*

 District Judge of the Northern District of Texas, sitting by designation.

UNITED STATES COURT OF APPEALS

For the Fifth Circuit

___________________________________

No. 99-20165

___________________________________

UNITED STATES OF AMERICA,

Plaintiff - Appellee,

VERSUS

PHILLIP S. PETERSON,

THEODORE F. CLARK,

SANDRA LYNN HOLICK, and

DEBRA WILLS O’KEEFE,

Defendants - Appellants.

__________________________________________

Appeals from the United States District Court

for the Southern District of Texas

__________________________________________

March 8, 2001

Before DUHE’ and PARKER, Circuit Judges, and LINDSAY,* District Judge.

LINDSAY, District Judge:

I. BACKGROUND AND PROCEDURAL HISTORY

This case involves a telemarketing operation called American Land Liquidators (“ALL”),

which solicited fees from landowners to advertise their land for sale and put them together with

buyers. ALL collected more than $9,000,000 in fees from about 27,000 property owners, between
2

June 1992 and May 1995, when the business was shut down by the government investigation. It

spent less than 3% of the income on advertising the properties to prospective buyers. Fewer than

than 1% of the property owners who paid fees to ALL sold their property as a result, and those who

did usually sold at very low prices. The government characterized ALL as a fraudulent scheme,

contending that ALL misrepresented the number of buyers available and the likelihood of sales, and

that the landowners would not have paid marketing feesto ALL if they had known the truth. A prior

case led to the convictions of several managers and organizers. See United States v. Reissig, 186

F.3d 617 (5th Cir. 1999), cert. denied, 528 U.S. 1094 (2000). In this case, defendants Phillip S.

Peterson(“Peterson”),TheodoreF.Clark (“Clark”), Sandra LynnHolick (“Holick”), andDebraWills

O’Keefe (“O’Keefe”) were each convicted of one count of conspiracy to commit mail fraud, wire

fraud, and money laundering, in violation of 18 U.S.C. § 371; four counts of mail fraud, in violation

of 18 U.S.C. §§ 2, 1341; and three counts of money laundering, in violation of 18 U.S.C.

§ 1956(a)(1)(A)(i). 

They appeal their convictions, asserting several points of error: 1) that the evidence was

legally insufficient to support the convictions; 2) that evidence of other conduct was improperly

admitted under Fed. R. Evid. 404(b); 3) that a motion to sever by Holick and O’Keefe was

improperly denied and a related limiting instruction, concerning the Rule 404(b) evidence, requested

by them was not given; and 4) that a “deliberate ignorance” jury instruction should not have been

given. As to most of the defendants’ arguments, we find no error on the part of the trial court. While

the trial court may have erred in refusing to give a requested limiting instruction concerning the Rule

404(b) evidence of other conduct, we conclude that the court’s refusal does not constitute an abuse

of discretion. We therefore affirm the convictions.
3

II. ANALYSIS

A. Sufficiency of the Evidence

Clark, O’Keefe, and Holick challenge the sufficiency of the evidence to support their

convictions for mail fraud, conspiracy to commit mail fraud, and money laundering. In reviewing a

challenge as to the sufficiency of the evidence, we consider the evidence in the light most favorable

to the prosecution and affirm if a reasonable juror could conclude that the government proved all

essential elements of the offense beyond a reasonable doubt. United States v. Richards, 204 F.3d

177, 206 (5th Cir.), cert. denied, 121 S. Ct. 73 (2000). All evidence is considered, not just that

supporting the verdict, but the evidence need not conclusively disprove alternatives; the jury is “free

to choose among reasonable constructions of the evidence.” Id. If the evidence is relatively

balanced, a reasonable juror could not convict beyond a reasonable doubt, and we would be required

to reverse the conviction in such instance. Id.

To prove mail fraud, 18 U.S.C. § 1341, the government must show (1) a scheme to defraud;

(2) use of the mails to execute the scheme; and (3) the specific intent to defraud. United States v.

Rico Industries, Inc., 854 F.2d 710, 712 (5th Cir. 1988). To prove conspiracy, 18 U.S.C. § 371, the

government must show (1) an agreement between two or more persons to pursue an unlawful

objective; (2) the defendant’s knowledge of the unlawful objective and voluntary agreement to join

the conspiracy; and (3) an overt act by one or more of the members of the conspiracy in furtherance

of the objective of the conspiracy. United States v. Dadi, 235 F.3d 945, 950 (5th Cir. 2000). “The

government must prove the same degree of criminal intent asis necessary for proof of the underlying

substantive offense.” Id. Clark, O’Keefe, and Holick challenge the conspiracy and mail fraud

convictions on the ground that there was insufficient evidence of the required intent to defraud.
4

O’Keefe denies that ALL was engaged in a fraudulent scheme at all, asserting that it was just an

unsuccessful venture. A similar argument was raised in Reissig. The evidence in the trial record as

to the nature of the operation is essentially the same for this case as it was in Reissig. As we did

there, we conclude that there wassufficient evidence to support the jury’s conclusion that “ALL was

a sham and . . . [a] fraudulent telemarketing scheme.” Reissig, 186 F.3d at 619. 

O’Keefe, Clark, and Holick further claim that, to the extent any representations they made

were false, they had no knowledge that the representations were false. ALL was separated into a

Seller’s Division (the telemarketers, dealing with property owners) and a Buyer’s Division (dealing

with prospective buyers and handling complaints). The defendants were employed in the Seller’s

Division, and were ALL’s top telemarketers. O’Keefe, Clark, and Holick claim that those in the

Buyer’s Division or in management would have been aware of the fraud but those in the Seller’s

Division were deliberately kept in the dark, thus negating the intent to defraud necessary for the mail

fraud and conspiracy counts.

The government presented evidence at trial from which a reasonable juror could infer

knowledge by the defendantsthat their representations(asto the large number of prospective buyers

for the properties, how quickly the properties would sell, and so on) were false. For example, the

defendants collected substantial sums from a large number of property owners (Clark - $137,805

from 379 individuals; Holick - $328,787 from 832 individuals; O’Keefe - $326,714 from 908

individuals). Only three of the properties for which Clark solicited fees were sold through ALL, all

after he left ALL. Only twenty-seven of the properties for which Holick solicited fees were sold.

Telemarketers received a bonus for each property that later sold, so the defendants would have been

aware that very few of the properties for which they obtained advertising fees were actually sold.
5

The defendants point out that no bonus was paid when properties were sold directly from seller to

buyer rather than through ALL, implying that the failure to receive bonuses did not mean that the

properties were not selling. To support their claim that they were misled by ALL management,

however, the defendants point out that the Buyer’s Division constantly reported how well ALL was

doing. Relying on such reassurances is inconsistent with the defendants’ implied assumption that

properties were being sold directly from seller to buyer. The jury could reasonably infer that the

defendants knew that few properties sold at all, either through ALL or directly from seller to buyer.

In addition, evidence showed that O’Keefe received complaints from customers, and had in her

possession a summons and copy of a complaint in a lawsuit alleging misrepresentations by ALL and

specific employees, including herself. 

The defendants also challenge the sufficiency of evidence asto the money laundering counts.

The money laundering statute prohibits two different categories of transactions — “promotion”

money laundering, 18 U.S.C. § 1956(a)(1)(A)(i) (“with the intent to promote the carrying on of

specified unlawful activity”), and “concealment” money laundering, 18 U.S.C. § 1956(a)(1)(B) (“to

conceal or disguise the nature, the location, the source, the ownership, or the control ofthe proceeds

ofspecified unlawful activity”). The defendants were charged only with the former. The transactions

in questionwere disbursementsfor advertising, travel and entertainment (including hotels and casinos

in Las Vegas), office and administrative expenses, and so on. For a conviction of promotion money

laundering, “the Government must prove that the defendant (1) conducted or attempted to conduct

a financial transaction, (2) which the defendant knew involved the proceeds of a specified unlawful

activity, (3) with the intent . . . to promote specified unlawful activity . . . .” United States v. Wyly,

193 F.3d 289, 295 (5th Cir. 1999).
6

Holick argues that she had no knowledge of unlawful activity and therefore could not have

intended to promote such activity. That argument fails for the same reason as does her argument that

the evidence is insufficient to show that she had the intent to defraud. Clark argues that, as he did

not personally make the disbursements in question, he was convicted of derivative responsibility as

a member of a conspiracy. See Pinkerton v. United States, 328 U.S. 640, 647 (1946); United States

v. Garcia, 917 F.2d 1370, 1377 (5th Cir. 1990) (“A party to a conspiracy may be held responsible

for a substantive offense committed by a coconspirator in furtherance of the conspiracy, even if that

party does not participate in or have any knowledge of the substantive offense.”). Clark argues that

the money laundering counts must fall since the evidence is legally insufficient for his conviction on

the conspiracy count. Because we conclude that the evidence was sufficient for the conspiracy

convictions, this argument also fails.

Clark and O’Keefe raise a more substantial argument —that a “promotion”moneylaundering

count cannot be based on expenditures for legitimate business activities. See, e.g., United States v.

Brown, 186 F.3d 661, 668-70 (5thCir. 1999) (holding that paymentsfor legitimate business expenses

of the enterprise cannot support a “promotion” money laundering charge, absent a showing of intent

such as expenditures that “were not necessary to the defendant’s legitimate business operations and

played an important role in his [illegal] scheme”); United States v. Jackson, 935 F.2d 832, 841 (7th

Cir. 1991) (money laundering charge against leader of drug ring supported by expenditures for

beepers, but not by expenditures for mobile phones, rent, and cash). This argument rests on two

contentions: 1) that ALL was either primarily legitimate or could be divided into separate and distinct

components, one ofwhichwas a legitimate business; and 2) that the expenditures on which the money
7

laundering counts are based were not associated with the unlawful part, if any, of ALL’s activities.

We reject both contentions.

As noted above, the evidence at trial wassufficient for a reasonable juror to conclude beyond

a reasonable doubt that ALL was a fraudulent scheme. The defendants propose considering ALL as

consisting in essence of two different businesses, one legitimate (advertising to find buyers for land,

maintaining buyer profiles, mailing property listings, entering data into a computer database, and

arranging the sales of a limited number of properties) and one illegitimate (recruiting propertyowners

through fraudulent misrepresentations). We find this argument unpersuasive, and the decisions in

Brown and Jackson inapposite. 

Brown dealt with an automobile dealership which perpetrated several types of fraud on some

of its customers, but these constituted “some relatively minor fraudulent transactions” by “an

otherwise legitimate business enterprise.” Brown, 186 F.3d at 670. The expenditures in question,

for the basic operations of the dealership, only indirectly supported the fraudulent operations. Id.

In this case, by contrast, the fraud was not restricted to isolated instances — the evidence presented

at trial supports a conclusion that essentially all of the property owners who paid fees to ALL were

treated to the same fraudulent misrepresentations. In Jackson, the defendant made both expenditures

related to the illegal business(beepers) and personal expenditures(mobile phones, rent); the Seventh

Circuit held that the former sufficed for promotion money laundering, while the latter did not.

Jackson, 935 F.2d at 841. In this case, all the expenditures related to the illegitimate business

operation.

We further note that ALL’s operations were not two stand-alone divisions, each with its own

revenue source sufficient to earn a profit. The Buyer’s Division and Seller’s Division each relied on
8

the existence of the other, and ALL’s revenues came almost exclusively from the Seller’s Division’s

solicitation of fees. Expenditures for the operation of the Buyer’s Division, even if not absolutely

required for the continued operation of the Seller’s Division, would support the continued operation

of ALL as a whole. When the business as a whole is illegitimate, even individual expenditures that

are not intrinsically unlawful can support a promotion money laundering charge. See, e.g., United

States v. Coscarelli, 105 F.3d 984, 990 (5th Cir.) (expenditures supported “promotion” money

laundering charge when used to pay “the coconspirators, the telemarketers, and general operating

expenses of the scheme”), vacated, 111 F.3d 376 (5th Cir.1997), reinstated, 149 F.3d 342 (5th

Cir.1998); United States v. Leonard, 61 F.3d 1181, 1186 (5thCir. 1995) (“paying callers, purchasing

leads, paying phone bills” promoted the illegaltelemarketing activityand supportedmoneylaundering

charge). We think that a reasonable jury would conclude that this case more closely resembles

Coscarelli and Leonard than Brown and Jackson. In addition, we note that at least some

advertisements placed byALL solicited both property owners and propertysellers. The expenditures

for advertising expenses therefore did support the fraudulent operations of the Seller’s Division. 

The evidence submitted at trial is not proof to an absolute certainty of the defendants’ intent

to defraud, for the conspiracy and mail fraud counts, or intent to promote an unlawful activity, for

the money laundering count; however, such level of proof is not required. The defendants point to

evidence from which one could conclude that they did not have the requisite intent to defraud and

that the expenditures supporting the money laundering counts did not promote an unlawful activity

— if believed by the jury. The jury was aware of the evidence and apparently assigned it little or no

weight, which is exclusively within its province, and rendered the verdict accordingly. We are

convinced that a reasonable juror could conclude that the government proved all essential elements
9

of the offenses beyond a reasonable doubt. Accordingly, we reject the defendants’ argument as to

insufficiency of evidence.

B. Rule 404(b) Evidence

The government presented evidence pertaining to Peterson’s conduct after he left ALL, which

Peterson characterizes as “explosive and damning evidence of training other telemarketers to make

misrepresentations,” see Peterson’s Brief at 3. Peterson contends that this evidence does not meet

the standard of Fed. R. Evid. 404(b) governing admissibility of such evidence. 

“The district court’s decision to admit Rule 404(b) evidence is reviewed for abuse of

discretion. This review is necessarily heightened in criminal cases.” Richards, 204 F.3d at 199

(citations and internal quotation marks omitted). In making a Rule 404(b) determination, the trial

court must “determine that the extrinsic offense evidence is relevant to an issue other than the

defendant’s character” and also “whether the evidence satisfies Rule 403.” Id. (citing United States

v. Beechum, 582 F.2d 898, 911 (5th Cir.1978) (en banc)). Peterson challenges the evidence under

both prongs of the Beechum test, arguing that future acts are not evidence of criminal intent in the

past and that the evidence was unduly prejudicial. (Peterson’s brief also discusses that the evidence

in question came from a criminal investigation in Colorado which resulted in an indictment after the

jury verdict in this case, but does not explain how that fact is relevant to the admissibility of the

evidence, and we therefore ignore it.) We disagree as to both arguments. 

The evidence was offered as evidence of Peterson’s intent. Our prior decisions clearly allow

for evidence of “bad acts” subsequent to the subject matter of the trial for the purpose of

demonstrating intent. See United States v. Catano, 553 F.2d 497, 499-500 (5th Cir. 1977); Roe v.

United States, 316 F.2d 617, 623 (5th Cir. 1963) (“Since thisis a question of intent, acts done before
10

and after the crime charged are admissible if the circumstances show a sufficient connection from

which inferences may reasonably be drawn.”). The evidence of Peterson’s future conduct would not

be admissible to prove his conduct at ALL. Once the jury concluded that Peterson committed the

conduct at issue, however, they could consider evidence of similar subsequent conduct (relatively

closely linked in time), and evidence of his intent on that subsequent occasion, to draw inferences

about the intent underlying his conduct at ALL. The order in which the charged conduct and the

similar acts occur may affect which of the possible inferences the jury decides to draw, but does not

preclude admission of the evidence. 

We also conclude that the evidence was not unduly prejudicial. The jury heard eleven days

of testimony, and the evidence in question took less than a half hour. This is not a situation where

“[a]substantialportion ofthe total volume oftestimonybefore the juryconcerned extrinsic offenses,”

see United States v. Zabaneh, 837 F.2d 1249, 1265 (5th Cir. 1988). In addition, the court provided

a limiting instruction at the end ofthe case. Accordingly, we conclude that the evidence satisfies both

prongs of the Beechum test and the trial court did not abuse its discretion in admitting the evidence.

C. Severance and Limiting Instruction

Because of the testimony of “bad acts” admitted against Peterson, O’Keefe and Holick filed

motions to sever (before, during, and at the conclusion of the trial), which were denied. We review

the denial of a severance motion for an abuse of discretion. Richards, 204 F.3d at 193. To prevail,

“the defendant must show that: (1) the joint trial prejudiced him to such an extent that the district

court could not provide adequate protection; and (2) the prejudice outweighed the government’s

interest in economy of judicial administration.” Id. 
11

O’Keefe and Holick argue that the “bad acts” evidence would not have been inadmissible if

they were tried alone, as it would be hearsay to them and also would violate their Sixth Amendment

right to confrontation, see Bruton v. United States, 391 U.S. 123, 139 (1968), since Peterson did not

testify. They contend that this testimony was severely prejudicial and that the trial court did not

provide an adequate limiting instruction. The jury charge instructed the jury that they must give

separate consideration to the evidence as to each defendant, and that Rule 404(b) evidence was

admissible only for limited purposes. O’Keefe and Holick contend that the jury also should have been

instruct ed specifically that Rule 404(b) evidence concerning acts by one defendant cannot be

considered as evidence against another defendant.

We conclude that the risk of prejudice was not so high that it could be cured only by

severance. A risk of prejudice may arise when “evidence that the jury should not consider against a

defendant and that would not be admissible if a defendant were tried alone is admitted against a

codefendant,” but “[t]he risk of prejudice will vary with the facts in each case.” Zafiro v. United

States, 506 U.S. 534, 539 (1993). We have previously noted, however, that severance is not

necessarily the appropriate remedy. United States v. Rocha, 916 F.2d 219, 228-29 (5th Cir. 1990)

(“severance is not required merely because the Government introduced evidence admissible only

against individual co-defendants” and “severance isrequired on the basis of a disparity in the evidence

only in the most extreme cases”); United States v. Merida, 765 F.2d 1205, 1219 (5th Cir. 1985)

(severance is not required if “the jury could sort out the evidence reasonably and view each defendant

and the evidence relating to that defendant separately”). As discussed above, the Rule 404(b)

evidence was of limited extent and not unduly prejudicial to Peterson. An appropriate limiting
12

instruction, that the evidence of “bad acts” by Peterson should not be considered as to O’Keefe and

Holick, would suffice to reduce the risk of prejudice. 

The defendants complain that an appropriate limiting instruction was not given. They

requested during trial, and were refused at that time, a limiting instruction pursuant to Fed. R. Evid.

105 as to the Rule 404(b) evidence. Although the better practice may be to give such a limiting

instruction when the evidence is presented, see Rule 105, an instruction at the conclusion of trial will

often be sufficient. See, e.g., United States v. Cihak, 137 F.3d 252, 258-59 & n.3 (5th Cir. 1998)

(limiting instruction, apparently given at the conclusion of trial, was sufficient to cure any prejudice

from Rule 404(b) evidence against a co-defendant). We conclude that the evidence was not so

prejudicial and the trial was not so long that the delay in giving a limiting instruction rendered it

inadequate.

The defendants claimthat the limiting instruction at the conclusion oftrialwas notsufficiently

detailed. It is not clear from the record whether anyone submitted a proposed instruction for the jury

charge along the lines now suggested by defendants, that the Rule 404(b) evidence could not be

considered for any purposes as to O’Keefe and Holick specifically. We assume, for purposes of

discussion, that such a request was made. The trial court’s error, if any, therefore can be

characterized either as denial of the motion to sever or refusal to give the specific limiting instruction.

We review the refusal to give a requested jury instruction for abuse of discretion. Richards, 204 F.3d

at 204. 

Such a refusalrequiresreversalonlyifthe 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 trial such that the failure to

instruct the jury on the issue seriously impaired the defendant’s ability to present a

given defense. 
13

Id. 

The first part of thisstandard issatisfied, and we conclude that the second is as well. The trial

court’s actual instructions were as follows:

A separate crime is charged against each of the defendants in each count of the

indictment. Each count, and the evidence pertaining to it, should be considered

separately and individually. The fact that you may find one or more of the accused

guilty of any of the crimes charged should not control your verdict as to any other

crime or any other defendant. You must give separate consideration to the evidence

as to each defendant.

You have also heard of acts ofsome of the defendants which may be similar to those

charged in the indictment, but which were committed on other occasions. You must

not consider any of this evidence in deciding if those defendants committed the acts

charged in the indictment. However, you may consider this evidence for other, very

limited purposes.

If you find beyond a reasonable doubt from other evidence in this case that the

defendants did commit the acts charged in the indictment, then you may consider

evidence of the similar acts allegedly committed on other occasions to determine:

Whether those defendants had the state of mind or intent necessary to

commit the crime charged in the indictment; or

Whether those defendants had a motive or the opportunity to commit

the acts charged in the indictment; or

Whether those defendants acted according to a plan or in preparation

for commission of a crime; or

Whether those defendants committed the acts for which he is on trial

by accident or mistake.

These are the limited purposes for which any evidence of other similar acts may be

included.

We conclude that it might have been betterto use actual namesrather than “those defendants”

in the instructions in order to make crystal clear to the jury that the Rule 404(b) evidence against

Peterson could not be considered, even for “other, very limited purposes,” against O’Keefe and

Holick. Compare Cihak, 137 F.3d at 258 n.3 (jury instruction specified for which purposes and

against exactlywhich defendantsthe evidence could be considered). We are not convinced, however,
14

that the trial court’s denial of the motion to sever combined with the failure to give the requested

limiting instruction was so prejudicial that it severely impaired O’Keefe and Holick’s defense and

constitutesreversible error. While the instructions given did not specify that the Rule 404(b) evidence

could not be considered against O’Keefe and Holick specifically, the general instruction that the jury

should “give separate consideration to the evidence as to each defendant” served much the same

purpose and substantially reduced the risk of prejudice. Cf. United States v. Hemmingson, 157 F.3d

347, 357 (5th Cir. 1998). Given this general instruction, the limited extent of the Rule 404(b)

evidence, and the totality of the other evidence against O’Keefe and Holick, we do not believe that

they suffered “compelling prejudice” or received an unfair trial, and therefore conclude that the trial

court’s decisions did not constitute an abuse of discretion. Cf. id.

D. Deliberate Ignorance Instruction

Finally, Clark and O’Keefe challenge the trial court’s court’s decision to submit a deliberate

ignorance instruction. We review jury instructions to determine whether, as a whole, they are a

correct statement of the law and are applicable to the factual issues in the case. United States v.

Faulkner, 17 F.3d 745, 766 (5th Cir. 1994). A deliberate ignorance instruction is appropriate only

“when a defendant claims a lack of guilty knowledge and the proof at trial supports an inference of

deliberate indifference.” United States v. Threadgill, 172 F.3d 357, 368 (5th Cir.), cert. denied, 528

U.S. 871 (1999). “The instruction is proper where the evidence shows (1) subjective awareness of

a high probability ofthe existence ofillegal conduct, and (2) purposeful contrivance to avoid learning

of the illegal conduct.” Id. Although a deliberate ignorance instruction should rarely be given, it is

appropriate when supported by sufficient evidence. Id. Giving the instruction is error, but harmless

error, if the government shows that the defendants had actual knowledge. Id.
15

The defendants do not challenge the accuracy ofthe instruction, only whether it is applicable.

They claim that the government presented no evidence that they shut their eyes to evidence of fraud.

We disagree. As discussed above, the jury could reasonably infer from the evidence presented that

the defendants had the requisit e intent to defraud. That surely encompasses a conclusion that the

defendants either: 1) were aware of a high probability that ALL’s operations constituted fraud but

chose not to investigate (in which case the deliberate ignorance instructionwas proper); or 2) actually

knew that they were engaged in fraud (in which case the deliberate ignorance instruction constituted

harmless error). In either event, there is no reversible error here.

III. CONCLUSION

For the foregoing reasons, the judgment of the district court is

AFFIRMED.