U.S. v. Robichaux ( 1993 )

UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 92-3396
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
VERSUS
EDWARD ROBICHAUX,
Defendant-Appellant.
Appeals from the United States District Court
for the Eastern District of Louisiana
(July 1, 1993)
Before WISDOM, DAVIS, and SMITH, Circuit Judges.
WISDOM, Circuit Judge.
This criminal case involves mail and wire fraud which led to
the failure of an insurance company. We AFFIRM the conviction on
all three counts and also AFFIRM the sentence.
I.
Edward Robichaux was the CEO of North American Financial
Corporation (NAFC). Edward Street was the CEO of Windmier
Financial Services (Windmier). In April 1989, Robichaux and Street
formed a joint venture, N.W. Venture.
To fund this venture, Street contributed approximately $13
million in Federal National Mortgage Company securities (FNMAs or
"Fannie-Maes"). These securities did not belong to Street but were
held in trust by several banks. Street learned the identification
numbers of these securities and through this information was able
to act as if he had control over these securities. Street's
financial manipulations led to his conviction for bank fraud and
wire fraud. Robichaux did not pay anything for these securities.
In June 1989, Robichaux attempted to secure a $2.2 million
dollar loan from the People's Bank in Biloxi. He proposed to use
one of the FNMA's as collateral. On June 8, 1989, Robichaux faxed
a letter of guarantee to the People's Bank reflecting that he did
own the securities. This conduct forms the substance of count
three. The loan was not completed because Robichaux could not
produce the securities.
Shortly thereafter, Robichaux entered into an agreement with
Gordon L. Rush, who owned Presidential Fire and Casualty Company
(Presidential). Robichaux assigned the Fannie-Maes to G.L.R.,
Inc., (GLR) in exchange for various GLR assets, including GLR
stock. GLR then assigned these FNMAs to Presidential as a capital
contribution. Without incurring any corresponding debt,
Presidential placed the FNMAs on its books. The effect of this
assignment was to make Presidential appear to be solvent.
2
Presidential continued to issue insurance policies (and collect
premiums) for without this $13 million, Presidential would have
been undercapitalized and thus barred from any further insurance
business.
At this time, Rush wrote personal checks to Robichaux for
commissions totaling $86,000, which was funded by Presidential.
On October 2, 1989, Robichaux faxed to the Texas State Board
of Insurance (Texas) a letter verifying that approximately $12.78
million in Fannie-Maes was held by NAFC on behalf of GLR, free and
clear of any encumbrance. Count two of the indictment is based on
this misrepresentation.
In December 1989, the Louisiana Insurance Commission
(Commission) retained Deloitte & Touche (Touche) to audit
Presidential. Touche asked Robichaux to verify Presidential's
ownership of the FNMAs. Robichaux verified that the FNMAs were
held by him for GLR by letter on December 18, 1989. Count one of
the indictment is based on this verification. Touche relied on
Robichaux's verification and issued a favorable audit. On November
12, 1991, Presidential was declared insolvent.
Gordon Rush and Edward Street have been convicted of charges
related to Robichaux's. Rush is awaiting sentencing, and Street's
appeal is pending before this Court.
Robichaux was indicted on September 13, 1991 for mail fraud
(count one) and two counts of wire fraud (counts two and three).
After a four day trial, a jury found Robichaux guilty on all
counts. The district court sentenced Robichaux to fifty-seven
3
months in jail.
II.
Robichaux raises numerous points of error. We have arranged
them in seven categories:
A. 404(b) Evidence.
B. Failure to Disclose Grand Jury Transcript.
C. Surplusage in the Indictment.
D. The Non-Severance of the Indictment.
E. Sufficiency of the Evidence.
F. Prosecutorial Misconduct.
G. Sentencing.
A. 404(b) Evidence.
In the fall of 1987, Robichaux admitted to an undercover FBI
agent that he knew that certain bonds he intended to use to
increase the assets of another insurance company which was owned by
Rush were fraudulent. Robichaux subsequently inflated the assets
of this insurance company with these bonds. On September 14, 1988,
he pleaded guilty to this crime.
The district court permitted the FBI agent to testify at this
trial about Robichaux's earlier conduct. Federal Rule of Evidence
404(b) allows the introduction of other crimes as proof of
knowledge and intent.1 The district court must also undertake a
1
FRE 404(b) provides:
Other crimes, wrongs, or acts. Evidence of other
crimes, wrongs, or acts is not admissible to prove the character
of a person in order to show action in conformity therewith. It
may, however, be admissible for other purposes, such as proof of
4
403 probity--prejudice balancing.2 The district court's
determinations on these matters "will not be disturbed absent a
clear showing of abuse of discretion".3
The government was required to prove that Robichaux had the
specific intent to commit fraud. Robichaux asserted at trial that
he lacked this intent, and in his brief to this Court contended
that he did not know "what was going on". Because intent is
subjective, it is often difficult to prove. This was the rationale
behind allowing evidence of other crimes to show intent under
404(b).
Robichaux was on trial for enhancing with fraudulent
securities the assets of an insurance company owned by Rush. That
just a few years ago, Robichaux had knowingly used fraudulent
securities to increase the assets of another insurance company
owned by Rush made it substantially less likely he did not know
"what was going on" and had acted without intent to commit fraud in
this case.
motive, opportunity, intent, preparation, plan, knowledge,
identity, or absence of mistake or accident.
2
FRE 403 provides:
Exclusion of Relevant Evidence on Grounds of Prejudice,
Confusion, or Waste of Time Although relevant, evidence may be
excluded if its probative value is substantially outweighed by
the danger of unfair prejudice, confusion of the issues, or
misleading the jury, or by considerations of undue delay, waste
of time, or needless presentation of cumulative evidence.
See U.S. v. Beechum, 582 F.2d 898 (5th Cir. 1978) (en banc) cert.
denied, 440 U.S. 920 (1979) for a discussion of this two-step
approach to admission of extrinsic evidence.
3
U.S. v. Emery, 682 F.2d 493, 497 (5th Cir. 1982) cert.
denied 459 U.S. 1044 (1982).
5
The probative value of this evidence is strong. The district
court must also consider the prejudicial effect and whether the
probative value is substantially outweighed by the attendant
prejudice. Because the offenses are so similar the potential
prejudice is great, for there is the risk that the jury may become
confused or convict the defendant under a propensity theory. The
prejudice, however, results from the great probative value.
Indeed, the earlier evidence is so similar that it almost amounts
to a signature. The district court acted properly in admitting
this evidence and wisely instructed the jury as to the limited
purpose of this extrinsic evidence.
B. Failure to Disclose Grand Jury Transcript.
The government did not turn over to Robichaux the grand jury
transcript of Jennifer Matte, an attorney for Presidential, who
testified at Robichaux's trial. This failure to disclose,
Robichaux argues, requires a new trial.
The grand jury testimony consisted only of Matte stating her
name, occupation, and that she was counsel for Presidential. She
thereupon invoked the Fifth Amendment and gave no further
testimony. At trial, Matte was more loquacious (her testimony
occupies forty-five pages of volume 11 of the transcript), and her
testimony was harmful to Robichaux. Robichaux suggests that if he
had known about this prior testimony, he would have cross-examined
her about it and sought to impeach her.
Robichaux's argument fails. The law is clear that cross-
examining a witness about an invocation of the Fifth Amendment at
6
a grand jury proceeding is not permitted.4 This Court has held
that, "The only . . . purpose for which defense counsel might have
sought to introduce [the witness's] past silence [before a grand
jury] would have been to infer that the witness had something to
hide. Because a plea of privilege in such circumstances is not
probative of guilt, the court properly excluded the evidence . . .
A claim of privilege is wholly consistent with innocence."5
Because the law is clear that Matte could not be questioned
about her earlier testimony, we need not reach the question of
whether this evidence is material under Brady v. Maryland, 373 U.S.
83 (1963) and U.S. v. Bagley, 473 U.S. 667 (1985) or falls under
the Jencks Act.
C. Surplusage in the Indictment.
Robichaux sought to have parts of the indictment struck. We
review for abuse of discretion.
Robichaux's argument is meritless. The cast of characters
including Rush in paragraph A of the indictment is accurate,
helpful, and relevant. The listing of the victims including the
citizens of Louisiana and Texas in paragraph B appears to be an
accurate listing of those who suffered because of Robichaux's
alleged fraud. Finally, as this Court has stated, the use of the
phrase "`scheme and artifice to defraud' [in paragraph B] does not
make the indictment defective . . . [it was] meant only to
4
U.S. v. Johnson, 585 F.2d 119, 126-27 (5th Cir. 1978).
5
Id.
7
elaborate the nature of [the defendant's] fraudulent activity".6
The district court did not abuse its discretion in refusing to
strike portions of the indictment.
D. The Non-Severance of the Indictment.
Robichaux claims that counts one and two were improperly
joined with count three.
We must consider whether either a misjoinder or a prejudicial
joinder has occurred.
This Court has held that misjoinder "is a matter of law which
is completely reviewable on appeal, but rule 8 [of the Federal
Rules of Criminal Procedure]7 is to be broadly construed in favor
of initial joinder".8 Rule 8's transaction requirement is flexible
and "may comprehend a series of many occurrences, depending not so
much upon the immediateness of their connection as upon their
logical relationship".9
Prejudicial joinder is committed to the discretion of the
trial court, and reversal is warranted only if the defendant can
6
U.S. v. Lennon, 814 F.2d 185, 190 (5th Cir. 1987), cert.
denied, 484 U.S. 928 (1987).
7
Rule 8(a) provides:
Joinder of Offenses. Two or more offenses may be
charged in the same indictment or information in a separate count
for each offense if the offenses charged, whether felonies or
misdemeanors or both, are of the same or similar character or are
based on the same act or transaction or on two or more acts or
transactions connected together or constituting parts of a common
scheme or plan.
8
U.S. v. Fortenberry, 914 F.2d 671, 675 (5th Cir. 1990)
cert. denied 111 S. Ct. 1333 (1991).
9
Id.
8
show clear prejudice from the trial court's refusal to sever.10
Some of the same securities used in the transaction that forms
the basis of count three were used in the transaction that was the
basis for counts one and two. Both transactions occurred within a
few months of each other. They require similar background
explanations. Although different victims were involved, they are
logically related. Moreover, Robichaux has not demonstrated any
prejudice which resulted from this joinder. Therefore, we hold
that the district court neither erred nor abused its discretion in
refusing to sever the indictment.
E. Sufficiency of the Evidence.
This Court reviews a contention that the evidence was
insufficient "in the light most favorable to the verdict" and
inquires "whether a reasonable juror could find the evidence
establishes guilt beyond a reasonable doubt".11
Robichaux argues that the government failed to prove intent to
commit fraud. This Court has pointed out that in a mail fraud case
proof of intent "may arise by inference from all of the facts and
circumstances surrounding a transaction". 12 In a wire fraud case
we stated, "Intent to defraud another for [one's] personal gain
constitutes the specific intent to defraud as required by the wire
10
Id.
11
U.S. v. Salazar, 958 F.2d 1285, 190-91 (5th Cir. 1992)
cert. denied 113 S. Ct. 185 (1992).
12
U.S. v. Aubrey, 878 F.2d 825, 827 (5th Cir. 1989) cert.
denied 493 U.S. 922 (1989).
9
fraud statute."13
Rush paid Robichaux $86,000 in commission payments. Robichaux
told Texas and Touche that he held the Fannie-Maes for
Presidential/GLR. There was a side agreement between Robichaux and
Rush that the Fannie-Maes would revert to Robichaux and NAFC if
Presidential became insolvent. This side agreement was not filed
with the Jefferson Parish Clerk of Court or shown to Touche, Texas,
or Commission while the agreement purporting to transfer the
Fannie-Maes to Presidential was filed. The 404(b) evidence is also
indicative of intent. This Court "will not lightly overturn a
determination by the trier of fact that the accused possessed the
requisite intent [to commit fraud],"14 and there is more than
sufficient evidence here to affirm a verdict that Robichaux knew
"what was going on" and had the intent to commit fraud.
F. Prosecutorial Misconduct.
Robichaux contends that the prosecutor made improper
statements in both her opening and closing arguments.15 The alleged
13
U.S. v. St. Gelais, 952 F.2d 90, 96 (5th Cir. 1992)
cert. denied 113 S. Ct. 439 (1992).
14
Aubrey at 827.
15
In her opening argument, the prosecutor stated, "...And
you will hear how much the loss was to the State of Louisiana.
And, as you know, the State of Louisiana is the taxpayers and the
taxpayers are the citizens. And not only is there a loss of the
taxpayers and citizens but all those people that went in to get
insurance and said I need to insure my car so if its stolen or
someone rear ends me or, you know, if I get in an accident of any
kind I can make sure if I am hurt or my child is hurt they can go
to the hospital and the bill is covered. Well, guess what, it
was not covered...."
In her closing argument, the prosecutor stated: "This
is of monumental importance to the defendant you're told. Well,
10
impropriety is that the prosecutor suggested that Louisiana
citizens and all those who seek to purchase insurance suffer from
Robichaux's fraud. This, Robichaux argues, placed the jurors in
the position of victims and thereby prejudiced him.
The appellant objected only to the closing statement. The
opening remark, therefore, is reviewed under a plain error
standard.16 If this Court finds the closing remark to be
misconduct, we must determine whether it casts serious doubt upon
the correctness of the jury's verdict.17
Neither statement was unduly prejudicial. The government was
attempting to explain a rather complicated financial transaction
and tried to make it easier for the jury to understand the effect
of the fraud. In essence, the government said that this crime
affects us all. Counsel is allowed "wide latitude in closing
arguments".18 A prosecutor is allowed to "impress upon the jury the
seriousness of the charges".19 The comments about which Robichaux
complains were within the bounds of reasonableness in impressing
upon the jury the seriousness of the charges.
I will tell you what, this case is of monumental importance to
every person who ever bought a policy, every person that ever
paid to have their car insured from Presidential Fire &
Casualty."
16
U.S. v. Carter, 953 F.2d 1449, 1461 (5th Cir. 1992)
cert. denied 112 S. Ct. 2980 (1992).
17
Carter at 1457.
18
U.S. v. Lowenberg, 853 F.2d 295, 304 (5th Cir. 1988)
cert. denied 489 U.S. 1032 (1989).
19
Id.
11
G. Sentencing.
Robichaux has two complaints about the sentencing: the
district court incorrectly determined the amount of loss which
stemmed from his fraudulent behavior, and the district court did
not reduce his sentence for acceptance of responsibility.
1. Amount of Loss.
Robichaux argues that the only loss which can be clearly
established from his actions is the $86,000 payment. The district
court held that a $5-10 million loss can reasonably be calculated
from the facts. "Factual findings regarding sentencing factors .
. . are entitled to considerable deference and will be reversed
only if they are clearly erroneous. A factual finding is not
clearly erroneous as long as it is plausible in light of the record
read as a whole."20
We must determine, therefore, whether it was clearly erroneous
to find that the losses attributable to Presidential's failure
resulted from Robichaux's actions in placing fraudulent securities
on Presidential's books. It is not clearly erroneous to assume
that if Touche had not issued a favorable audit for Presidential,
which only occurred because of Presidential's fraudulently inflated
balance sheet, the Commission would have acted to liquidate the
firm at an earlier date and minimized the losses. As of the date
of the presentence report, the cost to the state of Louisiana that
resulted from the failure of Presidential was estimated at $10
20
U.S. v. Sanders, 942 F.2d 894, 897 (5th Cir. 1991).
12
million.21 The commentary to the fraud guidelines states, "The loss
need not be determined with precision. The court need only make a
reasonable estimate of the loss, given the available information."22
The district court's decision to value the loss resulting from
Robichaux's fraud at between $5 and $10 million dollars is a
reasonable estimate and is not clearly erroneous.
2. Acceptance of Responsibility.
This Court's review of the district court's decision not to
reduce the guideline level by two points for acceptance of
responsibility is "entitled to great deference"23. The extent of
Robichaux's acceptance of responsibility appears in a short note to
the probation officer in which he wrote, "I made a mistake for
which I am very sorry." He presents no additional support for his
argument. Robichaux's continuing assertion of lack of intent
suggests that he has not fully accepted responsibility for his
actions. The district court acted properly in refusing to award
two points for acceptance of responsibility.24
III.
21
Dale Reed, an insurance liquidator hired by the
Louisiana Insurance Guarantee Association (LIGA) told the
probation officer that "the State of Louisiana has already
suffered an approximate loss of at least $10,000,000. This
figure is, however, expected to grow." (Presentence Report pp.6-
7).
22
U.S.S.G. § 2F1.1 comment 8.
23
U.S. v. Edwards, 911 F.2d 1031, 1034 (5th Cir. 1990)
quoting U.S.S.G. § 3E1.1 comment 5.
24
The Court would like to commend the government for an
excellent brief. It states the facts and law clearly in simple
declarative sentences.
13
We AFFIRM the judgment of the district court.
14