U.S. v. Brace

• Citation: 145 F.3d 247
• Decision Date: 24 June 1998
• Docket Number: No. 96-50352,96-50352
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. David BRACE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 247

145 F.3d 247

UNITED STATES of America, Plaintiff-Appellee, v. David BRACE, Defendant-Appellant.

No. 96-50352.

United States Court of Appeals Fifth Circuit.

June 24, 1998.

Richard L. Durbin, Jr., Asst. U.S. Atty., San Antonio, TX, for Plaintiff-Appellee.

Roy R. Barrera, Sr., Nicholas & Barrera, San Antonio, TX, for Defendant-Appellant.

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

Before POLITZ, Chief Judge, and KING, JOLLY, HIGGINBOTHAM, DAVIS, JONES, SMITH, DUHE, WIENER, BARKSDALE, EMILIO M. GARZA, DeMOSS, BENAVIDES, STEWART, PARKER and DENNIS, Circuit Judges. ¹

RHESA HAWKINS BARKSDALE, Circuit Judge:

We granted rehearing en banc to consider whether, in order to rebut the entrapment defense raised by David Brace, the Government was required to prove "positional predisposition" on his part, a new requirement utilized in another circuit and by the panel; but, we conclude that we cannot address that subissue because it was neither preserved in district court nor even raised, for the first time, on appeal. Instead, at issue is simply whether, under our existing precedent, Brace was entrapped as a matter of law.

A jury convicted Brace and Shannon Knox of money laundering. On appeal, the panel affirmed as to Knox; but, it reversed Brace's convictions, finding entrapment as a matter of law, because the Government failed to prove "positional predisposition" on the part of Brace. In taking this case en banc, we severed Knox, with the panel opinion as to him remaining unaffected; of course, as to Brace, we vacated that portion of the opinion as it related to him. United States v. Knox, 112 F.3d 802 (5th Cir.), severed and granted rehearing en banc by 120 F.3d 42 (5th Cir.), cert. denied as to Knox, --- U.S. ----, 118 S.Ct. 616, 139 L.Ed.2d 501 (1997). Upon rehearing en banc as to Brace, we AFFIRM.

I.

Brace was the pastor of Faith Metro Church in Wichita, Kansas. In 1991, the church began construction on an 80,000 square foot building, financed through bonds, which required monthly payments of approximately $65,000. The church also owned and operated five, largely unprofitable, radio stations in the Wichita area, which had required an investment of approximately $500,000 over three years. In 1993, due to financial difficulties arising from these obligations, the church issued bonds and sought short-term, unsecured loans.

Brace met in May 1994 with Mike Clark, a financial consultant from Houston, Texas, and Clark's assistant, Knox. During this meeting, Brace decided to pursue a limited private offering in the amount of $10.8 million to retire the church's outstanding debt. The church trustees approved the plan and the offering began in September 1994; but, there were few responses and no money was raised. Shortly after the offering began, Knox met Roy Clarkston, a financier, in October or November 1994; and Knox gave Clarkston a copy of the private offering prospectus. In February 1995, Clarkston told Knox that he knew of some "South American investors" who might be interested in Faith Metro Church.

Concerning those "investors", while Brace had been attempting unsuccessfully to secure financing for his church in Kansas, undercover federal agents were conducting a money laundering investigation in San Antonio, Texas. Beginning in October 1994, around the time that Knox first met with Clarkston, Drug Enforcement Administration Special Agent Gonzalez met several times with Clarkston, who was suspected of money laundering. Agent Gonzalez identified himself as a Columbian narcotics trafficker seeking to launder money from cocaine sales.

In early March 1995, Clarkston contacted United States Customs Special Agent Cisneros, who was operating undercover as the "accountant" for Agent Gonzalez, and informed Agent Cisneros that he had a "major big time guy" from "a church group" who was "very interested" in talking to Cisneros and wanted to "close" the deal the following weekend. (During the investigation, conversations between the Agents and Brace, Knox, and Clarkston were recorded, by video and/or audio, with the exception of the two following 17 March meetings.)

On 17 March 1995, Agents Gonzalez and Cisneros met with Clarkston at a San Antonio hotel. Clarkston stated that he knew a minister who was interested in laundering the cocaine money, and that the minister's financial advisor was in town and eager to meet with them. At this time, the Agents had no knowledge of the identity of either Brace or Knox. Agent Gonzalez told Clarkston that he did not want any innocent people involved in the operation and asked if the minister (Brace) knew Gonzalez was a cocaine trafficker looking to launder cocaine proceeds. Clarkston stated that the minister and his financial advisor knew and did not care.

That same afternoon, Clarkston brought Knox to the hotel to meet the Agents. Knox told them that he was the representative for the minister and wanted to negotiate a deal. The Agents told Knox, early in the conversation, that Agent Gonzalez was a Colombian drug trafficker; that Agent Cisneros was the accountant for the drug organization; and that the deal involved laundering money from cocaine sales. Knox responded that he and the minister knew this and were not concerned about the money's source.

Knox explained that Brace's nonprofit Kansas corporation, New Life Fellowship, Inc., d/b/a Faith Metro Church, could launder the money; and, that the transaction would not arouse suspicion, because a minister was involved. Knox provided a copy of the private offering prospectus for Faith Metro Church. Agent Gonzalez told Knox that the Agents needed to meet with Brace to ensure that he understood that they were drug traffickers seeking to launder cocaine proceeds. Knox stated that Brace would gladly meet with them and could do so within 12 hours.

Over the next few days, Clarkston left telephone messages with Agent Cisneros that Knox and Brace were in San Antonio and ready to meet with the undercover Agents. On 24 March 1995, Agents Gonzalez and Cisneros met Brace, along with Clarkston and Knox, in a San Antonio hotel room. Gonzalez stated that he was authorized to "invest" up to $10 million, but that Knox and Brace would first need to transfer some test amounts, around $100,000.

Brace quickly agreed, assuring that he would do whatever was necessary in order to accomplish his goal and satisfy Gonzalez's organization. The Agents then stated that they needed to "go into the delicate issues", so that "there [were] no misunderstandings" or "confusion as to where the money [was] coming from". During the meeting, Agent Cisneros stated: "[Agent Gonzalez] plainly puts it ... that the money is from the sale of cocaine trafficking. That it is narcotics money .... he is asking you to launder money".

Brace responded: "I have monies that I know that come to the church. I don't have a questionnaire ... where these monies come from." Brace told the Agent that he knew that he had received funds "from sources that, uh, would be questionable". Brace then stated: "I prayed to God ... because I wanted to know if I was supposed to do this". According to Brace, "God said that ... He helped put this [ ] together." Finally, Brace told the Agents: "I appreciate the fact that you want to be very straight forward and up front with me .... but, uh, that does not concern me, really."

Brace and Knox stated that they were surprised, however, by the $10 million figure, because they had originally been seeking only $3 million. Brace and Knox stated that they would need some time to figure out how long it would take to transfer and repay this larger amount. Agent Gonzalez explained that he would give various denominations of cash to Knox and Brace; and they responded that they had already discussed those matters, although the Agents had never before met with Brace. Gonzalez agreed to pay Brace, Knox, and Clarkston six percent of the transferred amount. Brace assured the Agents that he was ready to transfer the test money, but Agent Gonzalez told him to have patience and wait.

A month later, on 24 April 1995, Knox telephoned Agent Cisneros, informing him that Brace was in San Antonio and ready to take the first test money. Knox stated also that he and Brace had already "contrived a system" to quickly deposit and transfer the first $100,000.

Two days later, Agent Cisneros met with Brace and Clarkston in San Antonio. At the beginning of the meeting, Agent Cisneros told Brace that the Colombian organization had just "crossed" three tons of cocaine into the United States, and explained, "[s]o ... now there's a lot of profit". Agent Cisneros gave Brace the account number for an undercover account in a London bank. Brace stated he would wire the $100,000 from his Wichita bank, but suggested transferring the money instead to a domestic bank, because it would clear faster and because Faith Metro Church had not previously transferred money to a foreign bank. Agent Cisneros told Brace that "the Colombians" probably would not change the destination account; but, that all other details of the transaction were left to Brace.

Brace also discussed how the $10 million would be repaid: he planned to make payments of $50,000 per month for the first two years; of $100,000 per month for the next two years; and then pay the balance. During this meeting, undercover Agents Gallman and Pineda gave $100,000 to Brace. Agent Cisneros offered Brace two opportunities to withdraw from the transaction, but Brace declined both times.

Brace enlisted Mark Raccuglia, a staff member at Faith Metro Church, to help launder the money, giving him specific instructions to obtain cashier's checks with different remitters from certain banks and to deposit them in specific accounts. And, Brace instructed Raccuglia to use cashier's checks in amounts less than $3000 each, in order to avoid the internal records policy at the banks.

Brace successfully...