United States v. Keith Kennedy ( 2013 )

REVISED February 8, 2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 11-60431 February 7, 2013
Lyle W. Cayce
Clerk
UNITED STATES OF AMERICA,
Plaintiff - Appellee
v.
KEITH M. KENNEDY; J. LARRY KENNEDY; MARK J. CALHOUN,
Defendants - Appellants
Appeals from the United States District Court
for the Southern District of Mississippi
Before JOLLY, JONES, and GRAVES, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
This case arises from an elaborate scheme contrived by Mark Calhoun
(“Calhoun”), with the help of Keith Kennedy and Larry Kennedy, to fraudulently
obtain mortgage loans. The defendants now appeal their convictions for
conspiracy to commit mail and wire fraud,1 substantive wire fraud,2 conspiracy
1
18 U.S.C. § 1349 (2006).
2
18 U.S.C. § 1343 (2006).
No. 11-60431
to commit money laundering,3 and promotional money laundering.4 The primary
issue we address arises in the context of the money laundering convictions and
relates to the alleged merger of two crimes into a single crime; here, whether the
wire fraud convictions and money laundering convictions merged to result in
convictions for two crimes on the same facts, when the facts will support only
convictions for wire fraud. Because we find that the wire fraud convictions did
not merge with the money laundering convictions, and because we otherwise find
no reversible error, we AFFIRM the judgments and convictions on all counts.
I.
Calhoun was a licensed home mortgage loan originator and a preacher
who fleeced the flock. Larry and Keith Kennedy (collectively, “Kennedys”), who
operated a loan closing business, Loan Closing and Title Service (“LCTS”),
helped with the shearing. Calhoun established an arrangement in which he
would secure borrowers to make fraudulent applications for mortgage loans and,
once the loans were approved, the lenders would wire the money to LCTS. In
turn, LCTS funneled hundreds of thousands of dollars back to Calhoun by
paying liens against the mortgage properties that were fraudulently claimed by
corporations Calhoun owned; Calhoun then transferred much of the proceeds
into schemes to secure additional fraudulent loans. The defendant Kennedys
were involved in the scheme of processing the loans and disbursing the funds
through LCTS.
Calhoun initiated the scheme by convincing borrowers with good credit to
secure loans to invest in homes; these borrowers expected to receive rental
income and to profit from then-appreciating property values. Calhoun often
enticed these borrowers into investing by telling them his congregation members
3
18 U.S.C. § 1956(h) (2006).
4
18 U.S.C. § 1956(a)(1)(A)(i) (2006).
2
No. 11-60431
were trying to become first-time homeowners. At certain times, Calhoun made
clear that the borrowers would be purchasing the homes and represented that
these homes would be rented to his congregation members, who would
eventually purchase the houses themselves (though most often these
representations proved entirely untrue). At least one other time, Calhoun told
the borrower he was seeking to form a group of people to “hold” various homes
for 30 to 45 days, pending the banks’ decisions to accept his congregation
members and to approve them for loans. In this case, the borrower was seriously
misled, and allegedly did not understand that he would in fact be purchasing the
home himself or that a mortgage would be taken out in his name. Calhoun told
this borrower he did not need to put any money at all into the investment
because Calhoun’s congregation members would be making the monthly
payments; Calhoun then paid the downpayments on the mortgages himself,
apparently without involving the borrower. Calhoun additionally told this
borrower he would receive a return on his investment at the time the bank and
his congregation members closed on the loans, simply for “holding” the
properties.5
After lining up borrowers, Calhoun committed several fraudulent acts to
obtain the mortgage loans on these properties, including misrepresenting the
creditworthiness of borrowers,6 falsifying the intended use of the
properties—certifying they would be the borrowers’ primary residence, rather
than rental properties—certifying forged signatures as authentic, and
misleading lenders as to the source of downpayments. Additionally, after a
borrower invested in a house or two, Calhoun would sometimes use that
5
This return was to be similar to a real estate agent’s fee at closing, i.e., a reward the
borrower would receive for holding the property for the ultimate buyer.
6
For example, Calhoun would, at times, increase the gross monthly income of borrowers
on loan applications and submit false supporting documents, such as bank statements.
3
No. 11-60431
borrower’s credit and personal information to invest in additional homes without
even consulting the borrower about this additional investment. Calhoun further
arranged with the sellers to purchase properties at one price, and later, when
seeking financing for the purchases, indicated higher sales prices.
The Kennedys assisted in this fraud in numerous ways. For example, they
certified signatures on multiple affidavits stating the same borrower would
primarily reside at different addresses, despite that these affidavits came before
them in quick succession. They further permitted Calhoun to conduct “travel
closings,” by which Calhoun would pick up closing documents from LCTS and
have them signed outside the presence of either Kennedy; when Calhoun
returned the documents to LCTS, one of the Kennedys would nonetheless
notarize the documents. An LCTS employee expressed concern over these
practices, but the Kennedys ignored her warning.
Once the mortgages were obtained, the lenders wired closing funds to
LCTS. Keith Kennedy would then authorize disbursements pursuant to
payments claimed in the fraudulent HUD-1 settlement statements. In order to
funnel some of the illicit funds back to himself in an ostensibly legitimate
manner, Calhoun incorporated and owned several fake companies.7 Although
these were shell companies that performed no services, these companies would
claim various expenses in the HUD-1 settlement statements. The Kennedys
authorized disbursements to these shell companies without looking to the title
abstract to identify that the loans were indeed made and recorded, in
contravention of typical and proper settlement agent practice. Furthermore,
they allowed money to be “pulled out” of the mortgage loan proceeds; this money
7
Calhoun incorporated Fast Start Mortgage, Inc. and Silver Cross Financial Group,
LLC, and owned M & C Investments, LLC. Willie Jones, a defendant who pled guilty and is
not involved in this appeal, also incorporated a fake construction company, Metro One
Investments, LLC.
4
No. 11-60431
purportedly went to shell companies, but testimony indicated the Kennedys were
aware the money actually went to a defendant not involved in this appeal.
After the Kennedys made the proper disbursements, they made additional
disbursements to the shell corporations to satisfy fraudulently asserted liens.
It was these funds that Calhoun was able to channel to himself. He would then
use part of the disbursements to obtain future fraudulent mortgages and to
reward borrowers and encourage them to borrow again. Additionally, rather
than use money belonging to the actual borrower to fund the downpayments on
new mortgages, Calhoun used the proceeds he illicitly obtained from earlier
mortgage loans to make the downpayments himself.
Following a jury trial, the defendants were convicted of conspiracy to
commit mail and wire fraud, substantive wire fraud, conspiracy to commit
money laundering, and promotional money laundering for operating this scheme
from 2004 to 2006. The district court sentenced Calhoun to 200 months
imprisonment8 and ordered him to pay a $3,200 special assessment. The court
sentenced Keith Kennedy to 72 months imprisonment9 and Larry Kennedy to 60
months imprisonment;10 each of their sentences is to be followed by three years
of supervised release. Each Kennedy was also ordered to pay a $3,300 special
assessment. Finally, the district court ordered each defendant to pay a
$10,244,574 forfeiture.
II.
8
The district court sentenced Calhoun to 200 months imprisonment for each of Counts
1-4, 6-20, and 23-34, and 120 months imprisonment as to Count 38, to run concurrently.
9
Keith Kennedy was sentenced to 72 months for each of Counts 1-21 and 23-34, to run
concurrently.
10
Larry Kennedy was sentenced to 60 months for each of Counts 1-21 and 23-34, to run
concurrently.
5
No. 11-60431
The defendants raise several issues on appeal. The issue deserving of the
most attention is their assertion that the money laundering crimes merged with
the wire fraud crimes. Accordingly, we turn to this issue first, before briefly
addressing the defendants’ remaining claims.
The defendants begin their argument by asserting that their money
laundering convictions should be overturned because the allegedly laundered
funds were in fact the same funds constituting the basis of the wire fraud
conviction—not funds that were “profits” derived from the underlying wire fraud.
Thus the money laundering counts merged with, i.e., effectively duplicated, the
underlying wire fraud counts as a single crime. Furthermore, and stated in an
alternate manner, the argument is that the wire fraud crime was not complete
at the time the conduct that is charged as money laundering occurred, and using
that intervening conduct as a basis for money laundering resulted in a merger
of the crimes. We review de novo the denial of a motion to dismiss an
indictment. United States v. Villanueva-Diaz, 634 F.3d 844, 848 (5th Cir. 2011).
To the extent this claim is premised upon a sufficiency of the evidence question,
we similarly conduct de novo review, considering the evidence in the light most
favorable to the verdict. United States v. Harris, 666 F.3d 905, 907 (5th Cir.
2012).
A.
In its statutory basics, money laundering occurs when a person, “knowing
that the property involved in a financial transaction represents the proceeds of
some form of unlawful activity, conducts or attempts to conduct such a financial
transaction which in fact involves the proceeds of specified unlawful activity . . .
with the intent to promote the carrying on of specified unlawful activity[.]” 18
U.S.C. § 1956(a)(1)(A)(i). The concept of merger is implicated when a defendant
is convicted under two criminal statutes for what is actually a single crime; that
is, convicted under the money laundering statute for essentially the same
6
No. 11-60431
conduct that constitutes the conduct of the “unlawful activity” upon which the
money laundering count is premised—here, wire fraud. See United States v.
Lineberry, 702 F.3d 210, 215 (5th Cir. 2012) (citing Garland v. Roy, 615 F.3d
391, 402 (5th Cir. 2010)). In this sense, i.e., in convicting a defendant more than
once for the exact same conduct, merger is comparable to double jeopardy.
United States v. Santos, 553 U.S. 507, 527 (2008) (Stevens, J., concurring).
The Supreme Court first addressed the possible “merger problem,” and the
related issue of defining the term “proceeds” under the federal money laundering
statute, in United States v. Santos, 553 U.S. 507. Santos was convicted of, inter
alia, running an illegal gambling business11 and money laundering.12 553 U.S.
at 509-10. His money laundering convictions were based upon payments he
made to lottery winners and to his various employees—essentially, business
expenses of conducting his illegal scheme. Id. at 509, 524. Santos appealed his
money laundering convictions, arguing that “proceeds,” as used in the money
laundering statute, referred only to subsequent transactions financed by profits
derived from his illegal gambling crimes; that “proceeds” did not refer to the
gross receipts from his operation. Id. at 509-10. The argument was that gross
receipts were funds from which the costs of the illegal activity scheme itself must
be paid; only the proceeds from profits of the illegal venture—a fractional part
of gross receipts—can be used for “investment” in a further financial transaction.
At the time the Supreme Court decided Santos, “proceeds” was not a
defined term.13 In endeavoring to define it, Justice Scalia, writing the plurality
11
18 U.S.C. § 371.
12
18 U.S.C. § 1956(a)(1)(A)(i).
13
In May 2009, after the transactions at issue here occurred, Congress amended the
money-laundering statute to define “proceeds” as “any property derived from or obtained or
retained, directly or indirectly, through some form of unlawful activity, including the gross
receipts of such activity.” 18 U.S.C. § 1956(c)(9).
7
No. 11-60431
opinion, identified what is now known as the “merger problem,” which he
described as follows:
If “proceeds” meant “receipts,” nearly every violation of the illegal-
lottery statute would also be a violation of the money-laundering
statute, because paying a winning bettor is a transaction involving
receipts that the defendant intends to promote the carrying on of
the lottery. Since few lotteries, if any, will not pay their winners,
the statute criminalizing illegal lotteries, 18 U.S.C. § 1955, would
“merge” with the money-laundering statute. Congress evidently
decided that lottery operators ordinarily deserve up to 5 years of
imprisonment, § 1955(a), but as a result of merger they would face
an additional 20 years, § 1956(a)(1). Prosecutors, of course, would
acquire the discretion to charge the lesser lottery offense, the
greater money-laundering offense, or both—which would predictably
be used to induce a plea bargain to the lesser charge.
Id. at 515-16. Similarly, Justice Stevens noted that “[a]llowing the Government
to treat the mere payment of the expense of operating an illegal gambling
business as a separate offense is in practical effect tantamount to double
jeopardy.” 553 U.S. at 527 (Stevens, J., concurring).14 Because there was no
evidence that the funds alleged in the money laundering counts were profits
from his illegal gambling, the Court affirmed the Seventh Circuit’s judgment
vacating Santos’s money laundering convictions.
In the years since Santos was decided, this Court has had a few
opportunities to discuss its difficult application. See, e.g., United States v.
Brown, 553 F.3d 768, 782-83 (5th Cir. 2008) (“The precedential value of Santos
is unclear outside of the narrow factual setting of that case, and the decision
raises as many issues as it resolves for the lower courts.”). In United States v.
Brown, for example, the defendants argued that their money laundering
convictions merged with their convictions for conspiracy to unlawfully distribute
14
This Court has since held, in accord with the Santos plurality’s acknowledgment, that
Justice Stevens’ concurring opinion in that case, which decided the issue on the narrowest
grounds and advocated a bifurcated analysis for defining proceeds, is controlling. Garland v.
Roy, 615 F.3d 391, 399 (5th Cir. 2010).
8
No. 11-60431
controlled substances and for actual distribution, because the government’s
evidence of “proceeds” was inadequate. Id. at 775-76, 782-85. This Court,
without deciding the “thorny issue[]” of how to define proceeds, rejected this
argument, finding the defendants failed even under the more stringent “profits”
definition; the government introduced “ample, unchallenged evidence that the
[drug] sales were profitable,” and the court accordingly found that “the money
laundering here at issue does not involve ‘mere payment’; rather, it clearly
involves payments for more drugs made out of accounts well-padded with the
profits from the appellants’ criminal enterprises.” Id. at 784-85.
Later, in Garland v. Roy, this Court addressed the defendant’s argument
that he was convicted for multiple nonexistent money laundering offenses, as the
Government did not prove he used “profits” to pay “returns” to investors in his
illegal pyramid scheme; thus, he argued, his money laundering convictions
merged with his mail fraud and securities fraud convictions. 615 F.3d 391, 393
(5th Cir. 2010). In analyzing this argument, this Court noted that a merger
occurs “when a defendant could be punished for the same ‘transaction’ under the
money-laundering statute as well as under another statute, namely the statute
criminalizing the ‘specified unlawful activity’ underlying the money-laundering
charge.” Id. at 402; see also Lineberry, 702 F.3d at 215 (citing the same). The
court went on to hold
in light of the statute, indictment, and jury instructions in this case,
it appears that (1) the Government did not prove or attempt to show
that [the defendant] engaged in money laundering with “proceeds,”
narrowly defined as “profits” rather than as “gross receipts”; (2) the
same “transaction may have been used to prove both the underlying
unlawful activity and the money-laundering charges; and therefore
(3) [the defendant’s] convictions for mail and securities fraud
potentially “merged,” as defined by Justice Stevens and the
plurality, with his money-laundering conviction.
Garland, 615 F.3d at 404.
9
No. 11-60431
Accordingly, to address merger in the money laundering context, we ask
whether the money laundering crime is based upon the same or continuing
conduct of the underlying predicate crime, or whether the crimes are separate
and based upon separate conduct. Under this reasoning, merger may be proved
in two ways: (1) a defendant may demonstrate the underlying unlawful activity
was not complete at the time the alleged money laundering occurred; or (2) a
defendant may show the transaction upon which the money laundering count is
based was not a payment from profits of the underlying crime made in support
of new crimes, but, instead, was a payment from gross receipts of the previously
committed crime made to cover the costs of that same crime. See United States
v. Harris, 666 F.3d 905, 910 (5th Cir. 2012) (“Money does not become proceeds
of illegal activity until the unlawful activity is complete.”); Brown, 553 F.3d at
785.
B.
We now turn to the case before us, focusing on the factual questions of
whether the wire fraud was complete when the money laundering occurred, and
whether the transactions for which the defendants were convicted of money
laundering indeed involved profits of the underlying wire fraud.15
At the outset of analyzing the defendants’ arguments, it is important to
clarify the Government’s theory of the case, that is, the theory upon which the
jury found the defendants guilty. In this connection, the defendants argue that
the Government presented the defendants’ conduct as one, singular scheme—not
one scheme of wire fraud and a separate scheme of money laundering. This
statement is broadly true, but not with the consequences that the defendants
urge. The very nature of the promotional money laundering statute suggests
15
Because the district court, “out of caution,” defined proceeds as profits in its jury
instructions, and because we find the defendants’ arguments fail even under this more exacting
definition, we need not engage in Justice Stevens’ bifurcated analysis to discern the proper
definition of proceeds.
10
No. 11-60431
there will always be one overarching scheme,16 but not necessarily only one
crime; the question is whether within the “single scheme” to which the
defendants refer, there is more than one fully completed crime.
With respect to the issue of completion of the underlying crime, the
indictment clearly states that the underlying wire fraud was consummated
before the defendants conducted the transactions constituting money laundering.
The indictment bases the wire fraud charges specifically upon the use of wire
communications to transfer the mortgage loan funds from the lenders to LCTS.
Once such a transfer occurred, the Government argues, the wire fraud crime was
fully consummated. See Harris, 666 F.3d at 910. The indictment, after charging
that the wire fraud crime was complete when the lenders transferred the loan
funds to LCTS, then proceeds further to charge the defendants with money
laundering for subsequent transactions—transactions which transferred some
of the proceeds of the mortgage loan funds to the defendants’ various shell
corporations.
The defendants contest the indictment’s characterization of the facts,
arguing the wire fraud crime was incomplete at the time the mortgage loans
were transferred to LCTS because the subsequent payments by LCTS to
16
In relevant part, the statute states:
(a)(1) Whoever, knowing that the property involved in a financial
transaction represents the proceeds of some form of unlawful activity,
conducts or attempts to conduct such a financial transaction which in
fact involves the proceeds of specified unlawful activity—
(A)(i) with the intent to promote the carrying on of
specified unlawful activity;
...
[is guilty of money laundering.] For purposes of this paragraph, a
financial transaction shall be considered to be one involving the proceeds
of specified unlawful activity if it is part of a set of parallel or dependent
transactions, any one of which involves the proceeds of specified unlawful
activity, and all of which are part of a single plan or arrangement.
18 U.S.C. § 1956(a)(1)(A)(i). Accordingly, promotional money laundering inherently requires
one comprehensive scheme for committing both the underlying unlawful activity and the
money laundering in promotion thereof.
11
No. 11-60431
Calhoun “were transactions that normally occurred during the course of the
alleged mail / wire fraud crimes.” This argument is unpersuasive. Unlike
payments made to lottery winners as part of the expense of engaging in the
illegal gambling scheme, the payments the defendants made to shell
corporations were not an ordinarily occurring aspect of the crime of wire fraud.
Wire fraud is a consummated crime when the illicitly obtained funds are
transmitted—in this case, when the lenders wired LCTS the mortgage loan
funds.17 If the entire scheme had come to a halt upon the Kennedys’ receipt of
the funds, the defendants would still have been guilty of the crime of wire
fraud—which illustrates that the subsequent disbursements to the shell
corporations have no bearing on the completion of the crime of wire fraud.18
These disbursements constituted different conduct underlying a different crime.
17
The federal wire fraud statute makes it a crime to wire, or cause to be wired, money
with the intent to obtain that money by fraud:
Whoever, having devised or intending to devise any scheme or artifice to
defraud, or for obtaining money or property by means of false or
fraudulent pretenses, representations, or promises, transmits or causes
to be transmitted by means of wire, radio, or television communication
in interstate commerce, any writing, signs, signals, pictures, or sounds
for the purpose of executing such scheme or artifice, shall be fined under
this title or imprisoned not more than 20 years, or both.
18 U.S.C. § 1343. Accordingly, wire fraud is consummated when the illicitly obtained funds
are transmitted—in this case, when the lenders wired LCTS the mortgage loan funds.
18
Additionally, it is simply not the case that, as the defendants contend, they were
convicted for precisely the same transactions under both the wire fraud and the money
laundering counts. Larry Kennedy, for example, asserts Counts 11 and 24 are duplicative.
This assertion is incorrect. Count 11 charges wire fraud for a transfer of $393,147.60 from the
lender to the LCTS bank account, while Count 24 charges money laundering for a transfer of
$58,194.00 from the LCTS bank account to a shell corporation. As we have noted, the
Government separately charged the defendants with violating the wire fraud statute for
causing lenders to make mortgage loan disbursements to LCTS, and only thereafter with
violating the money laundering statute by transferring part of the proceeds of the loan
disbursements to shell corporations in order to promote new fraudulent loans. See Harris, 666
F.3d at 910 (“The crime of money laundering is targeted at the activities that generally follow
the unlawful act in time.”).
12
No. 11-60431
Thus in this sense, the crime of money laundering does not merge with the
underlying crime of wire fraud.
We turn now to the argument that the two criminal statutes merged
because the proceeds upon which the money laundering counts were based were
not profits from the wire fraud, but instead, were gross receipts of the wire fraud
scheme used only to pay business expenses incurred in executing the earlier
crimes of wire fraud. After close review, we find this case does not present facts
in which the money laundering transactions were “mere payment” of an expense
of carrying on the wire fraud crime. Santos, 553 U.S. at 527 (Stevens, J.,
concurring). In the first place, the transactions that are charged as money
laundering only involve the transfers of money from LCTS to the shell
corporations to satisfy the fraudulent liens Calhoun had conjured up.
Accordingly, there were virtually no expenses related to the money transferred,
and this money constitutes profits, and profits only. As in United States v.
Brown, “the money laundering [transactions] at issue d[id] not involve ‘mere
payment’; rather, [they] clearly involve[d] payments for more” fraudulent
mortgage loan transactions “made out of accounts well-padded with the profits
from the appellants’ criminal enterprises.” 553 F.3d at 785 (emphasis added).
Moreover, the Government demonstrated that Calhoun used funds from the loan
closing disbursements, made to the shell companies, to make downpayments on
newly acquired mortgages and to make bonus payments to borrowers to
encourage them to invest again.19 The Government further showed that the
shell companies incurred no expenses and performed no services in
implementing the earlier wire fraud crimes. Thus, the defendants cannot
plausibly argue that the disbursements made to these companies were for
previously incurred expenses—indeed, they could not be anything but profits.
19
The Government presented evidence that many investors did, in fact, invest more
than once.
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No. 11-60431
In sum, the crimes of wire fraud were complete before the conduct
underlying the money laundering counts began; furthermore, the defendants
used only profits from the underlying wire fraud crimes to assist them in
committing new crimes of wire fraud. There has been no showing of merger of
crimes in these convictions.
III.
We now turn to other arguments raised by the appellants and find no
merit in any of them. For all the reasons identified above, and given that our
“standard of review for a challenge to sufficiency of the evidence is highly
deferential to the verdict,” there was sufficient evidence for the jury to find each
defendant guilty on the counts for which he was convicted. United States v.
Redd, 355 F.3d 866, 872 (5th Cir. 2003).
A.
The Kennedys’ argument that the district court erred in instructing the
jury that “knowingly” includes deliberate ignorance is similarly unavailing. “We
review the trial court’s decision to issue a deliberate ignorance instruction for
abuse of discretion.” United States v. Miller, 588 F.3d 897, 905 (5th Cir. 2009).
“We have consistently held the deliberate ignorance instruction is proper when
supported by sufficient evidence, including when used with many of the crimes
of which the Defendants are convicted.”20 United States v. Scott, 159 F.3d 916,
924 (5th Cir. 1998) (defendants were convicted of, inter alia, conspiracy, wire
fraud, and money laundering). In this case, the Kennedys’ defense was to deny
any knowledge of the fraudulent scheme. As we have discussed, there was
20
See, e.g., United States v. Gray, 105 F.3d 956 (5th Cir.1997) (mail fraud,
conspiracy);United States v. McKinney, 53 F.3d 664 (5th Cir.1995) (conspiracy); United States
v. Cavin, 39 F.3d 1299 (5th Cir.1994) (conspiracy); United States v. Faulkner, 17 F.3d 745 (5th
Cir.1994) (conspiracy, wire fraud, and RICO charges); see also United States v. Wisenbaker, 14
F.3d 1022 (5th Cir.1994) (tax evasion); United States v. Breque, 964 F.2d 381 (5th Cir.1992)
(conspiracy); United States v. Fuller, 974 F.2d 1474 (5th Cir.1992) (conspiracy, money
laundering).
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No. 11-60431
ample evidence supporting a deliberate ignorance instruction. On numerous
occasions, the Kennedys notarized documents signed outside their presence; they
further notarized statements that the same borrower would primarily reside at
numerous addresses, despite that these documents came before the Kennedys
in quick succession; the Kennedys were on notice of the potential problems
associated with these practices, as an employee alerted them to concerns she had
with these practices; they disbursed funds on liens claimed in HUD-1 statements
without verifying the existence of these liens; and they allowed funds to be
“pulled out” of mortgage loans proceeds. See United States v. Nguyen, 493 F.3d
613, 622 (5th Cir. 2007) (“The sheer intensity and repetition in the pattern of
suspicious activity coupled with the [defendants’] consistent failure to conduct
further inquiry to create a reasonable inference of purposeful contrivance that
satisfies” the requirements for a deliberate ignorance instruction.). Accordingly,
the Kennedys have failed to show that the district court erred in instructing the
jury on deliberate ignorance.
B.
Nor did the district court err in denying the defendants’ Batson challenge.
We review Batson rulings for clear error. United States v. Davis, 393 F.3d 540,
544 (5th Cir. 2004). The district court found a prima facie showing of racial bias
deriving from the prosecution’s striking of two black venire members, a car-
washer and an assembly line worker, when the prosecution failed to strike two
white venire members, a warehouse manager who completed a year of junior
college and a landscaper. The district court, however, then accepted the
prosecution’s race neutral explanation for these decisions, that is, that the
prosecution was seeking to compose a jury with a higher level of education and
sophistication for this complex case. The district court had the advantage of
actually being present to observe the prosecuting attorney as well as the venire
members. Certainly, we cannot say this decision was clear error. Id. (“[W]e
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No. 11-60431
must give great deference to the district court because ‘findings in this context
largely turn on an evaluation of the credibility or demeanor of the attorney who
exercises the [peremptory] challenge.’” (quoting United States v. Bentley-Smith,
2 F.3d 1368, 1373 (5th Cir. 1993) (second alteration in original))).
C.
The defendants further challenge the district court’s denial of their
motions, respectively, for mistrial based upon improper outside influence on the
jury and for severance. We review each of these rulings for abuse of discretion.
United States v. Smith, 354 F.3d 390, 394 (5th Cir. 2003) (“We review only for
abuse of discretion a court’s handling of complaints of outside influence on the
jury.”); United States v. Solis, 299 F.3d 420, 440 (5th Cir. 2002) (denial of motion
to sever is reviewed for abuse of discretion). After Calhoun’s improper
interactions with jurors outside of the courtroom, the district court judge spoke
to each juror, and each stated his or her ability fairly and impartially to evaluate
the case was unaffected. Accordingly, the district court adequately handled the
problem and acted within its discretion to deny the defendants’ motion for
mistrial.
Regarding their motions to sever, the Kennedys contend the district court
should have severed their trials because Calhoun primarily orchestrated and
perpetrated the scheme and the Kennedys’ roles were comparatively
unassuming. To demonstrate abuse of discretion in denying severance, “the
defendant bears the burden of showing specific and compelling prejudice that
resulted in an unfair trial, and such prejudice must be of a type against which
the trial court was unable to afford protection.” United States v. Mitchell, 484
F.3d 762, 775 (5th Cir. 2007) (quoting United States v. Morrow, 177 F.3d 272,
290 (5th Cir. 1999)). The Kennedys have not satisfactorily made such a showing.
The district court, as is typically appropriate, instructed the jury to “give
separate consideration to the evidence as to each defendant.” See United States
16
No. 11-60431
v. Whitfield, 590 F.3d 325, 355-56 (5th Cir. 2009) (“Limiting instructions such
as these are generally ‘sufficient to prevent the threat of prejudice resulting from
unsevered trials.’” (quoting United States v. Massey, 827 F.2d 995, 1005 (5th Cir.
1987))). Thus, the district court did not abuse its discretion in denying
severance.
D.
Finally, Calhoun raises two sentencing issues. He argues that the district
court erred in applying, respectively, a two-level increase to his base offense level
for misrepresenting that he acted on behalf of a religious organization, and a
two-level increase for abusing a position of trust. For sentencing purposes, “[w]e
review the district court’s findings of fact for clear error and its interpretation
and application of the [Sentencing] Guidelines de novo.” United States v.
Gharbi, 510 F.3d 550, 554 (5th Cir. 2007). The district court explicitly found
“Calhoun represented himself as acting to obtain a benefit on behalf of his
congregation, which is a religious organization, and that he intended to divert
hidden proceeds to himself through the third-party payouts.” This finding was
not clear error and, to be sure, the district court’s application of a sentencing
enhancement on this premise was valid.
The district court further found Calhoun abused a position of trust and
accordingly enhanced his sentence, relying upon United States v. Wright, 496
F.3d 371 (5th Cir. 2007). In Wright, this Court affirmed the district court’s
sentence enhancement when a mortgage broker used his position to submit false
information on loan applications to lenders with whom he had preexisting
relationships. Id. at 375-77. Similarly here, the district court found Calhoun
was uniquely positioned to prevent fraud, but went to great lengths to conceal
his fraudulent activities from lenders with whom he had repeated interactions.
Accordingly, the district court’s decision to enhance Calhoun’s sentence on this
basis was not error.
17
No. 11-60431
IV.
In this opinion, we have held that the district court correctly found the
wire fraud and money laundering convictions did not merge. The wire fraud
crimes were complete before the conduct forming the basis of the money
laundering convictions began, and the defendants used only profits from the
underlying wire fraud to promote further wire fraud crimes. Finally, the
defendants have failed to identify any other reversible error. Thus, the
judgment of the district court is, in all respects,
AFFIRMED.
18