affected b y Demond's deceptive billing. See Daugherty, 387 S.W.3d at 659 n. 18 . The record need not show that but for Demond's de ception,Page 24

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. the PEC would not have approved these payments. Rat her, there must be sufficient evidence that the PEC would have considered the fact that these payments were going to Curtis and Price to be a “substantial and materi al factor” in determining whether the payments should be made. See id.

The PEC's assistant general manager testified that he approved several of the $30,000 payments to Clar k Thomas that were each used to pay six months of Curtis's s alary. The assistant manager stated that had he kno wn that Clark Thomas was billing the PEC for Curtis's salary, he likely would have reported the matter first to Fuel berg, and then potentially to the PEC board of directors. Furthermore, the as sistant general manager explained that if employees at the PEC had learned that Curtis was being paid as a n outside consultant, “all hell would have broken l oose” because employees might complain that Fuelberg was allowed to hire his relatives while other employees were no t. This, according to the assistant manager, would have crea ted a morale issue amongst PEC employees which woul d have become “an important consideration to management.”

The three current and former PEC directors who test ified at trial all stated that they would like to h ave known that Curtis and Price were being paid with PEC funds thr ough Clark Thomas. According to these directors, al though Fuelberg had the authority to hire outside consulta nts as he saw fit, given the general nepotism polic y applicable to PEC employees, Fuelberg should have informed them o f Curtis's and Price's status as outside consultant s. One former director, Edwin Smith, stated that he was “pretty h ot when he found out” that Fuelberg and Demond conc ealed Curtis's and Pirce's employment.

Although there was testimony that PEC employees wou ld have reacted negatively to the revelation that F uelberg authorized payments to Curtis and Price, there was no testimony that such morale issues would have pre vented any PEC employee from authorizing these payments to Cur tis and Price. Furthermore, although the PEC board members testified that they would like to have known that t he PEC was indirectly paying Curtis's salary and Pr ice's retainer,
none of the directors testified that the board woul d have stepped in and blocked these payments. Simil arly, none of the directors testified that had they known that Curtis and Price were being paid through Clark Thomas, th ey would have recommended that the PEC's nepotism policy be modif ied to cover outside consultants. Finally, no witne ss testified that had either the PEC's accounting department or board of directors known about these payments, they would have considered terminating Fuelberg's employment or rei ning in his authority.

*14 Thus, we conclude that the evidence is insufficien t to support a finding that either Demond's or Fuel berg's deception induced the PEC to make payments it other wise would not have made. Although it is understand able that the PEC board wished that Demond or Fuelberg had been m ore forthcoming, that frustration, standing alone, is not sufficient to prove beyond a reasonable doubt that the ir deceptive conduct induced the PEC to pay Clark T homas for
Curtis's and Price's salaries. Because the State in dicted Demond for theft by deception, it was limite d to that theory of theft, and was required to prove that some deceptiv e act induced the PEC's consent.

Having failed to offer such proof, we conclude that the evidence is insufficient to support Demond's c onviction for theft by deception. We therefore reverse and va cate Demond's conviction for theft by deception. Ha ving vacated Demond's conviction for theft, we need not address Demond's double-jeopardy complaint.

Proceeds of criminal activityPage 25

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. [13] In his fifth appellate issue, Demond asserts that t he “State's theory of money laundering is incorrect as a matter of law.” Specifically, Demond argues that ev en if the evidence is sufficient to establish that he misapplied the PEC's funds, that misapplication was not complete u ntil the money was transferred to Curtis and Price. Therefore, according to Demond, the PEC's funds did not become “proceeds of criminal activity” within the meaning of the Penal Code until after those funds had already been trans ferred through Clark Thomas, and thus Demond's alle ged transfer
of funds from Clark Thomas to Curtis and Price coul d not constitute the transfer of proceeds of crimin al activity.

Relevant here, a person commits money laundering if he knowingly “(1) acquires or maintains an interes t in, conceals, possesses, or transfers ... the proceeds of criminal activity or (2) conducts, supervises, o r facilitates a transaction involving the proceeds of a criminal ac tivity.” Tex. Penal Code § 34.02(a)(1)-(2) . “Criminal activity” is defined as any offense that is “classified as a fel ony under the laws of this state....” Id. § 34.01(1)(A). “Proceeds” are “funds acquired or derived directly or indirectly f rom, produced through, realized through, or used in the commission
of ... an act.” Id. § 34.01(4)(A). The predicate criminal activity all eged in the indictment is “misapplication of fiduci ary property with an aggregate value of $100,000 or mor e.” See id. § 34.02(e)(3) (classifying money laundering as second-degree felony if value of funds laundered more than $100,000 but less than $200,000). Therefore, t he State was required to prove that Demond either (1) acquired o r maintained an interest in, concealed, possessed, or transferred the proceeds of misapplication of fiduciary property or (2) conducted, supervised, or facilitated a transa ction involving the proceeds of such a misapplication.

Demond contends, and the State appears to agree, th at for purposes of the money-laundering statute, mo ney does not become proceeds of criminal activity until the underlying criminal offense is complete. See id. § 34.01. The parties rely on federal cases interpreting the federal mone y-laundering statute for this assertion. FN9 See generally United States v. Harris, 666 F.3d 905, 907–08 (5th Cir.2012) (discussing cases in which appellate courts held t hat relevant funds were not proceeds of criminal activity before they were transferred); see also 18 U.S.C. §§ 1956

– 57 (defining federal money-laundering offense). We note, however , that although the Texas money-laundering statute and its federal counterpart contain similar provisions, the y are not identical. Compare 18 U.S.C. §§ 1956

– 57

, with Tex. Penal Code §§ 34.01 –.02. Relevant here, the Texas money-laundering sta tute defines “criminal activity” as “any offense, including any preparatory offense, ” that is classified as a felony. Tex. Penal Code § 34.01(1) (emphasis added). Furthermore, the Texas statute defines “proceeds” a s “funds acquired or derived directly or indirectly from, produced through, realized through, or used in the commission of ” a criminal activity. Id. § 34.01(4) (emphasis added). Given that the Texas money-laundering statute broadly def ines (1) criminal activity to include inchoate crim es and (2) proceeds of criminal activity to include indirect g ains and money used to assist in the commission of the criminal activity—neither of which is present in the federal statute—it is by no means clear that a predicate o ffense must be complete before it can create proceeds of criminal activity. However, because the parties do not dispu te this issue and we can resolve Demond's sufficiency complaint on ot her grounds, we will assume, without deciding, that the predicate misapplication of fiduciary property needed to be c omplete before Demond's alleged money laundering oc curred.

FN9. This Court and the court of criminal appeals have also looked to federal cases interpreting the feder al money-laundering statute for guidance in applying T exas law. See, e.g., DeLay v. State, 443 S.W.3d 909, ––––, 2014 WL 4843917, *8 n. 55 (Tex.Crim.App.2014) ; DeLay v. State, 410 S.W.3d 902, 914 (Tex.App.—Austin 2013)

, aff'd, 443 S.W.3d at ––––, 2014 WL 4843917, at *12

.Page 26

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. *15 [14][15] To prove misapplication of fiduciary property, the State was required to show that Fuelberg (1) “failed to apply the funds according the terms of t he agreement” under which they were held and (2) th e misapplication created a substantial risk of loss to the PEC. See Merryman v. State, 391 S.W.3d 261, 270 (Tex.App.—San Antonio 2012, pet. ref'd) . “The actual disposition of the money is immaterial, and the State is not required to prove how the fiduciary applied the funds ‘if the State has p roved that the fiduciary failed to apply the funds according to the terms of the agreement.’ ” Skillern v. State, 355 S.W.3d 262, 268–69 (Tex.App.—Houston [1st Dist .] 2011, pet. ref'd) (emphasis added) (quoting Little v. State, 699 S.W.2d 316, 318 (Tex.App.—San Antonio 1985, no pet.) ); see also Merryman, 391 S.W.3d at 270 (same). Therefore, the State was not required to p rove that the PEC's funds ultimately were received by Curtis and Price to establish misa pplication, and the jury could have reasonably conc luded that the misapplication of fiduciary property was complete w hen Fuelberg transferred the funds from the PEC to Clark
Thomas. See Merryman, 391 S.W.3d at 270 ; Skillern, 355 S.W.3d at 268–69 . Similarly, the jury could have reasonably concluded that the PEC's funds became proceeds of criminal activity when they were received by Cl ark Thomas, that Demond's subsequent transfer of those funds to Curtis and Price was a transaction involving the p roceeds of criminal activity, and therefore that Demond was gu ilty of money laundering. See Tex. Penal Code § 34.02(a)(2)

.

This analysis is consistent with federal cases deal ing with similar federal statutes. In United States v. Allen, 76 F.3d 1348, 1352–53 (5th Cir.1996) , a bank executive conspired to hire his business a ssociates as consultants for the bank, pay the associates substantially more than th eir work would justify, and then have the associate s “kickback” a portion of their consultant salaries to the executi ve. The executive and associates asserted that thei r misapplication of bank funds was not complete until the bank executiv e received his kickback and, therefore, none of the preceding transfers between the parties could constitute laun dering of proceeds from that misapplication. See id. at 1360 ; see also 18 U.S.C. §§ 656 (misapplication of bank funds), 1956(a)(1)(B)(i) ( money laundering).

The Fifth Circuit disagreed, concluding that the “[ d]efendants' contentions fail because the funds at issue in each of the transactions became proceeds at the moment t he money left the control of [the bank] and was dep osited into the
account of a consultant....” Allen, 76 F.3d at 1361 (internal citation omitted). The subsequent transfer from a consultant's account to another bank account constitut ed the transfer of proceeds of the misapplication, and thus money laundering. Id. To illustrate the point that the misapplication wa s complete as soon as the bank lost control of its funds, the court used the following hypothetical:

Suppose, for example, a consultant and a bank offic er agree to an invoice and kickback scheme, but the consultant decides to cheat by keeping all the money and makin g no kickback. The two would have perpetrated a fra ud against the bank. The bank officer in this example particip ated in the scheme by approving the invoice with in tent to defraud. The dishonor among thieves is not relevant, certainly not to the bank.

Id.

Similarly here, Fuelberg committed misapplication o f fiduciary property by authorizing payments to Cla rk Thomas to pay Curtis's salary and Price's retainer when he knew that the PEC was, at a minimum, overpa ying for those services. Had Demond decided to cheat and not pay a ny of the PEC's money to Curtis and Price, either k eeping it for himself or leaving it with Clark Thomas, the PEC's property still would have been misapplied, Fuelberg would still be guilty of misapplication of fiduciary property, and Demond would still be guilty as a party to Fuelber g's conduct.Page 27

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. [16][17] Demond asserts that because the indictment alleges that he committed misapplication of fiduciary property “by making or causing payments to be made to” Curtis and Price, the State cannot now assert t hat the misapplication was complete when the PEC's property wa s transferred to Clark Thomas. Although Demond rais es this issue as a sufficiency claim, the underlying argume nt may be more properly characterized as a material -variance issue similar to the party liability argument discussed a bove. See generally Byrd, 336 S.W.3d at 246 (discussing material variance). “[I]mmaterial variances are to be disreg arded in the sufficiency of the evidence.” Id. Therefore, if the allegation that the misapplication was committed by m aking payments to Curtis and Price is immaterial, t hen the State was not limited to that method of misapplication at trial, and the State could prove that the misappli cation of fiduciary property was complete when the funds were transferr ed to Clark Thomas. See id.

*16 [18][19][20][21] There are three categories of variances: (1) “a var iance involving statutory language that defines the offense,” such as the theft-by-deceptio n allegation discussed above; (2) “a variance invol ving a non-statutory allegation that describes an ‘allowab le unit of prosecution’ element of an offense,” suc h as misidentifying the name of a murder victim; and (3) “other t ypes of variances involving immaterial non-statutor y allegations.”
See Johnson v. State, 364 S.W.3d 292, 298–99 (Tex.Crim.App.)

, cert. denied, ––– U.S. ––––, 133 S.Ct. 536, 184 L.Ed.2d 351 (2012) . The first category of variances is always materia l, and when an indictment alleges a specific statutory manner and means of committing an offense , then the State must prove that specific manner an d means. See,

e.g., Geick, 349 S.W.3d at 547–48 (concluding that if indictment alleges theft by de ception, State is limited to that theory of theft). The second category involves non- statutory allegations that are “descriptive of an e lement of the offense that defines or helps define the allowable unit of prosecution,” such as the name of the victi m in an assault case or the property that was stolen in a theft case. See Johnson, 364 S.W.3d at 297 . A variance in this second category can be material if it is “significant enough that we co uld not conclude whether the State had proved the s ame” offense alleged in the indictment. Id. ; see also Byrd, 336 S.W.3d at 256–57 (noting that theft of property belonging to store manager would be completely separate offense than t heft of property belonging to store, and thus misid entifying who owned the property was material variance). The fina l category involves unnecessarily specific descript ions of elements of the offense that do not affect the allowab le unit of prosecution, such as alleging that the d efendant committed assault by hitting the victim when in fact the defe ndant slammed the victim against a wall. See Johnson, 364 S.W.3d at
298 (noting that act that caused the injury does not d efine or help define whether offense is separate as sault). Variances in this final category are always immaterial, and t herefore do not affect the sufficiency of the evide nce. See id. at
298–99

.

The variance at issue in this case clearly does not fit into the first category because how a person c ommits misapplication of fiduciary property does not involve a statutorily defined manner and means of that offe nse. Cf. Geick,
349 S.W.3d at 547–48 (discussing how theft statute defines various ways that victim's consent can be ineffective). Similarly, the variance in this case is not descrip tive of an element that defines or helps define the allowable unit of prosecution for misapplication of fiduciary propert y. See Johnson, 364 S.W.3d at 297 . As discussed above, the actual disposition of fiduciary property is immaterial, “a nd the State is not required to prove how the fiduc iary applied the
funds.” Skillern, 355 S.W.3d at 268–69 . Rather, the State is required to show that the di sposition of the property violated the fiduciary agreement under which it was held. Id. Thus, unlike the identity of the victim, the prope rty allegedly misapplied, or the fiduciary agreement un der which that property was held, the manner in whi ch Demond misapplied the PEC's property is not descriptive of an element that helps define the allowable unit of prosecution for misapplication of fiduciary property, and therefore the variance at issue in this case does not fit wi thin the secondPage 28

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. category of variances discussed above. See Johnson, 364 S.W.3d at 297 (noting that in theft prosecution, victim and property are two elements that affect unit of prose cution).

[22] Therefore, we conclude that the indictment's allega tion that Demond misapplied property by causing pay

ments to be made to Curtis and Price is in the thir d category of variances—i.e., types of variances in volving immaterial non-statutory allegations. See id. Similar to the manner in which an assailant causes his victim's bodily injury, the manner in which Demond misapplied the PEC's propert y does not affect the allowable unit of prosecution for this offense, and thus a variance between the indictment and the evidence adduced at trial on this issue is immaterial. See
id. Therefore, in considering the sufficiency of the e vidence to prove when the misapplication of fiducia ry property was complete, neither the State nor the jury was li mited to the disposition of the PEC's property that was alleged in the
indictment. FN10 See Byrd, 336 S.W.3d at 246 (noting that immaterial variances do not affect su fficiency of evidence).

FN10. Similarly, Demond's complaint that the jury charge did not assert that he committed misapplication of fiduciary property by making payments to Clark Thom as is without merit, as the State was not required to prove how Demond disposed of the PEC's property, bu t only that the property was applied in a manner th at violated the fiduciary agreement under which it was held. Skillern v. State, 355 S.W.3d 262, 268–69 (Tex.App.—Houston [1st Dist.] 2011, pet. ref'd).

*17 For the reasons stated above, we conclude that the evidence is sufficient to prove that the misapplic ation of fiduciary property was complete when Fuelberg autho rized PEC funds to be transferred to Clark Thomas. See Merryman, 391 S.W.3d at 270 (noting that actual disposition of fiduciary prope rty is immaterial in proof of misapplication of fiduciary property); Skillern, 355 S.W.3d at 268–69 (same). Although our conclusion is based on Texas precedent,
it is consistent with federal case law. See Allen, 76 F.3d at 1361 . Thus, the PEC's funds became proceeds of criminal activity when they were transferred to Clark Thomas , and the jury could have reasonably concluded that Demond's subsequent transfer of those funds to Curtis and Pr ice constituted money laundering because it was a t ransaction involving the proceeds of criminal activity. See Tex. Penal Code 34.02(a)(2) . We overrule Demond's fifth issue on appeal.

“Stacking” of jail time [23] In his sixth appellate issue, Demond asserts that t he trial court erred in ordering him to submit to 5 00 days in jail as a condition of his community supervision. FN11 Demond cites to article 42.12, section 12(a) of the Code of
Criminal Procedure , which provides that if “a judge having jurisdicti on of a felony case requires as a condition of community supervision that the defendant submit to a period of confinement in a county jail, the perio d of confinement may not exceed 180 days.” Demond argues that t his provision means that a trial court cannot order a defendant to submit to more than 180 days confinement for any ca se, regardless of how many felony convictions arise out of that case. Therefore, according to Demond, the trial cou rt abused its discretion in ordering him to submit to separate terms of confinement for each of his felony convictions.

FN11. The conditions of community supervision state that Demond must submit to 140 days confinement for misapplication, 180 for theft, and 180 for money la undering, with the confinements to be served consec utively.Page 29

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. The court of criminal appeals has specifically reje cted this argument, concluding that article 42.12, section 12(a) authorizes terms of confinement of up to 180 days per felony conviction. See Kesaria v. State, 189 S.W.3d 279, 279 (Tex.Crim.App.2006) . Demond does not assert that there has been any in tervening change in the statute or case law, but instead claims that the court of criminal appea ls failed to properly analyze the statute. Even if we were to agree with Demond on this issue, we are bound to conform our opinions to those of the court of criminal appe als. See State v. DeLay, 208 S.W.3d 603, 607 (Tex.App.—Austin 2006)

, aff'd sub. nom., State v. Colyandro, 233 S.W.3d 870 (Tex.Crim.App.2007) . Therefore, we overrule Demond's sixth issue on ap peal.

However, because we have vacated Demond's convictio n for theft by deception, Demond is no longer on co mmunity supervision for that offense. See Kesaria, 189 S.W.3d at 279 (concluding that trial court may order 180–day confinement as condition of community supervision f or each felony conviction). Therefore, we modify th e trial court's order imposing conditions of community supervision to delete the requirement that Demond submit to 180 days confinement for theft by deception. See supra n.11. As modified, we affirm the trial court's con ditions of community supervision.

Disqualification and recusal of Judge Mills In his seventh appellate issue, Demond asserts that as a PEC customer, Judge Mills (1) had a disqualifying pecuniary interest in this case, (2) had a disqualify ing personal interest in this case, and (3) should have been recused because his impartiality might reasonably be questi oned. These identical appellate issues were raised and fully addressed in this Court's two prior opinions concerni ng Fuelberg's appeal. See Fuelberg v. State, 410 S.W.3d 498, 502–507 (Tex.App.—Austin 2013, no pet.) (concluding Judge Mills did not have disqualifying pecuniary interest in this case); Fuelberg v. State, –––S.W.3d ––––, –––– – ––––, No. 03–11–00317–CR, 2 014 WL 3558761, *3–8 (Tex.App.—Austin 2014, no pet. h.) (concluding Judge Mills not otherwise disqualified or required to be recused). We will not repeat that analysis here.

*18 In this appeal, Demond adopted Fuelberg's appellat e brief with regard to Judge Mills's recusal and di squalification in its entirety. For the reasons stated in our previous opinions, we conclude that Judge Mill s was not disqualified and the assigned judge did not abuse his discretion in concluding that Judge Mills should no t be recused. Therefore, we overrule Demond's seventh issue on ap peal.

Removal of seated juror [24] In his eighth and final appellate issue, Demond ass erts that the trial court abused its discretion by removing a juror as disabled when the juror complained of a bladder infection . Specifically, Demond asserts that the infection w as only temporary and the juror stated that she might be able to return the following day. This temporary illness, according to Demond, is not the type of illness that would make a juror “disabled from sitting” for purp oses of article
36.29 of the Code of Criminal Procedure . Therefore, according to Demond, the trial court a bused its discretion in concluding that the juror was disabled.

[25][26][27] If a juror, “as determined by the judge, becomes di sabled from sitting,” the judge may remove the juror and allow the trial to proceed with fewer tha n twelve jurors. Tex.Code Crim. Proc. art. 36.29(a) . “Disabled, as used [in article 36.29 ], means any condition that inhibits the juror from fully and fairly performing the functions of a juror.” Griffin v. State, 486 S.W.2d 948, 951 (Tex.Crim.App.1972) . Such a condition can include “physical illness,Page 30

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. mental condition, or emotional state which hinders one's ability to perform one's duties as a juror.” Landrum v. State, 788 S.W.2d 577, 579 (Tex.Crim.App.1990) (internal citations omitted); see also Granados v. State, 85 S.W.3d 217, 235 (Tex.Crim.App.2002) (noting that juror's bias against defendant can ma ke juror disabled if bias prevents juror from following court's instruction). “The determina tion as to whether a juror is disabled is within th e discretion of the
trial court.” Brooks v. State, 990 S.W.2d 278, 286 (Tex.Crim.App.1999) . Therefore, we will only reverse the trial court's ruling if it is outside the zone of reasona ble disagreement. See id.

Midway through the second day of trial, an empanele d juror notified the court that she was ill with wh at was “[p]robably some kind of bladder infection ” that was causing her significant pain. The juror stated that she generally took “AZO” when this type of pain begins and that m edication “is supposed to clear up a minor infectio n,” meaning she could likely return to court the following day. However, the juror did not know if this was a mino r infection and
was not certain that she would be better the next d ay. Based on the juror's statements, the trial cour t found that the juror was “physically incapable of proceeding because of her pain” and, over Demond's objections, dismissed the juror as
disabled.

Demond asserts that because the juror believed she could return to court the following day, the trial would likely only have been delayed for half of a day. This type of temporary illness, according to Demond, does no t constitute the type of illness that would justify finding a juror disabled. This Court, however, along with several o f our sister courts of appeals, has rejected the argument that a tempor ary illness does not constitute a disability. See Moore v. State, 82 S.W.3d 399, 406–07 (Tex.App.—Austin 2002, pet. ref' d) (concluding trial court did not abuse discretion b y dismissing juror with temporary gastrointestinal issue s), overruled on other grounds by Taylor v. State, 268 S.W.3d 571, 588 (Tex.Crim.App.2008) ; see also Romero v. State, 396 S.W.3d 136, 143–44 (Tex.App.—Houston [14th Dis t.] 2013, pet. ref'd) (citing several appellate court decisions rejectin g argument that temporary illness does not constitu te disability). In Moore, we concluded that a trial court did not abuse its discretion in finding a juror was disabled based on the juror's “severe gastrointestinal ailment” becau se “although a stomach ailment is only temporary, i t remains within
the trial court's discretion to determine whether t his juror” could no longer perform his functions. 82 S.W.3d at 407

.

*19 Demond does not cite to any cases in which an appe llate court has concluded that a trial court abused its discretion by finding a juror to be disabled based on a temporary illness. Therefore, we adhere to our ruling in Moore
and conclude that it is within the trial court's di scretion to determine whether a temporary illness d isables a juror. See
id. Given that the juror in this case stated that her bladder infection caused her so much pain that she could not focus o n the trial and that the juror was not certain that s he would be able to return to court the next day, t he trial court could have reasonably concluded that the juror's illness prevented her from performing her function as a jur or. Therefore, we
cannot conclude that the trial court abused its dis cretion in finding that the juror was disabled. We overrule Demond's eighth issue on appeal.

CONCLUSION Having concluded that the evidence is insufficient to support Demond's conviction for theft by decepti on, we reverse and vacate the trial court's judgment of co nviction for that offense. Similarly, we modify Dem ond's conditions of community supervision to delete the requirement that he submit to 180 days' confinement for theft b y deception. Having overruled Demond's remaining appellate issue s, we affirm the trial court's judgments of convict ion in all other
respects.Page 31

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© 2015 Thomson Reuters. No Claim to Orig. US Gov. W orks. Tex.App.-Austin, 2014
Demond v. State --- S.W.3d ----, 2014 WL 6612510 (Tex.App.-Austin)

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