United States v. Knox

Court Case Details
Court Case Opinion

UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 96-50340

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

VERSUS

SHANNON KNOX; DAVID BRACE,

Defendants-Appellants.

Appeals from the United States District Court

for the Western District of Texas

May 1, 1997

1

Before POLITZ, Chief Judge, DeMOSS, Circuit Judge and JUSTICE,

District Judge.

DeMOSS, Circuit Judge:

A preacher and his financial advisor were caught in a

government sting designed to snare money launderers. Both raised

entrapment at trial, but the jury rejected the defense and they

were convicted of laundering drug proceeds. Because the government

failed to prove that the preacher was likely to engage in money

1

District Judge of the Eastern District of Texas, sitting by

designation.

laundering absent the government’s conduct, we hold that he was

entrapped as a matter of law.

BACKGROUND

Defendant/Appellant Reverend David Brace was pastor of the

Faith Metro Church in Wichita, Kansas. Faith Metro had financial

difficulties and, by late 1993, was heavily in debt. The church

had to pay over $60,000 per month in debt service and needed to

raise $10 million to pay its bondholders and other creditors. In

an effort to raise money, Brace hired a Houston financial

consulting firm First Diversified Financial Services, in early

1994. Brace met with Mike Clark, the president of First

Diversified, and Clark’s assistant, 24-year-old Defendant/Appellant

Shannon Knox. Brace paid First Diversified $75,000 to prepare a

prospectus for a $10.8 million limited private offering by Faith

Metro.

Under the terms of the prospectus, Faith Metro offered 432

units of senior secured notes bearing 12.5% interest. The units

were $25,000 each, with a minimum subscription of two units

($50,000). If all units were sold, $10.8 million would be raised,

of which $9.375 million went to the church. Payment on the notes

would begin in September 1995 with quarterly payments of $337,500.

Thus, interest of $112,500 accrued monthly on the notes. The

church could begin repaying the principal any time after December

2

31, 1996, and the notes matured on December 31, 1999. Thus, under

the terms of the prospectus, Faith Metro would have use of $9.375

million for up to five years, accruing $112,500 per month in

interest (paid quarterly), with the principal of $10.8 million due

for repayment on December 31, 1999.

The first printing of the prospectus was on September 1,

2

1994.

Knox sent the prospectus to approximately 40 broker

dealers, and received responses from two. The second printing of

the prospectus was on December 1, 1994. Copies were sent to 32 or

33 broker dealers, and Knox received responses from three. None of

these responses proved fruitful and, ultimately, no money was

raised through the private offering.

In October or November 1994, Knox met Roy Clarkston, who

worked for the Brazos Valley Small Business Development Center.

Clarkston had several clients in the Bryan-College Station area

interested in private placements, so Clark, who was also at the

meeting, gave Clarkston a copy of the Faith Metro prospectus. In

mid to late February 1995, Clarkston told Knox that he had several

potential investors in San Antonio. Clarkston told Knox that he

knew them through his business dealings in South and Central

America. Brace was not present at any of these meetings and did

not meet Clarkston until March 24, 1995.

At the same time Clark and Knox were seeking financing for

2

Under the terms of the first prospectus, the interest rate

was 10%.

3

Faith Metro, undercover federal agents were running an elaborate

sting operation in San Antonio designed to catch money launderers.

Beginning in October 1994, undercover agents from the United States

Drug Enforcement Agency, the Internal Revenue Service, and United

States Customs were involved in the operation. As part of the

sting operation, undercover agents investigated Clarkston, who they

suspected was a money launderer. The undercover agents told

Clarkston that they were seeking to launder cocaine proceeds and

requested his assistance. Clarkston suggested several long-term

laundering schemes, including investing in a cattle business and a

sports bar, but the undercover agents rejected the ideas, saying

they were interested in short-term investments.

In early March 1995, Clarkston told the undercover agents that

he had a “major big time guy,” a church group, anxious to do

business. At this time the undercover agents had no knowledge of

Brace or Knox. On March 17, 1995, Clarkston met with the

undercover agents in San Antonio and explained that he knew a

minister who was interested in laundering cocaine funds, and that

the preacher’s representative, his financial advisor, was in town

and anxious to meet with them. The undercover agents explained to

Clarkston that they did not want innocent people involved in the

business, and asked him if the minister knew they were cocaine

traffickers and that the money would be cocaine proceeds.

Clarkston replied that the preacher and the other person knew and

4

3

did not care.

Later that day, Knox met with Clarkston and the undercover

agents. Knox said that he was representing Brace and that he was

there to negotiate a deal. Early in the conversation, the

undercover agents told Knox that the money was from drug proceeds;

4

Knox said that this was not a problem.

Knox showed the prospectus

to the undercover agents, who indicated that they might be able to

lend Brace $3 million.

On March 24, the undercover agents met Brace for the first

time at a meeting also attended by Knox and Clarkston. The

undercover agents told Brace that they would be able to loan him

the entire $10 million, not just the $3 million previously

discussed. To make sure that Brace and Knox could handle such a

large sum, the undercover agents told them that they would have a

practice transfer of $100,000, a condition to which Brace readily

agreed. The undercover agents then informed Brace that the money

came from the sale of cocaine, and that he was being asked to

3

Clarkston did not testify at trial; instead, one of the

undercover agents testified as to Clarkston’s statements regarding
Brace and Knox. Knox objects that Clarkston’s statements are
hearsay and should not have been admitted. We address this issue
below.

4

This conversation, unlike later ones, was not taped. Knox

testified that the undercover agents did not tell him they were
drug dealers. The veracity of the conversation, however, was a
credibility issue for the jury.

5

5

launder it.

Brace stated that he was not troubled by the money’s

6

source.

At the end of the meeting, Brace said he was ready to

start the test money, but the undercover agents told him to have

patience.

Brace and Clarkston met with the undercover agents on April

26. Before the meeting, Knox told the undercover agents that he

and Brace had already “contrived a system” to quickly deposit and

transfer the first $100,000. At the meeting, the undercover agents

gave Brace an account number for an undercover account in a London

5

One of the undercover agents actually said, “he is asking you

to launder money.” The government informed Brace that the money
was from drugs only six pages into the transcript of the meeting.

6

Brace stated that:

[E]ven the last two days, my office called and let me
know that someone in Kansas had, won the lottery and
they gave our church 5,000 dollars. Uh... I have
monies that I know that come to the church. I don’t
have a questionnaire... where these monies come from.

***

I know I get monies... That are from sources that, uh,
would be questionable.

***

Uh, I ask, and it’s important I think for you to know
I, I prayed to God... I said God, because I wanted to
know if I was supposed to do this...

***

God said that... He helped put this, this together.
So I feel comfortable because of that.

6

bank where Brace was to wire the $100,000 in the first test. Brace

was given $100,000 in cash, which he wired to the English bank the

next week.

On May 5, the undercover agents again met with Brace in San

Antonio. The undercover agents suggested another $100,000 test,

this time to a domestic account controlled by the undercover

agents. Brace agreed to this, stating that to conceal the source

of the money, he would carry it on his books as a loan. The

undercover agents again gave Brace $100,000 in cash. As he counted

it, he commented, “I have a feeling that neither one of you, have

ever come across a pastor like me.” Brace took the money and wired

it the account.

Knox called one of the undercover agents on May 10. During

the conversation, Knox mentioned that he “kn[e]w a couple of people

that deserve a bullet,” and inquired, “can we work on that.” Knox

then stated that “I got a couple of problems, that I’m trying to

alleviate but if, uh they don’t alleviate I, uh I might need some

7

services of some kind,” referring to having someone killed.

On May 12, the undercover agents met with Brace, Clarkston and

Knox, and delivered the cash for another test, this time $150,000.

Four days later Brace and Knox wired the money to the English bank.

The undercover agents told Brace and Knox that they would soon be

7

Knox never brought up the subject again, but the undercover

agent questioned him about it often. Knox argues that it was plain
error for the district court to admit the extrinsic evidence of
Knox’s solicitation of murder. We address this issue below.

7

ready to transfer the entire $10 million.

On June 21, the final meeting took place. The undercover

agents met Brace and Knox in a San Antonio parking lot and gave

them three canvas bags purportedly containing $10 million. The

bags actually contained an amount of newspaper clippings

approximating the weight of $10 million in cash. Brace and Knox

were arrested as they left the parking lot.

Brace and Knox were charged with money laundering in a four

8

count indictment.

In Count One, Brace and Knox were charged with

conspiring to launder money in violation of 18 U.S.C. § 1956(h).

In Count Two, Brace was charged with laundering $100,000, and

aiding and abetting Clarkston, in violation of 18 U.S.C. §§ 2 and

1956(a)(2)(B)(i). In Count Three, Brace was charged with

laundering $100,000 in violation of 18 U.S.C. § 1956(a)(3)(B). In

Count Four, Brace and Knox were charged with laundering $150,000,

and aiding and abetting each other, in violation of 18 U.S.C. §§ 2

and 1956(a)(2)(B)(i). After a jury trial, Brace and Knox were

convicted on all counts and sentenced to 175 and 97 month

imprisonment, respectively.

8

Clarkston was also charged in the indictment, but pleaded

guilty.

8

DISCUSSION

Entrapment as a Matter of Law

9

Brace argues that, as a matter of law, he was entrapped.

“Where the Government has induced an individual to break the law,

and the defense of entrapment is at issue, . . . the prosecution

must prove beyond reasonable doubt that the defendant was disposed

to commit the criminal act prior to first being approached by

Government agents.” Jacobson v. United States, 503 U.S. 551, 548-

49 (1992). The government concedes that Brace was induced;

therefore, the evidence must prove beyond reasonable doubt that

Brace was predisposed to launder money. Because this is a

sufficiency review, we will reverse only if no rational juror could

have found predisposition beyond a reasonable doubt. See United

States v. Byrd, 31 F.3d 1329, 1335 (5th Cir. 1994), cert. denied,

115 S. Ct. 1432 (1995).

The Supreme Court most recently addressed entrapment and

predisposition in Jacobson v. United States, 503 U.S. 551 (1992).

In Jacobson, government agents engaged in a
campaign of phony mailings to induce a Nebraska
farmer to violate the ban on child pornography
contained in the 1984 Child Protection Act. After
seven or eight mailings spanning 26 months,
Jacobson succumbed and ordered an illegal magazine.
The Supreme Court held as a matter of law that
Jacobson had been entrapped. . . . Given the
government’s persistent encouragements, the Supreme

9

In his brief, Knox does not argue that he was entrapped as a

matter of law. Accordingly he waived the issue and we do not
address it.

9

Court found that Jacobson’s “ready response to
these solicitations cannot be enough to establish
beyond a reasonable doubt that he was predisposed,
prior to the Government acts intended to create
predisposition, to commit the crime.”

United States v. Sandoval, 20 F.3d 134, 137 (5th Cir. 1994)

(quoting Jacobson, 503 U.S. at 553). The Court summarized

entrapment law, stating that “[w]hen the Government’s quest for

convictions leads to the apprehension of an otherwise law-abiding

citizen who, if left to his own devices, likely would have never

run afoul of the law, the courts should intervene.” Jacobson, 503

U.S. at 553-54.

The en banc Seventh Circuit recently wrestled with the meaning

of Jacobson in United States v. Hollingsworth, 27 F.3d 1196 (7th

Cir. 1994) (en banc). Writing for the majority, Chief Judge Posner

stated that in examining predisposition, we must ask ourselves what

the defendant would have done, had the government not been

involved. See id. at 1199-1200. To properly answer that question,

we must look to more than the defendant’s mental state; we must

also consider the defendant’s skills, background and contacts. As

Chief Judge Posner explained, predisposition “has positional as

well as dispositional force. The defendant must be so situated by

reason of previous training or experience or occupation or

acquaintances that it is likely that if the government had not

induced him to commit the crime some criminal would have done so.

. . .” Id. at 1200. A defendant may have the desire to commit the

10

crime, but may be without any ability to do so. The defendant is

able to commit the crime only when the government steps in and

10

provides the means to do so.

In those cases, we cannot say that,

absent government involvement, the defendant would likely have

committed the crime.

The facts of Hollingsworth illustrate the Seventh Circuit’s

point. The Hollingsworth defendants were an orthodontist and a

farmer, both from Arkansas. The pair, who had attempted and failed

at many business ventures, decided to become international

financiers, “a vocation for which neither had any training,

contacts, aptitude, or experience.” Id. at 1200. They secured two

foreign banking licenses, one from Grenada, and attempted to make

money. Unfortunately, they had no customers and were rapidly going

broke. The orthodontist, deciding to raise capital by selling the

Grenadan banking license, placed an ad in USA Today offering the

license for $29,950.

A Customs agent saw the ad and, “[k]nowing that foreign banks

are sometimes used for money laundering, . . . assumed that someone

who wanted to sell one would possibly be interested in money

laundering.” Id. (internal quotation omitted). The agent, acting

10

We echo the Seventh Circuit’s statement that “lack of present

means to commit a crime is alone [not] enough to establish
entrapment if the government supplies the means.” Hollingsworth,
27 F.3d at 1202 (emphasis in original). Instead, we are only
speaking of individuals who, but for the government’s inducement,
likely would not commit the offense. Id. at 1202-03.

11

undercover, contacted the orthodontist and, ultimately, persuaded

him to launder money. The orthodontist and farmer were convicted

of money laundering.

The en banc Seventh Circuit reversed, stating that, “[h]ad the

government left [him] ‘to his own devices’ . . . in all likelihood

[the orthodontist], a middle-aged man who so far as anyone knows

had never before committed any crime, would never have committed a

money-laundering or related offense.” Id. at 1201-02 (quoting

Jacobson, 503 U.S at 553). The government “turned two harmless,

though weak, foolish, . . . and greedy, men into felons.” Id. at

1202. Chief Judge Posner made clear that “[w]hatever it takes to

become an international money launderer, they did not have it.”

Id. “Even if they had wanted to go into money laundering before

they met [the agent,] . . . the likelihood that they could have

done so was remote. They were objectively harmless.” Id. It was

“highly unlikely that if [the agent] had not providentially

appeared someone else would have guided them into money laundering.

No real criminal would do business with such [novices].” Id. at

1203.

We recognize that the Seventh Circuit’s reading of Jacobson

has not been universally embraced. The Ninth Circuit has rejected

the Seventh Circuit’s positional predisposition requirement and the

First Circuit has adopted a different test. See United States v.

Thickstun, 1997 WL 152744, *4 (9th Cir. April 3, 1997); United

12

States v. Gendron, 18 F.3d 955, 962-63 (1st Cir. 1994); see also

Hollingsworth, 27 F.3d at 1211 (Easterbrook, J., dissenting)

(criticizing positional predisposition requirement). In Gendron,

then Chief Judge (now Justice) Breyer held that Jacobson stands for

the proposition that in trying to induce the target of a sting to

commit a crime, the government may not confront him with

circumstances that are different from the ordinary circumstances a

real criminal would use in inducing one to engage in wrongdoing.

See Gendron, 18 F.3d at 962 (proper inquiry for predisposition is

“how the defendant likely would have reacted to an ordinary

opportunity to commit the crime”); Thickstun, 1997 WL 152744, at *4

(following Gendron). Thus, the government must show that a

defendant would have committed the crime when “faced with an

ordinary `opportunity’ to commit the crime rather than a special

`inducement.’” Id. at 963.

Nonetheless, we are persuaded that the Seventh Circuit’s

11

Hollingsworth decision is correct.

See Paul Marcus, Presenting

11

In this case, the result would not differ under the First

Circuit’s Gendron test. The government failed to prove that real
drug dealers would provide the same, or even similar, terms to a
launderer as the undercover agents offered Brace. Thus, the
government failed to offer any evidence that Brace would accept an
“ordinary opportunity” to launder money.

Under the deal worked out between Brace and the undercover

agents, Brace would have the use of $10 million for four years. He
would pay back $50,000 a month for the first two years, and then
$100,000 for the last two. At the end of four years, a balloon
payment
of $6.4 million would be due. The money would be paid back

13

Back From the [Almost] Dead, the Entrapment Defense, 47 F

.

L.

R

.

LA

EV

205, 233-34 (1995) (arguing Hollingsworth is proper approach to

without interest. With the undercover agents’ approval, Brace
would use the money to pay the church’s debts. This arrangement
was similar to Brace’s proposal in the prospectus, except the
payments were lower and there was no interest.

This structuring was necessary to Brace’s participation. Brace

had pressing financial needs and needed to restructure his debts.
He needed the use of $10 million for several years. Had the
laundering of the $10 million been structured the same as the test
amounts, the scheme would have offered no benefit to Brace. Under
the tests, Brace had to immediately wire the money, and thus could
not use it. Without use of the money for several years, Brace had
no incentive to launder money. Therefore, without the deal being
structured as it was, Brace would not have laundered money.

The government presented no evidence as to what is involved in

an ordinary opportunity to launder money. Perhaps real drug
dealers regularly give launderers the interest free use of millions
of dollars for several years, with low monthly payments and a large
balloon payment. If that is the case, then we can infer that Brace
would accept an ordinary opportunity to launder drug proceeds.
But, it seems just as likely that real drug dealers would not want
their money tied up for years, with only token payments coming back
at first. It also seems just as likely that real drug dealers
would not allow a launderer to use $10 million in to-be-laundered
cash to pay off current debts, hoping that an income stream was
available to pay them back. Instead, real drug dealers might only
give the cash as needed, and ask that it be laundered immediately,
so that the launderer receives no benefit from the use of the
money, as in the tests. If the latter scenario is how real drug
dealers operate, then Brace would likely not have accepted an
ordinary opportunity to launder money.

The fact is that we do not know what constitutes an ordinary

opportunity to launder money. This is a subject on which the
record is silent. Because the record does not show what is an
ordinary opportunity to launder money, it follows that it provides
no support for the proposition that Brace would accept an ordinary
opportunity to launder money. Because predisposition is an issue
on which the government bears the burden of proof, we would hold
that, under the First Circuit’s test, the evidence is insufficient
to conclude that Brace was predisposed to launder money.

14

entrapment law). The Supreme Court instructs that in determining

predisposition we are to ask what the defendant would have done

absent government involvement. To give effect to that command, we

must look not only to the defendant’s mental state (his

“disposition”), but also to whether the defendant was able and

likely, based on experience, training, and contacts, to actually

commit the crime (his “position”).

We are called upon to determine whether the government proved

beyond a reasonable doubt that Brace was predisposed to launder

money. Following Hollingsworth, we look to Brace’s position, as

well as his mental disposition. The evidence of Brace’s mental

disposition to launder money is close. Nonetheless, we must

reverse because the government failed to prove that Brace, absent

government involvement, was in a position to launder money.

Therefore, the evidence is insufficient to prove that Brace was

predisposed to launder money.

The government argues that the evidence shows that Brace was

predisposed to launder money. The government, however, fails to

address the positional and dispositional aspects of pre-

12

disposition.

All of the evidence the government adduced at trial

went solely to Brace’s mental disposition. The government offered

no evidence that Brace was in a position to launder money. The

12

In fact, in its brief, the government fails to even cite

Hollingsworth, let alone deal with it substantively.

15

government offered no evidence that real drug dealers would use a

novice such as Brace to launder money. Brace had never been

convicted of a crime, and, as far as the record shows, had never

committed a crime worse than speeding before he met the undercover

agents. The evidence shows that Brace certainly had never

laundered money before, and knew little, if anything, about the

subject. In fact, he had to send an associate to the library to

figure out the mechanics of laundering money. It is possible that

real drug dealers often use such ignorant and naive individuals to

launder millions of dollars. If that is the case, the government

offered no proof of it.

The government failed to prove that real drug dealers would

use a church to launder money. The only evidence that a church

might be useful in money laundering came when Brace’s counsel was

cross-examining one of the undercover agents. When asked whether

a real drug dealer would use someone who “didn’t know what the hell

he was doing,” and “was totally inefficient,” the undercover agent

responded that:

[P]erhaps, perhaps not, depending on what he -- in
the whole gist of the thing, the fact that he had a
church, that was golden to me. That would have
been golden because nobody looks at a church.

This statement is too vague and non-committal to be evidence of

anything. The undercover agent says “perhaps, perhaps not,” and

then says that a church would be “golden” to him, not whether a

real drug dealer would find it so.

16

The government never adduced evidence that a church would be

valuable in money laundering, or that a church has ever been used

in money laundering. The only evidence the government offered on

the subject established that no church has ever knowingly been used

to launder drug money. On cross-examination of Knox, the Assistant

United States Attorney (“AUSA”) asked whether Knox could “identify

even a single church company in the United States that’s ever

knowingly taken purported drug proceeds.” Knox responded that he

had no information regarding that, and the AUSA asked, “Never heard

of that before?” To which Knox responded, “No, sir. Not thus

far.” It is possible that drug dealers regularly use churches to

launder money, and that a willing, though inexperienced, pastor

would be an invaluable asset. That, however, is not in the record,

and this is an issue upon which the government bore the burden of

proof. On the record before us, the government failed to prove

that any church has ever been used to launder money, or that a

church would even be useful in laundering money.

After examining the record, we must conclude that the

government failed to prove that Brace was in a position to launder

money. When we ask the question of what Brace would have done if

he had never met the undercover agents, we cannot answer “launder

money for real drug dealers.” In all likelihood, Brace never would

have laundered money, but instead would have missed his bond

payments and been forced into bankruptcy, as ultimately happened.

Because the government failed to establish that Brace would have

17

laundered money absent government involvement, the evidence is

insufficient to prove predisposition. Accordingly, we hold that

Brace was entrapped as a matter of law, and his convictions must be

13

reversed.

Entrapment Jury Instruction

Knox argues that the district court erred in using the pattern

jury instruction on entrapment after Jacobson. Fifth Circuit

Pattern Instruction No. 1.28. We recently held that the entrapment

pattern jury instruction is correct post-Jacobson. United States

v. Hernandez, 92 F.3d 309, 311 (5th Cir. 1996), cert. denied, 65

U.S.C.W. 3692 (April 14, 1997) (No. 96-7257). Accordingly, his

claim must fail.

Hearsay as to Clarkston’s Statement

Knox argues that the district court erred in admitting

14

Clarkston’s hearsay statement.

The undercover agent testified

that on March 17, Clarkston told him that Brace and Knox knew, but

did not care, that the undercover agents were cocaine traffickers

and that the funds were cocaine proceeds. The statement was

13

Brace raises several other issues in his brief. Because we

reverse his convictions based upon the sufficiency of the evidence,
we do not address those other issues.

14

Brace does not raise this issue. Accordingly, we only

consider the issue as it relates to Knox.

18

admitted under Federal Rule of Evidence 801(d)(2)(E) as “a

statement by a co-conspirator of a party during the course and in

furtherance of the conspiracy.” To support admission of an out of

court statement under this provision, the proponent must show by a

preponderance of the evidence that (1) a conspiracy existed; (2)

the statement was made during the course and in furtherance of the

conspiracy; and (3) the declarant and the defendant were members of

the conspiracy. United States v. El-Zoubi, 993 F.2d 442 (5th Cir.

1993). Knox argues that there is no evidence that he or Brace were

Clarkston’s co-conspirator at the time the statement was made;

thus, it was not made during the course of the conspiracy.

The evidence was sufficient for the district court to find by

a preponderance of the evidence that the conspiracy existed at the

time of Clarkston’s statement. In determining whether a conspiracy

exists, the district court is free to look at all evidence,

including the putative hearsay statement. See Bourjaily v. United

States, 483 U.S. 171, 175-180 (1987) (applying F

.

R.

E

.

ED

VID

104(a)); United States v. Triplett, 922 F.2d 1174, 1181 (5th Cir.

1991). The evidence clearly established that Clarkston and Knox

had previously met and were in contact with each other. On the

morning of March 17, Clarkston told the agents that he had a

preacher interested in laundering money and that his financial

advisor was in town. Just a few hours later, Clarkston produced

Knox and Knox agreed to launder money for the undercover agents.

19

Knox’s quick arrival and ready agreement to launder could be read

as evidence that he and Clarkston were already part of a conspiracy

to launder money when Clarkston made the statement that morning.

Considering this evidence, as well as Clarkston’s statement that

Knox knew the money was drug proceeds, yet did not care, the

district court could have reasonably concluded that Clarkston and

Knox were already part of a conspiracy to launder money. Thus, the

statement was an admission of a co-conspirator and not hearsay.

Admission of Evidence of Solicitation of Murder

Knox argues that the district court erred in admitting

evidence regarding his solicitation of murder. Knox admits that he

failed to object at trial; our review, therefore, is for plain

error. We will correct plain error only if (1) there is error, (2)

which is clear or obvious, (3) which affected substantial rights,

and (4) which will seriously affect the fairness, integrity or

public reputation of judicial proceedings if allowed to stand. See

United States v. Clements, 73 F.3d 1330, 1337 (5th Cir. 1996);

United States v. Calverley, 37 F.3d 160, 162-64 (5th Cir. 1994) (en

banc). Therefore, our first task is to determine if there is

error. Calverley, 37 F.3d at 162 (“There first must be error.”).

If we determine that the district court did not err in admitting

the solicitation of murder evidence, then our inquiry need go no

further.

20

The district court allowed evidence that Knox asked the

undercover agents to kill someone. Specifically, Knox told the

undercover agents that he knew “a couple of people that deserve a

bullet,” and asked “can we work on that.” The next day, the

undercover agents asked whether he still needed the hit, and Knox

responded that his situation had not become a problem yet, but if

it did, his “wrath is just going to be biblical.” The undercover

agents raised the issue with Knox twice more. Both times Knox said

that he longer needed anyone killed. The last time the issue was

raised, Knox stated that his problem had abated, and “I don’t have

to get violent with anybody so I’m happy about that. . . . [T]he

other day I really didn’t wanna have to go to extremes but I wanted

to know I kinda had the ability to if I needed to.”

15

Knox argues that this testimony is extrinsic evidence

(that

is, evidence of other crimes) and should be inadmissible under

16

Federal Rule of Evidence 404(b).

“Extrinsic offense evidence is

15

The government argues that the evidence of solicitation of

murder is not extrinsic, but rather is intrinsic evidence, which is
not governed by Rule 404(b). See United States v. Coleman, 78 F.3d
154, 156 (5th Cir.), cert. denied, 117 S. Ct. 230 (1996). Because
there is no plain error either way, we assume, without deciding,
that the evidence of solicitation of murder is extrinsic.

16

Rule 404(b) provides that:

Evidence of other crimes, wrongs, or acts is not
admissible to prove the character of a person in order
to show action in conformity therewith. It may,
however, be admissible for other purposes, such as
proof of motive, opportunity, intent preparation,
plan, knowledge, identity, or absence of mistake or

21

properly admitted under Rule 404(b) only if (1) it is relevant to

an issue other than the defendant’s character, and (2) its

probative value is not substantially outweighed by its undue

17

prejudice” under Federal Rule of Evidence 403.

United States v.

Buchanan, 70 F.3d 818, 831 (5th Cir. 1995), cert. denied, 116 S.

Ct. 1340 (1996); see also United States v. Route, 104 F.3d 59, 63

(5th Cir. 1997); United States v. Beechum, 582 F.2d 898, 911 (5th

Cir. 1978). Knox argues that the solicitation of murder is only

relevant as to his character. It is not relevant to whether he

laundered money, but only serves to show that he is a bad man who

deserves to be punished. We disagree. Knox’s defense at trial was

entrapment. The government, therefore, was required to prove

beyond a reasonable doubt that Knox was predisposed to launder

money. The government did so by having Knox himself testify, via

the undercover tapes, that he was experienced in drug trafficking

and knowledgeable of criminal activity. Through this evidence, and

through Knox’s solicitation of murder, the government sought to

prove that Knox was predisposed to launder money.

accident. . . .

17

Federal Rule of Evidence 403 provides that:

Although relevant, evidence may be excluded if its

probative value is substantially outweighed by the
danger of unfair prejudice, confusion of the issues,
or misleading the jury, or by consideration of undue
delay, waste of time, or needless presentation of
cumulative evidence.”

22

At trial, the jury essentially saw two Shannon Knoxes. The

jury saw the Knox of the undercover tapes, the young man who told

the undercover agents that his father was friends with a mafia

hitman, and that as a young boy he had seen a man killed. The Knox

of the undercover tapes told the undercover agents that he had

experience in the drug business, and that two years earlier he “had

a guy that was making a run to Cincinnati . . . and he had a

Cincinnati connection to buy ‘em three [kilograms of cocaine].”

The Knox of the undercover tapes spoke knowledgeably about

processing and dealing cocaine, and said that he knew the biggest

drug dealer in Pasadena. The Knox of the undercover tapes told the

undercover agents that he was not worried about federal undercover

agents because he “figure[d] if you’re going to get problems with

the feds, they’re easily purchased,” and stated that he had “always

had friends in the judicial system downtown that have always

cleaned [him] up.”

The Knox who testified at trial was a quite different figure.

He claimed that all the things he had told the undercover agents

were lies, that he was just “puffing” and “funnin’,” so as to

create a “level of comfort” with the putative Colombian drug

dealers. He stated that he had no cocaine trafficking experience,

other than buying small amounts for personal use, and that he had

no Cincinnati connection. The Knox at trial stated that he did not

know the biggest drug dealer in Pasadena, and that he had no

friends in the judicial system who could help him out. He stated

23

that most of his knowledge of drug trafficking and the underworld

came from “things seen in movies and read in books and magazines.”

It was in this context that the government put on evidence

that Knox solicited murder from the undercover agents. The

government was attempting to show the jury that Knox was the man on

the tapes, experienced in drug trafficking and the underworld, a

man who would order a hit on an associate giving him trouble. The

Knox of the undercover tapes was a man predisposed to launder

money, while the Knox testifying at trial was an inexperienced

innocent, whom the jury might think had no predisposition to

launder. The jury was entitled to decide which picture of Knox was

more credible, the one on the undercover tapes, or the one

testifying at trial. By presenting evidence of Knox telling the

undercover agents that he had some people “that deserve[d] a

bullet,” and that he might need some “services of some kind,” the

government could show the jury that the Knox of the undercover

tapes was the real Knox. The jury could conclude that a person

just “funnin’” would not solicit murder and, therefore, the real

18

Knox was on the undercover tapes, not in the courtroom.

If the

jury believed the government’s portrayal of Knox, it could infer

that he was predisposed to launder money. The evidence, therefore,

was relevant to the main issue at trial: predisposition.

Having determined that the solicitation of murder evidence is

18

At trial, Knox explained away his comments by stating that

he solicited murder for “no particular reason.”

24

relevant to an issue other than Knox’s character, we must next

determine whether its probative value is substantially outweighed

by the danger of unfair prejudice. Evidence of solicitation of

murder is prejudicial to a defendant. See, e.g., United States v.

Limones, 8 F.3d 1004, 1008 (5th Cir. 1993) (evidence of murder

prejudicial); United States v. Fortenberry, 860 F.2d 628, 632 (5th

Cir. 1988) (evidence of violent crimes highly prejudicial).

Nonetheless, Knox has not shown that the danger of unfair prejudice

resulting from this evidence substantially outweighs its highly

probative value. Testimony regarding solicitation of murder did

not dominate the trial. In a seven day trial comprising over 1400

pages of trial transcript and hundreds of pages of undercover tape

transcripts, references to Brace’s solicitation of murder spans

only a few pages. Cf. Fortenberry, 860 F.2d at 632 (evidence of

extrinsic offenses “occupied more of the jury’s time than the

evidence of the charged offenses”). After reviewing the record, we

are not convinced that this evidence was likely to lead the jury to

base its verdict on an improper basis. See Fed. R. Evid. 403

advisory committee’s note; Fortenberry, 860 F.2d at 632 (evidence

likely to inspire emotional basis for verdict); United States v.

McRae, 593 F.2d 700, 707 (5th Cir. 1979) (noting that Rule 403's

major function is only to exclude matters of slight probative

force, "dragged in by the heels for the sake of prejudicial

effect").

25

Because the extrinsic evidence of solicitation of murder was

relevant to Knox’s predisposition, and not just his character, and

because the evidence’s probative value is not substantially

outweighed by the danger of unfair prejudice, the district court

did not err in admitting the evidence regarding solicitation.

Because there is no error, it follows that there is no plain error.

Sentencing

Knox argues that the district court erred in calculating his

base offense level. The Guideline under which he was sentenced

requires a three level decrease:

[U]nless the defendant or a coconspirator completed
all the acts the conspirators believed necessary on
their part for the successful completion of the
substantive

offense

or

the

circumstances

demonstrate that the conspirators were about to
complete all such acts but for apprehension or
interruption by some similar event beyond their
control.

U.S.S.G. § 2X1.1(b)(2). The commentary to the guideline states

that:

In most prosecutions for conspiracies or

attempts, the object offense was substantially
completed or was interrupted or prevented on the
verge of completion by the intercession of law
enforcement authorities or the victim. In such
cases, no reduction of the offense level is
warranted. Sometimes, however, the arrest occurs
well before the defendant or any co-conspirator has
completed the necessary acts of the object offense.
Under such circumstances, a reduction of 3 levels
is provided under § 2X1.1(b)(1) or (2).

U.S.S.G. §2X1.1, comment. (backg’d.).

26

The district court denied the reduction, stating that “the

three level decrease to the offense level is not warranted []

because the Defendants completed all the acts believed necessary on

their part for a successful completion of the offense.” Knox

contends that the district court erred in denying the reduction

because he had not taken all the acts necessary to launder the $10

million when he was caught. In fact, he argues, he was nowhere

near ready to launder that amount of cash.

The district court’s statement that Knox had completed all

acts believed necessary for completion of the offense is a

factfinding, which we review for clear error. United States v.

Sotelo, 97 F.3d 782, 799 (5th Cir. 1996), cert. denied, 117 S. Ct.

1002 (1997). “In making findings pursuant to the Sentencing

Guidelines, a district court need only be convinced by a

preponderance of the evidence.” Id. “Factual findings are not

clearly erroneous if they are plausible in light of the record read

as a whole.” United States v. Ayala, 47 F.3d 688, 690 (5th Cir.

1995). We will only hold a finding clearly erroneous if,

considering the evidence as a whole, we are left with a definite

and firm conviction that a mistake has been made. See United

States v. Acosta, 972 F.2d 86, 90 (5th Cir. 1992).

Knox and Brace had previously laundered $350,000 in three

tests. They had no difficulty laundering this amount, and always

completed their task within the time limit set by the undercover

27

agents. On the undercover tapes, Knox and Brace detailed their

plans to launder the money over four years, which included mixing

the cash in with offerings at Brace’s church. Knox argues that

while he and Brace had plans to launder the money, none had been

implemented. For example, he had taken no steps to create the

Cayman Islands corporation he had discussed. The only method he

had for laundering the funds was using cashiers checks, as had been

done for the tests. Knox argues that this plan was unworkable,

because 33,000 cashier’s checks would have been required to launder

19

the $10 million.

In similar circumstances, other circuits have approved

factfindings

that

defendants

completed

all

steps

believed

necessary. For example, in United States v. Barton, 32 F.3d 61, 64

(4th Cir. 1994), the Fourth Circuit held that the factfinding of

completion of "all steps believed necessary" was not clearly

erroneous when a defendant merely accepted a suitcase of alleged

drug money for delivery to his associate. See also United States

v. Brown, 74 F.3d 891, 893 (8th Cir.) (defendant need not have

reached the “last step” before completion of the substantive

offense), cert. denied, 117 S. Ct. 74 (1996).

19

The cashiers checks had to be for less than $3000 in order

to avoid triggering bank reporting requirements.

28

Reviewing the evidence as a whole, we do not have a definite

and firm conviction that the district court made a mistake in

finding that Knox had completed all steps he believed necessary to

launder the $10 million. Accordingly, the district court did not

err in denying the three point reduction under U.S.S.G. §

2X1.1(b)(2).

CONCLUSION

The government failed to prove beyond a reasonable doubt that

Brace would likely have laundered money absent the government’s

involvement. Accordingly, we hold that Brace was entrapped as

matter of law, and his convictions and sentence on all counts are

REVERSED. The district court did not err in admitting Clarkston’s

statement, or in admitting evidence regarding Knox’s solicitation

of murder. The district court did not err in refusing the three

level decrease because Knox had not completed all steps necessary

to launder the entire $10 million. Therefore, Knox’s convictions

and sentences are, in all respects, AFFIRMED.

29

Referenced Cases