FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA, 

No. 04-50082 Plaintiff-Appellee,

D.C. No. v. 

CR-02-00319-DOCTIMOTHY JAMES LYONS, 01

Defendant-Appellant. 

UNITED STATES OF AMERICA,  No. 04-50127

Plaintiff-Appellee, D.C. No.

v.  CR-02-00319-DOC2 GABRIEL SANCHEZ,

Defendant-Appellant. OPINION 

Appeal from the United States District Court

for the Central District of California

David O. Carter, District Judge, Presiding

Argued and Submitted

March 8, 2006—Pasadena, California

Filed July 17, 2006

Before: Sidney R. Thomas and M. Margaret McKeown,

Circuit Judges, and Samuel P. King,* Senior Judge.

Opinion by Judge McKeown

*The Honorable Samuel P. King, Senior United States District Judge

for the District of Hawaii, sitting by designation. 

7841
COUNSEL

John H. Weston, Weston, Garrou & DeWitt, Los Angeles,

California; William J. Kopeny, William J. Kopeny & Associates, Irvine, California, for the defendants-appellants. 

Ellyn Marcus Lindsay, Assistant United States Attorney, Los

Angeles, California, for the plaintiff-appellee.

OPINION

McKEOWN, Circuit Judge: 

Rare is the person who relishes getting calls from those

great patrons of the telephone, telemarketers.1 Yet many char1One oft-repeated expression of the collective view of telemarketers is

Jerry Seinfeld’s response to a telemarketer’s call: 

[TELEMARKETER]: Hi. Would you be interested in switching

over to TMI long-distance service[?] 

UNITED STATES v. LYONS 7845
ities, especially small, obscure or unpopular ones, could not

fund their operations without telemarketers. Some professional telemarketers take the lion’s share of solicited donations, sometimes requiring and receiving commission rates of

up to 85%. Most donors would probably be shocked or surprised to learn that most of their contributions were going to

for-profit telemarketers instead of charitable activities. But the

Supreme Court has held that, under the First Amendment, the

bare failure to disclose these high costs to donors cannot, by

itself, support a fraud conviction. Madigan v. Telemarketing

Assocs, Inc., 538 U.S. 600, 606 (2003). Evidence of high fundraising costs may, nonetheless, support a fraud prosecution

when “nondisclosure is accompanied by intentionally misleading statements designed to deceive the listener.” Id.

In this appeal we consider, among other things, under what

circumstances the government may introduce high commission rates as evidence in a criminal fraud case. Timothy

Lyons and Gabriel Sanchez challenge their convictions for

mail fraud and money laundering on the basis that they never

lied, and never asked the telemarketers in their employ to lie,

about the fact that around 80% of donations to their charities

were earmarked for telemarketing commissions. 

Lyons and Sanchez did, however, misrepresent to donors

how they spent contributions net of telemarketer commisSEINFELD: Oh, gee, I can’t talk right now. Why don’t you give

me your home number and I’ll call you later? . . . . 

[TELEMARKETER]: Well, I’m sorry. We’re not allowed to do

that. 

SEINFELD: I guess you don’t want people calling you at home.

[TELEMARKETER]: No. 

SEINFELD: Well, now you know how I feel. 

available at http://transcripts.cnn.com/TRANSCRIPTS/0102/14/nr.00.

html. 

7846 UNITED STATES v. LYONS
sions. Their undoing was not that the commissions were large

but that their charitable web was a scam. Donors were told

their contributions went to specific charitable activities when,

in reality, almost no money did. We conclude that the government did not violate the First Amendment by introducing evidence that over 80% of donations went to telemarketers. 

Lyons and Sanchez also claim non-constitutional error

involving the admission of evidence and jury instructions.

These claims lack merit. We affirm the convictions and order

a limited remand pursuant to United States v. Ameline, 409

F.3d 1073, 1078-79 (9th Cir. 2005) (en banc). 

BACKGROUND

I. FACTUAL BACKGROUND

We first describe the scheme Lyons and Sanchez devised,

and then turn to the specific representations made to potential

donors through both telemarketers and promotional pamphlets, and how Lyons and Sanchez actually spent the funds

they received. 

A. OVERVIEW OF THE SCHEME

Around early 1994, long-time friends Lyons and Sanchez

decided to form a business in which Sanchez would run a

church and Lyons would supervise telemarketers to raise

money for the church. Sanchez formed the First Church of

Life (FCL), which had no congregation, services or place of

worship; its address belonged to the house of Sanchez’s

father. Lyons formed a fundraising company called North

American Acquisitions (NAA). 

In pursuit of their scheme, the pair created six charities

under the FCL umbrella and selected names likely to attract

sympathy and donations, including the AIDS Research Association, Children’s Assistance Foundation, Cops and Sheriffs

UNITED STATES v. LYONS 7847
of America, Handicapped Youth Services, U.S. Firefighters,

and U.S. Veterans League. None of these charities had infrastructure separate from FCL. The groups also had little if any

actual contact with the people or causes they purported to support. 

NAA outsourced most operations to third-party telemarketers to solicit donations on behalf of FCL’s charities.

Donors usually sent checks, made out to the various FCL

charities, to the telemarketers. On average, the telemarketers

took 80% of the donated funds as commission. NAA kept

another 10%, and the last 10% was deposited into the respective accounts of the six FCL charities. We explain later in

greater detail how funds were distributed. 

As a registered fundraiser, NAA filed annual financial

reports with the State of California and disclosed all funds

collected and all fees that went to the third-party telemarketers and NAA. By December 1997, FCL had lost its taxexempt status in California, so Sanchez registered a new

church in Nevada, Christian Outreach Ministries, through

which he ran the six charities originally under the FCL

umbrella. 

In 1997, a California newspaper published articles calling

Sanchez’s operation a scam. Sanchez left Christian Outreach

Ministries and began to work for NAA. The operation of the

charities fell to other co-schemers. 

Lyons and Sanchez went to Nevada, where they incorporated yet another church, Mercy Ministries, later renamed

Glory Ministries. The church became the umbrella organization for six new charities, which inherited money and similarsounding names from the old charities.2

2For example, AIDS Research Association became Children’s AIDS

Council; Cops and Sheriffs of America became the Police and Sheriffs

Support Fund; U.S. Firefighters became Firefighters Assistance Foundation. 

7848 UNITED STATES v. LYONS
In 2000, Lyons sold the assets of NAA to Roger Lane.

According to his employees, Lyons kept operational control

of NAA. Although employees were told to regard him as a

consultant, Lyons was still in charge and actively involved. 

B. SPECIFIC REPRESENTATIONS AND FUNDS SPENT

During the course of the scheme, Lyons and Sanchez raised

over $6 million for the various causes. Out of these millions

raised on behalf of the six FCL charities, very little was spent

on charitable activities—according to the government, about

$4,800.3 This amount is small, even as a percentage of the net

donations received after paying telemarketers’ commissions.

Most of the charities’ funds actually went to Sanchez’s personal expenses—home rent, car payments, loan payments,

legal expenses, medical expenses, and credit card payments.

Nevertheless, Lyons and Sanchez wrote scripts for telemarketers to read to would-be donors, as well as promotional

pamphlets, that suggested otherwise.4 Every script and pamphlet mentioned a number of specific charitable activities purportedly funded by donors’ contributions. We review in turn

each of the six charities, what each charity promised, and

what each charity actually delivered. 

AIDS Research Association claimed that its goals were to

“provide funds to local A.I.D.S. hospitals to help find a cure

or at least to help funding of drug programs which may

enhance or lengthen the life of A.I.D.S. patients,” and to “pro3The bank records were incomplete because certain electronic media

were unreadable. Sanchez argued at trial that all of the funds for which the

bank had lost records went to charity. However, Sanchez agreed that of all

the funds for which the bank could provide “hard and fast” numbers, less

than $5,000 went to charitable activities. 

4Sanchez testified that “I wrote the brochure information; and in later

years, I believe it was something that Mr. Lyons would write and I would

approve, modify, and I would come up with a product that was . . . acceptable to both of us.” 

UNITED STATES v. LYONS 7849
vide funds to local A.I.D.S. patients by giving in-home care

or just helping out families when a person dies of A.I.D.S.”

No evidence indicates that the Association ever gave funds to

hospitals, AIDS patients or their families. According to the

government, the association raised $261,257 in 1998 and

1999 but spent no money at all on charitable activities. 

Children’s Assistance Foundation claimed that its goal was

to “eventually open a facility [for] . . . long term care for children and their families,” and that its activities included “relocat[ing] entire families” and “helping children and their

families . . . by providing food, shelter, medical care, and simple family expenses.” The group did not help multiple “families” or “children,” though Sanchez himself provided exactly

one woman and her child food and shelter for several months.

The foundation raised $465,596 in 1998 and 1999, but could

document spending just $100 on charitable activities. 

Cops and Sheriffs of America claimed to finance “various

crime prevention and drug awareness programs throughout

the country” and provide police officers education on “state

of the art” crime-fighting equipment and techniques. The

group published a magazine annually containing paid advertisements. The charity changed its name to Police and Sheriff’s Support Fund, which purported to provide free selfdefense classes, financial support for neighborhood watch

programs and “families of slain officers,” and contributions to

“The National Law Enforcement Officers Memorial.” Of its

advertised activities, the Fund offered only a single selfdefense class attended by a few NAA or FCL employees. The

group raised $828,928 in 1998 and 1999, with only $400

spent on charitable activities. 

Handicapped Youth Services purported to help provide

“wheelchairs, crutches, walkers or any other equipment that

these children may need but financially cannot afford,” and to

take handicapped children to “fairs, museums, and amusement parks to give some cheer to their lives.” In 1998 and

7850 UNITED STATES v. LYONS
1999, the charity raised $602,643. The group documented

spending no money at all on charitable activities. 

The pamphlet for U.S. Firefighters said that it funded “various fire prevention and awareness programs throughout the

country,” including the education of “professional and volunteer firefighters” on “state-of-the-art equipment and techniques of firefighting and fire prevention.” Apparently, one

person went to low income houses in Orange County on

behalf of the group, installed fire extinguishers and smoke

detectors, left information, and gave away 50-75 fire extinguishers. Nothing in the record suggests that any firefighters

were educated. In 1998 and 1999, the group raised $752,270

but could document only $3,015 spent on its charitable activities. 

U.S. Veteran’s League claimed to provide clothing, food,

shelter, and career counseling to homeless veterans and purported to have formed scholarships and grants for veterans.

Employees of Sanchez and Lyons testified that the charity

carried out none of these activities. The League raised

$955,806 in 1998 and 1999 but spent just $295 on charitable

activities. 

II. PROCEDURAL BACKGROUND

In October 2002, a grand jury charged Lyons and Sanchez,

as well as Roger Lane and Steven Delatorre, with 33 counts

of mail fraud, 11 counts of money laundering and one count

of criminal forfeiture. Lane and Delatorre pleaded guilty just

before trial. 

At trial, the government introduced evidence of the misrepresentations Lyons and Sanchez made on behalf of each charity. The government introduced as exhibits the telemarketer

scripts and promotional pamphlets prepared by Lyons and

Sanchez, as described above. Donors testified as to what they

were told by telemarketers. The government also explained

UNITED STATES v. LYONS 7851
how Lyons and Sanchez, through their scripts and pamphlets,

had misrepresented the nonprofit status of FCL and its charities.5

Evidence of the high commissions taken by telemarketers

and how donations were actually spent formed a backdrop for

testimony about the charities. Former employees testified that

very little money was spent on charitable work. Some testified

that Sanchez did no work while at the office, where he talked

on the telephone and played video games. Former employees

also testified that they had asked Lyons and Sanchez what

precise charitable activities FCL engaged in. Lyons admitted

to an employee that FCL and its progeny did nothing for charity, and Sanchez told another employee that it was none of her

business what he did for charity. 

The government presented pie-charts that summarized the

bank records of each of the six charities and how they spent

donations received. Each chart showed the total donations

raised by each of the charities over roughly two years,

between 1998 and 1999. For instance, the chart for Handicapped Youth Services showed that, from late 1997 to

November 1999, the organization received $602,643 in donations. Of this amount, the chart showed that $520,313 or 85%

went to NAA, and that $19,519 eventually went to a new

account for Disabled Children’s Charity (the second generation incarnation of Handicapped Youth Services). Of the

$46,655 available for the charity to spend on its activities not

including returned deposits and funds for which records are

missing, the government’s chart reflected that $0 was spent on

charitable activities. The government explained that Sanchez

5The government noted that the materials authored by Lyons and Sanchez represented that the charities were registered § 501(c)(3) nonprofit

organizations, and thus that any donations were tax deductible. The government argued that both Lyons and Sanchez knew that the basis for any

tax exemptions was the fact that Sanchez called his organization a church,

but that to receive a tax exemption, FCL had to apply for an exemption

and receive formal recognition from the IRS. Lyons and Sanchez never

sought formal approval of the organization’s claimed nonprofit tax status.

7852 UNITED STATES v. LYONS
actually spent the $46,655 on his own expenses, including his

own sports car, house rent, legal fees unrelated to NAA or

FCL, and personal medical bills. 

Throughout the trial, as a foundation for its explanation that

the charities established by Lyons and Sanchez spent almost

no money on charitable activities, the government referred to

the high commissions taken by telemarketers. The government’s opening argument is fairly representative of the way

it treated the high telemarketer commission rate throughout

the trial: 

I’d like to talk now a moment about the money. 

You will hear during the course of this trial that

out of every dollar raised from donors, 85 to 90 percent went to N.A.A., defendant Lyon’s company.

Not a dollar of that money . . . went for any charitable purpose whatsoever. 

Now, out of that money, . . . 75 to 80 percent went

to professional telemarketers. The rates varied

depending on the firm. And he kept the rest himself.

He used it to pay his salary, his personal expenses

. . . . 

Now, that leaves us with 10 percent approximately. That 10 percent was . . . deposited into an

account under the name of the purported charity; for

example, the Handicapped Youth Services account.

Those accounts were under the control of defendant Sanchez. 

But of this money . . . you will hear that the vast

majority of it went into the pockets of defendant

Sanchez and those that worked for him — went to

pay for their business expenses, their personal

UNITED STATES v. LYONS 7853
expenses, and other items. Virtually no money went

for any charitable purpose whatsoever. 

In November 2003, after a two-day trial, the district court

instructed the jury on the elements of mail fraud, co-schemer

liability, and the relevance of high fund-raising costs to fraud:

In order for the defendant to be found guilt[y] of

mail fraud as charged in counts 1 through 33 . . . [in

violation of 18 U.S.C. §1341], the government must

prove each of the following elements beyond a reasonable doubt: 

First, the defendant knowingly devised or knowingly participated in a scheme or plan to defraud, or

a scheme or plan for obtaining money or property by

means of false or fraudulent pretenses, representations, or promises; 

Second, the defendant knew that the promises or

statements were false; 

Third, the promises or statements made or facts

omitted were material, that is, they would reasonably

influence a person to part with money or property; 

Fourth, the defendant acted with the intent to

defraud; and 

Fifth, the defendant used or caused to be used, the

mails to carry out or attempt to carry out an essential

part of the scheme. 

. . . . 

The phrases “scheme to defraud” and “scheme to

obtain money or funds” mean any deliberate plan of

action or course of conduct by which someone

7854 UNITED STATES v. LYONS
intends to deceive or to cheat another, or by which

someone intends to deprive another of something of

value. 

. . . . 

The term “false or fraudulent pretenses, representations, or promises” includes actual direct false

statements and includes the knowing concealment of

facts that are material to the matter in question that

were made or used with the intent to defraud. 

. . . . 

Each member of a scheme to defraud may be

responsible for the actions of the other co-schemers

performed during the course of and in furtherance of

the scheme. A defendant is responsible for a coschemer’s fraudulent acts if: 

One, the defendant himself was a member of the

scheme to defraud; 

Second, the defendant had the intent to defraud; 

Third, the acts of co-schemers were performed

during the course of and in furtherance of the

scheme; and 

Fourth, the defendant personally made up or participated in the scheme. 

High fund-raising costs without more do not

establish fraud. And mere failure to volunteer the

fund-raiser’s fee when contacting a potential donee

without more is insufficient to establish fraud. 

The jury convicted Lyons and Sanchez on all mail fraud

and money laundering counts. The district court denied

UNITED STATES v. LYONS 7855
Lyons’ motion for a new trial and directed verdict. Lyons and

Sanchez were each sentenced to 180 months in prison and

three years of supervised release. 

ANALYSIS

Lyons and Sanchez challenge their convictions on constitutional and evidentiary grounds. They also argue that if their

convictions stand, they are entitled to a remand under Ameline, if not full resentencings. Sanchez alone requests a

remand to a different district judge.

I. FIRST AMENDMENT AND FUNDRAISING COSTS

Lyons and Sanchez argue that their mail fraud convictions

violated the First Amendment6 because the district court

allowed the government to use the high cost of fundraising as

evidence of fraud even though they had not affirmatively misrepresented the cost of fundraising to donors. They raise a

cluster of closely-related arguments, all premised on a similar

misreading of Madigan. 

[1] Madigan established a default rule in criminal prosecutions for fraud involving telemarketing: the “bare failure to

disclose [the high cost of fundraising] directly to potential

donors does not suffice to establish fraud.” 538 U.S. at 606.

That is, the mere fact that a telemarketer keeps 85% of contributions it solicits cannot be the basis of a fraud conviction,

and neither can the fact that a telemarketer fails to volunteer

this information to would-be donors. This fund-raising safe

harbor stems from a trio of Supreme Court cases that barred

states from adopting non-criminal regulations either (1) limiting the percentage of donations fundraisers (usually telemar6Constitutional issues are reviewed de novo. Buono v. Norton, 371 F.3d

543, 548 (9th Cir. 2004). A constitutional error is only harmless if it is

harmless beyond a reasonable doubt. Chapman v. California, 386 U.S. 18,

24 (1967). 

7856 UNITED STATES v. LYONS
keters) may take, or (2) requiring fundraisers to tell would-be

donors about the percentage commission taken by fundraisers.

See Riley v. Nat’l Fed’n of the Blind, 487 U.S. 781, 784-87

(1988); Secretary of State of Md. v. Joseph H. Munson Co.,

467 U.S. 947, 950-54 (1984); Schaumburg v. Citizens for a

Better Environment, 444 U.S. 620, 622-28 (1980). The

Supreme Court articulated the First Amendment concern at

stake in these fundraising cases this way: “Our prior cases

teach that the solicitation of charitable contributions is protected speech, and that using percentages to decide the legality of the fundraiser’s fee is not narrowly tailored to the

State’s interest in preventing fraud.” Riley, 487 U.S. at 789.

[2] The limit of this principle may be seen in Madigan’s

holding that when “nondisclosure is accompanied by intentionally misleading statements designed to deceive the listener,” the high cost of fundraising may be introduced as

evidence of fraud in a criminal case. 538 U.S. at 606. Riley

foreshadowed this result by noting that fraud prosecutions

were “narrowly tailored” enough to be in “keeping with First

Amendment directives,” and that “the State may vigorously

enforce its antifraud laws to prohibit professional fundraisers

from obtaining money on false pretenses or by making false

statements.” 487 U.S. at 800. 

Lyons and Sanchez urge an extremely narrow view of

Madigan, arguing that “Madigan held that if the fundraiser

affirmatively misrepresented the costs of the fundraising,

then, and only then, evidence of the costs might be utilized to

demonstrate the fraudulent nature of any specific misrepresentations.” (Emphasis added). The apparent basis for this

argument is that in Madigan, the defendants directly lied to

donors about the percentage of donations that went to charitable activities as opposed to fundraising.7

 Thus, Lyons and

7

In Madigan, most donors were told that “a significant amount of each

dollar donated would be paid over” to the charity. 538 U.S. at 605 (emphasis added). One donor was even told that 90% of her donation would go

directly to the charity; yet another was told that no funds would go to labor

expenses because “ ‘all members [were] volunteers.’ ” Id. at 608. 

UNITED STATES v. LYONS 7857
Sanchez urge that unless the government could show that they

lied to donors about how much the telemarketers would

receive, the government was barred from introducing evidence of the high commissions paid to telemarketers. 

[3] Madigan’s reach is not as narrow as Lyons and Sanchez suggest: “So long as the emphasis [in the arguments

made by the prosecution] is on what the fundraisers misleadingly convey, and not on percentage limitations on solicitors’

fees per se, such actions need not impermissibly chill protected speech.” Madigan, 538 U.S. at 619. The Supreme

Court emphasized that “the First Amendment . . . case law

emphatically do[es] not require . . . a blanket exemption from

fraud liability for a fundraiser who intentionally misleads in

calls for donations.” Id. at 621. Madigan underscores that the

state faces a high burden to demonstrate fraud, including the

burden to prove that a defendant made knowing misrepresentations with the intent to defraud. See id. at 620. Thus,

“[e]xacting proof requirements of this order, in other contexts,

have been held to provide sufficient breathing room for protected speech.” Id. (citing, inter alia, New York Times Co. v.

Sullivan, 376 U.S. 254, 279-80 (1964)). 

In Madigan, the defendants not only misrepresented the

percentage of funds going to telemarketers, they also made

false promises about how donations—even net of telemarketers’ fees—were to be spent. Telemarketers “told prospective donors their contributions would be used for specifically

identified charitable endeavors,” such as food baskets, job

training, rent and bill payments, and rehabilitation for veterans of the Vietnam War, even though donations did not pay

for these activities. Id. at 608. The government alleged that,

even taking into account the fact that fundraisers received

85% of donations, the charity itself spent only 3% of all funds

(or only 20% of net donation proceeds) on providing charitable services. See id. at 607 n.1. The indictment charged that

“the charitable solicitation was a facade” because “[a]lthough

[the fundraisers] represented that donated funds would go to

7858 UNITED STATES v. LYONS
[the charity’s] specific charitable purposes, the amount of

funds being paid over to the charity was merely incidental to

the fund raising effort, which was made for the private pecuniary benefit” of the fundraisers and their agents. Id. at 618-19

(internal citations and quotation marks omitted). 

[4] With respect to Lyons and Sanchez, the government

both alleged in its indictment and offered evidence at trial of

specific misrepresentations and omissions they made regarding the use of donated funds. Specifically, the government’s

evidence underscored the fact that virtually none of the

money that ended up in the bank accounts of the six FCL

charities went to any charitable activities at all, let alone the

specific charitable activities mentioned in the telemarketers’

calls or promotional pamphlets. These misrepresentations are

nearly identical to the specific misrepresentations at issue in

Madigan. See id. at 607 n.1 (misrepresenting that significant

part of donations actually went to charitable activity when,

even net of fundraising costs, very little did); id. at 608 (representing that donations would fund specific charitable activities for Vietnam veterans that were never carried out). 

[5] Neither Madigan nor the First Amendment insulates

defendants from criminal prosecution for fraudulent misrepresentations about their charitable endeavors. Rather, the government is constrained from charging that high fundraising

costs per se are tantamount to fraud. Our case is much like

Madigan. The fraud is banded by the blatant misrepresentations about the charities. However, admission of evidence

regarding the fundraising costs was essential to understanding

the overall scheme and the shell game of the multiple charities. The government did not violate Lyons’ or Sanchez’s

First Amendment rights by introducing evidence that thirdparty telemarketers received 80% of funds donated to the various FCL charities because the government had also shown

that Lyons and Sanchez, through their respective organizations, had made fraudulent misrepresentations regarding disposition of the charitable funds. 

UNITED STATES v. LYONS 7859
II. RULE 403 AND FUNDRAISING COSTS

[6] Lyons and Sanchez argue that the government’s

repeated emphasis throughout the trial on the cost of fundraising, specifically the high commissions received by telemarketers, constituted “unfair prejudice” substantially

outweighing its probative value under Federal Rule of Evidence 403.8

 Under Rule 403, “unfair prejudice” is “an undue

tendency to suggest decision on an improper basis.” Rule 403

Advisory Committee Notes. We review the district court’s

Rule 403 decisions for abuse of discretion. United States v.

Leon-Reyes, 177 F.3d 816, 821 (9th Cir. 1999). 

Relying on selective excerpts from the record, Lyons and

Sanchez claim that the government repeatedly emphasized the

high commissions taken by third-party telemarketers, as if this

fact alone were sufficient to sustain a fraud conviction. A

review of the record and trial as a whole shows the government did not solely or relentlessly focus on the high cost of

fundraising to prove fraud. To be sure, the government asked

many witnesses about the high fundraising costs, but the vast

bulk of questions concerned misrepresentations or FCL’s failure to apply donated funds to charitable purposes. Nor was

the high commission rate itself a basis of the government’s

fraud case. Rather, the commission was a legitimate expense

and part of the overall picture of how the money was allocated.9

8Rule 403 provides: “Although relevant, evidence may be excluded if

its probative value is substantially outweighed by the danger of unfair

prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.” 

9

See Madigan, 538 U.S. at 625 (Scalia, J., concurring) (“[T]here can in

general be no reasonable expectation on the part of donors as to what fraction of the gross proceeds goes to expenses. . . . [O]ne who is promised,

without further specification, that his charitable contribution will go to a

particular cause must reasonably understand that it will go there after the

deduction of legitimate expenses . . . .”) (emphasis in original). 

7860 UNITED STATES v. LYONS
Just as the government could not demonstrate fraud simply

by showing that 80-90% of contributions went to telemarketing fees instead of charity, neither could it prove fraud solely

by showing that 10-20% of donations were not spent on charity, without showing what happened to the remaining 80-90%

of the funds. 

[7] The evidence is overwhelming that between telemarketers’ fees and Lyons’ and Sanchez’s personal expenses, the

six FCL charities spent virtually no money on charitable

activities promised to donors. The district court did not abuse

its discretion in overruling the Rule 403 objections regarding

fundraising costs.10

III. JURY INSTRUCTIONS

Lyons and Sanchez argue that the district court made four

discrete errors, failing to instruct the jury (1) as to the proper

scope of Madigan; (2) to be unanimous on the particular false

representations made by Lyons or Sanchez; (3) to be unanimous on the theory of mail fraud because the government

allegedly offered two theories (false representations or

scheme to defraud); and (4) as to the correct elements of coschemer liability. We review de novo whether the district

court’s jury instructions accurately stated the law. United

States v. Stapleton, 293 F.3d 1111, 1114 (9th Cir. 2002). 

A. MADIGAN

The following was, in relevant part, the district court’s jury

instruction as to the rule in Madigan: “High fund-raising costs

10Sanchez alone argued Rule 403 prejudice as to the admission of evidence on how he spent donated funds net of fundraising costs—about

$700,000. Sanchez attempts to blur the distinction between fundraising

costs and net charity proceeds; the latter is definitely probative as to the

claimed fraud here. Madigan and the First Amendment surely do not preclude a district court from admitting evidence of how charitable funds, net

of fundraising fees, are spent. See 538 U.S. at 607 n.1. 

UNITED STATES v. LYONS 7861
without more do not establish fraud. And mere failure to volunteer the fund-raiser’s fee when contacting a potential donee

without more is insufficient to establish fraud.” According to

Lyons and Sanchez, the jury instruction allowed the jury to

believe that it could convict based on the confluence of these

two facts that, taken independently, could not support a fraud

conviction. That is, they claim the jury could have convicted

based on high fundraising costs and the failure to volunteer

information about fundraising costs to donors. 

Lyons and Sanchez posit that the district court should have

“directed the jury not to consider the high fundraising costs as

any evidence of fraud whatsoever.” Alternately, they propose

that the instruction “should have told the jury that neither evidence of high fundraising costs nor evidence that such costs

were not gratuitously disclosed, nor any combination of both,

could be deemed any evidence of fraud absent proof of misrepresentations of these costs.” 

[8] The difficulty with their challenge is that the court’s

instruction was a nearly verbatim quotation from Madigan.

See 538 U.S. at 624. It is difficult to understand the claim that

the jury instruction was “flatly prohibited by the Supreme

Court in Madigan” when the instruction quite appropriately

quoted the controlling law. 

B. UNANIMITY AS TO A PARTICULAR FALSE PROMISE

Both Lyons and Sanchez claim that the district court should

have instructed the jury that, to convict on mail fraud, it had

to agree unanimously on the particular false promise or statement made by the defendants. Thus, according to Lyons and

Sanchez, different members of the jury could have convicted

them based on different false promises. For instance, some

jurors may have decided to convict because Handicapped

Youth Services did not provide wheelchairs to handicapped

children as pamphlets promised, while other jurors may have

7862 UNITED STATES v. LYONS
convicted because the AIDS Research Association failed to

provide any funds to hospitals or AIDS patients. 

[9] This argument is foreclosed by a long line of cases; the

jury need not be unanimous on the particular false promise.

See, e.g., United States v. Woods, 335 F.3d 993, 998-99 (9th

Cir. 2003) (“Under the mail fraud statute the government is

not required to prove any particular false statement was

made.”). The district court instruction was proper. 

C. UNANIMITY AS TO THE THEORY OF FRAUD

The next challenge to the jury instructions is that the district court should have instructed the jury to be unanimous on

the theory of fraud. Lyons and Sanchez claim that the instructions given suggest two conceptually distinct theories of mail

fraud liability: the “scheme to defraud” theory and the specific misrepresentation theory. Because this issue was not

raised at trial, we review for plain error. United States v.

Sanders, 421 F.3d 1044, 1050 (9th Cir. 2005). 

[10] Ordinarily, the “general unanimity instruction suffices

to instruct the jury that they must be unanimous on whatever

specifications form the basis of the guilty verdict.” United

States v. Kim, 196 F.3d 1079, 1082 (9th Cir. 1999). A specific

unanimity instruction is required if it appears that there is a

“genuine possibility of jury confusion or that a conviction

may occur as the result of different jurors concluding that the

defendant committed different acts.” Id. (citing United States

v. Anguiano, 873 F.2d 1314, 1319 (9th Cir. 1989)) (internal

quotation marks omitted). 

[11] Nothing here suggests the jury might have been confused, nor do Lyons and Sanchez offer any evidence to suggest this was the case. See United States v. Mastelotto, 717

F.2d 1238, 1247 (9th Cir. 1983) (requiring special unanimity

instruction when “a variance occurred between the single

scheme charged in each count of the indictment and the proof

UNITED STATES v. LYONS 7863
at trial” which indicated the existence of two schemes). Most

importantly, though, the government did not present two “theories” of fraud. Lyons and Sanchez have miscast the jury

instructions and created a false dichotomy between a “scheme

to defraud” theory and a “false promises” theory. The jury

instruction provided that, to prove mail fraud under 18 U.S.C.

§ 1341, the government was required to show that a “defendant knowingly devised or knowingly participated in a

scheme or plan to defraud, or a scheme or plan for obtaining

money or property by means of false or fraudulent pretenses,

representations or promises . . . .” (emphasis added). 

Thus, the “alternate” theories actually both involve

schemes or plans. The jury instruction as given simply did not

provide for mail fraud liability in the absence of a unifying

scheme or plan. By following this instruction, the jury could

not have convicted Lyons and Sanchez for making false

promises in the abstract. 

In any case, jurors need not be unanimous as to a particular

theory of liability so long as they are unanimous that the

defendant has committed the underlying substantive offense.

Kim, 196 F.3d at 1083 (“[I]t was not necessary for the jurors

in this case to unanimously agree on a specific classification

of Kim’s conduct.”).11 Here, the “scheme or plan to defraud”

and “scheme or plan for obtaining money or property by

means of false or fraudulent pretenses” both involve the same

underlying statutory offense, a violation of 18 U.S.C. § 1341.

11See also Schad v. Arizona, 501 U.S. 624, 631-32 (1991) (“We have

never suggested that in returning general verdicts in such cases the jurors

should be required to agree upon a single means of commission, any more

than the indictments were required to specify one alone. In these cases, as

in litigation generally, different jurors may be persuaded by different

pieces of evidence, even when they agree upon the bottom line. Plainly

there is no general requirement that the jury reach agreement on the preliminary factual issues which underlie the verdict.”) (internal citations and

quotation marks omitted). 

7864 UNITED STATES v. LYONS
[12] Finally, sufficient evidence presented at trial showed

that both Lyons and Sanchez had both devised a scheme to

defraud donors and a scheme to obtain money by false pretenses. Under these circumstances, the district court did not

commit plain error. See United States v. Fredette, 315 F.3d

1235, 1243 (10th Cir. 2003) (finding no plain error when the

district court issued general unanimity instruction and “ample

evidence” showed that defendant “both devised a scheme to

defraud customers and dealers and devised a scheme to obtain

money by false pretenses.”) (emphasis in original). 

D. CO-SCHEMER LIABILITY

We next consider the final challenge to the jury instructions, namely that the district court did not instruct the jury as

to all the elements of co-schemer liability. The district court

instructed that to convict on co-schemer liability, the jury had

to find that (1) defendant was a member of the scheme; (2) he

acted with intent to defraud; (3) the acts of the co-schemer

were during and in furtherance of the scheme; and (4) defendant participated in the scheme. The district court did not

instruct the jury that, for a defendant to be vicariously liable

for the acts of his co-schemers, those acts must have been reasonably foreseeable and in furtherance of the scheme. See

United States v. Tarallo, 380 F.3d 1174, 1184 (9th Cir.

2004)). 

[13] The government argues that foreseeability is not an

element of co-schemer liability. But the very case it cites, Stapleton, indicates that jury instructions must “limit[ ] vicarious

liability to acts of co-schemers during the life of the scheme

and acts that were reasonably foreseeable as a necessary and

natural consequence of the fraudulent scheme.” 293 F.3d at

1118 (emphasis added). Stapleton affirmed jury instructions

that explicitly made foreseeability an element of co-schemer

liability. Id. at 1115-16 (“For a defendant to be found guilty

of an offense allegedly committed by a coschemer as part of

the scheme, the offense must be one which would reasonably

UNITED STATES v. LYONS 7865
have been foreseen to be a necessary and natural consequence

of the scheme to defraud.”) (emphasis added and original

bolding omitted). Thus, the district court erred by not instructing the jury that foreseeability is an element of co-schemer

liability. 

The question, then, is the effect of this instructional error.

Although this instruction was not challenged at trial, the error

was not plain and did not affect the substantial rights of either

Lyons or Sanchez. See Sanders, 421 F.3d at 1050. 

[14] Lyons seeks to distance himself from co-schemer liability for any misrepresentations in the brochures for charities,

Counts 13-33, all of which he argues were created after he

had sold his business to co-schemer Roger Lane. But Lyons

was still an active participant in the scheme, including the

drafting of fraudulent pamphlets, long after he sold his business. Lyons not only authored the brochures, he was still in

charge of NAA after Lane’s purchase. Because Lyons was

still actively participating in the fraud alleged, “foreseeability” was not an issue, and the district court’s error was not

plain and did not affect Lyons’ substantial rights. See Stapleton, 293 F.3d at 1117 (noting that a defendant may only be

vicariously liable for the acts of co-schemers that “occurred

during the defendant’s knowing participation or [were] an

inevitable consequence of actions taken while the defendant

was a knowing participant”). 

[15] As was the case with Lyons, many of the mail fraud

counts against Sanchez are based on Sanchez’s active participation in the scheme to defraud. They thus involve his liability as a principal.12 The remaining counts in the indictment

12Sanchez asserts that “[e]ach of the fraud counts is based on the conduct of the telemarketers,” and that the jury should have been instructed

that he was only vicariously liable if the telemarketers were co-schemers,

since he never personally lied to donors. His argument misapprehends

how the indictment alleged mail fraud. None of the mail fraud counts cor7866 UNITED STATES v. LYONS
involve actions in furtherance of the fraudulent scheme that

were reasonably foreseeable. The counts of mail fraud relating to actions that took place after Sanchez left the scheme in

late 2000 charged Sanchez with actions executed by coschemers in accord with his explicit instructions. Mail fraud

that took place after 2000, then, was “an inevitable consequence of actions taken while [Sanchez] was a knowing participant” in the scheme to defraud. Id. Thus the district court’s

error was not plain and did not affect Sanchez’s substantial

rights. 

IV. SENTENCING

[16] Lyons and Sanchez request limited remands pursuant

to Ameline, 409 F.3d at 1078-79. The government acknowledges that remand is appropriate and we grant the requests. 

Lyons and Sanchez go a step further and ask for full resentencings because the district court should have applied the

“beyond a reasonable doubt” standard to facts, aside from

prior convictions, used for sentencing enhancement. Sanchez

in particular argues that the loss calculations used to raise his

sentence were not proven by clear and convincing evidence.

Generally, the pre-Booker standards of proof apply to sentencing, see United States v. Dare, 425 F.3d 634, 642 (9th

Cir. 2005) (“[T]he preponderance of the evidence standard is

the appropriate standard for factual findings used for sentencing.”), though we have held that “the clear and convincing

responds with misrepresentations by telemarketers. The indictment alleges

a scheme to defraud in which Sanchez participated. Each of the 33 counts

of mail fraud is based on a separate mailing in furtherance of the scheme

to defraud—mostly packages from NAA containing commission checks

and supplies. 

Sanchez also suggests that any fraud stemmed from unscripted lies told

by telemarketers, but the indictment does not charge Sanchez with being

liable for any unscripted lies told by telemarketers. 

UNITED STATES v. LYONS 7867
standard still obtains for an enhancement with an extremely

disproportionate effect, even though the enhancement now

results in the calculation of an advisory rather than a mandatory Guidelines sentence.” United States v. Staten, ___ F.3d

___, No. 05-30055, 2006 WL 1542835, at *7 (9th Cir. June

7, 2006). 

As Sanchez and Lyons did not raise this argument in district court, the plain error standard applies. Sanders, 421 F.3d

at 1050. Because there were no extremely disproportionate

enhancements and there is no evidence that the district court

plainly erred in sentencing the defendants, they are not entitled to full resentencings. 

V. REASSIGNMENT OF DISTRICT JUDGE

Sanchez alone has asked to be assigned to a different judge

on remand, under 28 U.S.C. § 2106,13 because “the district

judge does not like Appellant.” Actually, the tension appeared

to be with Sanchez’s attorney, not Sanchez himself, and nothing in the record supports an allegation of bias against Sanchez. 

[17] After Sanchez’s counsel raised several objections that

the district judge seemed to find particularly objectionable,

the judge noted his displeasure with Sanchez’s counsel: “I

control this courtroom. Do you understand that?” The judge

stated that counsel’s objections were not inadvertent error,

refused counsel’s apology, told him to object properly, and

made the following comments to Sanchez’s counsel in front

of both defendants:

13Section 2106 provides: “[A]ny . . . court of appellate jurisdiction may

affirm, modify, vacate, set aside or reverse any judgment, decree, or order

of a court lawfully brought before it for review, and may remand the cause

and direct the entry of such appropriate judgment, decree, or order, or

require such further proceedings to be had as may be just under the circumstances.” 

7868 UNITED STATES v. LYONS
I don’t believe you. It’s willful, and I will resolve

this for you. I’m warning you. And by the time they

fish your client out of prison, if he is convicted—and

even if I’m overturned in terms of something I say

in front of the jury, it will be years. So don’t press

me on it counsel. We are done with this discussion

now. Have a nice lunch.

The government identifies no context or other facts that help

drain the sting from the judge’s comments. Nevertheless, Sanchez points to no other examples of purported bias by the district judge. These few comments alone do not justify

reassignment of this case. 

We may remand to a different district judge if a party can

show personal biases or unusual circumstances, based on an

assessment of three factors: (1) whether on remand the district

judge can be expected to follow this court’s dictates; (2)

whether reassignment is advisable to maintain the appearance

of justice; and (3) whether reassignment risks undue waste

and duplication. United States v. Peyton, 353 F.3d 1080, 1091

(9th Cir. 2003). 

Sanchez prevails on none of these factors. Nothing suggests

that the district judge would fail to follow this court’s mandate, even if it had been favorable to Sanchez. Nor do we

believe that these comments will affect the fairness of proceedings on limited remand. We also have no reason to

believe that reassignment is needed to maintain the appearance of justice. Even after this limited exchange, the district

judge made rulings favorable to Sanchez, departing downward on his criminal history score and refusing to impose a

two-level enhancement for obstruction of justice, as requested

by the government. Finally, as the government notes, reassignment would result in undue waste and duplication, particularly given the long procedural history of the case and

complexity of issues involved. 

UNITED STATES v. LYONS 7869
AFFIRMED in part; REMANDED in part pursuant to

Ameline. 

7870 UNITED STATES v. LYONS