United States v. Alphonso I. Waters, Jr. ( 2019 )

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 18-11333
________________________
D.C. Docket No. 1:16-cr-00407-TCB-JSA-1
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
ALPHONSO I. WATERS, JR.,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
________________________
(September 10, 2019)
Before ED CARNES, Chief Judge, JULIE CARNES, and CLEVENGER,∗ Circuit
Judges.
ED CARNES, Chief Judge:
∗ Honorable Raymond C. Clevenger, III, United States Circuit Judge for the Federal
Circuit, sitting by designation.
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In this wire fraud case, we are once again confronted with the question of
when a lie is just a lie and when it is a federal crime. “It is conceded that there is a
class of lies, voluntary, aimless, yet weak and wicked lies,” Green’s Adm’r v.
Bryant, 2 Ga. 66, 68 (1847), that our law does not forbid. And the federal wire
fraud statute “forbids only schemes to defraud, not schemes to do other wicked
things, e.g., schemes to lie, trick, or otherwise deceive.” United States v.
Takhalov, 827 F.3d 1307, 1310 (11th Cir.), as revised (Oct. 3, 2016), opinion
modified on denial of reh’g, 838 F.3d 1168 (11th Cir. 2016). “The difference,” we
have explained, “is that deceiving does not always involve harming another
person; defrauding does.” Id.Alphonso Waters, Jr., relies on that distinction to argue that the lies he told
in the process of obtaining a $6 million loan did not amount to fraud. He sought
that loan in 2013 from a private lender who discovered that Waters had several
years’ worth of federal tax liens outstanding. To calm the lender’s concerns,
Waters sent it a letter that appeared to be from the IRS approving him for a
payment plan to pay off the tax liens. Then he sent the lender another letter stating
that, as far as he knew, the first letter really was from the IRS. Both of those letters
were lies –– lock, stock, and barrel; stem to stern, top to bottom. But, Waters
argues, they weren’t statutorily damned lies; they weren’t lies constituting wire
fraud because they didn’t affect the bargain between the parties. He reasons that
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any lie he told about his creditworthiness was harmless because the collateral for
the loan was worth $8.4 million, which is more than the total amount of the loan.
We are not convinced.
I. BACKGROUND
A. The Scheme
Waters was the CEO of Family Practice of Atlanta, a medical practice he
owned and operated with his wife, Dr. Sondi Moore-Waters, a physician. He ran
the business side of things, she ran the medical side. [Id.] Sometime around 2011
they decided they needed a bigger building for the growing practice. They formed
Sondial Properties, LLC (a portmanteau of the couple’s names, Sondi and Al), and
the company borrowed about $4 million in the form of two different construction
loans from JP Morgan Chase Bank. Those loans matured on October 18, 2013,
and Sondial immediately defaulted on them because of delays and cost overruns
with the construction.
Waters sought the help of a commercial mortgage broker in finding a $6
million transitional loan so he could pay back the $4 million to Chase and also
finish construction. Waters’ broker, Tony Baldwin, contacted Chesterfield Faring,
Ltd., a real estate services and investment firm that specialized in finding funding
for lapsing or lapsed loans. Chesterfield’s CEO was a man named Larry Selevan.
Selevan and his company helped borrowers find loans by researching the financial
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viability of a proposed project and packaging that information so potential lenders
could easily decide whether to provide financing.
Selevan proposed the loan project to Colony Capital, LLC. Colony was a
private equity firm and real estate investment trust that provided financing for
commercial realty projects deemed to exceed a bank’s normal risk profile.
Michael Sanchez, the senior vice president of Colony, oversaw Sondial’s loan
application. He understood that the loan “had to be closed very quickly” so Waters
could pay off Chase and meet construction deadlines. On October 25, 2013,
Sanchez sent Chesterfield a term sheet outlining the terms and conditions that
Colony proposed for the loan. Under the proposal Colony would lend Sondial $6
million and, in exchange, it would receive a first priority mortgage on the new
building and rights to all leases and rents there, as well as about a 7% interest rate
for the two-year initial term. Al Waters signed the term sheet on behalf of Sondial.
With the terms of the loan all set, the due diligence phase began. Waters and
Moore-Waters filled out a personal financial statement for Colony, listing their
assets, income, liabilities, and things of that nature. To say the least, they weren’t
as forthcoming as they should have been. The couple left blank the line asking
them about any unpaid income taxes, and they listed “0” as the amount or value of
outstanding liens and other “assessments payable.” Truth be told, the couple had
nearly half a million dollars of outstanding federal tax liens filed against them.
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And the truth was told, or at least uncovered, when Colony ran a background check
a few weeks later that turned up the tax liens. 1
As you can imagine, that discovery wrenched the lending process to a halt.
When he found out about the liens Sanchez was “very very angry” because it “was
an item that absolutely should have been disclosed” earlier in the process. He saw
the lack of disclosure as a “deal killer” because he didn’t want “to close a
transaction with [those] outstanding liens.” Sanchez explained:
This [sort of thing] is disclosed up front. This is something that
when you find out during when you run a background check and hear
for the first time, that that [sic] is a huge red flag in terms of whether or
not, you know, this borrower has been disclosing and been forthright
on what his financial condition is.
Selevan, the CEO of Chesterfield, encouraged Sanchez not to walk away
from the deal and to work with Waters while they tried to come up with a solution
to the tax liens. Sanchez agreed to wait and see. He considered the liens a “gating
issue” that had to be resolved before the loan could be closed. Waters’ attorney,
David Gentry, understood that. Because he did, on December 13, 2013, he sent the
IRS Taxpayer Advocate a letter asking for approval of a payment plan and
requesting that the IRS provide “immediate assistance” so Waters could close the
loan with Colony by December 18.
1
Those liens were for $32,917.77 from tax year 2007; $37,109.61 from 2008; $68,111.60
from 2009; and $328,656.00 from 2010, for a total of $466,794.98.
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Also on December 13, Waters himself called his Congressman’s office to
ask for help getting the tax liens removed. The constituent services representative
told him that the lien removal process typically took 30–45 days, but that it would
take longer for him because the IRS had already closed for the holidays and would
not begin processing any new requests until January. Waters told the
representative to send the request to the IRS anyway, which she did.
Paraskevidekatriaphobics would note that December 13 was a Friday.
The following Monday, December 16, Waters emailed Gentry a letter that
seemed to be from the IRS. It was also dated December 16, 2013, and appeared to
be on “Department of the Treasury: Internal Revenue Service” letterhead and bore
the seal of the IRS Office of the Chief Counsel. It stated in full:
December 16, 2013
VIA US MAIL AND FACSIMILE
Re: Case No. 5684374
Dear Taxpayers:
We are in receipt of your letter submitted to us by the office of The
Honorable Hank Johnson, Member, U.S. House of Representative[s]
regarding Case No. 5684374 dated December 13, 2013.
The letter dated December 13, 2013 referencing Financial Hardship —
Immediate Assistance needed was a request to expedite your form
433A which was received in our office December 2, 2013.
In accordance with Section 5.14.2.1 your request for Partial Payment
Installment Agreement (PPIA) has been approved. A field
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representative will contact you in 60–90 days to discuss in further detail
the financial agreement.
I hope you find this letter helpful in the resolution of your immediate
requirements. Please maintain copies of this letter for your permanent
records.
Sincerely,
Rebecca Langford
District Director
Four minutes after receiving the letter, Gentry forwarded it to Colony’s
attorney, Beau Baker, and asked if it resolved Colony’s concerns. It did not.
Baker worried that the details of the IRS payment plan the letter referred to were
months away, while the parties were trying to close the loan in the next couple of
weeks. Sanchez, the senior vice president for Colony, also concluded that the
letter was insufficient because it did not contain any specifics of the IRS payment
plan.
Then there was the question of authenticity. After talking with tax experts at
his law firm, Baker became concerned that the letter might not really be from the
IRS at all. He did a Google search for “Rebecca Langford District Director” and
learned that the IRS had phased out the “District Director” position nine years
before, sometime around 2004. Baker wrote to the IRS to verify the letter, and
Tony Baldwin, the initial mortgage broker, asked Waters if he had the contact
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information for Rebecca Langford. Waters responded that he did not.
Undeterred, Waters sent this letter to Baldwin, Gentry, and Selevan:
December 30, 2013
RE: IRS Letter
To Whom It May Concern:
To the best of my knowledge the letter from Rebecca Langford IRS
District Director and dated December 16 2013 with the subject matter
“Partial Payment Installment Agreement” is from Rebecca Langford
IRS District Director.
A copy of the letter is attached to this email. Thank you.
Kind Regards,
Al Waters
Waters’ letter didn’t appease Colony. A few days into the new year, in
response to an email from Baldwin that the delay in financing was putting Waters
“in a very bad position,” Sanchez (the Colony VP) emailed Baldwin, Waters, and
others working on the deal: “With all due respect, we were not expecting to deal
with IRS liens in the hundreds of thousands of dollars with no plan in place. I am
not comfortable with a ‘to be determined’ plan with no clear documentation.”
Sanchez later testified that the tax liens were “absolutely critical things to resolve
before . . . getting even close to approving this loan for closing.”
It turned out, of course, that the IRS letter was “outrageously bogus,” as
Waters’ trial attorney would later put it. Nobody at the IRS had approved a
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payment plan for Waters; the IRS Office of Chief Counsel did not have district
directors in 2013; and there was no one at the IRS named Rebecca Langford. The
letter was as phony as Piltdown Man, although it did not take forty-one years to
disprove. Baker soon confirmed that the letter was false, and Colony killed the
transaction in January 2014. Waters eventually got a loan from a different lender.
That was not all he got.
B. Trial And Sentencing
Waters also got indicted on two counts of wire fraud in violation of 18
U.S.C. § 1343. One count was for sending the fraudulent IRS letter and the other
one was for sending the email stating that letter was authentic. Waters pleaded not
guilty and went to trial in November 2017. He moved for a judgment of acquittal
at the conclusion of the government’s case in chief, arguing that there was
insufficient evidence for the jury to find that he had created the fraudulent
documents and that, in any event, the deceptive documents were not material to the
proposed loan agreement. The district court denied the motion and Waters failed
to renew it at the end of his case.
Waters did not testify at trial, but through his counsel he argued to the jury
that the prosecution had not proved beyond a reasonable doubt that Waters was
responsible for the false IRS letter or that he had intentionally lied in his email
about the letter. He also argued that the IRS letter wasn’t material to the loan
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transaction because well into January 2014, a month after the IRS letter had been
circulated, the two mortgage brokers (Baldwin and Selevan) tried to find other
ways for Waters to pay off the tax liens and make the loan work.
One issue that came up at trial was how to charge the jury on wire fraud.
Waters requested a jury instruction on the difference between a scheme to deceive
and a scheme to defraud based on this Court’s decision in United States v.
Takhalov, 827 F.3d 1307, 1312–13 (11th Cir. 2016). He asked the judge to
instruct the jury that: “to defraud, one must intend to use deception to cause some
injury; but one can deceive without intending to harm at all”; and “if a Defendant
does not intend to harm the victim — to obtain, by deceptive means, something to
which the Defendant is not entitled — then he has not intended to defraud the
victim.” Doc. 45 at 12 (quoting Takhalov, 827 F.3d at 1312–13).
The government opposed Waters’ proposed instruction as unnecessary and
incomplete — unnecessary because the case was a “straightforward scheme to
defraud,” and incomplete because the proposed instruction did not instruct the
jurors how to tell if a scheme caused harm or not, which happened only if the lie
affected the “nature of the bargain itself.” See Takhalov, 827 F.3d at 1313.
The judge told the parties that he was not inclined to give Waters’ proposed
instruction, but that if he did give it, he would include an explanation about how to
tell if the lie caused harm and affected the nature of the bargain itself. Waters did
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not agree to that solution. 2 The judge then overruled Waters’ proposal and gave
the jury a charge based on the pattern instruction, without any language about the
difference between defrauding and deceiving. See Pattern Crim. Jury Instr. 11th
Cir. OI O51 (2016).3 The jury found Waters guilty on both counts of wire fraud.
2
Here’s the exchange:
The Court: I am not inclined to give [Waters’ proposed instruction], but if I did
give it I would add the government’s instruction. How would you feel about that,
Mr. Kish [the attorney for Waters]?
Mr. Kish: Having never heard this until this moment, the government’s instruction,
I would need to look at it. But my thinking is that the reason I structured my
instruction in the manner in which I did was because it is the essence of the
[Takhalov] decision, it is what the Court said the rule of law was. All of these
examples —
The Court: Read the instruction again, the proposed defendant’s instruction?
Mr. Kish: I have just described what is needed to prove a scheme to defraud;
however, quote, there is a difference between deceiving and defrauding. To
defraud . . . one must intend to use deception to cause some injury. But one can
deceive . . . without intending to harm at all. Put another way, one who defrauds
always deceives, but one can deceive without defrauding. A defendant schemes to
defraud only if he schemes to deprive someone of something of value by trick,
deceit, chicane, or over-reaching. . . . But if a defendant does not intend to harm
the victim to obtain by deceptive means something to which the defendant is not
entitled, then he has not intended to defraud the victim. Furthermore, a schemer
who tricks someone into a transaction has not schemed to defraud so long as he
does not intend to harm the person he intends to trick. And this is so, even if the
transaction would not have occurred but for the trick. For if there is no intent to
harm, there can only be a scheme to deceive, but not one to defraud.
The Court: I think that is overly confusing, and the subject is adequately covered
by the charge as given now. So I respectfully overrule the defendant’s request for
inclusion of his proposed charge no. 9.
(Italics omitted.)
3
This is the charge the district court gave:
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It is a federal crime to use interstate wire, radio, or television
communications to carry out a scheme to defraud someone else. The defendant can
be found guilty of this crime only if all the following facts are proved beyond a
reasonable doubt. One, the defendant knowingly devised or participated in a
scheme to defraud, or to obtain money or property by using false pretenses,
representations, or promises. Two, the false pretenses, representations, or promises
were about a material fact. Three, the defendant acted with the intent to defraud.
And four, defendant transmitted or caused to be transmitted, by wire or some
communication in interstate commerce, to help carry out the scheme to defraud.
The phrase scheme to defraud includes any plan or course of action intended
to deceive or cheat someone out of money or property by using false or fraudulent
pretenses, representations, or promises. A statement or representation is false or
fraudulent if it is about a material fact that the speaker knows is untrue, or makes
with reckless indifference to the truth, and makes with the intent to defraud. A
statement or representation may be false or fraudulent when it is a half truth, or
effectively conceals a material fact, and is made with the intent to defraud.
A material fact is an important fact that a reasonable person would use to
decide whether to do or not do something. A fact is material if it has the capacity
or natural tendency to influence a person’s decision. It doesn’t matter whether the
decision maker actually relied on the statement or knew or should have known that
the statement was false; however, not all misrepresentation or omissions constitute
a scheme to defraud. The misrepresentation or omission must be material, and it
must be one on which a person of ordinary prudence would rely.
The intent to defraud is the specific intent to deceive or cheat someone,
usually for personal financial gain or to cause financial loss to someone else. To
prove intent, the government must establish that the defendant believed that the
supposed victim would act or refrain from acting in reliance upon that
representation. The government does not have to prove all of the details alleged in
the indictment about the precise nature and purpose of the scheme. It also doesn’t
have to prove that the material transmitted by interstate wire was itself false or
fraudulent, or that using the wire was intended as the specific or exclusive means
of carrying out the alleged fraud, or that the defendant personally made the
transmission over the wire, and it doesn’t have to prove that the alleged scheme
actually succeeded in defrauding anyone.
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Before sentencing, the probation office prepared a presentence report and
recommended the application of an 18-level enhancement under U.S.S.G.
§ 2B1.1(b)(1)(J) for an intended loss amount of more than $3.5 million but less
than $9.5 million. That would have made Waters’ total offense level 25 and his
guidelines range 57 to 71 months in prison. Waters objected to the enhancement
on the basis that there was no actual or intended loss. He pointed out that the
building, which was to serve as collateral for the loan, had been appraised in April
2014 to be worth $8.4 million, $2.4 million more than the amount of the proposed
loan from Colony. The government agreed that this meant the enhancement should
not apply. That concession brought Waters’ guidelines range down to zero to six
months, and the district court sentenced him to six months in prison and one year
of supervised release.
Waters appeals his convictions and sentence. 4
II. THE TAKHALOV ISSUES
Waters contends that the district court abused its discretion by not giving his
proposed jury instruction on the difference between fraud and deceit. He also
contends that there was insufficient evidence for the jury to find him guilty of wire
fraud because the government did not show that he intended to harm Colony. Both
contentions rely on our decision in Takhalov. Since that case came out, a judge of
4
Waters is currently out on bond and has not begun serving his sentence.
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our Court has questioned some of the statements in that opinion. See United States
v. Feldman, 931 F.3d 1245, 1265–74 (11th Cir. 2019) (W. Pryor, J., concurring).
We need not get into that here. Even assuming that every statement in our
Takhalov opinion is correct, this case is distinguishable.
A. The Takhalov Case
The federal wire fraud statute makes criminal any “scheme or artifice to
defraud.” 18 U.S.C. § 1343. The statute does not define what that is, but we have.
See United States v. Bradley, 644 F.3d 1213, 1239–40 (11th Cir. 2011). And one
thing we’ve recognized, tautologically perhaps, is that to be convicted under the
§ 1343 fraud statute a defendant’s “scheme must be a scheme to defraud rather
than to do something other than defraud.” Takhalov, 827 F.3d at 1312. What is
essential to a scheme to defraud is a question we confronted in Takhalov.
The Takhalov defendants were a group of bar owners who had hired women
to pose as tourists and lure visiting businessmen into the defendants’ bars and
nightclubs. Id. at 1310. Then bartenders at the clubs would trick the unsuspecting
businessmen into buying ridiculously overpriced alcohol by misrepresenting the
prices of drinks or forging the men’s signatures on their credit card receipts. See
id. at 1310–11. The defendants admitted that they had hired the “B-girls” to lure
the men into the clubs and that the women did not tell the men that they had been
hired to do so. Id. But the defendants denied knowing about the fraud that took
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place once the men went into the clubs. Id. The defendants claimed that as far as
they knew, once the men came to the clubs they “got what they paid for.” Id. at
1311.
The Takhalov defendants asked the district court to instruct their jury that
“failure to disclose the financial arrangement between the B-girls and the Bar, in
and of itself, is not sufficient to convict a defendant” of wire fraud. Id. at 1314
(brackets and quotation marks omitted). The district court refused to give that
instruction, the government argued that the jury could return a verdict based on
that initial trickery alone, and the jury did. Id. at 1310–11. We reversed the
defendants’ convictions. Id. at 1324.
Our reasoning proceeded in three main steps. First, we noted that “there is a
difference between deceiving and defrauding: to defraud, one must intend to use
deception to cause some injury; but one can deceive without intending to harm at
all.” Id. at 1312. Second, that distinction meant that “if a defendant does not
intend to harm the victim — to obtain, by deceptive means, something to which the
defendant is not entitled — then he has not intended to defraud the victim.” Id. at
1313 (brackets and quotation marks omitted). And third, “[f]rom that conclusion, a
corollary follows: a schemer who tricks someone to enter into a transaction has not
‘schemed to defraud’ so long as he does not intend to harm the person he intends to
trick.” Id. “[T]his is so,” we said, “even if the transaction would not have
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occurred but for the trick. For if there is no intent to harm, there can only be a
scheme to deceive, but not one to defraud.” Id.
To tell the difference between a scheme to deceive and a scheme to defraud,
we instructed courts to look at “the nature of the bargain itself.” Id. at 1313. And
a lie about the nature of the bargain can take two primary forms. Id. First, “the
defendant might lie about the price (e.g., if he promises that a good costs $10 when
it in fact costs $20).” Id at 1313–14. Or second, “he might lie about the
characteristics of the good (e.g., if he promises that a gemstone is a diamond when
it is in fact a cubic zirconium).” Id. at 1314. “In each case, the defendant has lied
about the nature of the bargain and thus in both cases the defendant has committed
wire fraud.” Id.
By contrast, we explained, “if a defendant lies about something else — e.g.,
if he says that he is the long-lost cousin of a prospective buyer — then he has not
lied about the nature of the bargain, has not ‘schemed to defraud,’ and cannot be
convicted of wire fraud on the basis of that lie alone.” Id. And that is so even if
the buyer would not have bought anything but for the lie. Id. (citing United States
v. Shellef, 507 F.3d 82, 108 (2d Cir. 2007) (drawing “a fine line between schemes
that do no more than cause their victims to enter into transactions that they would
otherwise avoid — which do not violate the mail or wire fraud statutes — and
schemes that depend for their completion on a misrepresentation of an essential
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element of the bargain — which do violate the mail and wire fraud statutes”);
United States v. Starr, 816 F.2d 94, 98 (2d Cir. 1987) (“Misrepresentations
amounting only to a deceit are insufficient to maintain a mail or wire fraud
prosecution. Instead, the deceit must be coupled with a contemplated harm to the
victim . . . affect[ing] the very nature of the bargain itself.”) (internal quotation
marks omitted); United States v. Regent Office Supply Co., 421 F.2d 1174, 1182
(2d Cir. 1970) (“[W]e conclude that the defendants intended to deceive their
customers but they did not intend to defraud them, because the falsity of their
representations was not shown to be capable of affecting the customer’s
understanding of the bargain nor of influencing his assessment of the value of the
bargain to him, and thus no injury was shown to flow from the deception.”).
B. The District Court’s Jury Instructions
With that background in mind, we turn to Waters’ contention that the district
court erred by refusing to give his Takhalov-based jury instruction. We review
that decision only for an abuse of discretion. United States v. Dohan, 508 F.3d
989, 993 (11th Cir. 2007). “The failure of a district court to give an instruction is
reversible error where the requested instruction (1) was correct, (2) was not
substantially covered by the charge actually given, and (3) dealt with some point in
the trial so important that failure to give the requested instruction seriously
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impaired the defendant’s ability to conduct his defense.” United States v.
Eckhardt, 466 F.3d 938, 947–48 (11th Cir. 2006).
Waters requested that the district court give this instruction:
I have just described what is needed to prove a scheme to
defraud. However, there is a difference between deceiving and
defrauding; to defraud, one must intend to use deception to cause some
injury; but one can deceive without intending to harm at all. Put another
way, one who defrauds always deceives, but one can deceive without
defrauding.
A Defendant schemes to defraud only if he schemes to deprive
someone of something of value by trick, deceit, chicane or
overreaching. But if a Defendant does not intend to harm the
victim — to obtain, by deceptive means, something to which the
Defendant is not entitled — then he has not intended to defraud the
victim.
Furthermore, a schemer who tricks someone to enter into a
transaction has not schemed to defraud so long as he does not intend to
harm the person he intends to trick. And this is so even if the transaction
would not have occurred but for the trick. For if there is no intent to
harm, there can only be a scheme to deceive, but not one to defraud.
(Alterations and quotation marks omitted).
The district court did not abuse its discretion when it refused to give that
instruction. Though composed of quotations from our opinion in Takhalov,
Waters’ “proposed instruction was an incomplete statement of the law and would
have confused the jury.” United States v. Solomon, 686 F.2d 863, 876 (11th Cir.
1982). The proposal emphasized the requirement that a defendant have the intent
to harm, but it never defined what harm meant. And it introduced the distinction
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between a scheme to deceive and a scheme to defraud, but it didn’t tell the jurors
how to tell the difference between them. Without those tools the jury could hardly
have been expected to apply our Takhalov decision correctly.
The government pointed all of that out at the charge conference when it
asked the district court to supply the missing link in Waters’ instruction. The
additional language proposed by the government would have instructed the jury
that “[t]he ‘scheme to defraud,’ as that phrase is used in the wire fraud statute,
refer[s] only to those schemes in which a defendant lies about the nature of the
bargain itself.” Doc. 89 at 5–6 (quoting Takhalov, 827 F.3d at 1313). That
addition would have enabled the jurors to tell the difference between the two kinds
of schemes because it would have defined for them what “harm” means. To recap:
In a scheme to deceive, the victim of the lie hasn’t been harmed because he still
received what he paid for. But in a scheme to defraud, the victim has been harmed
because the misrepresentation affected the nature of the bargain, either because the
perpetrator lied about the value of the thing (for example, promising something
costs $10 when it actually costs $20), or because he lied about the thing itself (for
example, promising a gemstone is a diamond when it is actually a cubic
zirconium). Takhalov, 827 F.3d at 1313–14. Either way, though, the victim didn’t
get what he paid for.
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By not including that distinction, and then not accepting the government’s
proposal to add it, Waters asked the court to give an incomplete and misleading
jury instruction. The court did not abuse its discretion when it deemed the
instruction “overly confusing.” See United States v. Cooper, 926 F.3d 718, 736
(11th Cir. 2019) (affirming district court’s rejection of a defendant’s proposed
instruction “because it was misleading and confusing”) (quotation marks omitted);
United States v. Silverman, 745 F.2d 1386, 1396 (11th Cir. 1984) (noting that a
district court “is bound to refuse a requested instruction that is incomplete,
erroneous, or misleading”).
Waters’ argument also fails for another reason. Unlike in Takhalov, his
proposed jury instruction did not concern a “point in the trial so important that
failure to give the requested instruction seriously impaired [his] ability to conduct
his defense.” Eckhardt, 466 F.3d at 947–48. Recall that Waters had two main
theories at trial. The first was that he didn’t create the IRS letter and didn’t know it
was fake when he sent it to Colony. The district court’s refusal to give the
proposed instruction did not impact the presentation of that theory at all.
Waters’ second theory was that the IRS letter “didn’t matter” because the
“deal was going forward with or without that letter.” His attorney made the point
this way in his closing argument:
Did the Langford letter even make any difference, considering what
happened over the course of time? We will go over it again, but I think
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we pretty well established this at trial. . . . After the Rebecca Langford
letter is sent on [December] 16th, minutes later, Larry Selevan,
chomping at the bit, says, well, good enough for me. I am ready to go.
Nobody cared about the Rebecca Langford Letter. Nobody cared about
the taxes. . . . The Langford letter didn’t mean squat. And the reason
it didn’t mean squat is because of what the witnesses told you. We
wanted the deal to finalize. . . . Nobody worried about whether the
Rebecca Langford letter was authentic. To use the words of the
lawyers, it has to be material. It has to be important. It was not
important.
As Waters’ attorney told the jury, that is an argument about materiality. The
judge explicitly defined that term for the jurors (“A material fact is an important
fact that a reasonable person would use to decide whether to do or not do
something”) and instructed them that to be guilty of wire fraud Waters must have
omitted or misrepresented a fact that was material. See Pattern Crim. Jury Instr.
11th Cir. OI O51 (2016). So when Waters argued that the false IRS letter was not
material because the deal was going forward “with or without that letter,” and
when he said that the letter did not concern a material fact because “nobody cared
about the taxes,” his arguments were in accord with the court’s instructions. Of
course, the deal did not go forward “with or without that letter” and that may be
one reason the jury rejected his argument. But the jury’s rejection of Waters’
theory does not mean he was “seriously impaired” in his ability to present that
theory to the jury. Eckhardt, 466 at 948. He wasn’t.
This is materially different from what happened in Takhalov. Unlike in
Waters’ case, the jury instruction the Takhalov defendants requested was integral
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to their argument. Their argument did not hinge on whether the businessmen still
would have gone into the clubs had they known of the true relationship between
the B-Girls and the bar owners. See 827 F.3d at 1310–11. Instead, the defendants
argued that their concealment of their relationship with the B-Girls did not
constitute wire fraud, regardless of whether that concealment was material to the
businessmen’s decisions to enter the clubs. That is why the defendants asked for
this jury instruction: “Failure to disclose the financial arrangement between the B-
Girls and the Bar, in and of itself, is not sufficient to convict a defendant of any
offense.” Id. at 1311 (alterations omitted). The Takhalov defendants did not get to
present their theory to the jury because the district court rejected their proposed
jury instruction that would have put that theory before the jury. As we explained,
“[w]ithout an instruction supporting the defendants’ theory, the jury was not
required to believe this theory . . . [and] the jury could believe what the
government argued in its closing: that the concealment was material and the
defendants acted with the intent to deceive or cheat the victims.” Id. at 1322–23.
By contrast, Waters’ proposed jury instruction on the difference between
fraud and deceit did not propose either of his two defense theories. As a result, the
rejection of his jury instruction did not impair his presentation of a defense theory.
See Eckhardt, 466 F.3d at 947–48 (holding that defendant accused of violating the
Communications Decency Act was not impaired by trial court’s refusal to alter its
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jury instruction defining what constituted an “obscene” phone call because
defendant’s theory of the case was that he did not make the alleged phone calls).
Nor did Waters change a theory at trial in response to the court’s rejection of his
proposed jury instruction, as the Takhalov defendants did. Not until Waters got to
this Court did he argue that his misrepresentations weren’t wire fraud because they
did not affect the bargain between the parties. (More on that argument below.) He
did not consent to the government’s proposed instruction that would have
instructed the jury on that very topic. Given all of that, the district court did not
abuse its discretion when it declined to give Waters’ proposed jury instruction.5
C. Sufficiency Of The Evidence
We turn now to Waters’ second Takhalov-based argument: that the district
court should have granted his motion for a judgment of acquittal because there was
insufficient evidence that he intended to harm Colony. “Ordinarily, we review de
novo whether sufficient evidence supports a conviction, viewing the evidence and
taking all reasonable inferences in favor of the jury’s verdict.” United States v.
Fries, 725 F.3d 1286, 1291 (11th Cir. 2013). But Waters did not renew his motion
5
One side point is worth addressing. At the final charge conference Waters argued that
his proposed jury instruction was needed “[b]ecause there is the chance that jurors could think
that . . . the failure to include all of the tax liens on . . . the personal financial statement by itself
would be sufficient to show fraud.” By not raising this point on appeal Waters has abandoned
any argument that the jury found him guilty based on the false financial statement instead of the
fraudulent IRS letter and the email Waters sent affirming the IRS letter. See AT&T Broadband
v. Tech Commc’ns, Inc., 381 F.3d 1309, 1320 n.14 (11th Cir. 2004) (“Issues not raised on appeal
are considered abandoned.”).
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for acquittal at the close of all the evidence or present to the district court his
current theory of why there was insufficient evidence for the jury to find him
guilty. Because of his failure to renew the motion, “we will reverse [his]
conviction only where doing so is necessary to prevent a manifest miscarriage of
justice.” Id. (quotation marks omitted). Which means only if we find “either that
the record is devoid of evidence of an essential element of the crime or that the
evidence on a key element of the offense is so tenuous that a conviction would be
shocking.” Id. (quotation marks omitted).
Relying on Takhalov, Waters argues that the tax liens were peripheral to the
proposed loan transaction and, as a result, any lies about those liens (including the
letters he sent about the make-believe payment plan with the IRS) could not
constitute wire fraud because they did not affect the bargain between the parties.
This is basically a repackaging of his jury charge argument, but with a twist: it
relies on the law in the instruction proposed by the government instead of the
instruction he suggested.
In Waters’ telling, the tax liens merely “went to the integrity of
management,” and the projected cash flow from the new medical building formed
the heart of the bargain. He says that cash flow combined with the $2.4 million
“over-collateralization” of the building itself “ensured repayment of the requested
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Loan in full.” And, as a result, “the removal of [the] tax liens was not ‘part of the
bargain.’”
The jurors heard plenty of evidence that would cause them to disbelieve that
theory. For example, Sanchez, Colony’s senior vice president, called the discovery
of the tax liens “a deal killer” because he did not “want[] to close a transaction
with the[] outstanding liens.” And even after the folks at Chesterfield Faring
convinced Sanchez not to walk away from the deal when he first learned of the
liens, he still considered the tax liens a “gating issue” that had to be resolved
before he would consider making the loan. As he testified at trial: The liens were
“absolutely critical things to resolve before . . . getting even close to approving
th[e] loan for closing.”
Colony’s attorney, Beau Baker, testified to much the same thing. Once he
discovered that the tax liens existed, he stopped working on the due diligence and
documentation for the loan until the liens could be resolved. He explained to the
jury: “[I]f there is a creditor out there, especially a super creditor like the Internal
Revenue Service, that creditor could come after your borrower later on or come
after the guarantor, and that could put the payment stream that is coming to my
client in jeopardy.” The attorney representing Waters in the deal, David Gentry,
also understood that Colony “required either the tax liens get paid off or that some
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sort of payment plan be in place with the IRS to pay it off over time” before the
loan could be closed.
To all of that, Waters says: Doesn’t matter. He argues that Takhalov teaches
that there’s a difference between a scheme to deceive and a scheme to defraud.
And he says defrauding means that the material misrepresentation must affect the
nature of the bargain and not something else. Waters points to Takhalov’s
reasoning that “even if the transaction would not have occurred but for the trick,”
Takhalov, 827 F.3d at 1313, “a wire-fraud case must end in an acquittal if the jury
nevertheless believes that the alleged victims [would have] received exactly what
they paid for,” id. at 1314 (quotation marks omitted). Purporting to apply that
reasoning here, Waters argues that his case should have ended in an acquittal
because, as the government itself conceded at sentencing, the collateral was worth
$2.4 million more than the amount of the loan.
There are three reasons why Waters’ conclusion does not follow from his
premise. The first is that it misconstrues the nature of the bargain with Colony. As
the government persuasively points out, the bargain was not for Colony to be
sucked into a time-consuming and expensive foreclosure to mitigate its losses if
Waters was unable to make the payments on the loan. The bargain was to make a
solid loan in the first place and to receive loan payments without the threat of
outstanding tax liens getting in the way.
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That theory was supported by lots of testimony at trial. It’s why Sanchez
described the tax liens as a “gating issue,” and why Baker told the jury that he was
worried about the liens because they “could put the payment stream that [was]
coming to [Colony] in jeopardy.” So the jury was free to conclude that Waters’
creditworthiness, as the guarantor of the loan with Sondial, affected the value of
the transaction and was part of the bargain itself. See United States v. Appolon,
715 F.3d 362, 368–69 (1st Cir. 2013) (holding that misrepresentations in loan
applications used “to assess [a] borrower’s creditworthiness” were material
because they were “capable of influencing [the lender’s] decision”) (quotation
marks omitted); see also United States v. Rossomando, 144 F.3d 197, 201 (2d Cir.
1998) (“[W]here a defendant deliberately supplies false information to obtain a
bank loan . . . the defendant’s good-faith intention to pay back the loan is no
defense because he intended to inflict a genuine harm upon the bank — i.e., to
deprive the bank of the ability to determine the actual level of credit risk and to
determine for itself on the basis of accurate information whether, and at what price,
to extend credit to the defendant.”) (footnote omitted).
The second reason why the appraised value of the collateral exceeding the
amount of the loan does not render the misrepresentations about the tax liens
immaterial is that the appraisal of the collateral did not exist until after the deal
with Colony fell through. Waters’ misrepresentations to Colony about the tax liens
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occurred in December of 2013. Colony learned in late January of 2014 that the
letter from the IRS was fake. It was at that point that Colony walked away from
the deal for good. Waters then courted another company for the loan, and it was
that other company, Thorofare, that had the property appraised in April of 2014.
The appraisal did not exist when Waters misrepresented the facts about the tax
liens, when Colony was considering Waters’ loan application, when Colony
discovered the misrepresentations, or when it walked away. Something that did
not exist at the time of the fraud cannot evidence a lack of intent to defraud.
The third reason why the appraisal cannot figure into the sufficiency of the
evidence to prove intent to defraud is that sufficiency is judged based only on the
evidence before the jury. When deciding whether there was sufficient evidence to
convict, we may not consider evidence the jury never heard. See United States v.
DeSimone, 660 F.2d 532, 538–39 (5th Cir. Unit B Nov. 1981). No evidence of the
appraisal was ever put before the jury. None. The first time it was mentioned was
in Waters’ sentencing memoranda, six months after the jury had returned its
verdict and gone home. That was six months too late.
III. THE OTHER ISSUES
Waters has two more contentions, neither of which has merit. First, he
contends that the district court committed reversible error by not making an “on-
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the-record waiver inquiry” about his decision not to testify at trial. 6 Waters was
represented by an able defense attorney whom the trial judge complimented several
times for doing a good job. And Waters acknowledges that there is no “per se
requirement that the district court advise the defendant of his right to testify and
conduct an on-the-record inquiry into whether a non-testifying defendant
knowingly, voluntarily, and intelligently waived the right to testify.” United States
v. Van De Walker, 141 F.3d 1451, 1452 (11th Cir. 1998). So why does he contend
that the district court committed reversible error? Because he was the “only person
in a position to refute the prosecution’s case,” thereby making his situation
“exceptional.”
6
The parties disagree about what standard of review applies to this claim. The
government argues that plain error review applies because Waters did not object at trial, and that
seems right. But Waters relies on our decision in United States v. Hung Thien Ly, 646 F.3d
1307, 1318 (11th Cir. 2011), to argue that the standard of review is “unsettled” and that
structural error analysis may apply.
In Hung Thien Ly, the pro se defendant failed to object at trial to the district court’s
failure to correct his misunderstanding of his right to testify. We rejected the government’s
argument that we should review only for plain error. Id. at 1312 & n.5. We explained: “The
Government contends that plain-error review must apply because Ly never objected to the
district court’s alleged denial of his right to testify. In the context of Ly’s claim, this argument is
absurd. Ly’s argument on appeal is that his confusion regarding his right to testify was so
apparent during the court-initiated colloquy that the district court was obligated to correct his
misunderstanding. By definition, Ly could not have objected to the district court’s actions, for
his claim lies in his ignorance of the law.” Id. at 1312 n.5. Looking at the issue de novo, we
held that the district court had erred by not correcting the pro se defendant’s misunderstanding of
his right to testify, and then we assumed without deciding that harmless-error analysis applied
and held that the error was harmful. Id. at 1318.
There are significant differences between this case and Hung Thien Ly. The most
obvious of them is that Waters was represented by able counsel while the defendant in Hung
Thien Ly had no counsel. But even if we assume that de novo review applies, Waters still cannot
prevail on his claim that the district court should have inquired about his decision not to testify.
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We don’t accept that as a ground for relief. While being in a position to
refute the prosecution’s case may have been a good reason for Waters to take the
stand (though we doubt it’s all that “exceptional”), it certainly isn’t enough to
establish that his decision not to testify was unknowingly and unintelligently made.
See Hung Thien Ly, 646 F.3d at 1317 (“[A]bsent evidence to the contrary, district
courts should presume that the defendant, even a pro se defendant, has made a
knowing and intelligent decision about whether to testify.”).
Second, Waters also contends that the district court made an erroneous
factual finding that impacted his sentence. We normally review the procedural
reasonableness of a sentence under an abuse-of-discretion standard, and a court
abuses its discretion if it “select[s] a sentence based on clearly erroneous facts.”
Gall v. United States, 552 U.S. 38, 51 (2007). Because Waters did not object at the
sentence hearing, however, we review the alleged error only for plain error. See
United States v. Vandergrift, 754 F.3d 1303, 1307 (11th Cir. 2014) (using plain
error review because defendant failed to object on procedural reasonableness
grounds at sentencing). “Under plain error review, we can correct an error only
when (1) an error has occurred, (2) the error was plain, (3) the error affected
substantial rights, and (4) the error seriously affects the fairness, integrity or public
reputation of judicial proceedings.” Dupree v. Warden, 715 F.3d 1295, 1301 (11th
Cir. 2013).
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Waters’ contention is based on a comment the judge made at the end of the
sentence hearing, after he had announced Waters’ six-month sentence:
I don’t think this man is ever going to commit another crime. It
may not feel like it, but he got a break. I mean, what a break. If that
loan had not been repaid, we are looking at about a five-year sentence,
so he got that break.
That was a misstatement. Waters had not paid back a loan to Colony
because there never was a loan from Colony to repay. But Waters has not shown
that the misstatement constituted a clearly erroneous factual finding because he has
not shown that it was a factual finding at all. Earlier in the hearing the district
court formally adopted the unobjected-to factual findings in the PSR. Those
findings made clear that although Waters had applied for a loan from Colony, he
had not received one. The judge said that the fact that Colony had not lost any
loaned money “ma[de] a big difference” for sentencing purposes. That is literally
true. Viewed in this context, we can’t say that the judge’s slip up about the loan
having been repaid — as opposed to never having been made — was a relevant
fact finding instead of a stray comment at the end of a long hearing. And it is one
to which there was no objection.
Even if we were to consider the comment a clearly erroneous factual finding,
Waters has still not shown that it affected his sentence, as required to establish
plain error. See Vandergrift, 754 F.3d at 1312 (“In order for an error to have
affected substantial rights, it must have affected the outcome of the district court
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proceedings.”) (quotation marks omitted). According to Waters, the misstatement
affected his sentence because it showed that the judge “did not believe that [he]
deserved any leniency because he already had received the benefit of the Loan
being repaid.” But the judge himself gave three reasons for why he thought that
Waters did deserve leniency: (1) there was no economic harm to Colony,
(2) Waters’ conduct had otherwise been lawful and upstanding, and (3) Waters had
a lot of community support. Not only that, but after the judge had commented at
the beginning of the sentence hearing that he did not think that the government’s
proposed sentence of a year and a day would be long enough, he ended up
sentencing Waters to only six months. That indicates the judge had an open mind
and gave consideration to Waters’ arguments at sentencing. Waters’ speculation
about a single comment that the judge made after he had imposed the sentence is
not enough to show that it affected Waters’ sentence.
AFFIRMED.
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