EMILIO M. GARZA, Circuit Judge:
Defendant Bruce West, Sr. was tried before a jury and convicted of ten counts of bankruptcy fraud, in violation of 18 U.S.C. § 152 (1988), eleven counts of money laundering, in violation of 18 U.S.C. § 1956, and one count of conspiring to commit bankruptcy fraud, in violation of 18 U.S.C. § 371. West now appeals his conviction, contending both that the indictment did not properly charge violations of the bankruptcy fraud and money laundering statutes and that the district court's admission of and refusal to admit certain evidence deprived him of a fair trial. We affirm.
Bruce West, Sr., a Texas real estate developer, experienced serious financial problems as a result of the decline in the Texas economy during the mid- to late 1980s. West eventually filed a petition in bankruptcy on April 2, 1990. This criminal case emanates from West's bankruptcy filing, with many of the charges contained in the indictment based on three transactions that West participated in shortly before filing his bankruptcy petition.
In April 1989, West sold his homestead ("Dondi Farms") to Earlene Jett, as trustee for her son, Scott Mays. West received $75,000 in cash and a note signed by Jett in the amount of $277,500 ("the Jett note"). As part of the transaction, West leased, and held an option to purchase, a lakehouse owned by Jett. The Jett note was payable in quarterly installments of $8900; under the terms of the sale contract, however, West allowed Jett to deduct from the note payments the monies due Jett as a result of the lakehouse lease.
In June 1990, West arranged for a third party to purchase Jett's lakehouse for an amount slightly exceeding its existing mortgage. After the sale had closed, Jett paid the excess—$2,613—to West, who subsequently gave the money to Betty Ruben and Jo Ann Johnson as compensation for finding the buyer. Jett also received a refund on her insurance escrow account, which she paid to West and he then paid to Johnson. West's involvement with the sale of the lakehouse and its proceeds forms the basis for a single count of bankruptcy fraud.
The second transaction at issue involved the 1989 purchase of two notes executed by West and held by the Federal Deposit Insurance Corporation ("FDIC"). In 1984, West purchased a building in Addison, Texas ("the Broadway building") for $650,000, financing $350,000 of the purchase price with a loan from Parkway Bank & Trust ("Parkway"). A deed of trust for the building secured West's promissory note. In 1988, Parkway failed, the FDIC was appointed as receiver, and West defaulted on the loan.
The third transaction at issue involves Exalter's purchase and subsequent sale to West of a house in Frisco, Texas ("the Frisco house"). In June 1989, Richard McCally sold the Frisco house and an adjacent vacant lot to Exalter in exchange for $125,000 in cash and the Broadway Building, which McCally valued at $545,000.
West's failure to report his interest in two bank accounts forms the basis for two additional counts of bankruptcy fraud—Counts 24(a) and 26. In April 1989, Jack Franks wired $219,930 to Commonwealth National Bank in West's name. Because West did not have an account at Commonwealth, a bank employee opened an account in West's name into which the funds could be deposited. In May, West ordered the bank to close the account and disburse the funds as follows: a $150,000 cashier's check payable to the FDIC listing North Star Funding as the remittitur, which West subsequently presented to the FDIC in exchange for the Parkway notes; $50,000 deposited into a new account in Exalter's name;
Count 26 charged West with fraudulently transferring and concealing funds in a second Commonwealth account, which was opened by Sandra Malmay, West's then-girlfriend, in September 1989. Malmay testified that West directed her to open the account in her name because he was afraid that any accounts held in his name would be garnished. Malmay further stated that checks drawn on the account "mostly" benefitted West and were paid with funds deposited by West. Moreover, West deposited several payments made pursuant to the Jett note into the account, the proceeds of which then were transferred to Exalter.
Count 31 charged West with money laundering. The transactions underlying this count involved two automobiles—a 1962 Mazda coupe and a 1935 Austin. West failed to list the Mazda on the appropriate bankruptcy schedules and erroneously indicated that he held only a one-half interest in the Austin. However, West subsequently conveyed the cars to Great Cars, Inc. ("Great Cars") in exchange for a dune buggy and $5,750 cash, which was deposited into the Malmay account.
West was convicted of several counts of bankruptcy fraud, in violation of 18 U.S.C. § 152.
We disagree with West's interpretation of § 152. The plain language of § 152 certainly cannot be read to impose the requirement suggested by West. See United States v. Moody, 923 F.2d 341, 347 (5th Cir.1991) (noting that "words in a statute are to be given their plain and ordinary meaning"). Moreover, in light of the explicit intent requirements
West next challenges the sufficiency of Counts IX through XVIII and Count XXXI of the indictment, arguing that the government failed to adequately allege the elements of the charged offenses—money laundering, in violation of 18 U.S.C. § 1956.
West contends that the crime of money laundering "must always have at its core [the] act of taking `dirty money' and making it `clean.'" In contrast, West submits that "[t]he act at the core of this case ... was the taking of `clean money' and making it dirty.'" In other words, West contends the monies he received from Jett and Great Cars were not proceeds of some unlawful activity, but instead constituted the proceeds of lawful activities—namely, Jett's purchase of Dondi Farms and Great Cars' purchase of the two automobiles. We disagree. The mere fact that Jett and Great Cars were innocent third parties—i.e., they did not conspire with West to commit bankruptcy fraud—does not preclude West's conviction for money laundering. Instead, the checks that Jett and Great Cars gave to West involved the proceeds of unlawful activity—West's attempts to fraudulently conceal assets, in contemplation of a case under title 11 or with intent to defeat the provisions of title 11. Had West not undertaken such a course of action, he would not have received any funds from Jett or Great Cars. Consequently, the checks at issue resulted from West's concealment of assets and, therefore, constituted the proceeds of West's bankruptcy fraud.
West also challenges several evidentiary rulings made by the district court. We review the district court's determinations as to the admissibility of evidence using the abuse of discretion standard. See United States v. McAfee, 8 F.3d 1010, 1017 (5th Cir.1993) (exclusion of evidence); United States v. Loney, 959 F.2d 1332, 1340 (5th Cir.1992) (admission of evidence).
West first contends that the district court erred in refusing to allow him to introduce evidence that "it was a routine practice of the FDIC to sell notes held by a failed institution at a discount, and that the FDIC frequently allowed parties to purchase their own discounted note through third parties who were ... `straw purchasers.'" West argues that such evidence was both relevant to the issue whether the FDIC knew that West was using North Star as a straw purchaser in the Parkway notes transaction and admissible as a "routine practice" of the FDIC.
After reviewing the record, we conclude that the evidence offered by West to prove the FDIC's routine practice, when considered in light of the FDIC's dealings with literally thousands of debtors during the mid-to late 1980s, "falls far short of the adequacy of sampling and uniformity of response which are the controlling considerations governing admissibility."
West next contends that the district court erred in allowing the government to
West contends that the sole purpose behind Rule 607 is to allow the government to "pull the sting" of impeachment—i.e., to allow the government on direct examination to elicit the fact of conviction so as to prevent the defendant from exposing the conviction during cross-examination, thereby giving the jury the impression that the government was concealing a relevant fact about its witness. West submits that the government's intent to use Franks' convictions as substantive evidence of West's guilt is clear because West "guaranteed" that he would not impeach Franks using Franks' three prior felony convictions. Over West's objections and in spite of West's "guarantee," however, the district court ruled that the government could introduce evidence of the prior convictions during direct examination.
After reviewing the record, we conclude that the government's primary purpose in calling Franks was not to establish West's guilt by his association with Franks. Indeed, West admits that Franks' testimony "played a critical role in several facets of the case." Moreover, the government neither emphasized nor urged the jury to consider Franks' convictions as evidence of West's guilt. Cf. United States v. Hernandez, 921 F.2d 1569, 1582-83 (11th Cir.1991) (despite the absence of a cautionary instruction, the district court did not abuse its discretion in allowing the government to introduce a codefendant's guilty plea when the government did not emphasize it or urge the jury to consider it); United States v. Gorny, 732 F.2d 597, 604 (7th Cir.1984) (government's impeaching its own witness was not reversible error where it did not call the witness "merely for the purpose of introducing irrelevant evidence or of establishing the defendant's guilt by association with the witness"). Finally, the district court instructed the jury that it was to consider the evidence of Franks' prior convictions "solely in judging the credibility of the witness" and not to consider the evidence "for any purpose in judging the innocence or guilt of" West. See Zafiro v. United States, ___ U.S. ___, 113 S.Ct. 933, 939, 122 L.Ed.2d 317 (1993) (noting that juries are presumed to follow their instructions). Accordingly, the district court did not abuse its
Prior to trial, West moved in limine for an order directing the government to refrain from offering evidence pertaining to (1) West's fluctuating, and generally declining, net worth, (2) West's purchase and use of cashier's checks during December 1987 and January 1988, (3) West's participation in cash transactions involving amounts of $9,500 during December 1987, January, May and June 1988, and February 1989, and (4) West's rental or use of one or more safe deposit boxes. The district court refused to consider the issue until the government sought to offer the evidence at trial. When the government did offer the evidence, West argued that the court should exclude it as evidence offered by the government merely to prove that he was a person of bad character.
When extrinsic offense evidence is offered, Rule 404(b) calls for a two-step approach. First, evidence of prior extrinsic acts must be "relevant to an issue other than the defendant's character." United States v. Beechum, 582 F.2d 898, 911 (5th Cir.1978) (en banc), cert. denied, 440 U.S. 920, 99 S.Ct. 1244, 59 L.Ed.2d 472 (1979). Evidence is relevant when it has "any tendency to make the existence of any fact that is of consequence to the determination of the action more or less probable than it would be without the evidence." Fed.R.Evid. 401. "Second, the evidence must possess probative value that is not substantially outweighed by its undue prejudice and must meet the other requirements of Rule 403." Beechum, 582 F.2d at 911.
Evidence of prior extrinsic acts is admissible to prove "plan" where the existence of a plan is relevant to some ultimate issue in the case. United States v. Krezdorn, 639 F.2d 1327, 1331 (5th Cir.1981). For example,
Id. (quoting 22 Wright & Graham, Federal Practice & Procedure § 5244, at 500 (1978) (footnotes omitted)).
Evidence of prior extrinsic acts also is allowed by Rule 404(b) to establish that the defendant acted with the requisite criminal intent. See United States v. Goodstein, 883 F.2d 1362, 1370 (7th Cir.1989) ("Fraudulent intent may be proved by circumstantial evidence."). "Persons whose intention is to shield their assets from creditor attack [using the bankruptcy laws] while continuing to derive the equitable benefit of [their] assets rarely announce their purpose. Instead, if their intention is to be known, it must be gleaned from inferences drawn from a course of conduct." In re May, 12 B.R. 618, 627 (N.D.Fla.1980). Consequently, to prove intent, the government may introduce evidence relevant to establishing that a defendant engaged in a course of conduct designed to defraud his creditors or the bankruptcy trustee.
We conclude that the district court did not err in finding that the evidence offered by the government was relevant to whether West acted with the requisite intent or whether he acted pursuant to a plan to defeat the rights of his creditors. For example, the financial statements prepared on West's behalf indicate that West's net worth fell dramatically after 1985. Because the deterioration of West's financial situation bears strongly on both his incentive and need to seek bankruptcy protection, such evidence is relevant not only to West's motive for hiding assets from creditors, but also indicated that it was very probable that he knew that he was going to file a petition in bankruptcy long before March 1990.
The evidence regarding West's purchase and use of cashier's checks during December 1987 and January 1988 also was relevant to the issue whether West acted with the requisite intent. Miriam Lewis, West's secretary, testified as to why West directed her to cash various checks and obtain cashier's checks:
Moreover, the pattern of check use is similar and relatively close in time to the transactions undergirding the instant case, and the district court cautioned the jury not to use the evidence improperly.
The government next introduced evidence pertaining to West's participation during December 1987, January, May and June 1988, and February 1989 in cash transactions involving amounts of $9,500. Lewis testified that starting in 1987, the amount of cash West obtained from various accounts that he had access to increased dramatically.
Finally, we conclude that the district court did not err in admitting the evidence regarding West's rental or use of various safety deposit boxes. Lewis testified that during or after March 1989, as part of the duties relating to her employment with West, she went with West's daughter to First City Bank, where the daughter removed cash from a safety deposit box. Lewis and the daughter then proceeded to "several different banks
West next contends that even if the challenged evidence was relevant under Rule 404(b), the district court should have excluded the evidence pursuant to Rule 403 because its probative value was substantially out-weighed by the danger of unfair prejudice. We must determine "whether the danger of undue prejudice outweighs the probative value of the evidence in view of the availability of other means of proof and other facts appropriate for making decisions of this kind under Rule 403." Fed.R.Evid. 404(b) advisory committee's note. "The exclusion of evidence under Rule 403," however, "should occur only sparingly." United States v. Pace, 10 F.3d 1106, 1115 (5th Cir.1993); see also United States v. McRae, 593 F.2d 700, 707 (5th Cir.) (noting that Rule 403's "major function is limited to excluding matter of scant or cumulative probative force, dragged in by the heels for the sake of its prejudicial effect"), cert. denied, 444 U.S. 862, 100 S.Ct. 128, 62 L.Ed.2d 83 (1979).
At trial, the only real issue in dispute involved West's intent—i.e., whether he acted in contemplation of declaring bankruptcy or with intent to defeat the Bankruptcy Code. Direct means of proof tending to make the existence of criminal intent on West's part more probable than it otherwise would be is generally unavailable in bankruptcy fraud prosecutions. See In re May, 12 B.R. at 627. Consequently, Rule 404(b) evidence indicating that West acted with the requisite intent was extremely important to the government's case. Furthermore, the prior acts occurred relatively close in time to the conduct charged in the indictment, thereby increasing the probative value of the 404(b) evidence. See United States v. Rubio-Gonzalez, 674 F.2d 1067, 1075 (5th Cir.1982) (upholding trial court's decision pursuant to Rule 404(b) to admit evidence of 10-year-old acts). Finally, the district court properly instructed the jury on four occasions as to the limitations on consideration of the extrinsic offense evidence.
West's final assertion is that his trial was rendered fundamentally unfair because the district court refused to allow two bankruptcy experts—Philip Palmer and William H. Brister—to testify regarding the relationship
Under Fed.R.Evid. 702, "[i]f scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education may testify thereto in the form of an opinion or otherwise." Here, the critical issue at trial was whether West acted in good faith and relied upon the advice of counsel. Thus, the district court correctly allowed West to testify that he at all times relied in good faith upon the advice of experts and both Palmer and Reeder to testify that they advised West to structure the transactions as he did.
West nonetheless contends that precedent required the district court to admit the experts' testimony. West primarily relies upon United States v. Garber, 607 F.2d 92, 97-100 (5th Cir.1979) (en banc), where we held that because the taxability of the unreported income at issue was uncertain as a matter of law, the trial court erred in excluding the testimony of an expert about the unresolved nature of the law.
For the foregoing reasons, we AFFIRM the judgment of the district court.
23 Wright & Graham, Federal Practice & Procedure § 5274, at 45-46. Here, as previously noted, the FDIC officials with whom West dealt testified at trial that they did not direct West to utilize a straw purchaser.
13 R. at 1380.
14 R. at 1432.
14 R. at 1440.
26 R. at 3219-20.
25 R. at 3131.
26 R. at 3251-53. On appeal, West does not independently challenge the jury instructions, but instead contends that the district court's refusal to allow expert testimony, in light of the jury instructions, rendered his trial fundamentally unfair. To the extent West intended to challenge the sufficiency of the jury instructions, he has failed to brief the issue and, therefore, has waived it. See Edmond v. Collins, 8 F.3d 290, 292 n. 5 (5th Cir.1993).
Id. at 99.