U.S. v. Ross

Decision Date19 December 1997
Docket NumberNo. 96-3556,96-3556
Citation131 F.3d 970
Parties11 Fla. L. Weekly Fed. C 881 UNITED STATES of America, Plaintiff-Appellee, v. Kenneth D. ROSS, James H. Adams, Defendants-Appellants.
CourtU.S. Court of Appeals — Eleventh Circuit

Benjamin W. Beard, Special U.S. Atty., P. Michael Patterson, U.S. Atty., U.S. Dept. of Justice, Pensacola, FL, for Plaintiff-Appellee.

Appeals from the United States District Court for the Northern District of Florida.

Before ANDERSON and COX, Circuit Judges, and ALARCN *, Senior Circuit Judge.

ALARCN, Senior Circuit Judge:

Kenneth D. Ross and James H. Adams appeal from the judgment entered following their conviction for wire fraud, interstate transportation of money taken by fraud, and conspiracy to commit mail fraud, wire fraud, interstate transportation of money obtained by fraud, and money laundering. The Government persuaded the jury that Ross and Adams conspired to obtain money for their personal use and benefit from two financially troubled insurance companies by falsely representing that the loans were to be used solely for business purposes. To disguise their intent to channel part of the funds for their personal use and benefit, and to escape detection by state insurance regulators, Ross and Adams and their co-conspirators created shell corporations and contrived deceptive paper transactions that had no economic substance.

Ross and Adams contend that the evidence presented to the jury is insufficient to sustain a conviction. They also argue that the court erred in its rulings on the admissibility of evidence and in rejecting certain jury instructions. Finally, they assert that the district court miscalculated their sentence and applied a sentencing guideline that is unconstitutional. We discuss each of these contentions, and the facts pertinent thereto, under separate headings.

We affirm the judgment of conviction because we conclude the evidence is sufficient to persuade a rational trier of fact of the guilt of the accused of each crime, and we hold that the court's rulings on the admissibility of evidence and its decision to reject defense instructions were free from error.

We vacate the sentence imposed on each defendant and remand for resentencing because the district court failed to make an independent finding that it was persuaded beyond a reasonable doubt that Ross and Adams conspired to commit the offense of money laundering.

A. Background

Ross and Adams contend that the Government failed to present sufficient evidence that they committed any crime. They argue that the Government failed to demonstrate that they defrauded the policy holders of Midwest Life Insurance Co. ("MWL") Gulf National Life Insurance Co. ("GNL"), and state insurance regulators by concealing their intent to divert money for their personal use that had been loaned to corporations controlled by them, in reliance on false representations that it would be used solely for legitimate business purposes--the purchase of real property and a merchant vessel suitable for conversion into a gambling casino.

The evidence is sufficient to support a conviction if, "after reviewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979) (emphasis in the original). "[A]ll reasonable inferences must be drawn in favor of supporting the jury's verdict." United States v. Sawyer, 799 F.2d 1494, 1501 (11th Cir.1986) (citing Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942)).

Ross began his involvement with GNL in 1989. At that time, Ross was the chief executive officer of Charter Bank, a Mississippi savings and loan association. GNL was experiencing financial difficulties because of prior bad investments. GNL had a $1,000,000 unsecured note in its loan portfolio issued to it by a failing savings and loan institution. GNL had a serious financial problem: if the note was not paid, GNL would become insolvent. GNL concluded that it should dispose of the unsecured note by using it to purchase real property. In December 1989, GNL purchased the Ensley Shopping Center in Pensacola, Florida from Charter Bank for $4,000,000. As payment for the shopping center, GNL assigned the unsecured $1,000,000 note to Charter Bank, made a cash payment of $1,000,000, and executed a $2,000,000 promissory note secured by a mortgage on the shopping center. The Ensley Shopping Center was operating at a loss prior to this transaction. Ross was On March 13, 1990, Bobby Shamburger and Gary Jackson, the controlling stockholders and officers of Southshore Holding Company, ("Southshore") opened a bank account in the name of On Line Investment Company and wired $900,345.33 to that account. MWL was a subsidiary of Southshore. On March 30, 1990, Shamburger and Jackson filed articles of incorporation in Nevada for On Line Investment, Inc. ("On Line"). Ross was designated president, secretary, and treasurer of On Line. He was also the only person who had the right to withdraw from the On Line Investment bank account.

forced to resign from Charter Bank when it was taken over by the Resolution Trust Company in March 1990.

On Line was originally created as a straw party to conceal the transfer of first mortgage loans worth $875,000 from Public Investors Life Insurance Co. ("PILICO"), one of the insurance companies owned by SouthShore to MWL, another SouthShore subsidiary. PILICO was insolvent at this time and could not make payments to its policy holders without an infusion of new funds. MWL had been prohibited from purchasing notes from a related company without the consent of the Nebraska Insurance Commissioner. On Line was used to circumvent this restriction. Ross purchased the notes from PILICO with the money on deposit in the On Line Investment bank account. Upon receipt of the notes, Ross assigned them to MWL. Ross was paid $20,000 for participating in this scheme.

Ross's next transaction with MWL involved the Tops'l Beach and Racquet Club ("the Club"), which was located in Sandestin, Florida. The Club cost $25,000,000 to develop, but it failed to produce sufficient funds to repay the development loan. The Club was taken over by the NCNB Texas National Bank, which first attempted to sell it for $18,000,000. After several years without attracting a purchaser, the bank reduced the asking price to $5,450,000.

The Sandestin Golf Resort ("Sandestin") was located next to the Club. The Bos Holding Company owned Sandestin. Peter Bos was its largest stockholder. Sandestin went into bankruptcy on February 7, 1990. Bos decided that the acquisition of the Club by the Bos Holding Company would create an attractive golf, tennis, and beach resort, and reduce overhead and administration costs through combined management. An added incentive was the fact that the Club's property included two undeveloped parcels that would be suitable for the construction of a hotel or condominium. Bos persuaded the Birmingham-Destin Investment Partners ("BDIP") to join him in negotiating for the purchase of the Club. On May 4, 1990, Bos and BDIP formed the Tops'l Holding Co. Inc. ("THI") for the purpose of purchasing the Club.

On the same date, THI signed an agreement to purchase the Club. THI was required to make an initial payment of $200,000 as "earnest money." The purchase and sale agreement provided that, upon consummation of the sale, the earnest money would be applied to the purchase price.

THI was unable to raise the balance of the purchase price from its investors. Meanwhile, the BDIP partners concluded that they did not wish to participate in the purchase of the Club. Tom Underwood, a partner in BDIP contacted Ronald Dunston, a Florida real estate broker to seek his assistance in locating someone who would be interested in purchasing the Club. Dunston informed Underwood that Ross was interested in building a beach-front hotel. Ross met with Underwood in the spring of 1990 to discuss the proposed purchase of the Club. Underwood told Ross the purchase price would be $5,500,000.

Ross contacted Shamburger, Jackson, and Jeremiah O'Keefe, the president of GNL and owner of GNL's parent company, to see if MWL or GNL would lend him the money to purchase the Club. Each company expressed an interest in making the loan. On May 1, 1990, Ross presented MWL with a written request for a commitment to loan the money required for the purchase of the Club. On the same date, MWL issued a commitment letter in which it indicated it would provide the entire $5,500,000. Jerry Palmer, MWL's attorney, testified that MWL did not perform any due diligence to determine whether the Over the next few months, MWL, Ross, Oscar Jordan, a former member of the board of directors of Charter Bank and Ross's attorney, and representatives of Bos and Sandestin conducted negotiations regarding the structure for the purchase of the Club. On June 29, 1990, THI assigned its right to purchase the Club to On Line 1 in exchange for a payment of $200,000 to reimburse THI for the earnest money it had paid to the owner of the Club. At this point in time, Ross was in a position to purchase the Club because of the $5,500,000 loan commitment he had received from MWL.

investment was sound prior to issuing the commitment letter.

In the early part of July 1990, Dennis LaFont, MWL's treasurer, informed Shamburger and Jackson that MWL was going to have to report a loss of $2,300,000 on its second quarterly report to the state insurance regulators in Florida and Louisiana for the period ending June 30, 1990. LaFont was concerned that a loss of this magnitude would subject the company to regulatory action.

Shamburger and Jackson told LaFont that MWL was going to sell...

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