Court Opinion

ID: 2820216
Source: CourtListenerOpinion
Date Created: 2015-07-24 21:03:00.930475+00
Date Added: 2024-06-11T11:28:28.839304
License: Public Domain

NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS                            FILED
                            FOR THE NINTH CIRCUIT                              JUL 24 2015

                                                                          MOLLY C. DWYER, CLERK
                                                                            U.S. COURT OF APPEALS

UNITED STATES OF AMERICA,                        No. 13-30372

              Plaintiff - Appellee,              D.C. No. 3:11-cr-00247-BR-1

  v.
                                                 MEMORANDUM*
MARK A NEUMAN,

              Defendant - Appellant.

UNITED STATES OF AMERICA,                        No. 13-30373

              Plaintiff - Appellee,              D.C. No. 3:11-cr-00247-BR-3

  v.

LANE D. LYONS,

              Defendant - Appellant.

UNITED STATES OF AMERICA,                        No. 13-30374

              Plaintiff - Appellee,              D.C. No. 3:11-cr-00247-BR-2

  v.

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
TIMOTHY D. LARKIN,

                Defendant - Appellant.

                      Appeal from the United States District Court
                               for the District of Oregon
                       Anna J. Brown, District Judge, Presiding

                                Submitted July 6, 2015**
                                   Portland, Oregon

Before: PREGERSON, N.R. SMITH, and OWENS, Circuit Judges.

         Mark Neuman, Lane Lyons, and Timothy Larkin appeal their jury

convictions and sentences for conspiracy to commit mail fraud in violation of 18

U.S.C. § 1349, and conspiracy to commit transactional money laundering in

violation of 18 U.S.C. § 1956(h), arising from their misuse of client funds as

principals in Summit Accommodators, a 1031 qualified intermediary exchange

company. We have jurisdiction under 28 U.S.C. § 1291, and we affirm the district

court.

1.       The district court did not abuse its discretion when it granted the

government’s motion to preclude the Defendants’ expert witness (cognitive

psychologist Shawn Davis, Ph.D.) from testifying. Defendants’ expert disclosure

          **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
                                             2
was (1) untimely in violation of Fed. R. Crim. P. 16 (evidence presented indicates

that Defendants did not provide Davis’s full report to the government or to the

court until around June 18, 2013, over eighth days after the trial began and clearly

well after the court-imposed deadline for expert-witness disclosures of April 26,

2013. See United States v. Urena, 659 F.3d 903, 909 (9th Cir. 2011)); and (2)

excludable under Fed. R. Evid. 702, because Defendants failed to establish that

Davis’s proffered testimony was reliable or that it would be helpful to the jury. See

United States v. Cruz-Escoto, 476 F.3d 1081, 1088 (9th Cir. 2007). Thus, the

district court’s decision to preclude Davis’s testimony was not “illogical,

implausible, or without support.” See United States v. Hinkson, 585 F.3d 1247,

1263 (9th Cir. 2009) (en banc); see also United States v. Olano, 62 F.3d 1180,

1204 (9th Cir. 1995) (“[T]rial courts have very broad discretion in applying Rule

403 . . . .”).

2.     The district court did not abuse its discretion in precluding evidence related

to a 2006 IRS National Research Program audit of Summit’s 2004 tax return.

Defendants were charged and convicted of wire fraud and money laundering, not

tax fraud. Thus, given Defendants’ reason for wanting to introduce the evidence, it

was not “illogical, implausible, or without support” for the district court to find

that, under Federal Rule of Evidence 403, the marginal probative value of the

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evidence was outweighed by the danger of unfair prejudice to the government and

the risk that jurors may give it undue weight or misapply its significance. See

Hinkson, 585 F.3d at 1263.

3.    Defendants’ assertion that conspiracy to commit mail or wire fraud (Count

One) cannot constitute “specified unlawful activity” under 18 U.S.C. §§ 1956 or

1961 is without merit. Section 1956(h) criminalizes the agreement to commit

transactional money laundering, not the commission of transactional money

laundering. Therefore, § 1956(h) does not require that substantive specified

unlawful activity be charged or proven. See United States v. Chao Fan Xu, 706

F.3d 965, 980 (9th Cir. 2013) (“The conspiratorial agreement [to violate § 1957(a)]

represents the crystallization of the conspirator’s culpable criminal intent;

accomplishment of the underlying crime is immaterial to culpability.”). Contrary

to Defendants’ assertions, a defendant does not have to commit or be convicted of

the underlying substantive specified unlawful activity that generated the illegal

proceeds to be guilty of a conspiracy to commit money laundering. See Chao Fan

Xu, 706 F.3d at 980; United States v. Kimbrew, 406 F.3d 1149, 1151-52 (9th Cir.

2005) (upholding conviction for conspiracy to commit money laundering where

jury acquitted defendant of conspiracy to commit mail fraud and wire fraud and of

substantive wire fraud).

                                           4
4.    a.     The district court did not abuse its discretion in giving a deliberate

ignorance jury instruction. “[A] district court may give a deliberate ignorance

instruction if it determines that a jury could rationally find deliberate ignorance,

even if the jury had rejected the government’s evidence of actual knowledge.”

United States v. Ramos-Atondo, 732 F.3d 1113, 1119 (9th Cir. 2013). The district

court properly instructed the jury on deliberate ignorance, because (1) each

Defendant disputed actual knowledge of the falsity of the information on Summit’s

website, in Summit’s marketing materials, and made by Summit employees; (2) the

instruction was necessary to address the concern that the jury could find that

Defendants were aware that clients would find information about Summit’s use

and holding of client funds material, yet Defendants purposefully chose not to have

or pursue “actual” knowledge of the information being conveyed to clients about

their funds; and (3) the jury had to assess the evidence against each Defendant

individually and the deliberate ignorance instruction properly accounted for each

Defendant’s varying levels of knowledge and involvement.

      b.     The district court did not err when declining to give a character

instruction. The Ninth Circuit Model Jury Instructions do not include a character

instruction, explaining that such an instruction “adds nothing to the general

instructions.” See Model Crim. Jury Instr. 9th Cir. 4.4 cmt. (2010). Additionally,

                                           5
Defendants were not impeded from fully developing a defense theory based on

their good character. See United States v. Moe, 781 F.3d 1120, 1127-28 (9th Cir.

2015). Defendants called a number of character witnesses who testified that the

Defendants were truthful and honest. The jury instructions as a whole adequately

covered this defense theory by informing the jury that any credited testimony could

establish reasonable doubt.

      c.     The district court’s jury instruction correctly defined a “scheme to

defraud or to obtain money or property” in the context of this case. Although

contested, the district court used the same language previously affirmed by this

court in United States v. Woods, 335 F.3d 993, 997-98 (9th Cir. 2003) (such

language is now referred to as a “Woods Instruction”). A Woods instruction was

appropriate given the facts of this case and Defendants’ theory of defense.

5.    Given the scope of Lyons’s and Larkin’s joint undertakings in the

conspiracy, and the forseeability that they would not be able to provide clients their

funds when due, the district court did not abuse its discretion when it attributed the

full amount of the financial loss to each Defendant. The district court made

specific findings of fact (consistent with the requirements of U.S.S.G. § 1B1.3), as

to both the scope of each Lyons’s and Larkin’s participation in the “joint

                                          6
undertaking” and the losses “reasonably foreseeable” to each of them. See United

States v. Treadwell, 593 F.3d 990, 1003 (9th Cir. 2010).

      The district court further found that: (a) although Larkin and Lyons joined

the conspiracy later than Neuman, all Defendants knew by October 2006 that their

personal use of client funds and the resulting Inland debt meant they never

maintained enough liquidity to cover that debt if all clients were to be paid at the

same time; and (b) by 2007, all Defendants were aware that clients were given

misleading information about the security of the exchange funds.

6.    The district court did not err in allowing the government to use the “Lyons’

Confidential Memo” in its case-in-chief against all Defendants. The government

obtained the Memo from Assistant Federal Public Defender Schatz, a source that

was wholly independent of Larkin’s proffer. See Kastigar v. United States, 406

U.S. 441, 460 (1972). Thus, this source of the Memo was not tainted by Larkin’s

proffer. Additionally, Defendants failed to establish that the Confidential Memo

was protected by attorney-client privilege. See United States v. Graf, 610 F.3d

1148, 1156 (9th Cir. 2010). Lyons composed the inculpatory Memo in anticipation

of a partnership meeting that occurred the following day. Therefore, the

Confidential Memo was not attorney work product. Rather, it was a preexisting

Summit record prepared by a Summit partner (Lyons) in preparation of a meeting.

                                          7
Further, the Confidential Memo was not protected by a joint defense agreement

(“JDA”).

      Evidence presented refutes Defendants’ claim that there existed a specific

coordinated strategy (JDA) among defense counsel in the early stages of the

criminal investigation. Rather than working in concert, Larkin and Lyons

individually pursued proffer agreements from the government. Larkin and Lyons

each actively and individually sought to gain an early advantage over the other

defendants and sought to minimize charges. Neuman was unaware of both

Lyons’s and Larkin’s proffer discussions with the government. Certainly, Neuman

and his counsel did not approve Larkin’s disclosure of the Confidential Memo to

the government.

7.    The district court did not abuse its discretion in denying Larkin’s motion for

a Kastigar hearing. There were no factual issues left to resolve. See United States

v. Dudden, 65 F.3d 1461, 1469 (9th Cir. 1995) (“[A Kastigar] hearing is not

required if no factual issues are left to resolve, or if the government meets its

burden to show independent sources through the use of affidavits,”). The issue of

the Confidential Memo was exhaustively briefed, and Larkin had numerous

opportunities to present evidence and argument to the district court prior to it

issuing its May 1, 2013, sixty-three page opinion and order on the issue. Although

                                           8
the court did not label its full-day April 9, 2013 hearing as a Kastigar hearing, the

court made it clear that the hearing was intended to encompass all issues

concerning whether the government could use the Lyons Confidential Memo in its

case-in-chief against Defendants.

      Additionally, the district court properly denied Larkin’s motion to reopen

the record. Contrary to Larkin’s assertions, his proposed new evidence was not

“newly discovered.” See Sch. Dist. No. 1J, Multnomah Cty., Or. v. ACandS, Inc., 5

F.3d 1255, 1263 (9th Cir. 1993). Rather, Larkin had made a conscious and

strategic decision to withhold the evidence, despite the fact that the court stated

(prior to its April 9, 2013 hearing) that it was going to take all evidence related to

the government’s use of the Confidential Memo, so that it could make a

comprehensive ruling and would not have to revisit the issue “over and over

again.”

      AFFIRMED.

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