Opinion ID: 155208
Heading Depth: 2
Heading Rank: 1

Heading: sufficiency of the evidence

Text: Mr. McIntosh challenges the sufficiency of the evidence against him on both the bankruptcy fraud and money laundering counts. We consider the sufficiency of the evidence in the light most favorable to the jury’s verdict, and determine whether any rational trier of fact could have found, from the direct and circumstantial evidence presented to it, together with the reasonable inferences therefrom, the essential elements of the crime beyond a reasonable doubt. United States v. Mitchell, 113 F.3d 1528, 1530 (10th Cir. 1997); United States v. Contreras, 108 F.3d 1255, 1264 (10th Cir. 1997), petition for cert. filed, June 7, 1997 (No. 96-9286). -6- A. Sufficiency of the Evidence of Bankruptcy Fraud Mr. McIntosh first challenges the sufficiency of the evidence supporting the four bankruptcy fraud convictions. A person who knowingly and fraudulently transfers or conceals property with the intent to defeat the provisions of the Bankruptcy Code violates 18 U.S.C. § 152(7). Mr. McIntosh argues that insufficient evidence supports his intent to conceal his financial interest in Fortex and the income it generated. He reasons that because he mentioned Fortex to his attorney, and his attorney failed to list that asset on the bankruptcy filings, his conviction must be reversed. This argument ignores, however, the evidence of Mr. McIntosh’s intent to conceal information about Fortex from the bankruptcy court and his creditors—and from his attorney. In a bankruptcy proceeding, the duty to disclose assets falls upon the debtor—whether or not that debtor is represented by counsel. Mr. McIntosh signed the bankruptcy schedules over a warning that his failure to provide complete and accurate data on those forms could result in prosecution, and Mr. McIntosh’s attorney testified that he explained to Mr. McIntosh the significance of his signature on those forms. Those schedules failed to list the checking account titled in Mr. McIntosh’s name on behalf of Fortex. Mr. McIntosh also -7- failed to report to the bankruptcy court his deposit of nearly $23,000 into that account. The attorney who represented Mr. McIntosh acknowledged that he had been informed generally about Fortex and that he intended to—but ultimately did not—investigate the extent of Mr. McIntosh’s interest in that entity and amend the schedules if necessary. The attorney also testified that Mr. McIntosh concealed from him information about the value of Fortex and the income it generated. A revenue agent testified at trial that, during an interview, Mr. McIntosh estimated his earnings from Fortex at about $50,000 annually. After his discussion of the matter with Mr. McIntosh, however, the attorney was left with the impression that Fortex was not an asset of great value. Mr. McIntosh never informed his attorney of the Fortex bank account, nor of the income deposited in that account during the pendency of the bankruptcy proceedings. Mr. McIntosh’s accountant also testified that Mr. McIntosh told him to remove mention of Fortex from the data he prepared for the bankruptcy filings. Although, for reasons discussed later in this opinion, we reverse Count 1 and conclude that Mr. McIntosh was entitled to an advice-of-counsel instruction on that count regarding his financial interest in Fortex, we find ample evidence supporting the jury’s conclusion that Mr. McIntosh intended to commit bankruptcy fraud by concealing income generated by Fortex. -8- Mr. McIntosh next challenges his bankruptcy fraud conviction for failing to report his interest in the New Jersey property. A debtor in a bankruptcy proceeding is required to disclose all property owned at the commencement of the case. Mr. McIntosh did not own the New Jersey property. Instead, the only evidence reflected that the property was owned by and titled in his father’s name. Although Mr. McIntosh lived in the house and paid the monthly mortgage payments, the government offered no evidence at trial to establish that Mr. McIntosh had a legal or equitable ownership interest in the property. A debtor need not report property in which he holds no legal or equitable interest to the bankruptcy court. See In re Vitek, Inc., 51 F.3d 530, 536 n.27 (5th Cir. 1995). Count 1 charged Mr. McIntosh with concealment of his financial interests in Fortex and in the New Jersey property, and the jury was instructed that they could find Mr. McIntosh guilty on that Count if they unanimously determined that he had concealed either interest. Mr. McIntosh had no financial interest in the New Jersey property, however, and the instruction to the jury was therefore based on an erroneous legal theory. Since we cannot determine with certainty that the jury convicted Mr. McIntosh of concealing his financial interest in Fortex, we must reverse his conviction on Count 1. Griffin v. United States, 502 U.S. 46, 59 (1991). We will remand this matter for a new trial on Count 1 amended to exclude the allegations regarding the New Jersey property. United States v. Self, -9- 2 F.3d 1071, 1093-94 (10th Cir. 1993). Count 2 was based solely upon Mr. McIntosh’s concealment of income from Fortex. We find sufficient evidence of the concealment of property, namely, approximately $68,500 of income for Fortex, and therefore affirm Mr. McIntosh’s conviction on Count 2. Mr. McIntosh argues that insufficient evidence supports his convictions on Count 3, charging him with concealment of the Pilcher fee in violation of 18 U.S.C. § 152(7), and Count 13, charging him with making a false statement on the March Operating Report regarding that fee in violation of 18 U.S.C. § 152(3). We conclude infra that the two counts are multiplicitous, but we reject Mr. McIntosh’s argument that the evidence is insufficient for want of materiality. Merely because it is ultimately determined that an asset is not includible as part of the bankruptcy estate does not mean that the omitted information is incapable of influencing the proceedings, see United States v. Gaudin, 515 U.S. 506, 509 (1995) (definition of materiality under 18 U.S.C. § 1001). To the contrary, where the debtor is under a duty to disclose, the bankruptcy court must know about an asset to determine its status, including whether it is property of the estate or, in a reorganization case, how it affects the feasibility of the debtor’s plan. See United States v. Ellis, 50 F.3d 419, 423 (7th Cir.), cert. denied, 116 S. Ct. 143 (1995); United States v. Cherek, 734 F.2d 1248, 1254 (7th Cir. 1984), cert. denied, 471 -10- U.S. 1014 (1985). The bankruptcy trustee so testified. Vol. II, Trial Transcript, at 97-98. B. Sufficiency of the Evidence of Money Laundering Mr. McIntosh also challenges the sufficiency of the evidence supporting the nine money laundering convictions. Seven of those convictions were based upon 18 U.S.C. § 1956(a)(1)(A)(i), 1 which is aimed at money laundering which promotes the carrying on of an unlawful activity. Mr. McIntosh was also convicted on one count of violating 18 U.S.C. § 1956(a)(1)(B)(i), 2 which is aimed at money laundering designed to conceal attributes of the proceeds of an unlawful activity, and on one count of engaging in a financial transaction with criminally derived proceeds in violation of 18 U.S.C. § 1957. To convict a defendant under any of these three statutory provisions, the government must prove as an initial 1 18 U.S.C. § 1956(a)(1)(A)(i) provides that “[w]hoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity[,] with the intent to promote the carrying on of specified unlawful activity . . .” commits a federal offense. 2 18 U.S.C. § 1956(a)(1)(B)(i) provides that “[w]hoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity[,] knowing that the transaction is designed in whole or in part [] to conceal or disguise the nature, the location, the source, the ownership or the control of the proceeds of specified unlawful activity . . .” commits a federal offense. -11- matter that the funds used in the financial transaction were in fact the proceeds of one of the specified unlawful acts enumerated in the statute. Bankruptcy fraud is one of the unlawful acts enumerated in the statute, 18 U.S.C. § 1956(c)(7)(D), however, the government has failed to prove that the funds used by Mr. McIntosh in the financial transactions at issue were the proceeds of bankruptcy fraud. The government does not argue that the fee Mr. McIntosh received for representing Ms. Pilcher was the property of the bankruptcy estate. Mr. McIntosh earned that fee by representing Ms. Pilcher, and collected it pursuant to the terms of their agreement. Mr. McIntosh committed no criminal offense when he received the funds, when he and Ms. Pilcher negotiated the settlement check, or when he negotiated the checks representing his share of the settlement. On the days that these events occurred, Mr. McIntosh was under no immediate obligation to advise the court or his creditors of the receipt of that property or to turn the property over to the bankruptcy court. Without such a duty, Mr. McIntosh did not commit bankruptcy fraud when he engaged in the financial transactions at issue. See United States v. Chiarella, 445 U.S. 222, 226-29 (1980); United States v. Cochran, 109 F.3d 660, 665 (10th Cir. 1997); United States v. Irwin, 654 F.2d 671, 678-79 (10th Cir. 1981), cert. denied, 455 U.S. 1016 (1982); Edwards v. United States, 265 F.2d 302, 306 (9th Cir. 1959). Consequently, the funds involved in the transaction were not the proceeds of bankruptcy fraud, and Mr. -12- McIntosh could not have committed money laundering by spending those funds. Neither the enactment of the money laundering statute nor Mr. McIntosh’s subsequent failure to report this property in the bankruptcy proceeding magically reached back and transformed these funds received from legitimate sources into the proceeds of unlawful activity. All of Mr. McIntosh’s money laundering convictions must be reversed.