U.S. v. Moody

• Citation: 903 F.2d 321
• Decision Date: 30 May 1990
• Docket Number: No. 88-6016,88-6016
• Parties: 30 Fed. R. Evid. Serv. 1279 UNITED STATES of America, Plaintiff-Appellee, v. Shearn MOODY, Jr., Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 321

903 F.2d 321

30 Fed. R. Evid. Serv. 1279

UNITED STATES of America, Plaintiff-Appellee, v. Shearn MOODY, Jr., Defendant-Appellant.

No. 88-6016.

United States Court of Appeals, Fifth Circuit.

May 30, 1990.

Samuel Buffone, Terrance G. Reed, Washington, D.C., for defendant-appellant.

Evan M. Spangler, Asst. U.S. Atty., Henry K. Oncken, U.S. Atty., Paula C. Offenhauser, Asst. U.S. Atty., Houston, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before CLARK, Chief Judge, WISDOM and SMITH, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

For nearly a generation, Shearn Moody, Jr. ("Moody"), served as a trustee of the philanthropic Moody Foundation (the "Foundation"), endowed by the will of his wealthy grandfather for the perpetual benefit of all Texans. The government maintains that Moody applied his influence as trustee to siphon, for his personal benefit, approximately $1.3 million in grants from the $460 million charitable trust. Specifically, he allegedly directed grants to fictitious tax-exempt organizations that had clandestinely pledged, in return for Foundation contributions, to subsidize Moody's civil and bankruptcy litigation that followed from the collapse of his insurance enterprise.

After a protracted three-month trial, Moody was convicted on all seventeen counts of fraud. He submits, however, that he lacked the specific intent to commit any of the crimes alleged; rather, disreputable men preyed upon his mental frailty and his deeply-held sentiment that the judicial system traditionally has been biased against his interests.

Moody raises a litany of alleged procedural and evidentiary challenges on appeal, creating the impression that the trial was rife with error. While we reject that dismal assessment, we nonetheless conclude that trial errors were committed that, viewed in combination, mandate a reversal of the conviction. Additionally, should the government reprosecute, it is free under the double jeopardy clause to retry Moody only with respect to those counts, addressed infra, for which sufficient evidence of mail or wire fraud was adduced at the first trial. Accordingly, we reverse and remand.

I.

A.

Moody shared the Foundation's trusteeship during the events relevant to this indictment with his brother, Robert Moody, and his elderly aunt, Mary Moody Northen. His tenure on the board traces back to 1954 and the genesis of the charitable trust. Despite a four-year interruption in service during a dispute with the State of Texas concerning the proper number of trustees, Moody served as a fiduciary until 1987, at which time this indictment forced his departure.

Generally, Foundation activities are administered by a small professional staff. The staff processes approximately 400 grant applications per year for the trustees' review, and it disperses millions of dollars annually, ranking the Foundation among the nation's most generous charitable institutions. Several law firms assist the board of trustees, which meets quarterly, in evaluating the merits of the various grant applications.

The three trustees, all descendants of the original benefactor, displayed an affinity for grant proposals that appealed to their individual tastes. Robert, for example, admitted that he preferred to channel Foundation resources in the direction of medical research. His aunt, in contrast, lobbied for historical preservation and the arts, and Moody favored grants addressing the justice system. The trustees accommodated each other's preferences in order to ensure approval of projects deemed by each to be especially worthy of support.

Moody's interest in the justice system is, undisputably, a consequence of his own litigiousness: In 1985, for example, he was a defendant in approximately sixteen civil actions and a plaintiff in eleven, arising principally in connection with his past management of an Alabama insurance company that he founded. As sole shareholder of that company, and with meager initial capital, Moody successfully engineered explosive growth for the fledgling enterprise by assigning to it forty percent of his life interest in a family trust. That life interest injected desperately needed capital into the venture and spurred rapid expansion.

A subsequent controversy concerning the valuation of Moody's life interest, however, degraded the company's prospects for insuring its obligations and prompted its sudden collapse. In 1972, Alabama's insurance regulators declared Moody's insurance company insolvent and appointed a receiver. At the time of this involuntary forfeiture, Moody remained the principal shareholder of the defunct company. Shortly thereafter, the Alabama receiver commenced a federal securities action on behalf of minority shareholders and policyholders, securing a judgment of $6.3 million (excluding interest) against Moody.

Moody regarded Alabama's prosecution of the civil action as politically inspired. A series of unsuccessful appeals followed, which served to reinforce his perception that the legal process was unfairly skewed against his caste: He had forfeited his insurance enterprise and remained liable on a burgeoning civil judgment valued, with interest, at $12 million once appeals were exhausted. Unable to dispose of this adverse judgment through the appellate process, Moody retained the legal services of Jane Ford in 1984 to petition for bankruptcy relief in North Carolina. Thereafter, a substantial portion of his assets was subject to the bankruptcy trustee's control, which only exacerbated his notion of victimization.

Contemporaneously with this bankruptcy litigation, Moody was introduced to two disreputable individuals, previously unknown to him, who were attached to an organization whose activities eventually would place Moody's tenure with the Foundation under criminal scrutiny. Vance Beaudreau and William Pabst prompted attorney Ford, who had represented Beaudreau in an earlier bankruptcy proceeding, to organize a meeting with Moody. There, they introduced themselves as representatives of the Centre for Independence of Judges and Lawyers (CIJL), an organization purportedly dedicated to aiding citizens "oppressed" by the American legal system.

Pabst and Beaudreau proclaimed that Moody had been treated by the judiciary unfairly--a phenomenon they allegedly witnessed in regard to other prominent citizens--and announced that they stood prepared to muster the "considerable" resources and political influence of the CIJL on his behalf. Moody quickly befriended Pabst and Beaudreau, allying himself, unsuspectingly, with eccentric individuals ¹ and an organization heavily involved in the peddling of fraudulent tax-avoidance schemes to cash-rich individuals.

Pabst formed the CIJL from a nucleus of tax protestors who vigorously objected to federal taxation. Beaudreau served as the organization's fundraiser and solicited wealthy clients to share in the false promise of tax-free income. To that end, they secured tax-exempt status for the CIJL from the Internal Revenue Service (IRS) and announced, misleadingly, to prospective clients that their tax shelters had been formally endorsed by the IRS. To bolster their credibility, they publicly held themselves out to be lawyers or government employees. The seal of the CIJL, in fact, mimicked that of the United States Department of Justice. In a sophisticated ruse, clients were led to believe that the CIJL's fraudulent enterprise constituted legitimate tax-planning.

The CIJL's tax scheme hinged upon the establishment, for a fee, of individual taxpayers as tax-exempt "subsidiary foundations" of the CIJL. Procedurally, a taxpayer would "donate" his income to the CIJL, claiming the entirety as a charitable contribution. Thereafter, the CIJL would siphon off a percentage and "redonate" the earnings back to the taxpayer through his individual subsidiary. The taxpayer was instructed to finance all routine living expenses strictly through his subsidiary foundation, thereby avoiding income taxation.

These fraudulent tax shelters were publicly marketed by Pabst and Beaudreau as being in strict compliance with existing tax laws. Nothing could have been further from the truth, however, as evidenced by the commencement of an IRS criminal investigation against the organization. Nevertheless, the CIJL attracted a significant corps of about fifty affluent clients, all of whom were promised commissions for enlisting additional taxpayers into the growing pyramid of CIJL clients.

Significantly, CIJL's activities were not limited strictly to tax avoidance. The organization also actively solicited--and secured--fraudulent grants from charitable trusts. In 1984, the Foundation was targeted, surreptitiously, when Pabst and Beaudreau first pledged CIJL's support for Moody in his ongoing civil litigation. Having lost his insurance business, and most of his assets to a North Carolina bankruptcy court, Moody endorsed the shared goal of correcting the injustice that he purportedly suffered. The CIJL, however, contemplated financing that "shared goal" exclusively with Foundation funds, despite initial CIJL disclaimers to Moody and his brother to the contrary.

To engender Moody's confidence, the CIJL immediately dispatched representatives to investigate the North Carolina judge's administration of Moody's bankruptcy case, hoping to secure the judge's disqualification. To that end, they compiled a pamphlet highly critical of that judge for distribution at a bankruptcy conference. Oddly, Moody endorsed such activities as constructive.

Shortly thereafter, Pabst allegedly announced to Moody that although the CIJL would not solicit Foundation grants directly, he would arrange for affiliated foundations to submit grant applications for other "worthy" projects. As promised, three CIJL subsidiaries (individual taxpayers) submitted grant applications to the Foundation, each prepared by Pabst and...