U.S. v. St. Gelais, 90-2726

Decision Date14 January 1992
Docket NumberNo. 90-2726,90-2726
Citation952 F.2d 90
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Jean Marie ST. GELAIS, Defendant-Appellant.
CourtU.S. Court of Appeals — Fifth Circuit

Marvin D. Miller, Alexandria, Va., for defendant-appellant.

Paula C. Offenhauser, Asst. U.S. Atty., Ronald G. Woods, U.S. Atty., Houston, Tex., for plaintiff-appellee.

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

Before THORNBERRY, DAVIS, and WIENER, Circuit Judges.

THORNBERRY, Circuit Judge:

The defendant, Jean Marie St. Gelais, was indicted and convicted on six counts of aiding and abetting wire fraud in violation of 18 U.S.C. § 1343 and 18 U.S.C. § 2. The district court sentenced St. Gelais to serve six consecutive four year prison terms, and to pay a fine of $1,000,000 and restitution of $12,120,244.29. St. Gelais appeals the validity of his conviction and the fine and restitution imposed.

Background

The six fraudulent wire transfers for which St. Gelais was convicted were part of a very involved and complicated scheme. In summary, St. Gelais sent fraudulent and misleading documents to an insurance company to induce the insurance company to issue surety bonds on promissory notes. St. Gelais then used the surety bonds to secure large loans from two financial institutions.

In order to carry out his scheme, St. Gelais created various limited partnerships allegedly for the purpose of oil and gas exploration and drilling. The investors for the limited partnerships were his son, his girlfriend, other individuals, and companies owned or operated by him that were worth little or nothing. Each investor supposedly contributed $37,000 cash to the partnership and signed a promissory note to pay an additional $187,000. The government introduced evidence at trial to show that St. Gelais fraudulently induced some investors to sign promissory notes and simply forged signatures on others.

The next step in the scheme was to get the promissory notes bonded by a reputable company so that St. Gelais, through the limited partnerships, could borrow against the notes. St. Gelais sent private placement memoranda describing the purpose of the limited partnerships to Mutual Fire, Marine and Inland Insurance ("Mutual") so that Mutual could determine whether the limited partnership met its criteria for bonding. He also sent an "investor package" for each investor or limited partner which contained the individual investor's financial statement, a signed pledge agreement, and two copies of the promissory note. Mutual relied on these documents to certify the financial condition of the limited partners, and hence, in bonding the promissory notes.

Once Mutual issued surety bonds on the promissory notes, St. Gelais, on behalf of the limited partnerships, approached the financial institutions for loans. He procured loans for the limited partnerships' alleged purpose, gas and oil exploration and drilling, from Metropolitan Savings Bank, now Crossland Savings Bank, ("Metropolitan"), and Anchor Savings Bank ("Anchor"), using the promissory notes as security. The financial institutions wired over $13 million to St. Gelais during the summer of 1984. Of course, the various limited partners defaulted on the promissory notes and the loan payments were not paid to Metropolitan and Anchor. Mutual, having bonded the notes, partially paid the loss to the financial institutions, but eventually stopped paying due to its own insolvency.

St. Gelais was indicted on six counts of aiding and abetting wire fraud and was convicted on all six counts. On appeal he claims (1) that the district court erred by not including a specific good faith instruction in the jury charge; (2) that the district court erred by instructing the jury that it could convict St. Gelais on the basis of a scheme substantially similar to the scheme contained in the indictment; (3) that the district court erred by not instructing the jury that only Mutual could have been an intended victim of the scheme and that, as a result of the failure to give that instruction, the jury's verdict is flawed; (4) that the district court imposed the fine under 18 U.S.C. § 3623 in violation of the ex post facto clause; 1 and (5) that the district court erred by not articulating factual findings regarding the fine imposed or the restitution ordered, pursuant to 18 U.S.C. § 3572 and § 3664, respectively. We find that the $1,000,000 fine was imposed in violation of the ex post facto clause and remand for sentencing on that basis only. We affirm the district court's opinion in all other respects.

Analysis
A. The Good Faith Instruction

St. Gelais claims that the district court erroneously ruled that the defense of good faith was not supported by the evidence and committed reversible error by refusing to include a good faith instruction in the jury charge. Although we need not reach the issue of whether the evidence supported the defense of good faith, we find that the district court did not commit reversible error by refusing to include the good faith instruction.

"A district court's refusal to include a defendant's proposed jury instruction in the charge is reviewed under an abuse of discretion standard." United States v. Rochester, 898 F.2d 971, 978 (5th Cir.1990). The district court abuses its discretion only if three conditions exist: (1) the requested instruction is substantively correct; (2) the requested instruction is not substantially covered in the charge given to the jury; and (3) it concerns an important point in the trial so that the failure to give it seriously impairs the defendant's ability to effectively present a particular defense. United States v. Hunt, 794 F.2d 1095, 1097 (5th Cir.1986). Under this test, "[t]his Court will not find an abuse of discretion where the instructions fairly and adequately cover the issues presented by the case." Rochester, 898 F.2d at 978.

St. Gelais cites United States v. Goss as authority for his contention that "if there is any evidentiary support whatsoever for a legal defense, and the trial court's attention is specifically directed to that defense, the trial judge commits reversible error by refusing to charge the jury." United States v. Goss, 650 F.2d 1336, 1344 (5th Cir.1981). St. Gelais fails to recognize, however, that Goss "must be read in light of later cases which indicate that the failure to instruct on good faith is not fatal when the jury is given a detailed instruction on specific intent and the defendant had the opportunity to argue good faith to the jury." Rochester, 898 F.2d at 978 (citing United States v. Hunt, 794 F.2d 1095 (5th Cir.1986)). Regardless of whether the evidence supported the defense of good faith, the court's definition of specific intent required the jury to consider any good faith St. Gelais may have demonstrated before finding him guilty of wire fraud.

The jury charge stated that

What must be proved beyond a reasonable doubt is that the Defendant knowingly and willfully devised or intended to devise or join a scheme to defraud substantially the same as the one alleged in the indictment....

The word "knowingly" as that term has been used from time to time in these instructions means that the act was done voluntarily and intentionally and not because of mistake or accident.

The word "willfully" as that term has been used from time to time in these instructions means that the act was committed voluntarily and purposely with the specific intent to do something the law forbids, that is to say, with bad purpose either to disobey or disregard the law.

(R., Vol. 20 at 18-19).

The court's instruction on specific intent required a showing of "bad purpose" for conviction. In this case, just as in the Rochester case, "the jury could only find specific intent after taking the evidence regarding good faith into account." Rochester, 898 F.2d at 979. Thus, the concept of good faith was adequately conveyed to the jury and the district court's refusal to include a specific instruction is not reversible error. See United States v. Luffred, 911 F.2d 1011, 1016 (5th Cir.1990) ("When the court instructs the jury as to the government's burden of proving that the defendant's conduct was willful and then properly defines that term, it adequately conveys the concept of the good faith defense.").

Although the court's charge, taken as a whole, is sufficient to support our finding that the district court did not commit reversible error by refusing to include a specific good faith instruction, we also point out that, despite St. Gelais' assertion that the defense of good faith was not argued to the jury, the trial transcript reveals numerous statements in defense counsel's closing arguments that implicitly raised the defense of good faith. For example, St. Gelais' counsel stated that the prosecution had discovered over the course of the investigation that "there is no motive for Mr. St. Gelais to involve himself in an inappropriate financial or business deal." (R., Vol. 28 at 22). Counsel also argued that Mr. St. Gelais' disclosures regarding the purchase of a penthouse allegedly with the loan funds were "consistent with, not inconsistent with, open and honest dealing." (R., Vol. 28 at 34). Finally, defense counsel argued throughout his closing argument that business practices were very different in 1984 compared to business practices in 1990. When discussing the false representation that each investor had put cash into the limited partnerships, defense counsel argued that

In each and every one of these pledge agreements, there's a representation that an investor has, in fact, put money down in these programs. When you look back through the crystal clear eyes of 1990 at the way business was run in 1984, when you take the position the government does, ... you overlook the way business was run back then.

As I said, money flowed like oil. The surety didn't care about the down payment, nor did the lending...

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