United States v. Knox ( 1997 )

UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 96-50340
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
VERSUS
SHANNON KNOX; DAVID BRACE,
Defendants-Appellants.
Appeals from the United States District Court
for the Western District of Texas
May 1, 1997
Before POLITZ, Chief Judge, DeMOSS, Circuit Judge and JUSTICE,1
District Judge.
DeMOSS, Circuit Judge:
A preacher and his financial advisor were caught in a
government sting designed to snare money launderers. Both raised
entrapment at trial, but the jury rejected the defense and they
were convicted of laundering drug proceeds. Because the government
failed to prove that the preacher was likely to engage in money
1
District Judge of the Eastern District of Texas, sitting by
designation.
laundering absent the government’s conduct, we hold that he was
entrapped as a matter of law.
BACKGROUND
Defendant/Appellant Reverend David Brace was pastor of the
Faith Metro Church in Wichita, Kansas. Faith Metro had financial
difficulties and, by late 1993, was heavily in debt. The church
had to pay over $60,000 per month in debt service and needed to
raise $10 million to pay its bondholders and other creditors. In
an effort to raise money, Brace hired a Houston financial
consulting firm First Diversified Financial Services, in early
1994. Brace met with Mike Clark, the president of First
Diversified, and Clark’s assistant, 24-year-old Defendant/Appellant
Shannon Knox. Brace paid First Diversified $75,000 to prepare a
prospectus for a $10.8 million limited private offering by Faith
Metro.
Under the terms of the prospectus, Faith Metro offered 432
units of senior secured notes bearing 12.5% interest. The units
were $25,000 each, with a minimum subscription of two units
($50,000). If all units were sold, $10.8 million would be raised,
of which $9.375 million went to the church. Payment on the notes
would begin in September 1995 with quarterly payments of $337,500.
Thus, interest of $112,500 accrued monthly on the notes. The
church could begin repaying the principal any time after December
2
31, 1996, and the notes matured on December 31, 1999. Thus, under
the terms of the prospectus, Faith Metro would have use of $9.375
million for up to five years, accruing $112,500 per month in
interest (paid quarterly), with the principal of $10.8 million due
for repayment on December 31, 1999.
The first printing of the prospectus was on September 1,
1994.2 Knox sent the prospectus to approximately 40 broker
dealers, and received responses from two. The second printing of
the prospectus was on December 1, 1994. Copies were sent to 32 or
33 broker dealers, and Knox received responses from three. None of
these responses proved fruitful and, ultimately, no money was
raised through the private offering.
In October or November 1994, Knox met Roy Clarkston, who
worked for the Brazos Valley Small Business Development Center.
Clarkston had several clients in the Bryan-College Station area
interested in private placements, so Clark, who was also at the
meeting, gave Clarkston a copy of the Faith Metro prospectus. In
mid to late February 1995, Clarkston told Knox that he had several
potential investors in San Antonio. Clarkston told Knox that he
knew them through his business dealings in South and Central
America. Brace was not present at any of these meetings and did
not meet Clarkston until March 24, 1995.
At the same time Clark and Knox were seeking financing for
2
Under the terms of the first prospectus, the interest rate
was 10%.
3
Faith Metro, undercover federal agents were running an elaborate
sting operation in San Antonio designed to catch money launderers.
Beginning in October 1994, undercover agents from the United States
Drug Enforcement Agency, the Internal Revenue Service, and United
States Customs were involved in the operation. As part of the
sting operation, undercover agents investigated Clarkston, who they
suspected was a money launderer. The undercover agents told
Clarkston that they were seeking to launder cocaine proceeds and
requested his assistance. Clarkston suggested several long-term
laundering schemes, including investing in a cattle business and a
sports bar, but the undercover agents rejected the ideas, saying
they were interested in short-term investments.
In early March 1995, Clarkston told the undercover agents that
he had a “major big time guy,” a church group, anxious to do
business. At this time the undercover agents had no knowledge of
Brace or Knox. On March 17, 1995, Clarkston met with the
undercover agents in San Antonio and explained that he knew a
minister who was interested in laundering cocaine funds, and that
the preacher’s representative, his financial advisor, was in town
and anxious to meet with them. The undercover agents explained to
Clarkston that they did not want innocent people involved in the
business, and asked him if the minister knew they were cocaine
traffickers and that the money would be cocaine proceeds.
Clarkston replied that the preacher and the other person knew and
4
did not care.3
Later that day, Knox met with Clarkston and the undercover
agents. Knox said that he was representing Brace and that he was
there to negotiate a deal. Early in the conversation, the
undercover agents told Knox that the money was from drug proceeds;
Knox said that this was not a problem.4 Knox showed the prospectus
to the undercover agents, who indicated that they might be able to
lend Brace $3 million.
On March 24, the undercover agents met Brace for the first
time at a meeting also attended by Knox and Clarkston. The
undercover agents told Brace that they would be able to loan him
the entire $10 million, not just the $3 million previously
discussed. To make sure that Brace and Knox could handle such a
large sum, the undercover agents told them that they would have a
practice transfer of $100,000, a condition to which Brace readily
agreed. The undercover agents then informed Brace that the money
came from the sale of cocaine, and that he was being asked to
3
Clarkston did not testify at trial; instead, one of the
undercover agents testified as to Clarkston’s statements regarding
Brace and Knox. Knox objects that Clarkston’s statements are
hearsay and should not have been admitted. We address this issue
below.
4
This conversation, unlike later ones, was not taped. Knox
testified that the undercover agents did not tell him they were
drug dealers. The veracity of the conversation, however, was a
credibility issue for the jury.
5
launder it.5 Brace stated that he was not troubled by the money’s
source.6 At the end of the meeting, Brace said he was ready to
start the test money, but the undercover agents told him to have
patience.
Brace and Clarkston met with the undercover agents on April
26. Before the meeting, Knox told the undercover agents that he
and Brace had already “contrived a system” to quickly deposit and
transfer the first $100,000. At the meeting, the undercover agents
gave Brace an account number for an undercover account in a London
5
One of the undercover agents actually said, “he is asking you
to launder money.” The government informed Brace that the money
was from drugs only six pages into the transcript of the meeting.
6
Brace stated that:
[E]ven the last two days, my office called and let me
know that someone in Kansas had, won the lottery and
they gave our church 5,000 dollars. Uh... I have
monies that I know that come to the church. I don’t
have a questionnaire... where these monies come from.
***
I know I get monies... That are from sources that, uh,
would be questionable.
***
Uh, I ask, and it’s important I think for you to know
I, I prayed to God... I said God, because I wanted to
know if I was supposed to do this...
***
God said that... He helped put this, this together.
So I feel comfortable because of that.
6
bank where Brace was to wire the $100,000 in the first test. Brace
was given $100,000 in cash, which he wired to the English bank the
next week.
On May 5, the undercover agents again met with Brace in San
Antonio. The undercover agents suggested another $100,000 test,
this time to a domestic account controlled by the undercover
agents. Brace agreed to this, stating that to conceal the source
of the money, he would carry it on his books as a loan. The
undercover agents again gave Brace $100,000 in cash. As he counted
it, he commented, “I have a feeling that neither one of you, have
ever come across a pastor like me.” Brace took the money and wired
it the account.
Knox called one of the undercover agents on May 10. During
the conversation, Knox mentioned that he “kn[e]w a couple of people
that deserve a bullet,” and inquired, “can we work on that.” Knox
then stated that “I got a couple of problems, that I’m trying to
alleviate but if, uh they don’t alleviate I, uh I might need some
services of some kind,” referring to having someone killed.7
On May 12, the undercover agents met with Brace, Clarkston and
Knox, and delivered the cash for another test, this time $150,000.
Four days later Brace and Knox wired the money to the English bank.
The undercover agents told Brace and Knox that they would soon be
7
Knox never brought up the subject again, but the undercover
agent questioned him about it often. Knox argues that it was plain
error for the district court to admit the extrinsic evidence of
Knox’s solicitation of murder. We address this issue below.
7
ready to transfer the entire $10 million.
On June 21, the final meeting took place. The undercover
agents met Brace and Knox in a San Antonio parking lot and gave
them three canvas bags purportedly containing $10 million. The
bags actually contained an amount of newspaper clippings
approximating the weight of $10 million in cash. Brace and Knox
were arrested as they left the parking lot.
Brace and Knox were charged with money laundering in a four
count indictment.8 In Count One, Brace and Knox were charged with
conspiring to launder money in violation of 18 U.S.C. § 1956(h).
In Count Two, Brace was charged with laundering $100,000, and
aiding and abetting Clarkston, in violation of 18 U.S.C. §§ 2 and
1956(a)(2)(B)(i). In Count Three, Brace was charged with
laundering $100,000 in violation of 18 U.S.C. § 1956(a)(3)(B). In
Count Four, Brace and Knox were charged with laundering $150,000,
and aiding and abetting each other, in violation of 18 U.S.C. §§ 2
and 1956(a)(2)(B)(i). After a jury trial, Brace and Knox were
convicted on all counts and sentenced to 175 and 97 month
imprisonment, respectively.
8
Clarkston was also charged in the indictment, but pleaded
guilty.
8
DISCUSSION
Entrapment as a Matter of Law
Brace argues that, as a matter of law, he was entrapped.9
“Where the Government has induced an individual to break the law,
and the defense of entrapment is at issue, . . . the prosecution
must prove beyond reasonable doubt that the defendant was disposed
to commit the criminal act prior to first being approached by
Government agents.” Jacobson v. United States, 503 U.S. 551, 548-
49 (1992). The government concedes that Brace was induced;
therefore, the evidence must prove beyond reasonable doubt that
Brace was predisposed to launder money. Because this is a
sufficiency review, we will reverse only if no rational juror could
have found predisposition beyond a reasonable doubt. See United
States v. Byrd, 31 F.3d 1329, 1335 (5th Cir. 1994), cert. denied,
115 S. Ct. 1432 (1995).
The Supreme Court most recently addressed entrapment and
predisposition in Jacobson v. United States, 503 U.S. 551 (1992).
In Jacobson, government agents engaged in a
campaign of phony mailings to induce a Nebraska
farmer to violate the ban on child pornography
contained in the 1984 Child Protection Act. After
seven or eight mailings spanning 26 months,
Jacobson succumbed and ordered an illegal magazine.
The Supreme Court held as a matter of law that
Jacobson had been entrapped. . . . Given the
government’s persistent encouragements, the Supreme
9
In his brief, Knox does not argue that he was entrapped as a
matter of law. Accordingly he waived the issue and we do not
address it.
9
Court found that Jacobson’s “ready response to
these solicitations cannot be enough to establish
beyond a reasonable doubt that he was predisposed,
prior to the Government acts intended to create
predisposition, to commit the crime.”
United States v. Sandoval, 20 F.3d 134, 137 (5th Cir. 1994)
(quoting Jacobson, 503 U.S. at 553). The Court summarized
entrapment law, stating that “[w]hen the Government’s quest for
convictions leads to the apprehension of an otherwise law-abiding
citizen who, if left to his own devices, likely would have never
run afoul of the law, the courts should intervene.” Jacobson, 503
U.S. at 553-54.
The en banc Seventh Circuit recently wrestled with the meaning
of Jacobson in United States v. Hollingsworth, 27 F.3d 1196 (7th
Cir. 1994) (en banc). Writing for the majority, Chief Judge Posner
stated that in examining predisposition, we must ask ourselves what
the defendant would have done, had the government not been
involved. See id. at 1199-1200. To properly answer that question,
we must look to more than the defendant’s mental state; we must
also consider the defendant’s skills, background and contacts. As
Chief Judge Posner explained, predisposition “has positional as
well as dispositional force. The defendant must be so situated by
reason of previous training or experience or occupation or
acquaintances that it is likely that if the government had not
induced him to commit the crime some criminal would have done so.
. . .” Id. at 1200. A defendant may have the desire to commit the
10
crime, but may be without any ability to do so. The defendant is
able to commit the crime only when the government steps in and
provides the means to do so.10 In those cases, we cannot say that,
absent government involvement, the defendant would likely have
committed the crime.
The facts of Hollingsworth illustrate the Seventh Circuit’s
point. The Hollingsworth defendants were an orthodontist and a
farmer, both from Arkansas. The pair, who had attempted and failed
at many business ventures, decided to become international
financiers, “a vocation for which neither had any training,
contacts, aptitude, or experience.” Id. at 1200. They secured two
foreign banking licenses, one from Grenada, and attempted to make
money. Unfortunately, they had no customers and were rapidly going
broke. The orthodontist, deciding to raise capital by selling the
Grenadan banking license, placed an ad in USA Today offering the
license for $29,950.
A Customs agent saw the ad and, “[k]nowing that foreign banks
are sometimes used for money laundering, . . . assumed that someone
who wanted to sell one would possibly be interested in money
laundering.” Id. (internal quotation omitted). The agent, acting
10
We echo the Seventh Circuit’s statement that “lack of present
means to commit a crime is alone [not] enough to establish
entrapment if the government supplies the means.” Hollingsworth,
27 F.3d at 1202 (emphasis in original). Instead, we are only
speaking of individuals who, but for the government’s inducement,
likely would not commit the offense. Id. at 1202-03.
11
undercover, contacted the orthodontist and, ultimately, persuaded
him to launder money. The orthodontist and farmer were convicted
of money laundering.
The en banc Seventh Circuit reversed, stating that, “[h]ad the
government left [him] ‘to his own devices’ . . . in all likelihood
[the orthodontist], a middle-aged man who so far as anyone knows
had never before committed any crime, would never have committed a
money-laundering or related offense.” Id. at 1201-02 (quoting
Jacobson, 503 U.S at 553). The government “turned two harmless,
though weak, foolish, . . . and greedy, men into felons.” Id. at
1202. Chief Judge Posner made clear that “[w]hatever it takes to
become an international money launderer, they did not have it.”
Id. “Even if they had wanted to go into money laundering before
they met [the agent,] . . . the likelihood that they could have
done so was remote. They were objectively harmless.” Id. It was
“highly unlikely that if [the agent] had not providentially
appeared someone else would have guided them into money laundering.
No real criminal would do business with such [novices].” Id. at
1203.
We recognize that the Seventh Circuit’s reading of Jacobson
has not been universally embraced. The Ninth Circuit has rejected
the Seventh Circuit’s positional predisposition requirement and the
First Circuit has adopted a different test. See United States v.
Thickstun, 1997 WL 152744, *4 (9th Cir. April 3, 1997); United
12
States v. Gendron, 18 F.3d 955, 962-63 (1st Cir. 1994); see also
Hollingsworth, 27 F.3d at 1211 (Easterbrook, J., dissenting)
(criticizing positional predisposition requirement). In Gendron,
then Chief Judge (now Justice) Breyer held that Jacobson stands for
the proposition that in trying to induce the target of a sting to
commit a crime, the government may not confront him with
circumstances that are different from the ordinary circumstances a
real criminal would use in inducing one to engage in wrongdoing.
See Gendron, 18 F.3d at 962 (proper inquiry for predisposition is
“how the defendant likely would have reacted to an ordinary
opportunity to commit the crime”); Thickstun, 1997 WL 152744, at *4
(following Gendron). Thus, the government must show that a
defendant would have committed the crime when “faced with an
ordinary `opportunity’ to commit the crime rather than a special
`inducement.’” Id. at 963.
Nonetheless, we are persuaded that the Seventh Circuit’s
Hollingsworth decision is correct.11 See Paul Marcus, Presenting
11
In this case, the result would not differ under the First
Circuit’s Gendron test. The government failed to prove that real
drug dealers would provide the same, or even similar, terms to a
launderer as the undercover agents offered Brace. Thus, the
government failed to offer any evidence that Brace would accept an
“ordinary opportunity” to launder money.
Under the deal worked out between Brace and the undercover
agents, Brace would have the use of $10 million for four years. He
would pay back $50,000 a month for the first two years, and then
$100,000 for the last two. At the end of four years, a balloon
payment of $6.4 million would be due. The money would be paid back
13
Back From the [Almost] Dead, the Entrapment Defense, 47 FLA. L. REV.
205, 233-34 (1995) (arguing Hollingsworth is proper approach to
without interest. With the undercover agents’ approval, Brace
would use the money to pay the church’s debts. This arrangement
was similar to Brace’s proposal in the prospectus, except the
payments were lower and there was no interest.
This structuring was necessary to Brace’s participation. Brace
had pressing financial needs and needed to restructure his debts.
He needed the use of $10 million for several years. Had the
laundering of the $10 million been structured the same as the test
amounts, the scheme would have offered no benefit to Brace. Under
the tests, Brace had to immediately wire the money, and thus could
not use it. Without use of the money for several years, Brace had
no incentive to launder money. Therefore, without the deal being
structured as it was, Brace would not have laundered money.
The government presented no evidence as to what is involved in
an ordinary opportunity to launder money. Perhaps real drug
dealers regularly give launderers the interest free use of millions
of dollars for several years, with low monthly payments and a large
balloon payment. If that is the case, then we can infer that Brace
would accept an ordinary opportunity to launder drug proceeds.
But, it seems just as likely that real drug dealers would not want
their money tied up for years, with only token payments coming back
at first. It also seems just as likely that real drug dealers
would not allow a launderer to use $10 million in to-be-laundered
cash to pay off current debts, hoping that an income stream was
available to pay them back. Instead, real drug dealers might only
give the cash as needed, and ask that it be laundered immediately,
so that the launderer receives no benefit from the use of the
money, as in the tests. If the latter scenario is how real drug
dealers operate, then Brace would likely not have accepted an
ordinary opportunity to launder money.
The fact is that we do not know what constitutes an ordinary
opportunity to launder money. This is a subject on which the
record is silent. Because the record does not show what is an
ordinary opportunity to launder money, it follows that it provides
no support for the proposition that Brace would accept an ordinary
opportunity to launder money. Because predisposition is an issue
on which the government bears the burden of proof, we would hold
that, under the First Circuit’s test, the evidence is insufficient
to conclude that Brace was predisposed to launder money.
14
entrapment law). The Supreme Court instructs that in determining
predisposition we are to ask what the defendant would have done
absent government involvement. To give effect to that command, we
must look not only to the defendant’s mental state (his
“disposition”), but also to whether the defendant was able and
likely, based on experience, training, and contacts, to actually
commit the crime (his “position”).
We are called upon to determine whether the government proved
beyond a reasonable doubt that Brace was predisposed to launder
money. Following Hollingsworth, we look to Brace’s position, as
well as his mental disposition. The evidence of Brace’s mental
disposition to launder money is close. Nonetheless, we must
reverse because the government failed to prove that Brace, absent
government involvement, was in a position to launder money.
Therefore, the evidence is insufficient to prove that Brace was
predisposed to launder money.
The government argues that the evidence shows that Brace was
predisposed to launder money. The government, however, fails to
address the positional and dispositional aspects of pre-
disposition.12 All of the evidence the government adduced at trial
went solely to Brace’s mental disposition. The government offered
no evidence that Brace was in a position to launder money. The
12
In fact, in its brief, the government fails to even cite
Hollingsworth, let alone deal with it substantively.
15
government offered no evidence that real drug dealers would use a
novice such as Brace to launder money. Brace had never been
convicted of a crime, and, as far as the record shows, had never
committed a crime worse than speeding before he met the undercover
agents. The evidence shows that Brace certainly had never
laundered money before, and knew little, if anything, about the
subject. In fact, he had to send an associate to the library to
figure out the mechanics of laundering money. It is possible that
real drug dealers often use such ignorant and naive individuals to
launder millions of dollars. If that is the case, the government
offered no proof of it.
The government failed to prove that real drug dealers would
use a church to launder money. The only evidence that a church
might be useful in money laundering came when Brace’s counsel was
cross-examining one of the undercover agents. When asked whether
a real drug dealer would use someone who “didn’t know what the hell
he was doing,” and “was totally inefficient,” the undercover agent
responded that:
[P]erhaps, perhaps not, depending on what he -- in
the whole gist of the thing, the fact that he had a
church, that was golden to me. That would have
been golden because nobody looks at a church.
This statement is too vague and non-committal to be evidence of
anything. The undercover agent says “perhaps, perhaps not,” and
then says that a church would be “golden” to him, not whether a
real drug dealer would find it so.
16
The government never adduced evidence that a church would be
valuable in money laundering, or that a church has ever been used
in money laundering. The only evidence the government offered on
the subject established that no church has ever knowingly been used
to launder drug money. On cross-examination of Knox, the Assistant
United States Attorney (“AUSA”) asked whether Knox could “identify
even a single church company in the United States that’s ever
knowingly taken purported drug proceeds.” Knox responded that he
had no information regarding that, and the AUSA asked, “Never heard
of that before?” To which Knox responded, “No, sir. Not thus
far.” It is possible that drug dealers regularly use churches to
launder money, and that a willing, though inexperienced, pastor
would be an invaluable asset. That, however, is not in the record,
and this is an issue upon which the government bore the burden of
proof. On the record before us, the government failed to prove
that any church has ever been used to launder money, or that a
church would even be useful in laundering money.
After examining the record, we must conclude that the
government failed to prove that Brace was in a position to launder
money. When we ask the question of what Brace would have done if
he had never met the undercover agents, we cannot answer “launder
money for real drug dealers.” In all likelihood, Brace never would
have laundered money, but instead would have missed his bond
payments and been forced into bankruptcy, as ultimately happened.
Because the government failed to establish that Brace would have
17
laundered money absent government involvement, the evidence is
insufficient to prove predisposition. Accordingly, we hold that
Brace was entrapped as a matter of law, and his convictions must be
reversed.13
Entrapment Jury Instruction
Knox argues that the district court erred in using the pattern
jury instruction on entrapment after Jacobson. Fifth Circuit
Pattern Instruction No. 1.28. We recently held that the entrapment
pattern jury instruction is correct post-Jacobson. United States
v. Hernandez, 92 F.3d 309, 311 (5th Cir. 1996), cert. denied, 65
U.S.C.W. 3692 (April 14, 1997) (No. 96-7257). Accordingly, his
claim must fail.
Hearsay as to Clarkston’s Statement
Knox argues that the district court erred in admitting
Clarkston’s hearsay statement.14 The undercover agent testified
that on March 17, Clarkston told him that Brace and Knox knew, but
did not care, that the undercover agents were cocaine traffickers
and that the funds were cocaine proceeds. The statement was
13
Brace raises several other issues in his brief. Because we
reverse his convictions based upon the sufficiency of the evidence,
we do not address those other issues.
14
Brace does not raise this issue. Accordingly, we only
consider the issue as it relates to Knox.
18
admitted under Federal Rule of Evidence 801(d)(2)(E) as “a
statement by a co-conspirator of a party during the course and in
furtherance of the conspiracy.” To support admission of an out of
court statement under this provision, the proponent must show by a
preponderance of the evidence that (1) a conspiracy existed; (2)
the statement was made during the course and in furtherance of the
conspiracy; and (3) the declarant and the defendant were members of
the conspiracy. United States v. El-Zoubi, 993 F.2d 442 (5th Cir.
1993). Knox argues that there is no evidence that he or Brace were
Clarkston’s co-conspirator at the time the statement was made;
thus, it was not made during the course of the conspiracy.
The evidence was sufficient for the district court to find by
a preponderance of the evidence that the conspiracy existed at the
time of Clarkston’s statement. In determining whether a conspiracy
exists, the district court is free to look at all evidence,
including the putative hearsay statement. See Bourjaily v. United
States, 483 U.S. 171, 175-180 (1987) (applying FED. R. EVID.
104(a)); United States v. Triplett, 922 F.2d 1174, 1181 (5th Cir.
1991). The evidence clearly established that Clarkston and Knox
had previously met and were in contact with each other. On the
morning of March 17, Clarkston told the agents that he had a
preacher interested in laundering money and that his financial
advisor was in town. Just a few hours later, Clarkston produced
Knox and Knox agreed to launder money for the undercover agents.
19
Knox’s quick arrival and ready agreement to launder could be read
as evidence that he and Clarkston were already part of a conspiracy
to launder money when Clarkston made the statement that morning.
Considering this evidence, as well as Clarkston’s statement that
Knox knew the money was drug proceeds, yet did not care, the
district court could have reasonably concluded that Clarkston and
Knox were already part of a conspiracy to launder money. Thus, the
statement was an admission of a co-conspirator and not hearsay.
Admission of Evidence of Solicitation of Murder
Knox argues that the district court erred in admitting
evidence regarding his solicitation of murder. Knox admits that he
failed to object at trial; our review, therefore, is for plain
error. We will correct plain error only if (1) there is error, (2)
which is clear or obvious, (3) which affected substantial rights,
and (4) which will seriously affect the fairness, integrity or
public reputation of judicial proceedings if allowed to stand. See
United States v. Clements, 73 F.3d 1330, 1337 (5th Cir. 1996);
United States v. Calverley, 37 F.3d 160, 162-64 (5th Cir. 1994) (en
banc). Therefore, our first task is to determine if there is
error. Calverley, 37 F.3d at 162 (“There first must be error.”).
If we determine that the district court did not err in admitting
the solicitation of murder evidence, then our inquiry need go no
further.
20
The district court allowed evidence that Knox asked the
undercover agents to kill someone. Specifically, Knox told the
undercover agents that he knew “a couple of people that deserve a
bullet,” and asked “can we work on that.” The next day, the
undercover agents asked whether he still needed the hit, and Knox
responded that his situation had not become a problem yet, but if
it did, his “wrath is just going to be biblical.” The undercover
agents raised the issue with Knox twice more. Both times Knox said
that he longer needed anyone killed. The last time the issue was
raised, Knox stated that his problem had abated, and “I don’t have
to get violent with anybody so I’m happy about that. . . . [T]he
other day I really didn’t wanna have to go to extremes but I wanted
to know I kinda had the ability to if I needed to.”
Knox argues that this testimony is extrinsic evidence15 (that
is, evidence of other crimes) and should be inadmissible under
Federal Rule of Evidence 404(b).16 “Extrinsic offense evidence is
15
The government argues that the evidence of solicitation of
murder is not extrinsic, but rather is intrinsic evidence, which is
not governed by Rule 404(b). See United States v. Coleman, 78 F.3d
154, 156 (5th Cir.), cert. denied, 117 S. Ct. 230 (1996). Because
there is no plain error either way, we assume, without deciding,
that the evidence of solicitation of murder is extrinsic.
16
Rule 404(b) provides that:
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 motive, opportunity, intent preparation,
plan, knowledge, identity, or absence of mistake or
21
properly admitted under Rule 404(b) only if (1) it is relevant to
an issue other than the defendant’s character, and (2) its
probative value is not substantially outweighed by its undue
prejudice” under Federal Rule of Evidence 403.17 United States v.
Buchanan, 70 F.3d 818, 831 (5th Cir. 1995), cert. denied, 116 S.
Ct. 1340 (1996); see also United States v. Route, 104 F.3d 59, 63
(5th Cir. 1997); United States v. Beechum, 582 F.2d 898, 911 (5th
Cir. 1978). Knox argues that the solicitation of murder is only
relevant as to his character. It is not relevant to whether he
laundered money, but only serves to show that he is a bad man who
deserves to be punished. We disagree. Knox’s defense at trial was
entrapment. The government, therefore, was required to prove
beyond a reasonable doubt that Knox was predisposed to launder
money. The government did so by having Knox himself testify, via
the undercover tapes, that he was experienced in drug trafficking
and knowledgeable of criminal activity. Through this evidence, and
through Knox’s solicitation of murder, the government sought to
prove that Knox was predisposed to launder money.
accident. . . .
17
Federal Rule of Evidence 403 provides that:
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 consideration of undue
delay, waste of time, or needless presentation of
cumulative evidence.”
22
At trial, the jury essentially saw two Shannon Knoxes. The
jury saw the Knox of the undercover tapes, the young man who told
the undercover agents that his father was friends with a mafia
hitman, and that as a young boy he had seen a man killed. The Knox
of the undercover tapes told the undercover agents that he had
experience in the drug business, and that two years earlier he “had
a guy that was making a run to Cincinnati . . . and he had a
Cincinnati connection to buy ‘em three [kilograms of cocaine].”
The Knox of the undercover tapes spoke knowledgeably about
processing and dealing cocaine, and said that he knew the biggest
drug dealer in Pasadena. The Knox of the undercover tapes told the
undercover agents that he was not worried about federal undercover
agents because he “figure[d] if you’re going to get problems with
the feds, they’re easily purchased,” and stated that he had “always
had friends in the judicial system downtown that have always
cleaned [him] up.”
The Knox who testified at trial was a quite different figure.
He claimed that all the things he had told the undercover agents
were lies, that he was just “puffing” and “funnin’,” so as to
create a “level of comfort” with the putative Colombian drug
dealers. He stated that he had no cocaine trafficking experience,
other than buying small amounts for personal use, and that he had
no Cincinnati connection. The Knox at trial stated that he did not
know the biggest drug dealer in Pasadena, and that he had no
friends in the judicial system who could help him out. He stated
23
that most of his knowledge of drug trafficking and the underworld
came from “things seen in movies and read in books and magazines.”
It was in this context that the government put on evidence
that Knox solicited murder from the undercover agents. The
government was attempting to show the jury that Knox was the man on
the tapes, experienced in drug trafficking and the underworld, a
man who would order a hit on an associate giving him trouble. The
Knox of the undercover tapes was a man predisposed to launder
money, while the Knox testifying at trial was an inexperienced
innocent, whom the jury might think had no predisposition to
launder. The jury was entitled to decide which picture of Knox was
more credible, the one on the undercover tapes, or the one
testifying at trial. By presenting evidence of Knox telling the
undercover agents that he had some people “that deserve[d] a
bullet,” and that he might need some “services of some kind,” the
government could show the jury that the Knox of the undercover
tapes was the real Knox. The jury could conclude that a person
just “funnin’” would not solicit murder and, therefore, the real
Knox was on the undercover tapes, not in the courtroom.18 If the
jury believed the government’s portrayal of Knox, it could infer
that he was predisposed to launder money. The evidence, therefore,
was relevant to the main issue at trial: predisposition.
Having determined that the solicitation of murder evidence is
18
At trial, Knox explained away his comments by stating that
he solicited murder for “no particular reason.”
24
relevant to an issue other than Knox’s character, we must next
determine whether its probative value is substantially outweighed
by the danger of unfair prejudice. Evidence of solicitation of
murder is prejudicial to a defendant. See, e.g., United States v.
Limones, 8 F.3d 1004, 1008 (5th Cir. 1993) (evidence of murder
prejudicial); United States v. Fortenberry, 860 F.2d 628, 632 (5th
Cir. 1988) (evidence of violent crimes highly prejudicial).
Nonetheless, Knox has not shown that the danger of unfair prejudice
resulting from this evidence substantially outweighs its highly
probative value. Testimony regarding solicitation of murder did
not dominate the trial. In a seven day trial comprising over 1400
pages of trial transcript and hundreds of pages of undercover tape
transcripts, references to Brace’s solicitation of murder spans
only a few pages. Cf. Fortenberry, 860 F.2d at 632 (evidence of
extrinsic offenses “occupied more of the jury’s time than the
evidence of the charged offenses”). After reviewing the record, we
are not convinced that this evidence was likely to lead the jury to
base its verdict on an improper basis. See Fed. R. Evid. 403
advisory committee’s note; Fortenberry, 860 F.2d at 632 (evidence
likely to inspire emotional basis for verdict); United States v.
McRae, 593 F.2d 700, 707 (5th Cir. 1979) (noting that Rule 403's
major function is only to exclude matters of slight probative
force, "dragged in by the heels for the sake of prejudicial
effect").
25
Because the extrinsic evidence of solicitation of murder was
relevant to Knox’s predisposition, and not just his character, and
because the evidence’s probative value is not substantially
outweighed by the danger of unfair prejudice, the district court
did not err in admitting the evidence regarding solicitation.
Because there is no error, it follows that there is no plain error.
Sentencing
Knox argues that the district court erred in calculating his
base offense level. The Guideline under which he was sentenced
requires a three level decrease:
[U]nless the defendant or a coconspirator completed
all the acts the conspirators believed necessary on
their part for the successful completion of the
substantive offense or the circumstances
demonstrate that the conspirators were about to
complete all such acts but for apprehension or
interruption by some similar event beyond their
control.
U.S.S.G. § 2X1.1(b)(2). The commentary to the guideline states
that:
In most prosecutions for conspiracies or
attempts, the object offense was substantially
completed or was interrupted or prevented on the
verge of completion by the intercession of law
enforcement authorities or the victim. In such
cases, no reduction of the offense level is
warranted. Sometimes, however, the arrest occurs
well before the defendant or any co-conspirator has
completed the necessary acts of the object offense.
Under such circumstances, a reduction of 3 levels
is provided under § 2X1.1(b)(1) or (2).
U.S.S.G. §2X1.1, comment. (backg’d.).
26
The district court denied the reduction, stating that “the
three level decrease to the offense level is not warranted []
because the Defendants completed all the acts believed necessary on
their part for a successful completion of the offense.” Knox
contends that the district court erred in denying the reduction
because he had not taken all the acts necessary to launder the $10
million when he was caught. In fact, he argues, he was nowhere
near ready to launder that amount of cash.
The district court’s statement that Knox had completed all
acts believed necessary for completion of the offense is a
factfinding, which we review for clear error. United States v.
Sotelo, 97 F.3d 782, 799 (5th Cir. 1996), cert. denied, 117 S. Ct.
1002 (1997). “In making findings pursuant to the Sentencing
Guidelines, a district court need only be convinced by a
preponderance of the evidence.” Id. “Factual findings are not
clearly erroneous if they are plausible in light of the record read
as a whole.” United States v. Ayala, 47 F.3d 688, 690 (5th Cir.
1995). We will only hold a finding clearly erroneous if,
considering the evidence as a whole, we are left with a definite
and firm conviction that a mistake has been made. See United
States v. Acosta, 972 F.2d 86, 90 (5th Cir. 1992).
Knox and Brace had previously laundered $350,000 in three
tests. They had no difficulty laundering this amount, and always
completed their task within the time limit set by the undercover
27
agents. On the undercover tapes, Knox and Brace detailed their
plans to launder the money over four years, which included mixing
the cash in with offerings at Brace’s church. Knox argues that
while he and Brace had plans to launder the money, none had been
implemented. For example, he had taken no steps to create the
Cayman Islands corporation he had discussed. The only method he
had for laundering the funds was using cashiers checks, as had been
done for the tests. Knox argues that this plan was unworkable,
because 33,000 cashier’s checks would have been required to launder
the $10 million.19
In similar circumstances, other circuits have approved
factfindings that defendants completed all steps believed
necessary. For example, in United States v. Barton, 32 F.3d 61, 64
(4th Cir. 1994), the Fourth Circuit held that the factfinding of
completion of "all steps believed necessary" was not clearly
erroneous when a defendant merely accepted a suitcase of alleged
drug money for delivery to his associate. See also United States
v. Brown, 74 F.3d 891, 893 (8th Cir.) (defendant need not have
reached the “last step” before completion of the substantive
offense), cert. denied, 117 S. Ct. 74 (1996).
19
The cashiers checks had to be for less than $3000 in order
to avoid triggering bank reporting requirements.
28
Reviewing the evidence as a whole, we do not have a definite
and firm conviction that the district court made a mistake in
finding that Knox had completed all steps he believed necessary to
launder the $10 million. Accordingly, the district court did not
err in denying the three point reduction under U.S.S.G. §
2X1.1(b)(2).
CONCLUSION
The government failed to prove beyond a reasonable doubt that
Brace would likely have laundered money absent the government’s
involvement. Accordingly, we hold that Brace was entrapped as
matter of law, and his convictions and sentence on all counts are
REVERSED. The district court did not err in admitting Clarkston’s
statement, or in admitting evidence regarding Knox’s solicitation
of murder. The district court did not err in refusing the three
level decrease because Knox had not completed all steps necessary
to launder the entire $10 million. Therefore, Knox’s convictions
and sentences are, in all respects, AFFIRMED.
29