1 District Judge for the Souther n District of Texas,

sitting by designation.

1 REVISED MARCH 8, 2000

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 98-20441

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

VERSUS

AL RICHARDS, ROGER BRAUGH,

AND KURT LATRASSE,

Defendants-Appellants.

Appeal from the United States District Court

for the Southern District of Texas

February 9, 2000

Before KING, Chief Judge, STEWART, Circuit Judge, and ROSENTHAL,

District Judge. 1

ROSENTHAL, District Judge:

Defendants appeal their convictions for their involvement in

a purported investment scheme that took large sums of money from

the investors and returned them little or nothing. The investors

believed that their money went to purchase letters of credit, which2

defendants were to “roll,” or repeatedly sell and repurchase, to

European banks. The indictment alleged that the defendants took

the money from the investors, but purchased no letters of credit

and instead kept the money for themselves.

Al Richards appeals his convictions for conspiracy to

commit wire and mail fraud, i n violation of 18 U.S.C. § 371;

interstate transportation of stolen property, in violation of 18

U.S.C. § 2314; and wire fraud, in vio lation of 18 U.S.C. § 1343.

Richards also appeals the district court’s orde r that he pay

restitution in the amount of $487,000. Roger Braugh and Kurt

Latrasse appeal their convictions for conspiracy to commit wire

fraud and mail fraud; interstate transportation of stolen property;

wire fraud; and mail fraud, in violation of 18 U.S.C. § 1341.

Braugh also appeals the district court’s order that he pay $504,500

in restitution. Finding ample evidence in the record to support

the convictions and no basis for reversal, we affirm.

I. BACKGROUND AND PROCEDURAL HISTORY

The superseding indictment charged all three defendants with

conspiracy to commit mail and wire fraud (count 1), interstate

transportation of stolen property (count 2); and wire fraud (count

3). The indictment charged Braugh and Latrasse with two additional

counts of wire fraud (counts 4 and 5) and one count of mail fraud

(count 6). The jury convicted Richards on all three counts and

convicted Braugh and Latrasse on all six counts.3

At trial, the government presented evidence as to how

defendants induced participants to “invest” in the so-called roll

program. Potential investors were told that their money would be

pooled with that of other i nvestors and used to buy letters of

credit. The letters of credit would be “rolled” — sold,

repurchas ed, and resold — to European banks frequently and

repeatedly. Each “roll” would generate a large profit to be

distributed among the investors, in proportion to their investment.

The investors were told that their funds would be safe at all

times, held either in an account at a nationally-known br okerage

firm or invested with a “prime” or “top 50" international bank.

Investors were also told that they would receive at least the

return of their initial investment, with interest, and would likely

make substantial profit. In fact, the defendants took the invested

funds for their own use, bought no letters of credit, and, except

for a small payment to one participant, returned no m oney to the

investors.

Three investors testified. Bert Hayes, an Arkansas

businessman, was introduced to the program by Al Richards in a

telephone call. Richards outlined an investment opportunity, but

refus ed to discuss the details until Hayes signed a

noncircumvention, nondisclosure agreement. After Hayes signed the

agreement, Richards suggest ed they meet in Dallas to discuss the

potential investment. Hayes agreed.4

At the Dallas meeting, Richards told Hayes that in the “roll

program,” the investors’ funds would be pooled to buy a $10 million

letter of credit from a “top 50 prime bank.” The letter of credit

would be “rolled” to different European banks. The investors would

earn interest with each “roll.” Richards told Hayes that the

interest o n the “rolls” would generate ten weekly payments of

$50,000 each on a $ 250,000 investment. Richards told Hayes that

his money would be kept in an interest-bearing account at the

Shearson Lehman Brother s brokerage firm until used to buy the

letter of credit. Richards assured Hayes that he would control the

money until all the other funds necessary for the roll program were

raised. If the roll program could not purchase a letter of credit,

Richards would return Hayes’s original investment, with ten percent

interest.

Richards explained that he would not personally be involved in

purchasing and selling the letters of credit. His “contacts,”

identified as Roger Braugh and Al Sellars, would handle the roll

program transactions.

Hayes signed a written contract in August 1991. The contract

identified Hayes and Gold Cloud Development Corpo ration as the

parties to a “joint business proposition.” The contract was signed

by Hayes and by “Roger S. Braugh by Al Richards” as the chairperson

of Gold Cloud Development.

The contract provided that Hayes would deposit his investment

funds in a designated brokerage firm account on September 5, 1991.5

On the Mo nday following that date, Gold Cloud Development would

purchase a “One Year Zero Interest Coupon Standby Letter of Credit

with a $10,000,000.00 USD face value.” Gold Cloud Development

would “orchestrate the sale of the Standby Letter of Credit in the

European or Japanese secondary markets based on an already existing

contractual arrangement

. . . .” Gold Cloud Development would wire

Hayes his share of the profits from that sale, expected to be

$50,000, to a bank Hayes would designat e. “The original $ 10

Million USD principal would be reinvested on Monday each week for

the purchase of a new Standby Letter of Credit to repeat the same

weekly chain of events, for a period of no less than ten (10)

transactions.”

On September 6, 1991, Hayes sent a $ 250, 000 check to a

designated Shearson Lehman Brothers account for investment in the

Gold Cloud Development roll program. On the same day, Richards

signed and sent Hayes a “Business Proposal on Funding Commitment.”

This document set out Al Richar ds’ plan to use GEI Associates, a

company Richards owned and ran, to raise $10 mi llion to buy the

first letter of credit. The business proposal provided that if GEI

Associates could not raise the money necessary to buy the first

letter of credit, Hayes would rec eive his money back, with

interest.

When Hayes sent in his $250,000 check, he told Richards he

wanted to meet the individuals who would be handling the roll

transactions. Richards arranged a meeting with Hayes and Roger6

Braugh and Al Sellars a few weeks later. At that meeting, Hayes

asked Al Sellars if the investment was safe. Sellars, noting that

Hayes was wearing a Mason pin, told Hayes that he was also a Mason

and that the investment was “as safe as the Rock of Gibraltar.”

Sellars asked Braugh to “roll” the investment at least twice in the

next week so that Hayes could see how the program worked.

After that meeting, Hayes understood Braugh to be in control

of the roll program transactions. Hayes expected to be paid within

a few weeks for the first roll transaction, set to occur the

following week. Several weeks passed with no payments. Hayes

began to question both Richards and Braugh about the program and

about his money. In December 1991, Richard told Hayes that the

initial arrangement was not working and proposed a different

arrangement. Richards proposed to change the payment plan from ten

weekly payments of $50,000 each to 42 weekly payments of $ 20,000

each. Hayes agreed and signed a revised contract. “Roger S.

Braugh by Al Richards” signed as the chairperson of Gold Cloud

Development.

Early in 1992, Braugh introduced Hayes to Kurt Latrasse.

Braugh identi fied Latrasse as an expert in the roll program.

Latrasse told Hayes that his money was invested in England and

“doing very well.” In June 1992, Latrasse advised Hayes to cancel

his contract with Richards and GEI Associates so that Hayes could

deal directly with Braugh and Latrasse and avoid paying commissions

to Richards. Hayes followed Latrasse’s advice and, by letter to7

Richards dated June 12, 1992, canceled the contract with Richards

and GEI Associates.

In August 1992, Hayes complained to Braugh that he still had

n ot received any payments from his investment. Braugh expressed

surprise and explained that he had sent Richards severa l checks

intended for distribution to Hayes. Braugh sent Hayes photocopies

of seven canceled checks, totaling $50,000, signed by Braug h and

made out to Richards. The notation “Bert Hayes payment” appeared

on the memorandum line of each check. Hayes telephoned Richards to

ask why he had not sent Hayes the $50,000. Richards expressed

surprise; he insisted that the checks were his own commissions, not

Hayes’s inves tment returns. Richards accused Braugh of lying to

Hayes. During this time, Braugh sent Hayes a $15,000 check so that

Hayes could pay the interest due on the loan he had taken out to

fund his $ 250,000 investment in the roll program.

In September 1992, Hayes sent a fax message to Latrasse asking

for an accounting and a status report on the investment. Hayes

received no response. A few weeks later, Hayes sent Latrasse a

second fax, again asking for an accounting. On October 5, 1992,

Latrass e sent a fax, announcing that Gold Cloud Development had

been able to purchase “the commitments” for the roll program in

late November 1991. Latrasse continued:

Now, as to the future, we believe we will be

able to return the original investment plus a

reasonable return to you within this month.

We would propose at that time to invest the

net proceeds (after principal and interest on8 your loan has been satisfied) in a ma s ter

collateral commitment.

. . . [I]nasmuch as you

have been patient as Job with us, we would

like to include you as an equal participant in

whatever profits are generated.

The month passed; Hayes received no money.

Hayes sent several more fax messages to Latrasse over the next

few months, to no avail. By May 1993, neither Latrasse nor Braugh

was returning H ayes’s telephone calls or faxed messages. Hayes

heard nothing further about the program until 1996, when the FBI

contacted him. Hayes lost $235,000.

Gail Schwinger, another inv estor, also testified at trial.

Schwinger met Richards in November 1991 through her partners in an

investment company. After Schwinger and her partners signed a

noncircumvention, nondisclosure agreement, Richards revealed the

mechanics of the roll program. Richards gave Schwinger much the

same explanation he had given Hayes, with one variation. Richards

told Schwinger that an investment of $250,000 could earn up to

$40,000 per week for 42 weeks, not the $50,000 per week for ten

weeks he initially described to Hayes.

In December 1991, Schwinger and her partners met with

Richards, Braugh, and Sellars in Houston. When Schwinger

questioned whether her money would be safe, Braugh assured her that

her money would never leave the banks and would be very safe.

Schwinger agreed to invest $ 250,000 and, on December 11, 1991,

signed a contract with Gold Cloud Development. “Roger Braugh by Al

Richards” signed the contract as the chairperson of Gold Cloud9

Development. The contract stated that the letters of credit would

be rolled 42 times; Schwinger would receive $40,000 for each roll.

The contract provided that if Gold Cloud Development could not buy

a letter of credit, Schwinger would receive her full investment

back with interest. Schwinger sent a $250,000 check for deposit in

the designated Shearson Lehman Brothers account on the same day she

signed the contract.

After the expected date for the first payment passed, one of

Schwinger’s partners began asking Richards questions about the

investment. In January 1992, Schwinger asked Braugh for a status

report. Braugh told her that the program had been delayed. In

February 1992, Braugh told Schwinger that Kurt Latrasse had taken

over the roll program. In later conversations, Braugh gave

Schwinger different excuses for the lack of payments. In separate

conversations, he told her that Latrasse was in the hospital with

gallstones; that Latrasse’s wife was in the hospital for dental

surgery; and that Latrasse might have cancer. According to Braugh,

these problems prevented Latrasse from traveling to Europe to

correct problems with the roll program.

Schwinger also spoke to Richards and Braugh several times in

February and March of 1992. Each time, Schwinger received excuses

or promises that quickly proved false. In March 1992, Braugh tried

to persuade Schwinger to invest in another roll program. Schwinger

agree d to attend a meeting in April 1992 to discuss the proposed

investment with Braugh, Al Sellars, and a man named Harold Sellers,10

identified as Al Sellars’ attorney. Schwinger had no intention of

participating in another program, but agreed to the meeting so she

could ask questions about her original $250,000 investment.

Schwinger received no answers at the meeting.

After the March 1992 meeting, Schwinger hired an attorney, who

sent a letter to Richards, Br augh, and Latrasse demanding an

accounting. On May 28, 1992, Latrasse called Schwinger and told

her that he was upset that she had hired a lawyer. The next day,

Schwinger sent a fax to Latrasse, again asking for an accounting.

Latrasse agreed. On June 11, 1992, Schwinger sent Latrasse another

fax asking when she would receive the promised accounting. On

June 19, Latrasse responded by offering another excuse for the

delays and promising prompt pa yment: “The commitments for

collateral and funding have now been conformed and are working

properly. We anticipate distribution of accumulated earnings to

commence by or on – by or before June 30 th .”

June 30, 1992 came without either payment or an

accounting. On that date, one of Schwinger’s partners wrote to

Latrasse, Braugh, and Sellars, stating that he planned to contact

federal and state authorities about the investment program.

Latrasse left two messages on Schwinger’s answering machine on

July 1, 1992. In the first message, Latrasse told Schwinger that

there had been movement on the account and proposed a meeting to

discuss the investment. In the second message, Latrasse said he

had received the “threatening” letter from Schwinger’s partner and11

proposed a meeting before attorneys bec ame involved. One of

Schwinger’s partners did arrange a meeting with Latrasse and

Schwinger. Latrasse did not appear. Schwinger never recovered any

of her investment.

Brandon Blackwelder was the third investor to testify at

trial. Blackwelder met Roger Braugh in 1993. Braugh described his

career field as “international finance” and asked if Blackwelder

w ould be interested in investing in a “deal” in Europe. Braugh

told Blackwelder that the investment was secret and available only

to “blue-bloods” and “high-ranking officials.” Braugh described

the investment as a “roll-over program” consisting of purchases and

sales of prime bank instruments in Europe. Blackwelder agreed to

invest $12,500.

On May 12, 1993, Braugh went to Black welder’s office to

collect the money. While there, Braugh telephoned Kurt Latrasse.

Using a speaker phone, Braugh asked Latrasse to allow Blackwelder

to invest only $12,500 instead of what Braugh described as the

minimum amount of $25,000. Latrasse responded that Blackwelder

could invest the lower amount if Blackwelder would agree to recruit

other investors for the program.

Blackwelder and Braugh signed a contract titled the “SAI

Opportunity Account Agreement” that same day. Braugh signed the

contract on behalf of “SAI & Associates.” The contract provided

that SAI & Associates would “guarantee that the capit al account12

shall be returned at the end of ninety (90) days from the date of

execution of this Agreement.” The initial term of 90 days would be

deemed renewed absent a written notice of nonrenewal by either

party. Braugh also signed a instrument styled an “Unsecured Note,”

in which he promised to pay Blackwelder, within the 90-day initial

term, the principal amount with interest at a twenty percent annual

rate.

Blackwelder spoke to Braugh or Latrasse several times after he

made the investment. On June 26, 1993, Blackwelder hand-delivered

Braugh a letter stating that Blackwelder did not wish to renew the

contract after the initial 90-day term. Blackwelder explained that

he needed the money for a down payment on a new house. After this

meeting, Blackwelder was unable to reach Braugh for weeks. When

Blackwelder finally talked to Braugh, Braugh provided excuses, but

no money.

In July 1993, Braugh call ed Blackwelder. Braugh explained

that if he could travel to Europe, he could expedite the roll

program transactions, but he needed $5,000 to $10,000 to make the

trip. Braugh asked Blackwelder to lend him the money. Blackwelder

agreed to lend Braugh $5,000, but asked Braugh to give him a postdated repayment check as security. On July 8, 1993, Blackwelder

gave Braugh two checks for $2, 500 each. In return, Braugh gave

Blackwelder a check in the amount of $5,000, post-dated July 16,13

1993. Braugh cashed the checks from Blackwelder, but did not use

the money to pay for a trip to Europe.

On July 16, 1993, Blackwelder told Braugh that he planned to

cash the repayment check. Braugh told Blackwelder that he had not

yet deposited money in the account on w hich the check was drawn.

Blackwelder nonetheless presented t he check for payment, which,

predictably, bounced. Blackwelder tried unsuccessfully to recover

his money from Braugh. On November 22, 1993, Braugh wrote

B lackwelder a letter stating that he would repay Blackwelder’ s

$5,000 loan with cash or a cashier’s check. Blackwelder received

no repayment.

Blackwelder also spoke with Latrasse several times about his

investment. Latrasse repeatedly told Blackwelder that there would

be action on his investment “any day.” In February 1994, Latrasse

sent Blackwelder a fax stating that Latrasse had designated a

disinterested third party to deliver Blackwelder a check returning

his investment. Blackwelder never received the check. He lost his

$12,500 investment and the $5,000 loan.

Kathryn Brewer, a financial analyst with the FBI, exa mined

numerous bank and brokerage account records to trace the funds

Hayes, Schwinger, and Blackwelder invested. She testified that

most of the money was distributed among bank accounts of the three

defendants. The remaining funds were disbursed to various entities

unrelated to any investment program.2 The signature card for the Lone Star Exploration account

disclosed that the account was opened on September 11, 1991, five

days after Hayes delivered his check. Braugh and a man named Jerry

Fritzler were the only authorized signatories. The signature card

identified Braugh as the chairman of Lone Star Exploration and

Fritzler as the president.

3 The bank records showed that checks made payable to

Watson Pipe, Inc.; Clark Oil Tools; Hall iburton Services; Pride

Petroleum; Cellular One; and Southwestern Bel l were drawn on the

Lone Star Exploration account.

14 Hayes’s $250,000 check was initially deposited into a Shearson

Lehman Brothers account in Braugh’s name on September 6, 1991. All

but approximately $1,000 of this money was transferred out of that

account within one month of the deposit. From September 11, 1991

to October 4, 1991, $182,500 was wire-transferred from Braugh’s

Shearson Lehman Brothers account to an account in Braugh’s name at

the Bank of Corpus Christi. A $100,000 check to Al Sellars was

drawn on Braugh’s Bank of Corpus Christi account on September 11,

1991. From September 11, 1991 to Septe mber 27, 1991, a total of

$24,000 was wire-transferred from Braugh’s Bank of Corpus Christi

account to an account at the same bank in the name of Lone Star

Exploration. 2 On October 3, 1991, $25,000 was transferred directly

from Braugh’s Shearso n Lehman Brothers account to the Lone Star

Exploration bank account. Nearly all the $49,000 deposited in the

Lone Star Exploration account was disbursed to various entities

unrelated to any roll program. 3

Brewer testified that a $32,000 cashier’s check made payable

to Al Sellars was purchased on September 20, 1991 with money from15

Braugh’s Bank of Corpus Christi account. The check was ultimately

redeposited into Braugh’s Shearson Lehman Brothers account. Brewer

testified that two wire transfers — a September 17, 1991 transfer

in the amount of $7,500 and a September 25, 1991 transfer in the

amount of $5,000 — were made from Braugh’s Bank of Corpus Christi

account to an account in the name of Kurt Latrasse in California.

Schwinger deposited her $250,000 check into the Shearson

Lehman Brothers account in the name of Gold Cloud Development on

December 12, 1991. Brewer testified that, on December 13, 1991,

two checks made pa yable to Roger Braugh, totaling $50,000, were

drawn on the Gold Cloud Development account. By January 3, 1992,

$198,500 was transferred from the Gold Cloud Development account to

Roger Braugh’s Shearson Lehman Brothers account. Seven checks made

payable to either Al Richards or GEI Associates, totaling $50,000,

were later drawn on Braugh’s Shearson Lehman Brothers account; two

checks made payable to Kurt Latrasse, totaling $59,500, were drawn

on this same account in late December 1991. Three wire transfers

totaling $46,000 were made to Roger Braugh’s account at the Bank of

Corpus Christi in December 1991. The records from Braugh’s Bank of

Corpus Christi account also s howed transfers totaling $22,000 to

the Lone Star Exploration account at that bank in December 1991;

the remaining money was disbursed to entities unrelated to any roll

program.16

Blackwelder wrote a $12,500 check payable to SAI & Associates

on May 12, 1993. The check was deposited into the account of SAI

& Associates at the Bank of America on the same day. On that same

date, a $5,000 check made payable to Kurt Latrasse was drawn on the

SAI & Associates account and $2,500 was transferred from the SAI &

Associates account to an account in the name of Roger Braugh at the

Bank of America . Another $1,400 was transferred from the SAI &

Associates account to Braugh’s account on May 24, 1993. The money

transferred to Braugh’s personal account was in turn disbursed to

various entities u nrelated to any investment program. Brewer’s

analysis showed that Braugh paid various expenses with the $5,000

Blackwelder l oaned him, writing checks to, among other entities,

General Motors Acceptance Corporation and Wal-Mart. Braugh did not

use the money to pay for a trip to Europe, as he had promised

Blackwelder.

On January 20, 1998, a jury convicted Richards , Braugh, and

Latrasse on all counts. On May 14, 1998, the district court

sentenced each defendant to thirty-three months of imprisonment

followed by three years of supervised release. The district court

ordered Richards to pay $487,000 in restitution and ordered Braugh

and Latrasse each $504,500 in restitution. The district court

entered judgment on May 19, 1998. Defendants timely appealed.17

II. THE CHALLENGE TO THE INDICTMENT18

Braugh argues for the first time on appeal that the

superseding indictment did not meet constitutional standards. He

relies on the recent decision of United States v. Neder , 527 U.S.

1, 119 S. Ct. 1827 (1999), holding that the “materiality of

falsehood is an element of the federal mail fraud [and] wire fraud

. . . statutes.” Id. at 1841. Braugh contends that because the

indictment did not specifically allege that the misrepresentations

he made were material, it failed to allege an essential element of

wire fraud and mail fraud.

“To be sufficient, an indictment must allege every element of

the crime charged.” U nited States v. Fitzgerald

, 89 F.3d 218, 221

(5th Cir. 1996). A challenge to the sufficiency of the indictment

is reviewed de novo. S ee United States v. Cabrera-Teran

, 168 F.3d

141, 143 (5th Cir. 1999). “An indictment’s failure to charge an

offense is a jurisdictional defect.” I d. Because the sufficiency

of an indictment is a prerequisite to jurisdiction, a “defendant[]

at any time may raise an object ion based on failure to charge an

offense.” I d. However, when a challenge to the sufficiency of the

indictment is made for the first time on appeal, “a court should

read the indictment with ‘maximum liberality’ and find it

sufficient ‘unless it is so defective that by any reasonable

construction, it fails to charge the offense for which the

defendant is convicted.’” U nited States v. Lankford

, 196 F.3d 563,

569 (5th Cir. 1999)(quoting Fitzgerald

, 89 F.3d 218, 221 (5th Cir.4 The definition of materiality quoted above refers to the

statements themselves, not whether the recipients of the statements

actually relied on them. Although allegations of actual reliance

19 1996)). “Maximum liberality” is the appropriate standard of review

when, as here, “the appellant does not assert prejudice, that is,

[when the appellant] had notice of the crime of which he stood

accused.” F itzgerald

, 89 F.3d at 221; see also Lankford

, 196 F.3d

at 569.

In determining the sufficiency of the indictment, “[t]he law

does not compel a ritual of words.” United States v. Wilson , 884

F.2d 174, 179 (5th Cir. 1989)(quoting U nited States v. Purvis

, 580

F.2d 853, 857–858 (5th Cir. 1978). “The test of the validity of an

indictment is ‘not whether the indictment could have been framed in

a more satisfactory manner, but whether it conforms to minimal

constitutional standards.’” W ilson

, 884 F.2d at 179(quoting United

States v. Webb , 747 F.2d 278, 284 (5th Cir. 1984)).

In Neder

, t he Court defined “materiality of falsehood” in a

footnote:

The Restatement instructs that a matter is material if:

“(a) a reasonable man would attach importance to its

e xistence or nonexistence in determining his choice of

action in the transaction in question; or

(b) the maker of the representation knows or has reason

to know that its recipient regards or is likely to regard

the matter as important in determining his ch oice of

action, although a reasonable man would not so regard

it.”

Neder

, 119 S. Ct. at 1840 n. 5(quoting Restatement (Second) of

Torts § 538 (1976)). 4 This court applies this definition toa ppear to allege materiality, the standards are different. A

recipient might actually rely on a false repres entation, but the

representation might not be one to which “a reasonable man would

attach importance

. . . i n determining his choice of action,” or

one that “the maker of the representation knows or has reason to

know that its recipient regards or is likely to regard the matter

as i mportant in determining his choice of action, although a

reasonable man would not so regard it.” Neder , 119 S. Ct at 1840

n. 5.

20 determine whether, by any reasonable construction, the superseding

indictment charged Braugh with making materially false

representations.

In United States v. McCough

, 510 F.2d 598 (5th Cir. 1975),

this court considered a similar challenge to an indictment. In

that case, the indictment charged a violation of 18 U.S.C. § 1001,

which prohibits the making of false statements to a department or

agency of the United States. The indictment in M cCough alleged

that a utility cooperative had submitted false financial statements

to a federal agency in a loan application. The defendants argued

that the indictment insufficiently alleged the materiality of the

falsehoods under section 1001. The court stated that “[i]f the

facts alleged in the indictment warrant an inference that the false

statement is material, the indictment is not fatally insufficient

for its failure to allege materiality in haec verba .” I d. at 602;

see also United States v. Fern

, 155 F.3d 1318, 1324 (11th Cir.

1998); United States v. Pommerening

, 500 F.2d 92, 98 (10th Cir.

1974); United States v. Olin Corp.

, 465 F. Supp. 1120, 1131–32

(W.D.N.Y. 1979).21

The McCough indictment alleged that the financial statements

substantially misstated the value of the cooperative’s assets and

described specific entrie s in the financial statements that

contained misrepresentations. The court held that the indictment

s ufficiently alleged the materiality of the false financial

statements because it alleged specific misstatements that were

significant and “could conceivably have the capacity to influence

the [agency’s] function in overseeing the status of the security of

a large public investment.” Id. at 603.

The superseding indictment in this case alleged false

representations of specific facts that also “warrant an inference

that the false statement[s] [were] materi al.” I d. at 602. The

indictment detailed the specific false representations and promises

defendants allegedly made to “ind uce the Investors to deliver to

the Defendants cashier’s check and checks.” Paragraph Six of Count

One of the indictment alleged:

ROGER S. BRAUGH, AL RICHARDS, and KURT LATRASSE would and

did represent falsely to certain individuals, including

but not limited to Bert Hayes, Gail Schwi nger, and

Brandon Blackwelder (the “Investors”), that they had

contacts with European banks and lenders and th at the

Investors would receive a substantial return on an

investment involving transactions between banks within a

matter of weeks or months.

Paragraph Ten of Count One of the indictment alleged:

ROGER S. BRAUGH, AL RICHARDS, and KURT LATRASSE would and

did continue to send and receive communications

. . . to

an d from the Investors, even after the Investors had

delivered their money to the defendants, for the purpose

of lulling the Investors into a false sense of security22

by assurances that the promised services would be, or

were being , performed, and that the investment was a

worthwhile one, and that they would receive

distributions, or return of it, at some future date; for

the purpose of postponing inquiries, complaints, or legal

acti on by the Investors, and lessening the suspect

appearance of the fraudulent transactions; and, for the

purpose of giving excuses for non-performance, thereby

allowing additional investments or loans to be sought

from the Investors.

Paragraph 13 of Count One of the indictment listed twenty-eight

overt acts, including specific communications wi th the investors

describing the details of the investment program and later assuring

the investors that the program was making money as promised. The

allegations in Paragraphs Six, Ten, and Thirteen of Count 1 are

incorporated by reference in all other counts of the indictment.

The indictment in this case does not test constitutional

limits in light o f Neder . Read as a whole, the superseding

indictment alleges specific facts that easily support an inference

that t he defendants made material misrepresentations and false

promises. In particular, the allegations that the defendants

misrepresented that the investment program existed, was free from

risk of loss, and would generate large profits support an inference

of materiality. A “reasonable man would attach importance” to

assurances that the investments would take place as described and

would return at least the invested funds, plus interest, within a

short time, in determining whether to invest. The allegations in

the indictment are sufficient to charge the offenses of mail fraud,

wire fraud, and conspiracy to commit mail fraud and wire fraud.23

III. THE CHALLENGE TO THE DENIAL OF BRAUGH’S MOTION TO SEVER

Braugh argues that the district court im properly denied his

motion to sever because the evidence presented at trial was so

complicated that the jury had difficulty considering the evidence

against each defendant separately. Braugh also argues that the

defendants presented antagonistic defenses.

The district court’s denial of a motion to sever is reviewed

for an abuse of discretion. See United States v. Pena-Rodriguez

,

110 F.3d. 1120, 1128 (5th Cir. 1997). Rule 8(b) of the Federal

Rules of Criminal Procedure provides in relevant part: “Two or more

defendants may be charged in the same indictment

. . . if they are

alleged to have participated . . . in the same series of acts or

transactions constituting an offense or offenses.” Generally,

“persons indicted together should be tried together, especially in

conspiracy cases . . . .” United States v. Posada-Rios , 158 F.3d

832, 863 (1998), cert. denied

,

___ U.S.

___, 119 S. Ct 1280 (1999),

cert. denied , ___ U.S. ___, 119 S. Ct 1487 (1999), a nd cer t

.

denied

,

___ U.S.

___, 119 S. Ct. 1792 (1999) (quoting United States

v. Pofahl , 990 F.2d 1456, 1483 (5th Cir. 1993)).

Rule 14 of the Federal Rules of Criminal Procedure authorizes

the trial court to grant a severance based on a showing of

prejudice. To demonstrate that a district court abused its

discretion in denying a motion to sever, the defendant must show

that: “( 1) the joint trial prejudiced him to such an extent that24

the district court could not provide adequate protection; and (2)

the prejudice outweighed the government’s interest in economy of

judicial administration.” United States v. McCord , 33 F.3d 1434,

1 452 (5th Cir. 1994)(quoting United States v. DeVarona

, 872 F .2d

114, 120–21 (5th Cir. 1989)).

This tria l lasted two weeks and involved three defendants.

This court has upheld a district court’s decision to deny severance

in cases involving many more defendants, more evidence, gr eater

complexity, and longer trials. S ee, e.g.

, Posada-Rios

, 158 F.3d at

863–65(upholding district court’s denial of a motion to sever in a

conspiracy case tried for six months against 12 defendants); United

States v. Ellender

, 947 F.2d 748, 753–755 (5th Cir. 1991)(upholding

district court’s denial of a motion to sever in a conspiracy case

tried for three months against 23 defendants, with 73 witnesses).

A general description of the complexity of a trial is not

sufficient to show the “specific and compelling prejudice”

necessary for reversal of a district court’s denial of a motion to

sever. United States v. McCord

, 33 F.3d at 1452; cf. Posada-Rios

,

158 F.3d at 863. Instead, an appellant must “isolate events

occurring in the course of the joint trial and then

. . .

demonstrate that such events caused substantial prejudice.”

Posada-Rios

, 158 F.3d at 863(quoting Ellender

, 94 7 F.2d 748, 755

(5th Cir. 1991)). Braugh has not identified specific events that

caused prejudice and require reversal.25

Braugh’s argument that the jury’s conviction of all defendants

on all counts shows that it did not separately consider the

evidence as to each defendant is unavailing. This court has

stated that “acquittals as to some defendants on some counts

support an inference that the jury sorted through the evidence and

considered each defendant and each count separately.” P osada-Rios

,

158 F.3d at 864 (quoting Ellender , 947 F.2d at 755). It does not

necessarily follow, however, that conviction of all defendants on

all counts shows that the jury failed separately to weigh the

evidence as to each defendant.

“Appropriate cautionary instructions can decrease the

possibility that the jury will improperly transfer proof of guilt

from one defendant to another.” E llender

, 947 F.2d at 755 (quoting

United States v. Hogan , 763 F.2d 697, 705 (5th Cir. 1985)). “The

pernicious effect of cumulation . . . is best avoided by precise

instructions to the jury on the admissibility and proper uses of

the evidence intr oduced by the Government.” U nited States v.

Morrow

, 537 F.2d 120, 136 (5th Cir. 1976). In this case, the trial

court gave careful instructions during the trial about the limited

purpose for which it admitted some of the evidenc e. The court

included the limiting instructions in the final instructions to the

jury. In the trial instructions, the court also admonished the

jury as follows:

A separate crime is charged against one or more of the

defendants in each count of the indictment. Each count,26

and the evidence pertaining to it, should be considered

separately. Also, the case of each defendant should be

considered separately and indiv idually. The fact that

you may find one or more of the defendants guilty or not

guilty of any of the crimes c harged should not control

your verdict as to a ny other crime or any other

defendant. You must give separate consideration to the

evidence as to each defendant.

Similar instructions have been held sufficien t to eliminate the

possibility of undue prejudice. S ee Posada-Rios

, 158 F.3d at 864;

United States v. Faulkner

, 17 F.3d 745, 759 (5th. Cir 1994). “The

remedy of severance is justified only if the prejudice flowing from

a joint trial is clearly beyond the curative powers of a cautionary

instruction.” M orrow

, 537 F.2d at 136. Braugh offers no specific

basis for concluding that the district co urt’s repeated and

meticulous instructions failed to avoid legally cognizable

prejudice.

Braugh also argues that the district court should have severed

his trial because Richards presented an a n tagonistic defense.

Braugh points to three instances of purported antagonism. First,

Richards’ attorney stressed in opening statements that Bert Hayes’s

money was deposited into an account that Braugh, not Richards,

controlled. Second, Richards’ attorney argued that the checks

Braugh wrote to Richards with the notation “Bert Hayes payment” on

the memorandum line were to pay Richards ’ commissions, and that

Braugh lied when he told Hayes that th e checks were for him.

Richards’ attorney argued that Braugh wrote “Bert Hayes payment” on

the cashed and canceled checks after the fact. Braugh’s attorney27

contended that Braugh sent the money to Richards in order to pay

Hayes. Third, during his cross-examination of Schwinger, Richards’

attorney asked questions about events that occurred after Richards’

involvement had ended, including actions Braugh took to make

Schwinger continue believing that the roll program was legitimate.

Braugh arg ues that these trial tactics were intended to blame

Braugh and portray Richards’ involvement as innocent.

“[S]everance is not automatically required merely because codefendants present mutually antagonistic defenses.” U nited States

v. Castillo , 77 F.3d 1480, 1491 (5th Cir. 1996); s ee also United

States v. Matthews

, 178 F.3d 295, 298 (5th Cir.), cert. denied

,

___

U.S.

___, 120 S. Ct. 359 (1999). The decision is committed to the

discretion of the trial court and will be reversed only if the

defendant shows “specific and compelling prejudice” the joint trial

caused his defense. This court has held that when defendants

present antagonistic defenses, “instructions to consider the

evidence as to each defendant separately and individually, and not

to consider comments made by counsel as s ubstantive evidence

sufficed ‘to cure any prejudice caused when co-defe ndants accuse

each other of the crime.’” United States v. Mann , 161 F.3d 840,

863 (5th Cir. 1998)(quoting United States v. Stouf fer , 986 F.2d

916, 924 (5th Cir. 1993)), cert. denied , ___ U.S. ___, 119 S. Ct.

1766 (1999)

. The district court gave both these instructions in

this case.28

In addition to the curative instructions, a close examination

of Richards’ and Braugh’s defenses shows that they fall short of

mutual antagonism. Defenses are antagonistic if they are “mutually

exclusive or irreconcilable, that is, if the core of one

defendant ’s defense is contradicted by that of a codefendant.”

United States v. Rojas-Martinez

, 968 F.2d 415, 419 (5th Cir. 1992);

see also United States v. Moser

, 123 F.3d 813, 829 (5th Cir. 1997).

Richards presented his belief that the roll program was legitimate

as the core of his defense. The core of Braugh’s defense was that

Al Sellars masterminded the “roll program” and Braugh believed it

to be legitimate. The two defenses are not mutually antagonistic;

the jury could have believed both. Specifically, the jury could

have found that Braugh wrote “Bert Hayes payment” on the canceled

checks after Richards cashed them , as Richards’ attorney argued,

and that Braugh believed the investment program was legitimate, as

Braugh’s attorney argued. The evidence as to Braugh’s continued

involvement with Schwinger’s investment after Richards’

participation ended similarly did not con flict with Braugh’s

defense that he believed the investment program to be legitimate.

Richards and Braugh did not pre sent mutually antagonistic

defenses, so as to require severance. The district court carefully

instructed the jury separately to consider the ev idence admitted

against each defendant. Braugh has not demonstrated the “specific29

and compelling prejudice” necessary for reversal based on the

district court’s denial of his motion to sever.

IV. THE CHALLENGES TO THE ADMISSION OF EVIDENCE

A. THE RULE 403 OBJECTION

Richards argues that the district court abused its discretion

in admitting Braugh’s testimony that he brought a dispute he had

with Richards to the a ttention of the federal and state

prosecutor’s offices in Fort Worth and Dallas, respectively.

Richards contends that the district court should have excluded the

testimony under Rule 403 of the Federal Rules of Evidence, on the

ground that “its probative value [was] substantially outweighed by

the danger of unfair prejudice.”

Braugh testified without objection that Richards asked him for

$30,000 in January 1992. Braugh sent Richards three $10,000 checks.

Braugh testified that Richards agreed not to cash those checks, but

merely to show them to anxious creditors to provide assurance.

Instead, Richards cashed the checks, against Braugh’s instructions.

Richards did object to Braugh’s testimony the following day,

when Braugh told the jury that he reported his dispute with

Richards over the three $10,000 checks to the local offices of the

district attorney and the United States Attorney. The reports did

not result in criminal charges against Richards. Braugh testified

that he knew that by making the complaint, he was bringing his5 In the letters, Braugh reported a dispute with Richards

and another man named Ron Cravens. According to Braugh, the

dispute arose after Richards endorsed the checks to Cravens so that

Cravens could cash the checks. However, the checks were postdated.

Cravens contacted Braugh and threatened to sue for the amount of

the checks. Braugh placed a stop payment order on the checks.

When Cravens attempted to cash the checks, the bank returned them

unpaid. Cravens continued to threaten Braugh with suit on the

ch ecks. Braugh ultimately wrote letters to law enforcement

agencies to report the dispute, claiming that Richards and Cravens

were “working together in an attempt to extort th[e] money from me

by threatening me with prosecution.”

30 relationship with R ichards to the attention of law enforcement

agencies.

The district court carefully limited Braugh’s testimony about

his dispute with Richards and carefully instructed the jury as to

how they could consider the limited testimony admitted. The court

did not permit Braugh to present the details of his disagreement

with Richards over the checks. Instead, the court limited Braugh’s

testimony to the fact that he had a dispute with Richards, which he

later reported. The court included Braugh’s letters to the

prosecutors detailing the dispute as part of the record, but did

not admit the letters at the trial. 5 The district court found that

the testimony had narrow, but significant, probative value. The

fact that Braugh reported the dispute to law enforcement tended to

support his contention that he did not believe that he and Richards

were parties to an unlawful conspiracy. The district court

reasoned that Braugh would be unlikely to take any action that31

could lead to law enforcement investigating his relationship with

Richards if he believed that their relationship was criminal.

The district court gave t he jury the following instructions

about Braugh’s limited testimony:

Let me explain to the jury what’s happening. I’m going

to let Mr. Braugh testify about this matter, this dispute

that he had with Mr. Richards. The nature of the dispute

is not really that relevant in this case, and you are not

going to be asked to decide whether Mr. Richards was

right in this dispute or Mr. Braugh was right in this

dispute, I’m letting the fact that Mr. Braugh brought the

dispute to the attention of law enforcement agencies be

admitted into evidence because you may decide that it’s

relevant to Mr. Braugh’s state of mind, in that, if Mr.

Braugh believed that his dealings with Mr. Richards that

we have been hearing in this case were illegal, he may

not have wanted law enforcement officials to learn of his

dealings with Mr. Richards. So that’s the only reason I

am letting this come into evidence. The exact dispute,

who’s righ t and wrong in the dispute, is not relevant.

Only the fact that Mr. Braugh’s state of mind was such

that he was willing to bring the nature of the dispute to

law enforcement officials in 1992.

Richards argues that Braugh’s testimony lacked probative

value. Because “the dispute was totally unrelated to the charged

offenses,” Braugh would not have been concerned that his complaint

would trigger an investigation into his relationship with Richards,

and the fact of the report did not tend to show that Braugh viewed

his rel ationship with Richards as lawful. Richards also argues

that the evidence of Braugh’s reports of his dispute with Richards

was cumulative of other evidence showing that Braugh and Richards

had a “falling out.” Richards asserts that the probative value was

minim al and the prejudicial effect significant, given the facial32

similarity between Braugh’s accusations and the conduct alleged in

the indictment.

This court reviews the district court’s ruling for an abuse of

discretion. See Old Chief v. United States , 519 U.S. 172, 174 n.

1 (1997); United States v. Ismoila

, 100 F.3d 380, 391 ( 5th Cir.

1996). “The exclusion of evidence under Rule 403 should occur only

sparingly.” U nited States v. Pace

, 10 F.3d 1106, 1115 (5th Cir.

1993). The “major function [of Rule 403] is limited to excluding

matter of scant or cumulative probative force, dragged in the by

the heels for the sake of i t s prejudicial effect.” I d. at

1116(quoting United States v, McRae

, 593 F.2d 700, 707 (5th Cir.

1979)).

Contrary to Richards’ argument, the evidence admitted did have

the probative value defined in the trial judge’s limiting

instructions. The district court did not admit Braugh’s testimony

for the purpose of establishing that his report about Richards to

law enforcement agencies was true or to show that he and Richards

had a dispute. The court instead admitted the fact of Braugh’s

reports of a dispute with Richards as evidence bearing only on

Braugh’s contention that he did not believe that he and Richards

were parties to a criminal conspiracy. As the government notes,

both Braugh’s and Richards’ attorneys discussed t he testimony in

their closing arguments, demonstrating its probative value.6 “Under the plain error standard, forfeited errors are

subject to review only where they are ‘obvious,’ ‘clear,’ or

‘rea dily apparent,’ and they affect the defendants substantial

rights.” U nited States v. Richardson

, 168 F.3d 836, 839 n. 9 (5th

Cir.)(quoting United Stat es v. Calverley , 37 F.3d 160, 162 (5th

Cir. 1994)(en banc), abrogated in part by Johnson v. United States

, 520 U.S. 461 (1997)), cert. denied , ___ U.S. ___, 119 S. Ct. 1589

(1999). “Even then, we will not exercise our discretion to correct

the forfeited errors u nless they ‘seriously affect the fairness,

integrity, or public reputation of the judicial proceeding.’”

Richardson

, 168 F.3d at 839 n. 9 (quoting C alverley

, 37 F.3d at

164). Braugh testified as follows about Richards’ cashing the

checks:

Q:

. . . [W] hat did Al Richards say he

needed money for?

A: That he had some expenses and some

obligations that were due and he needed

that money, or, he needed a check from –

a check or a series of checks from me to

hold as good faith against those debts.

Q:

. . . [W]hat was yo ur understanding Al

Richards was going to do with t he money

if you sent him the funds?

A: Well, I understood at the time that he

was going to hold these checks.

.... Q:

... [D]id you learn whether or not

ultimately or at some later date whether

or not th e se checks had in fact been

cashed?

A: I did learn lat er on they had been

cashed.

Even if we were to assume that this testimony was “clearly”

inadmissible under Rule 403, as Richards urges on appeal, Richards

has not shown plain error. He has not shown that the error

33 Nor was Braugh’s testim ony so prejudicial as to make its

admission, with the district court’s limiting instructions,

improper. When Braugh testified that Richards attempted to cash the

checks despite his agreement with Braugh not to do so, Richards did

not object. 6 Richards did not object until the following day, whenaffected his substantial rights

— that is, “affect[ed] the outcome

of the proceeding”

— much less that the error “seriously affect[ed]

the fairness, integrity, or pu blic reputation of [the] judicial

proceeding[].” Calverley , 37 F.3d at 164.

34 Braugh testified that he reported the disagreement over the checks

to law enforcement agencies. The district court’s detailed

limiting instructio n carefully defined the purpose for which the

jury could consider the testimony and mitigated the potential for

undue prejudice. S ee United States v. Bailey

, 111 F.3d 1229, 1234

(5th Cir. 1997).

In light of the court’s strict limit s on Braugh’s testimony

and instructi ons limiting the jury’s consideration of the

testimony, the district court did not err in admitting this

evidence.

B. THE RULE 404(B) AND HEARSAY CHALLENGES

In rebuttal, and over objections, the govern ment called a

w itness named Mark McMillan to testify about investments he m ade

through Braugh and Latrasse in 1987 and 1988. These objections are

reasserted on appeal.

McMillan testified that he met Braugh in late 1987. Braugh

was working from an office in the church to which McMillan

belonged, trying to help the financially troubled church raise

money. Braugh proposed an investment to McMillan to help solve the

church’s financial problems. Braugh explained that he “had some

kind of bank letter of credit, foreign bank letter of credit deal35

going where some bank was going to loan him $10 million

imminently.” Braugh told McMillan that $15,000 would make “the

deal” work. Braugh promised that if McMillan invested the

$15,000, Braugh would receive $10 million from the European bank;

would loan $800,000 to the church; would return $15,000 to McMillan

within a few days; and would pay McMillan an additional $15,000.

McMillan gave Braugh the $15,000. Neither McMillan nor the church

received any money from Braugh.

McMillan next saw Braugh several months later, at the offices

of Butler Industries. McMillan was there to see the company

president, a close personal friend. Braugh was using an office at

the company, working to raise money for the financially-troubled

business. Braugh proposed another investment opportunity to

McMillan. Braugh explained that he had succeeded in securing a $10

million loa n from a European bank. The money had been wired and

placed in a holding account, but Braugh needed $25,000 to release

the funds. Braugh promised that if McMillan invested the $25,000,

Braugh would pay him $50,000 before the close of the same business

day; would pay the $30,000 owed from the first investment; would

loan money to Butler Industries; and would loan the church the

money he had promised earlier.7 Roger Braugh testified that the Gold Clou d Development

Corporation referred to in connection with this transaction was not

the same Gold Cloud Development Corporation t hat was involved in

the roll program, of which he was the chairman.

36 Braugh told McMillan that the transactions would take place

through a company called Gold Cloud Development. 7 If the $10

million was not paid as expected, Gold Cloud Development would

invest McMillan’s money in a movie through a company called San

Francisco Productions. Braugh told McMillan that Kurt Latrasse was

in charge of both the loan from the European bank and the movie

deal and that Braugh was acting at Latrasse’s direction.

McMillan testified that, despite suspicions, he decided to

give Braugh the $25,000 . On April 14, 1988, McMillan had his

office manager draft a docu ment to record the promised

transactions. In this document, Braugh and Latrasse, referred to

as “Borrower,” promised to pay McMillan $50,000 from: (1) “proceeds

received on the Roger B raugh/Gold Cloud Development Project

(expected loan of $10,000,000.00)”; (2) “proceeds received on the

San Francisco Productions Project (expected loan of

$10,000,000.00)”; or (3) “other sources as deemed necessary by

Borrower.” McMillan’s staff also drafted a personal guarantee for

signature by Braugh and Latrasse individually. McMillan told

Braugh that he would pay the $25,000 only after Braugh and Latrasse

signed the documents.37

McMillan testified that he spoke by telephone to a man

identified as Kurt Latrasse after the documents had been faxed to

Latrasse:

A: . . . . [W]e got him on the telephone in

his motel room.

Q: Who is the “w e,” who got him on the

telephone?

A: Me and Roger Braugh and Robert Cohen, the

president of Butler Industries.

Q: And who is the “him” that you got on the

phone?

A: Kurt Latrasse.

Q: And what makes you think you had Kurt

Latrasse on the telephone?

A: He said he was Kurt Latrasse. They

dialed the hotel

-- I mean, I was told

that they were calling Kurt Latrasse.

The man got on the phone, said he was

Kurt Latrasse. He got the documents. He

said he read the documents. He said he

was sig ning them. He said he could not

get them notarize [sic] because his

secretary was gone to lunch or his notary

was gone to lunch, and he signed it,

supposedly, they faxed it back to me. I

looked at it, I verified the signature,

then I paid the money.

Later that day, Roger Braugh faxed McMilla n the “loan document,”

signed “Kurt Latrasse” and “Roger S. Braugh,” and the personal

guarantee, signed “Roger S. Braugh.” On the fax cover sheet,

Braugh wrote: “Kurt’s personal guarantee will be here tomo rrow

because the notary left before we sent the last document to him.”

McMillan did not see Braugh again after that day. He received

none of his money back and neither the church nor Butler Industries

received a loan. McMillan filed no complaint and made no attempt

to recover the money.38 1. Braugh’s Challenges to McMillan’s Testimony

Braugh argues that the admission of McMillan’s testimony

violated Rule 404(b) of the Federal Rules of Evidence because the

transactions McMillan described were remote in time from, and

dissimilar to, the transactions charged in the indictment. Braugh

also argues that, even if the evidence was relevant, its marginal

probative value was substantially outweighed by the highly

prejudicial impact.

In response, the government argues th at the McMillan

transactions had substantial similarities to the transactions

charged in the indictment, making the evidence highly probative of

Braugh’s intent. Braugh put his intent squarely in issue, making

McMillan’s testimony import ant rebuttal evidence. The district

court instructed the jury that they were to consider the testimony

only on the issue of intent.

The district court’s decision to admit Rule 404(b) evidence is

reviewed for abuse of discretion. S ee United States v. Chavez

, 119

F.3d 342, 346 (5th Cir. 1997). This review is “necessarily

heightened” in criminal cases. U nited States v. Gonzalez

, 76 F.3d

1339, 1347 (5th Cir. 1996)(quoting United States v. Anderson , 933

F.2d 1261, 1268 (5th Cir. 1991)). The probative value of the

evidence, the need for the evidence by the government on the issue

of intent, and the court’s limiting instructions are all considered8 Rule 404(b) of the Federal Rules of Evidence provides:

Evidence of other crimes, wrongs, or acts is not

admissible to prove the character of a person in order to

show action in conformity therewith. It may, however, be

admissible for other purposes, such as proof of motive,

opportunity, i ntent, preparation, plan, knowledge,

identity, or absence of mistake or accident.

39 in determining if the court properly admitted the testimony under

Rule 404(b). 8

A trial court must apply the test set out in United States v.

Beechum

, 582 F.2d 898, 911 (5th Cir. 1978)(en banc), in determining

whether t o admit extrinsic offense evidence under Rule 404(b).

Careful applicati on of the B eechum test protects defendants from

unfair prejudice in the admission of extrinsic act evidence. See

Anderson

, 933 F.2d at 1268. The first step of the B eechum test is

to determine that the extrinsic offense evidence is relevant to an

issue other than the defendant’s character. The second step is to

determine whether the evidence sati sfies Rule 403. S ee Beechum

,

582 F.2d at 911.

The relevance of extrinsic act evidence “is a function of its

similarity to the offense charged .” I d. When the evidence is

admitted to show the defendant’s intent to commit the offense

charged, “the relevancy of the extrinsic offense derives from the

defendant’s indulging himself in the same state of mind in the

perpetration of both the extrinsic and charged offenses.” I d.

“The reasoning is that because the defendant had unlawful intent in40

the extrinsic offense, it is less likely that he had lawful intent

in the present offense.” I d. An extrinsic offense is relevant to

the issue of intent only if “an offense was in fact committed and

the defendant in fact committed it.” I d. at 912. The proponent of

the evidence need not establish these facts by a preponderance of

the evidence; rather, “the evidence in the case must be sufficient

to permit a jury, acting reasonably, to find the preliminary facts

by a preponderance of the evidence.” Anderson , 933 F.2d at 1269.

“Once it is determined that the extrinsic offense requires the same

intent as the charged offense and that the jury could find that the

defendant committed the extrinsic offense, the evidence satisfies

the first step under rule 404(b).” Beechum , 582 F.2d at 913.

As to Braugh, McMillan’s testimony satisfies the first part of

the Beechum test. McMillan’s testimony, if believed, would permit

a reasonable jury to find by a preponderance of the evidence that

Braugh co mmitted fraud in both of the McMillan transactions,

involving the same intent as the offenses charged in the

indictment.

In perform ing the second part of the B eechum test,“the task

for the court . . . calls for a commonsense assessment of all the

circumstances surrounding the extrinsic offense.” Id. Several

factors affect the probative value of the evidence, including “the

extent to which the defendant’s unlawful intent is established by

other evidence, the overall similarity of the extrinsic and charged41

offenses, and the amount of time that separates the extrinsic and

charged offenses.” Chavez , 119 F.3d at 346-47.

McMillan’s testimony was highly probative as to Braugh’s

intent. “The mere entry of a not guilty plea in a conspiracy case

raises the issue of intent sufficient ly to justify the

admissibility of extrinsic offense evidence.” U nited States v.

Broussard , 80 F.3d 1025, 1039 (5th Cir. 1996). In this case, the

core of Braugh’s defense was that he lacked the intent to defraud.

Braugh testified, and his attorney argued, that Braugh believed the

“roll program” was a legitimate investment. The government had no

direct evidence of Braugh’s fraudulent intent.

Braugh’s arguments as t o the dissimilarity between the

McMillan transactions and those described in the indictment are

without merit. Braugh twice induced McMillan to give him money by

describing investments that would result in a European bank paying

$10 million to Braugh, yielding McMillan a substantial return in a

very short time with no risk of losing his money. The first of the

two transactions involved a letter of credit. The “roll program”

transactions involved promises that the investors’ payments would

enable Braugh and the other defendants to obtain a $10 million

letter of credit from a foreign bank, which would return the

investors’ money, plus interest and large profits, in a very short

time. Braugh told McMillan that Latrasse was in charge of the

inves tments proposed in the second transaction, just as he would42

later tell the “roll program” victims that Latrasse was the expert

in that inves tment plan. The three to five years between the

McMillan transactio ns and the later charged offenses does not so

diminish the probative value of the evidence as to make it

inadmissible. C f. United States v. Hernandez-Guevara

, 162 F.3d

863, 872–73 (5th Cir. 1998)(affirming district court’s admission of

an 18-year-old conviction under Rule 404(b) to show intent), cert.

denied , ___ U.S. ___, 119 S. Ct. 1375 (1999); Chavez , 119 F.3d at

346-47(affirming district court’s admission of a 15-year-old prior

conviction under Rule 404(b) to show intent).

The district court instructed the jury on the limited purpose

for which McMillan’s testimony could be considered:

You are going to hear evidence that you may conclude is

similar to the acts of Defendants Braugh and La trasse

that are charged in the indictment but that occurred on

different occasions than those alleged in the indictment.

You must not consider any of the evidence that you are

about to hear in deciding if Mr. Braugh or Mr. Latrasse

committed the acts charged in the indictment. However,

you may consider the evidence for other very limited

purposes. If you find beyond a reasonable doubt from the

evidence you have heard up to now that Mr. Braugh or Mr.

Latrasse committed the acts charged against them in the

indictment, then you may consider the evidence that you

are about to hear to determine whether Mr. Braugh or Mr.

L atrasse had the state of mind or intent necess ary to

commit the crimes charged against them in the indictment.

That is the only purpose for which you may consider the

evidence that you are about to hear.

The distr ict court repeated this admonition in his final

instructions to the jury. “[T]he danger of unfair prejudice was

minimized by the district court’s careful instructions to the9 Braugh concedes that he did not object to McMillan’s

testimony specifically on the ground that it was “guilt-byassociation” evidence. However, he argues that, based on the

record, his Ru le 404(b) objection suffices to preserve this

argument on appeal. Of course, if Braugh did not timely object to

McMillan’s testimony on this ground, the plain error standard would

apply. S ee Polasek

, 162 F.3d at 883-84. We conclude that

McMillan’s testimony was not inadmissible “guilt-by-association”

evidence even under the abuse of discretion standard.

43 jury.” G onzalez

, 76 F.3d at 1348. The high degree of probative

value of McMillan’s testimony, balanced against the danger of

unfair prejudice the testimony r aised, in light of the limiting

instructions, leads to the conclusion that the district court acted

well within its discretion in admitting the testimony over Braugh’s

Rule 404(b) objection.

Braugh’s argument th at McMillan’s testimony was improper

“guilt-by-associ ation” evidence is similarly without merit. 9 “It

is well establi shed . . . that the government may not attempt to

prove a defendant’s guilt by showing that [the defendant]

associates with ‘unsavory characters.’” U nited States v. Polasek

,

162 F.3d 878, 884 (5th Cir. 1998). McMillan’s testimony did not

suffer from this defect. McMillan testified about Braugh’s acts

and statements in inducing McMillan to make the two “investments.”

The testimony focused on Braugh’s own conduct. It did not merely

show that Braug h associated with Latrasse. S ee id. at

885(distinguishing between evidence showing extrinsic wrongdoing on

defendant ’s part, which might be admissible to show knowledge or

intent under Rule 404(b), a nd evidence showing the defendant44

associated with people who we re later convicted of an offense

similar to the charged offense, which would be inadmissible guiltby-association evidence). The district court did not err on this

basis in admitting McMillan’s testimony.

2. Latrasse’s Challenges to McMillan’s Testimony

Latrasse challenges McMillan’s testimony as inadmissible, both

because it failed the Rule 404(b) criteria and because parts of

McMillan’s testimony were hearsay as to Latrasse.

Latrasse challenge s the sufficiency of the evidence showing

that “an offense was in fact committed and the defendant in fact

committed it.” Beechum , 582 F.2d at 913. Specifically, Latrasse

argues that M cMillan’s testimony was insufficient to show that

Latrasse was involved with Braugh in the second McMillan

transaction. To determine whether there was sufficient evidence to

satisfy the first part of the Beechum test, Latrasse’s hearsay

objection must first be addressed. The statements Latrasse objects

to would, if admissib le, form part of the evidence showing

Latrasse’s involvement.

Latrasse objected under Rule 802 to McMillan’s testimony that

Braugh described Latrasse as the person in charge of the

investment, w ho was giving Braugh direction. The district court

admitted McMillan’s testimony against Latrasse under Rule

801(d)(2)(D), which defines statements of an agent or employee of10 Braugh’s out-of-court statements about Latrasse were only

arguably offered for the truth of the matters asserted in them.

However, because the government did not make this argument at trial

or on appeal, we do not rest our resolution o f the issue on this

ground.

45 the defen dant as non-hearsay. Latrasse challenges the district

court’s ruling. 10

An out-of-court statement of a declaran t is not hearsay if

“[t]he statement is offered a gainst a party and is . . . a

statement by the party’s agent or employee, made during the

e xistence of the relationship.” F E D

. R. E VID

. 801(d)(2)(D). The

proponent of th e evidence must prove the preliminary facts that

bring the statement within Rule 801(d)(2)(D), by a preponderance of

the evidence. See United States v. Bourjaily , 483 U.S. 171, 174

(1987). The statement itself may be considered in making this

determination. S ee id. However, “[t]he contents of the statement

. . . are not alone sufficient to establi sh . . . the agency or

employment relationship and scope thereof under subdivision

(D) . . . .” F ED

. R. E VID . 801(d)(2).

McMillan testified that Braugh told him “over and over and

over that Kurt Latrasse was the man in charge” of the Gold Cloud

Development and San Francisco P roductions investments. McMillan

also testified that Braugh said “he was basically acting as an

agent for Kurt Latrasse.” These statements provided the only

evidence of Latrasse’s role as principal and Braugh’s as agent in

the sec ond transaction Braugh proposed to McMillan. Neither the46

l oan document bearing Latrasse’s signature nor the circumstance s

under which Latrasse signed it provide proof that Braugh was acting

as Latrasse’s agent. In light of the lack of evidence to

corroborate Braugh’s out-of-court statements that he was acting as

an agent for Latrasse, Rule 801(d)(2)(D) cannot serve as the basis

for the admission of these statements against Latrasse.

However, even if McMillan’s testimony should not have been

admitted against Latrasse under Rule 801(d)(2)(D), other grounds

for admission remove any harmful error. S ee United States v.

Lopez , 979 F.2d 1024, 1033 (5th Cir. 1992). The government urges

that the testimony was admissible u nder Rule 801(d)(2)(E), which

takes an out-of-court statement outside t he hearsay rule if the

statement “is offered against a party and is . . . a statement by

a coconspirator of a party during the course and in furtherance of

the conspiracy.” F E D

. R. E VID

. 801(d)(2)(E). Although the

indictment did not allege an earlier conspiracy in connection with

the McMillan transactions, “the conspiracy that forms the basis for

admitting coconspirators’ statements need not b e the same

conspiracy for which the defendant is indicted.” U nited States v.

Arce , 997 F.2d 1123, 1128 (5th Cir. 1993).

Before admitting evidence under Rule 801(d)(2)(E), the

proponent must “establish by a preponderance of the evidence that

the declarant and the defendant were involved in a conspiracy and

that the statements were made during and in furtherance of the47

conspiracy.” United States v. Broussard , 80 F.3d 1025, 1038 (5th

Cir. 1996); see also Bourjaily

, 483 U.S. at 175-76. Under Rule

104(a) of the Federal Rules of Evidence, a court “is not bound by

the rules of evidence except those with respect to privileges” in

determining the existence of preliminary facts to support the

admission of evidence. See also Bourjaily , 483 U.S. at 178. The

out-of-court statement itself may be considered in determining the

existence of the conspiracy and other preliminary facts. See id.

at 177–81; F E D

. R. E VID

. 801(d)(2). However, the out-of-court

statement alone is not sufficient to support its own admission.

See F ED

. R. E VID . 801(d)(2).

Braugh made the statements as part of his efforts to induce

McMillan to give him money a second time. There is sufficient

evidence to show that Braugh and Latrasse conspired in this effort

to defraud McMillan. The trial record included the following

evidence that Braugh and Latrasse were parties to such a

conspiracy:

• McMillan testified that Braugh told him “over and

over again that Latrasse was in charge” of the Gold

Cloud Development transaction and the San Francisco

Production movie deal.

• McMillan testified that Braugh said that “he was

basically acting as an agent for Kurt Latrasse.”

C After McMillan refused to give Braugh any money

unless Latrasse signed a loan document and personal

guarantee drafted by McMillan’s staff, those

documents were faxed to Latrasse.48

• Braugh and McMillan telephoned the hotel where

Latrasse was staying. They were connected to a man

who identified himself as Kurt Latrasse. That man

stated that he had received the document s that

McMillan’s staff drafted and was signing them.

C Braugh faxed McMillan the loan document bearing a

signature purporting to be that of Kurt Latrasse.

• The signature of Kurt Latrasse was very similar to

Latrasse’s signature on other documents previously

admitted as evidence in the trial.

This evi dence shows the predicate facts making Braugh’s

statements about Latrasse admissible under Rule 801(d)(2)(e). The

record discloses sufficient evidence to show by a preponderance of

the evidence that Latr asse and Braugh conspired to defraud

McMillan. Braugh’s out-of-court statements in furtherance of the

conspiracy were admissible under Rule 801(d)(2)(E) of the Federal

Rules of Evidence.

In light of this determination, we return to the first part of

the Beechum test to consider whether McMillan’s testimony was

admissible against Latrasse under Rule 404(b). Under the

circumstances presented in this case, there was sufficient evidence

to permit a rational jury to find that Latrasse committed an

offense involving fraud for the purpose of the Beechumanalysis.

McMillan’s testimony also satisfies Rule 403, the second part

of the Beechum test. Latrasse placed his intent at issue by

testifying that he believed the “roll program” was legitimate. The

evidence of the second McMillan transaction was probative rebuttal49

evidence, particularly given the similarity between Latrasse’s role

in the extrinsic offense and his role in the charged offenses.

Braugh described Latrasse to McMillan as the person in charge

of the proposed investments; later, Latrasse was presented to the

roll program investors as the expert in such transactions. In both

schemes, when an investor expressed concern or doubt, Latrasse was

called in to provide reassurance. McMillan’s testimony was

probative on the issue of Latrasse’s intent. The district court

gave a careful limiting instruction to the jury, minimizing the

prejudicial impact of McMillan’s testimony. S ee Gonzalez

, 76 F. 3d

at 1348. Balancing the probative value against the danger of

unfair prejudice in light of the limiting instruction, the district

court did not abuse its discretion in admitting McMilla n’s

testimony against Latrasse over his Rule 404(b) objection.

Moreover, even if McMillan’s testimony was inadmissible, the

error was, on this record, harmless. S ee United States v. Cornett

,

195 F.3d 776, 784 (5th Cir. 1999). The erroneous admission of

McMillan’s testimony would require reversal of Latrasse’s

conviction only if the evidence had a “substantial impact” on the

verdict. S ee United States v. Dickey

, 102 F. 3d 157, 163 (5th Cir.

1996); United States v. El-Zoubi

, 993 F.2d 442, 446 (5th Cir.

1993). The trial record discloses ample evidence of Latrasse’s

guilt. The evidence shows that Latrasse repeatedly provided Hayes,

Schwinger, and Blackwelder assurances a s to the legitimacy and50

profitability of the roll program long after he knew that the money

had not been invested as promised and was not producing the

promised returns. The record shows that Latrasse gave the

investors detailed and varying explanations, promises, and excuses

long after the investors’ money had already been disbursed to the

defendants, including Latrass e. In the context of the ample

evidence of Latrasse’s criminal intent in the record, McMillan’s

testimony did not have a “substantial impact” on the jury verdict

so as to require reversal.

V. THE CHALLENGE TO THE JURY INSTRUCTIONS

All three defendants argue that the district court er red in

rejecting the defendants’ proposed jury instruction as to the

relationship between breach of fiduciary duty and criminal

liability.

John Shockey testified as the government’s expert witness on

international banking practices and financial fraud. During crossexamination, Braugh’s attorney asked Shockey whether “people in the

phony money world” ever used “people in the legitimate money world”

to promote fraudulent investment schemes. In response, Shockey

testified:

Well, while that could happen, we would hope that proper

due diligence would be done. And if the parties involved

hold themselves out as knowledgeable and experienced

financial advisors, they have a fiduciary responsibility

to their clients to conduct due diligence to protect the

interests of their clients.51

Latrasse’s attorney later asked Shockey several questions to

clarify that “due diligence” and “fiducia ry responsibility” were

terms from civil, not criminal, law.

Latrasse timely requested the trial court to include the

following language in the court’s jury instructions: “N either a

failure to exercise due diligence nor a breach of fiduciary duty in

and of themselves rise to the level of specific intent to defraud.

Before you may fi nd a Defendant guilty of fraud, you must find

beyond a reasonable dou bt that the Defendant had the specific

intent to defraud.” The other defendants joined in the request.

The district court did not give the instruction.

A district court’s refu sal to provide a requested jury

instruction is reviewed for abuse of discretion. U nited States v.

Jobe

, 101 F.3d 1046, 1059 (5th Cir. 1996). Such a refusal requires

reversal only if the requested instruction (1) was a substantially

correct statement of the law, (2) was not substantially covered in

the charge as a whole, and (3) concerned an important point in the

t rial such that the failure to instruct the jury on the issue

seriously impaired the defendant’s ability to present a given

defense. S ee United States v. Webster

, 162 F.3d 308, 322 (5th Cir.

1998), cert. denied

,

___ U.S.

___, 120 S. Ct. 83 (1999); Jobe

, 101

F.3d at 1059.

The district court instructed the jury, in relevant part, as

follows:52

The word “knowingly,” as that term has been used from

time to time in these instructio ns, means that the act

was done voluntarily and intent ionally, not because of

mistake or accident.

Good faith is a complete defense to the charges in the

indictment, since good faith on the part of the defendant

is inconsistent with intent to defraud, which is an

essential part of the charges. The burden of proof is

not on a defendant to prove his good faith, since a

defendant has no burden to prove anything. The

government must establish beyond a reasonable doubt that

the defendants acted with specific intent to defraud as

charged in the indictment.

One who expresses an opinion honestly held by him, or a

belief honestly entertained by him, is not char geable

with fraudulent intent e ven though his opinion is

erroneous or his belief is mistaken; and, similarly,

evidence which establishes o nly that a person made a

m istake in judgment or an error in management, or was

careless, does not establish fraudulent intent.

On the other hand, an honest belief on the part of the

defendant that a particular business venture was sound

and would ultimately succeed would not, in and of itself,

constitute “good faith” as used in these instructions if,

in car rying out that venture, the defendants knowingly

made false or fraudulent representations to other with

the intent to deceive them.

The district court also instructed the jury on the level of

intent required for conviction on each of the offenses charged in

the indictment. As to the conspiracy charge, the district court

instructed the jury as follows:

For you to find a defendant guilty of conspiracy,

you must be convinced that th e government has

proved . . . beyond a reasonable doubt . . . [t]hat the

defendant knew the unlawful purpose of the agreement and

joined i n it willfully, that is, with the intent to

further the unlawful purpose . . . .

One may become a member of a conspiracy without

k nowing all the details of the unlawful scheme or the

identities of all the other alleged conspirators. If a11 Under Pinkerton v. United States

, 328 U.S. 640, 666

(1946), “[a] party to a continuing conspiracy m ay be responsible

for a substantive offense committed by a coconspirator pursuant to

and in furtherance of the conspiracy, even if that party does not

participate in the substantive offense or have any knowledge of

it.” United States v. Castillo , 179 F.3d 321, 324 n. 4 (5th Cir.

1999)(quoting United States v. Elwood

, 9 93 F.2d 1146, 1151 (5th

Cir. 1993)) (alterations in original), cert. granted

,

___ U.S.

___, 2000 WL 21143 (2000).

53 defendant understands the unlawful nature of the plan or

scheme and knowingly and intentionally joins in that plan

or scheme on one occasion, that is sufficient to convict

him of conspiracy . . . .

The district court also instructed the jury on the P inkerton

doctrine of accomplice liability. 11

As to the interstate transportation of stolen property charge,

the district court instructed the jury that “to find the defendant

guilty of this crime, you must be convinced that the government has

proved

. . . beyond a reasonable doubt [that] the defendant devised

a scheme to defraud one or more persons of at least $5,000.” The

district court instructed the jury on the elements of mail fraud

and wire fraud, in relevant part, as follows:

For you to find the defendant guilty of this crime,

you must be convinced that the government has proved each

of the following beyond a reasonable doubt:

First: That the defendant knowingly created a scheme

to defraud, that is a scheme to obtain money, funds, or

credits from anothe r by means of false pretenses,

representations and promises substantially as alleged in

this Indictment;

Second: That the defendant acted with the specific

intent to commit fraud . . . .

The district court’s instructions to the jury, considered as a

whole, substantially covered the defendants’ requested instruction.54

Defendants fully presented their theory of defense, their belief

that the roll program was a legitimate investment. In his closing

argument, Latrasse’s attorney ar gued that a breach of fiduciary

duty does not necessarily giv e rise to criminal liability.

“[C]ounsel was not circumscribed in his argument to the jury” on

the theory of defense. U nited States v. Storm

, 36 F.3d 1289, 1295

(5th Cir. 1994). The district court’s charge adequately instructed

the jury that they could not convict any defendant unless the

government prov ed, beyond a reasonable doubt, that the defendant

had the specific intent to defraud. S ee United States v. Giraldi

,

86 F.3d. 1368, 1376 (5th Cir. 1996) (affirming district court’s

denial of a requested instruction on good faith because the charge

detailed specific intent and defined “willfully” and “knowingly”).

The defendants were not entitled to more specific instructions on

the distinctions betwee n the civil terms “due diligence” and

“fiduciary responsibility” on the one hand, and criminal liability

on the other.

The district court’s refusal to give the defendants’ requested

instruction was not error.

VI. THE CHALLENGES TO THE SUFFICIENCY OF THE EVIDENCE

All defendants challe n ge the sufficiency of the evidence

supporting some or all of their convictions. In assessing these

challenges, “[t]his court must view the evidence in the light most

favorable to the jury verdict and affirm if a rational trier of55

fact could find that the government proved all essential elements

beyond a reasonable doubt.” G iraldi

, 86 F.3d 1368, 1372 (5th Cir.

1996). We consider “the countervailing evidence as well as the

evidence that supports the verdict.” United States v. Brown , 186

F.3d 661, 664 (5th Cir. 1999)(quoting Giraldi , 86 F.3d at 1272).

“It is not necessary that the evidence exclude every

reasonable hypothesis of innocence or be wholly inconsistent with

every conclusion except that of guilt provided a reasonable trier

of fact could find that the evidence establishes guilt beyond a

reasonable doubt.” United States v. Bell , 678 F.2d 547, 549 (5th

Cir. Unit B 1982); see United State s v. Soape , 169 F.3d 257, 264

(5th Cir.), cert. denied

,

___ U.S.

___, 1 19 S. Ct. 2353 (1999).

The jury is free to choose among reasonable constructions of the

e vidence. S ee United States v. Ortega Reyna

, 148 F.3d 540, 543

(5th Cir. 1998). If, however, “the evidence, viewed in the light

most favorable to the government, gives equal or nearly equal

circumstantial support to a theory of guilt and a theory of

innocence, the conviction should be reversed. United States v.

Pennington

, 20 F.3d 593, 597 (5th Cir. 1994); see Ortega Reyna

, 148

F.3d at 543. “When the evidence is essentially in balance, a

reasonable jury must necessarily entertain a reaso nable doubt.”

Ortega Reyna , 148 F.3d at 543.12 Section 2314 provides in relevant part:

Whoever, having devised or intending to devise any scheme

or ar tifice to defraud, or for obtaining money or

property by means of false or fraudulent p r etenses,

representations, or promises,

. . . induces any person

. . . to travel in, or be transported in interstate . . .

commerce in the execution or concealment of a scheme or

artifice to defraud that person

. . . of money or

property of $ 5,000 or more

. . . [s]hall be fined under

this title or imprisoned not more than ten years, or

both.

56 A. Richards

Richards argues that the evidence was insufficient to support

his conviction fo r inducing a person to travel in interstate

commerce in furtherance of a scheme to defraud and his conviction

for wire fraud. He does not challenge the sufficiency of the

evidence supporting his conspiracy conviction.

1. Interstate Transportation

18 U.S.C. § 2314 “requires proof of two elements to support a

conviction: (1) that the de fendant devised a scheme intending to

defraud vict im of money or property of a minimum value of $

5,000,and (2) that as a result of this scheme, a victim was induced

to travel in interstate commerce.” U nited States v. Myerson

, 18

F.3d 153, 164 (2d Cir. 1994); see also United States v. Biggs

, 761

F.2d 184, 187 (4th Cir. 1985). 12

Richards does not challenge the proof that he i nduced Bert

H ayes to travel from Arkansas to Texas to meet with Richards and

deliver a $250,000 check. Richards’ argument is narrow. He57

asserts that the evidence was insufficient to permit a reasonable

jury to find that he induced Hayes to cro ss state lines with the

specific intent to defraud Hayes. S ee United States v. Snelling

,

862 F.2d 150 (8th Cir. 1988) (holding that it is an essential

element of the interstate transportation offense under section 2314

that the defendant had the intent to defraud at the time the victim

crossed state lines as a result of the defendant’s inducement).

The record, viewed in the light most favorable to the verdict,

contains evidence sufficient to suppor t Richards’ conviction on

count 2. Richards promoted the roll program to Hayes, promising

that the money invested would be safe and would generate

substantial returns. The roll program described to Hayes did not

exist. John Shockey, the government’s expert on international

banking practices and financial fraud, testified that no such

investment existed in the legitimate financial world.

A reasonable jury could conclude that Richards knew the roll

program was not legitimate when he induced Hayes to travel to Texas

with his $250,000 check. Richards pitched an investment program

that did not exist in the legitimate financial world. He continued

his participation in the sche me, soliciting additional investors

and later lulling them into continuing to believe that the program

existed and was working long after he knew that a t least some of

the money had gone to the p romoters rather than to the investors

and that they investors had not received any of the money promised58

them. The evidence that Richards continued to solicit and reassure

investors after he knew that the program had failed to perform as

h e had promised supports the inference that Richards knew the

program was a fraud from the outset, when he induced Hayes to

invest in the program and to cross state lines to deliver his

check.

2. Wire fraud

“In order to establish wire fraud [under 18 U.S.C. § 1343],

the Government must prove that a defendant knowingly participated

in a scheme to defraud, that interstate wire communications were

used to further the scheme, and that the defendants intended that

some harm result from the fraud.” U nited State s v. Powers , 168

F.3d 741, 746 (5th Cir.), c ert. denied

,

___ U.S.

___, 120 S. Ct.

360 (1999); see also United States v. St. Gelais , 952 F.2d 90, 95

(5th Cir. 1992). “An intent to defraud for the purpose of personal

gain satisfies the ‘harm’ requirement of the wire fraud statute.”

Powers

, 168 F.3d at 746; St. Gelais

, 952 F.2d at 95. A use of the

interstate wire facilities is in furtherance of a scheme to defraud

if it is “incident to an essential part of the scheme.” S chmuck v.

United States

, 489 U.S. 705, 710–11 (1989) (citations omitted); see

also Powers , 168 F.3d 741, 747 (5th Cir. 1999). A defendant need

not personally have made the communication on which the wire fraud

count is based, nor have directed that it be made. “The test to

determine whether a defendant caused [interstate wire facilities]13 Because the language of the mail fraud and wire fraud

statutes are so similar, cases construing one are applicable to the

other. S ee United States v. Herron

, 825 F.2d 50, 54 n. 5 (5th Cir.

1987); United States v. Bentz , 21 F. 3d 37, 40 (3d Cir. 1994).

59 to be used is whether the use was reasonably foreseeable.” U nited

States v. Massey , 827 F.2d 995, 1002 (5th Cir. 1987)(interpreting

the mail fraud statute). 13 For a defendant to be convicted of wire

f raud, it is sufficient that the defendant could reasonably h ave

foreseen the use of the wires; the inte rstate nature of the wire

communication need not have been reasonably foreseeable. S ee

United States v. Lindemann

, 85 F.3d 1232, 1241 (7th Cir. 1996);

United States v. Blackmon

, 839 F.2d 900 (2d Cir. 1988); cf. United

States v. Kelly

, 569 F.2d 928, 934 (5th Cir. 1978)(holding that the

interstate transportation offense, 18 U.S.C. § 2314, incl uded no

level of mens rea as to the interstate nexus because the interstate

nexus requirement was merely “the linchpin for federal

jurisdiction”); United Stat es v. Darby , 37 F.3d 1059, 1067 (4th

Cir. 1994)(holding the same under 18 U.S.C. § 875, which prohibits

the transmission of a threatening communication in inte r state

commerce).

Richards asserts that the use of the wires charged in count 3

of the indictment was not reasonably foreseeable. This count

charges the September 17, 1991 wire transfer of $7,500 from Texas

to Kurt Latrasse in California. The record evidence supports the

conclusion that the wire transfer to Latrasse was a distribution of60

proceeds from the roll program scheme. Richards reasonably could

have foreseen that a distribution of the investors’ funds to the

defendant promoters might be made by use of wire transfers. The

evidence was sufficient to support Richards’ conviction on count 3.

B. Braugh

Braugh challenges the sufficiency of the evidence supporting

his conspiracy, inter state transportation, wire fraud, and mail

fraud convictions. We uphold the convictions on all six counts.

1. Conspiracy

Braugh was convicted of conspiracy to c ommit mail and wire

fraud under 18 U.S.C. § 371. “To establish a violation of [section

371], the government must prove beyond a reasonable doubt (1) that

two or more people agreed to pursue an unlawful objective, (2) that

the defendant voluntarily agreed to join in the conspiracy, and (3)

that one or more members of the conspiracy committed an overt act

to further the objectives of the conspiracy.” U nited States v.

Soape

, 169 F.3d 257, 264 (5th Cir.), cert. denied , ___ U.S. ___,

119 S. Ct. 2353 (1999).

“To be guilty of conspiracy to commit mail [and wire] fraud,

[the defendant] must have had the requisite intent to commit mail

[and wire] fraud.” United States v. Sneed , 63 F.3d 381, 385 (5th

Cir. 1995). Neither “[m]ail fraud [nor wire fraud], however, has

[a] specific intent requirement regarding use of the mails [or wire

facilities].” I d. (quoting United States v. Massey

, 827 F.2d 995,61

1002 (5th Cir. 1987)). “The test to determine whether a defendant

caused the mails [or interstate wire facilities] to be used is

whether the use was reasonably foreseeable. The defendant need not

intend to cause the mails [or wire facilities] to be used.” S need

,

63 F.3d at 385 (quoting M assey

, 827 F.2d at 1002). “The

government’s burden, therefore, is to demonstrate beyond a

reasonable doubt that [the alleged conspirators] agreed to engage

in a scheme to defraud in which they contemplated that the [wire

facilities] would likely be used.” S need

, 63 F.3d at 385 (quoting

Massey , 827 F.2d at 1002).

Braugh contends that the evidence was not sufficient to permit

a reasonable jury to conclude that he was a party to a conspiracy

to commit wire fraud and mail fraud. At most, he claims, the

evidence sh ows that the defendants participated in a failed

business together, not that they agreed to commit a crime. Braugh

points out that he was not present when either Schwinger or Hayes

signed contracts to invest in the roll program.

The lack of direct evidence of agreement to commit a crime

does not require reversal. Each element of a section 371

conspiracy may be inferred from circumstantial evidence. S ee

United States v. Faulkner

, 17 F.3d 745, 768 (5th Cir. 1994).

Concert of action can indicate an agreement. S ee United States v.

Lopez

, 979 F.2d 1024, 1029 (5th Cir. 1992). The record contains

ample circumstantial evidence to support Braugh’s conspiracy62

conviction. Braugh and others induced Hayes, Schwinger, and

Blackwelder to part with their money and in lulling them into

continued belief that their money was safely invested. The bank

records showed that nearly all Hayes’s money was moved from

Braugh’s Shearson Lehman account within one month of deposit and

transferred to accounts in the defendants’ names at different

banks, including Braugh’s accounts. Most of the money Schwinger

invested was also transferred from a Shearson Lehman account to

accounts held by Richards, Braugh, and Latrasse, within a short

time.

The evidence showed the defendants’ coordinated a cts to

implement their fraudulent scheme, including the use of the mails

and wire facilities to distribute the proceeds of the fraud and to

lull the investors as they grew a nxious about their money. In

light of the other evidence in the record, the jury was free to

disbelieve Braugh’s self-serving testimony that he thought the

“roll program” was a legitimate investment. See United States v.

Brown

, 18 6 F.3d 661, 667 (5th Cir. 1999); U nited States v. Ruiz

,

860 F.2d 615, 619 (5th Cir. 1988). The evidence was sufficient to

permit a reasonable jury to find that Braugh conspired to commit

wire and mail fraud.

2. Interstate Transportation

Braugh argues that there is no evidence that he, rather than

Richards, induced Hayes to travel from Arkansas to Texas with the63

$250,000 check. The interstate transportation element “is merely

the linchpin for federal jurisdiction and bears no relationship, in

terms of culpability, to the underlying criminal acts which are the

objects of [section] 2314.” U nited States v. Kelly

, 569 F.2d 928,

934 (5th Cir. 1978) (quoting United States v. Ludwig

, 523 F.2d 705,

707 (8th Cir. 197 5)). The government need not prove that Braugh

knew that Hayes would travel in interstate commerce. S ee Kelly

,

569 F.2d at 934. Indeed, the government need not show that Braugh

directly caused Hayes to travel across state lines. S ee id. at

934–35. It is enough if Braugh “was a motivating force in the

transportation.” I d. at 935 (quoting Thogmartin v. United States

,

313 F.2d 589 (8th Cir. 1963)).

In Kelly , this court upheld a section 2314 interstate

transportation conviction over a suff iciency of the evidence

challenge. The defendant had devised a scheme to sell shares in a

nonexistent mutual fund. He sold shares in the fund to an

individual, who in turn transferred them to a third party. As part

of the transaction, the immediate and secondary purchasers met in

the Bahamas. This travel provided the interstate transportation

element of the original seller’s section 2314 conviction. The

court held that the original seller was a “motivating force” in the

ultimate buyer’s interstate travel, despite the f act that it was

the original buyer who induced the ultimate buyer to make the trip.64

In this case, although Richards persuaded Hayes to cross state

lines to deliver his roll program check, Braugh’s involvement in

the roll program made him a “motivating force” in Hayes’s travel.

The evidence sufficed to permit a reasonable jury to find that

Braugh violated section 2314.

3. Wire Fraud

Braugh was convicted of three counts of wire fraud under 18

U.S.C. § 1343. His limited claim on appeal is that because there

was insufficient evidence to show that he knowingly participated in

a scheme to defraud, there was also ins ufficient evidence to

support his wire fraud convictions. The same record evidence that

led to the rejection of Braugh’s sufficiency of the evidence

challenge to his conspiracy conviction also leads this court to

reject Braugh’s challenge to the wire fraud convictions.

4. Mail Fraud

Count 6 of the indictment charged Braugh with mail fraud under

18 U.S.C. § 1341 , based on Braugh’s November 22, 1993 letter to

Blackwelder, promising to send a cashier’s check to repay the

$5,000 “loan.” Braugh argues that there was insufficient evidence

to show that he participated in a scheme to defraud. The argument

is without merit.65

C. Latrasse

Latrasse challenges his conviction on all counts on the basis

of insufficiency of the evidence. Latrasse argues that because he

did not talk to any investors until after they h ad made their

investments, he did not induce anyone to part with their money.

Latrasse also asserts that he believed the roll program to be

legitimate.

1. Conspiracy

The record presented sufficient evidence to permit a rational

jury to find Latrasse guilty of conspiracy to commit wire and mail

fraud. The fact that Latrasse did not speak to the investors until

after they had parted with their funds does not preclude his

membership in the conspiracy. Ample evidence showed that Latrasse

worked to induce the participants to continue believing that the

roll program existed and that their money was safe. Latrasse

lulled the investors when they protested the lack of the promised

payments. Latrasse’s lulling efforts furthered the fraudulent

scheme. Cf. United States v. Allen , 76 F.3d 1348, 1363 (5th Cir.

1996)(holding that actions designed to avoid detection after the

defendants had control over the money produced by the fraud were in

furtherance of the fraud under the mail fraud statute); cf. also

United States v. Perry , 152 F.3d 900, 904 (8th Cir. 1998)(holding

that mailings designed to lull the vict ims into a false sense of

security and hide a fraudulent scheme are considered an overt act66

in furtherance of a conspiracy to commit mail fraud and wire

fraud), cert. denied , ___ U.S. ___, 119 S. Ct. 1088 (1999).

The evidence was also suf ficient for the jury to disbelieve

Latrasse’s self-serving testimony and conclude that Latrasse knew

the investment program was not legitimate. Latrasse knew the

investors were not receiving the payments as promised when he

repeatedly assured them that their money was safely investe d and

earning returns. He knew that money received from two investors

had been quickly transf erred from the initial deposits in the

Shearson Lehman investment accounts to the defendants, in cluding

Latrasse. There was ample circumstantial evidence showing that

Latrasse knew the roll program was fraudulent when he assured the

investors of its legitimacy. There was also clear evidence showing

that the use of the mails and wire facilities in furtherance of the

fraud was reaso nably foreseeable. Latrasse’s challenge to his

conviction on count 1 fails.

2. Interstate transportation

A party to a conspiracy may be held criminally responsible for

a substantive offense committed by a coconspirator in furtherance

of the conspiracy if the offense was reasonably foreseeable and was

committed dur ing that party’s membership in the conspiracy. S ee

United States v. Castillo

, 179 F.3d 321 , 324 n. 4 (5th Cir.

1999)(describing the Pinkerton doctrine), cert. granted , ___ U.S.

___, 2000 WL 21143 (2000); U nited States v. Dean

, 59 F.3d 1 479,67

1490 n. 20 (5th Cir. 1995)(holding that the offense must have been

reasonably foreseeable for the defend ant to face accomplice

liability under the Pinkerton doctrine); U nited States v. Basey

,

816 F.2d 980, 998–99 (5th Cir. 1987). We have already found the

evidence sufficient to show that Latrasse conspired to commit mail

and wire fraud and that Richards and Braugh induced Hayes to travel

in interstate commerce with the intent to defraud.

The question as to Latrasse’s conviction on count 2 is the

sufficiency of the evidence to show that Latrasse was a member of

the conspiracy when Richards induced Hayes to cross state lines on

September 5, 1991 to participate in the roll program. Latrasse

points out that he did not begin communicating with the roll

program investors until early 1992. However, the record also shows

that Latrasse received a $7,500 wire transfer from Braugh’s Bank of

Corpus Christi account on September 11, 1991 and a $5,000 transfer

on September 17, 1991. Brewer testified that Latrasse received

money from Hayes’s deposit, only days after Hayes wrote his check.

A reasonable jury could conclude that Latrasse was a member of the

conspiracy when Hayes cross ed state lines to deliver the check.

There is no basis to reverse Latrasse’s conviction on count 2.

3. Wire fraud

Latrasse challenges his convi ctions on the three counts of

wire fraud. The first of these counts involved the $7,500

September 11, 1991 wire transfer from Braugh’s Bank of Corpus68

Christi account in Texas to Latrasse in California. The evidence

was sufficient to permit a rational jury to conclude that this

transfer was a distribution of proceeds from the fraudulent scheme,

in furtheranc e of that scheme and reasonably foreseeable to

Latrasse.

The second count, Count 4, involved a fax from Latrasse in

California to Schwinger in Texas on June 19, 1992. In the fax,

Latrasse promised a distribution of funds to Schwinger and her

p artners on or before June 30, 1992. The evidence was clearly

sufficient for a reasonable jury to find that Latrasse sent this

fax to further the fraudulent scheme by lulling Schwinger into

conti nuing to believe that her money was safely invested, as

promised. S ee United States v. Allen

, 76 F.3d 1348, 1363 (5th Cir.

1996)(holding that “actions taken to avoid detection, or to lull

the fraud victim into complacency” are in furtherance of the fraud

for the purpose of the wire fraud statute); see also United States

v. Maze

, 414 U.S. 395, 402–03 (1974). The evidence was sufficient

to support Latrasse’s conviction on count 4.

The third wire fraud offense, alleged in count 5 of the

superseding i ndictment, involved a February 2, 1994 fax that

Latrasse sent from California to Blackwelder in Texas. In the fax,

Latrasse promised to send Blackwe lder a check returning his

investment. Again, the evidence was sufficient to support a

finding that Latr asse sent this fax to lull Blackwelder into69

continuin g to believe the investment was legitimate. There was

sufficient evidence to permit a rational jury to convict Latrasse

on count 5 of the indictment.

4. Mail fraud

The mail fraud offense alleged in count 6 of the superseding

indictment arose from a November 22, 1993 letter Braugh sent to

Blackwelder by mail. In the letter, Braugh promised to send

Blackwelder a cashier’s check repaying the July 8, 1993 $5,000

“loan.”

The ev idence show that in the weeks leading up to the loan,

Blackwelder had asked Braugh several time s when he would receive

the promised payments from the roll program. Braugh repeatedly

a ssured Blackwelder that he would receive the money soon, giv ing

such excuses as “it’s going to happen in a day, it’s going to

happen in two days, it’s going to happen in a week, there’s a

problem, a little problem, it’s going to be good in a day.”

Blackwelder continued to press. As part of Braugh’s efforts to

lull Blackwelde r into believing the roll program was legitimate,

Braugh explained that there were problems in Europe that needed

attention and asked for a $5,000 loan so that Braugh could travel

to Europe and “help expedite the transaction.”

Blackwelder tried to recover his money from Braugh. In a

telephone conversation on November 19, 1993, Braugh told

Blackwelder that the unpaid loan “was the only mistake he made in70

executing his little ordeal here.” Three days later, Braugh sent

Blackwelder the letter that forms the bas is for count 6. In the

letter, Braugh prom ised to give Blackwelder a cashier’s check to

repay the loan within one week.

After the November 22, 1993 letter, Blackwelder did not see or

speak to Braugh f or approximately six months. However, Latrasse

continued to call Blackwelder to assure him that payment on his

roll program investment was imminent. On February 2, 1994,

Latrasse sent Blackwelder a fax, telling Blackwelder that Latrasse

had designated a “disinterested third party to deliver th e check

for the pay-out” on Blackwelder’s investment. The fax continued:

It is regrettable that this project t ook longer than

programmed and that this led to the hard feelings between

you and Roger. Hope that we can quickly resolve the

remaining business between yourself and SAI [Associates]

and Roger’s personal obligation to you.

A reasonable jury could conclude that Braugh’s November 22,

1993 letter to Blackwelder was in furtherance of the scheme to

defraud. Braugh solicited the loan from Blackwelder in the context

of reassuring Blackwelder about the roll program. Braugh told

Black welder that the $5,000 loan would help him make a trip to

Europe to fix problems with the roll program and “expedite the

transaction.” Three days before he sent Blackwelder the November

22, 1993 letter promisi ng to repay the $5,000, Braugh told

Blackwelder that failing to repay the $5,000 was “the only mistake

he made” in connection with the roll program. The November 22,71

1993 letter was another instance of lulling, another assurance that

money promised would be paid soon. In his February 2, 1994 fax to

Blackwelder, Latras se, seeking to reassure Blackwelder about the

roll program generally, stated: “I hope that we can quickly resolve

t he remaining business between yourself and SAI and Roger’s

personal obligation to you.” Braugh obtained the $5,000 “loan”

through his involvement in the roll program. Latrasse was clearly

aware that Braugh had done so. Braugh’s and Latrasse’s statements

and written communications evidence their recognition that

assurances about the $5,000 trans action were part of keeping

Blackwelder satisfied about the status of the r oll program.

Braugh’s lulling letter was “incident to an essential part” of the

roll program scheme, which Latrasse could reasonably have foreseen.

The evidence was sufficient to support Latrasse’s conviction

on count 6.

VII. THE RESTITUTION ORDER

Richards and Braugh a rgue that the district court erred in

applying the Ma ndatory Victims Restitution Act (MVRA) in setting

the amount of restitution. They contend that the Ex Post Facto

Clause of the United States Constitution precludes the application

of the MVRA to conduct occurring before April 24, 1996, the

effective date of the Act. The conduct underlying their

convictions occurred well before then. Defendants did not object

to the orders of restitution at trial. Plain error applies.72

United States v. Cihak , 137 F.3d. 252, 264 n. 7 (5th Cir.), cert.

denied

,

___ U.S.

___, 119 S. Ct. 118 (1998), and cert. denied

,

___

U.S. ___, 119 S. Ct. 203 (1998).

The MVRA amended the Victim Witness Protection Act (“VWPA”),

18 U.S.C. §§ 3663–3664. Before the amendments to the VWPA, the

statute required a court to consider a defendant’s ability to pay

in setting the amount of a restitut ion order. As amended, the

statute provides that “the court shal l order restitution to each

victim in the full amount of each victim’s losses as determined by

the court and without consideration of the economic circumstances

of the defendant.” 18 U.S.C. § 3664(f)(1)(A). Richards and Braugh

contend that the MVRA, by forbidding the trial court to consider a

defendant’s ability to pay in setting the amount of res titution,

causes an increase in the punishment a defendant faces for a given

offense. They argue that “retroactive” application of the Act to

conduct occurring before its effective date violates the Ex Post

Facto Clause.

The MVRA provides that it “shall, to the extent

constitutionally permissible, be effective for sentencing

proceedings in cases in which the defendant is convicted on or

after the date of enactment of this Act.” S ee 18 U.S.C. § 2248

(statutory notes). If application of the MVRA to a given defendant

would violate the Ex Post Facto Clause, the district court must

apply the pre-amendment VWPA in determining restitution.73

A law violates the Ex Post Facto Clause if (1) it “appl[ies]

to events occurring before its enactment,” and (2) it

“disadvanta ge[s] the offender affected by it by altering the

definition of criminal conduct or increasing the punishment for his

crime.” Lynce v. Mathis , 519 U.S. 433, 441 (1997)(quoting Weaver

v. Graham

, 450 U. S. 24, 30 (1981)). Although this court has not

yet addressed t he issue, several federal circuit courts have

considered whether application of the MVRA to conduct occu rring

before its enactment would violate the Ex Post Facto Clause. The

majority of these courts have held that retroactive application of

the MVRA would violate the Ex Post Facto Clause. C ompare United

States v. Siegel

, 153 F.3d 1256, 1260 (11th Cir. 1998)(holding that

it would violate the Ex Post Facto Clause to apply the MVRA to a

person whose criminal conduct occurred prior to its passage);

United States v. Edwards

, 162 F.3d 87, 89–90 (3d Cir. 1998)(same);

United St ates v. Baggett , 125 F.3d 1319, 1321–1322 (9th Cir.

1997)(same); United States v. T hompson , 113 F.3d 13, 15 n. 1 (2d

Cir. 1997)(same); United States v. Rezaq , 134 F.3d 1121, 1141 n.

13 (D.C. Cir.), cert. denied , ___ U.S. ___, 119 S. Ct. 90 (1998);

and United States v. Williams

, 128 F.3d 1239, 1241 (8th Cir.

1997)(holding that an order of restitution under the MVRA is

punishment under the Ex Post Facto Clause and suggesting that

retroactive application of the Act would violate that clause); with

U nited States v. Nichols

, 169 F.3d 1255, 1278–80 (10t h74

Cir.)(holding that retroactive application of the MVRA did not

violate the Ex Post Facto Clause), cert. denied

,

___ U.S.

___, 120

S. Ct. 336 (1999); United States v. Newman

, 144 F.3d 531, 537 (7th

Cir. 1998)(same).

T he circuits approving retroactive application of the MVRA,

the minority approach, have reasoned that restitution orders under

the Act are not punishment for the purpose of Ex Post Facto Clause

analysis. This circuit’s precedent does not provide a basis to

adopt this reasoning. This circuit has held that restitution

imposed under the VWPA is punishment for the purpose of the Ex Post

Facto Clause. S ee United States v. Rose , 153 F.3d 208, 211 n. 1

(5th Cir. 1998); United States v. Corn , 836 F.2d 889, 895–96 (5th

Cir. 1988). By requiring the court to order restitution in the

full amount of loss, without considering the defendant’s ability to

pay, the MVRA increases the severity of the punishment a defendant

faces as compared to the pre-amendment VWRA. S ee Siegel

, 153 F.3d

at 1260; see also Lindsey v. Washington

, 301 U.S. 397 (1937).

Retroacti ve application of the MVRA to Richards and Braugh would

violate the Ex Post Facto Clause.

However, Braugh and Richards have not shown that the

challenged orders of restitution resulted from retroactive

application of the MVRA. Nothing in the record suggests that the

district court applied the MVRA in this case. During each

defendant’s sentencing, the district court adopted the presentence75

report, w hich included specific findings about that defendant’s

ability to pay. Under the plain error standard of review, we have

held such adoption to be sufficient evidence that the district

court did consider a defendant’s financial resources in ordering

restitution under the pre-amendment VWPA. S ee United S tates v.

Greer

, 137 F.3d 2 47, 252 (5th Cir.), c ert. denied

,

___ U.S.

___,

118 S. Ct. 2305 (1998). We find no plain error in the district

court’s orders of restitution.



### VIII. CONCLUSION

For the reasons assigned, the convictions and sentences of

defendants Richards, Braugh, and Latrasse are AFFIRMED.