United States Court of Appeals Fifth Circuit 

## FILED October 31, 2006 Charles R. Fulbruge III Clerk 

## In the 

# United States Court of Appeals for the Fifth Circuit

_______________


### m 05-31107

_______________ I N RE : 

### P HILLIPS AND 

### H ORNSBY 

### LITIGATION



### . K AREN 

### H ORNSBY 

### K

IRKWOOD 

### , E TC 

### .; ET 

### AL 

### .,

Plaintiffs,

VERSUS


### P AUL 

### D. G LASS 

### ; ET 

### AL 

### .,

Defendants.
* * * * * * * * * * * * * * *

I N RE : 

### FRAUDULENT 

### T RANSFER



### . U NITED 

### S TATES OF 

### AMERICA 

### , Plaintiff-Appellee,
VERSUS


### R YAN 

### P HILLIPS 

### ; ET 

### AL 

### .,

Defendants,


### R YAN 

### P HILLIPS AND 

### G REGORY 

### P HILLIPS 

### , Defendants-Appellants.2 _________________________ Appeal from the United States District Court fo r the Middle District of Louisiana 

### m 3:03-CV-3231

______________________________

Before J ONES , Chief Judge, S MITH and S TEWART , Circuit Judges.
J ERRY E. S MITH , Circuit Judge: *
Defendants appeal a summary judgm e nt voiding a transfer o f property from Chaney Phillips to his sons Gregory and Ryan. We affirm.
I. On April 21, 1998, Chaney Phillips was convicted of

, inter alia , mail fraud and mo ney launderin g in vio lat io n of 18 U.S.C. §§ 1341 and 1957, respectively. Before sentencing, a probation of

ficer met wit h him to determ in e the value of his financial assets fo r inclusio n in a presentence invest igation report (“PSR”). In answer to a specific question about inherited property , Phillips disclosed that he had a five percent int erest in a succession from his friend Stanley Hornsby but claimed the int erest was of small value and was entangled in lit igation. Based on these representations, the of ficer assumed the int erest was de minimis and did not include it in the PSR. Actually, however, mo nt hs before Phillips’s conversation wit h the probation of

ficer, the lit igation had been com
pleted, and Phillips had been awarded $32,600, which was an amo unt roughly equal to the remainder of his net worth.
On June 26, 1998, the prob a tion of ficer presented Phillips wit h t he PSR, including info rmation about what restitution he might be obl igated to pay . Phillips objected to several aspects of the report, including the amo unt and recipients of the possible restitution. The PSR was duly amended on July 24 to include Phillips’s objections.
On the mo rning of July 30, the day of Phillips’s scheduled sentencing, he executed an inter vivos donation of his int erest in the Hornsby succession to his sons. Later that day , he was sentenced to 97 mo nt hs’ incarceration and $225,587.56 in restitution. At no time during his sentencing hearing did he disclose the donation he had made that morning. Phillips appealed his convictions and init ial sentence. Certain of his convictions were vacated, and on November 20, 2000, he was resentenced to pay $217,587.56 in restitution.
When it discovered Phillips’s gift , the government brought this action, alleging that the conveyan ce consti

tuted a fraudulent transfer under the Federal Debt Collection Practices Act (“FDCPA”), 28 U.S.C. § 3302 et seq. , which permits the government to avoid “t ransfer[s] or obligation[s] to the extent necessary to sati sfy [a] debt to the Unit ed S tates.” 28 * Pursuant to 5 TH C IR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except u nder the limited circumstances set forth in 5 TH C IR . R. 47.5.4.3

U.S.C. § 3306(a)(1). 2 On October 31, 2003, the government mo ved fo r summary j udgment, which was denied because the distr ict court fo und th at there was a genuine dispute of materi al fact as to whether Phi llips had transferred the property wit h fraudulent intent.
The government mo ved fo r reconsideration and submit ted a redacted version of the PSR in support. Finding t hat the PSR demonstrated conclusively th at Phillips had been info rm ed of the likeliho od of restitution before the transfer, the court granted summary judgment as to the claim of a fraudulent transfer in vio lat io n of 28 U.S.C. § 3304. Only P hillips’s sons appeal, contending th at the PSR was improperly admit ted int o evidence and th at, even considering the PSR, a genuine dispute of mat erial fact exist s wit h regard to Phillips’s int ent in making the transfer.
II. The sons object to the relevance of and redactions to the PSR and to the authenticity of the docum

ent under Federal Rule of Evidence 901. We agree with the district court that defendants waived their objections to the relevance of the document and the redactions thereto; we review the district court’s application of rule 901 fo r abuse of discretion. S ee R.R. Mgmt. Co., L.L.C. v. CFS La. Midstream Co. , 428 F.3d 214, 220 (5 th Cir. 2005). We will reverse only where we determ ine t hat an error was prej udicial. S ee United States v. Scott , 678 F.2d 6 06, 612 (5th Ci r. 1982) (stating th at rule 901 error is subject to harmless error analysis).
We agree wit h the district court th at defendants had am

ple opportunity to ob

ject to the relevance and content of the PSR and failed to do so. The government informed defendants and the court th at it int ended to introduce the redacted PSR, and it disclosed specifically which portions it intended to include.
Pursuant to Local Rule 7.5M, the court required th at any objections be filed wit hin twenty days of Marc h 27, 2004. Defendants filed no objection until January 24, 2005; they supp ly no plausible reason why they could not have objected to the relevance of or redactions to the PSR wit hin the time allo tted by the district court. Accordingly, we affirm the finding of waiver as to these issues.
We need not decide whether defendant s waived their objection to the authentic it y of the copy of the P SR that the government introduced or whether the admission of the PSR was error under rule 901. That is because any error was harmless. Phillips has actually seen the PSR and on appeal his sons raise no genuine issue of fact as to the authenticity of the docum ent. Thus, any error com

mit ted in admit ting the copy of the PSR wit hout certificat io n was harmless. Likewise, defendants have supplied no reason to believe th at a dmit ting copies in lieu of the original was unfair; accordingly, we also rej e ct their challenge based on Federal Rule of Evidence 1003.

III. The Phillips son s contend that, even considering the PSR as properl y admit ted int o 2 Private re stitution orders ma y be recovered in the sam e ma nner as the statute provides for “debt[s] to the United States.” S ee 18 U.S.C. § 3664(m)(1)(A)(i)-(ii) (stating tha t the United States is authorized to enforce victim restitution orders by the sam

e mea ns as it recovers fines); United States v. Phillips , 303 F.3d 548, 550-51 (5th Cir. 2002).4

evidence, summary judgment is inappropriate because there is a genuine dispute as to Phillips’s int ent in making the t ran sfer. We disagree. Analyzing a Texas statute that was, in all relevant respects, identical to the FDCPA, this court stated th at “[i]ntent to defraud . . . c an be decided as a matter of law” where numerous “badges of fraud” 3 are present and the only evidence in support of the defendant’s theory is a series of conclusional, self-serving statem ents. BMG Music v. Martinez , 74 F.3d 87, 90-91 (5th Cir. 1996).
As in BMG Music , six of th e eleven listed badges of fraud are present: (1) The transfer oc curred shortl

y befo re or after the debt was incurred; (2) Phillips received no reasonably equivalent value fo r the transfer; (3) the transfer was made to “insiders”; (4) Phillips was insolvent at the time of the transfer; (5) he conce aled the transfer by failing to disclose it at his sentencing; 4 and (6) he concealed his retirement account wit h th e Louisiana Tax Assessors’ Office. See 28 U.S.C. § 3304(b)(2). In addition to these nonexclusive statutory factors, P h illips mischaracterized his succession int erest when he met wit h the of ficer developing the PSR, describing it as speculative and of s mall value. He also failed to disclose at t he sentencing th at he had executed a $100,000 second mo rtgage on his house onl y t wo day s earlier.
Alt hough there are som

e diff e rences between this case and BMG Music 

### S S fo r example, the defendant in BMG Music admit ted th at he retained an int erest in the transferred property , see BMG Music , 74 F.3d at 91 n.21, these di sti nctions are insignificant to the outcom e of this case. The same number of badges of fraud are present, and the inference o f fraud is similarly inescapable.
None o f defendant s’ self-serving statements th at Phillips lacked int ent to defraud is enough 3 The FDCPA states, in determining actual intent, that special consideration ma y be given to certain “badges of fraud” such as whether (A) the transfer or obligation was to an insider; (B) the debtor retained possession or control of the property transferred after the transfer; (C) the transfer or obligation was di s closed or concealed; (D) before the transfer was ma de or obligation was incurr e d, the debtor had been sued or threatened with suit; (E) the transfer was of substantially all the debtor’s assets; (F) the de

btor absconded; (G) the debtor removed or concealed assets; (H) the value of the consideration recei ved by the debtor was reas onably equivalent to the value of the asset transferred or the am

ount of the obligation incurred; (I) the debtor was insolvent or became insolvent shortly after the transfer was ma de or the obligation was incurre d; (J) the transfer occurred shortly before or shortly after a substantial debt was incurred; and (K) the debtor transferred the essential assets of the business to a li enor who transferred the assets to an insider of the debtor. 28 U.S.C. § 3304(b)(2). 4 Defendants’ contention that Phillips disclosed the transfer because he ma de the transaction public under Louisiana law is without mer it. The fact that Phillips recorded the transaction and thus publicized it to the minimum extent necessary to achieve a valid transfer under Louisiana law is insufficient to c onstitute “disclosure” under the statute where he failed to inform the sentencing court, the United States, or e ven any of the persons to whom he owed re stitution. S ee, e.g. , LSA-C.C . art. 2442 (stating that concealed transfers of property are ineffective wi t h re spect to third parties such as creditors).5

to overcom

e the objective evidence. 5 It i s implausible th at Phillips did not know the difference betw een a f

ine, which he had been info rm ed th at he was unlikely to have to pay, and restitution. It i s scarcely credible that he did not realize th at h e woul d l ikely be fo rced to make som

e restitution. He had been shown the PSR, he knew was likely to be ordered to pay restitution, and he transferred his int erest in the Hornsby succession to his sons to avoid fo rfeiting it to his likely creditors. The numerous indicia of fraudulent int ent make summary judgment appropriate.
AFFIRMED.

5 See In re Hinsley , 201 F.3d 638, 643 (5th Cir. 2000) (“A party’s self-servin g and unsupported claim that [he] lacked the requisite intent is not sufficient to defeat summary judgment where the evidence otherwise supports a finding of fraud.”).