Scott K. Field, Justice.
A jury found appellant Walter Demond guilty of misapplication of fiduciary property, theft by deception, and money laundering. See Tex. Penal Code §§ 31.03, 32.45, 34.02. The jury assessed punishment at ten years' imprisonment for each offense, but recommended that the sentences be suspended and Demond be placed on community supervision. Demond raises eight issues on appeal. We affirm the trial court's judgments in part, reverse and vacate in part, and modify the conditions of Demond's community supervision.
The Pedernales Electric Cooperative (PEC) is a member-owned utility that provides electrical service to twenty-four counties in Central Texas. See Tex. Util. Code §§ 161.001-.254 (describing formation and operation of utility cooperatives). Any resident in the PEC's service area is required to join the PEC in order to receive
Demond was a partner at Clark, Thomas & Winters, PC (Clark Thomas), a law firm that had represented the PEC for several decades. Demond was the head of Clark Thomas's "energy group," which was the section of the firm that handled the PEC's representation. Demond's primary contact at the PEC was Bennie Fuelberg, who was the PEC's general manager from 1976 until 2008. Fuelberg was given broad authority to oversee the PEC's day-to-day operations, including expenditures on outside consultants.
The State alleges that between November 1996 and March 2007, Fuelberg conspired with Demond to funnel over $200,000 in PEC funds to Fuelberg's brother, Curtis, and William Price, the son of a former PEC board member.
The State contends that the PEC received no benefit from Curtis's and Price's employment. The State notes that Price did not know that his retainer was being paid by the PEC and that Price never performed any legal work for the PEC even though there was work available. Similarly, the State emphasizes that Curtis did not register as a lobbyist for the PEC, and therefore he was prohibited from directly communicating with "the legislative or executive branch to influence legislation or administrative action on behalf of" the PEC. See Tex. Gov't Code §§ 305.003(b) (requiring lobbyists to register with Texas Ethics Commission), .031 (making violation of registration requirement a Class A misdemeanor). Thus, the State contends that Price and Curtis were "sham hires," meaning Fuelberg and Demond intentionally paid Price and Curtis with PEC funds, all the while knowing that the PEC would receive little or no benefit from Price's or Curtis's employment.
Furthermore, according to the State, Fuelberg and Demond went to great lengths to hide these payments from the PEC and Clark Thomas. Through a complex "billing scheme," Fuelberg allegedly instructed Demond to have Clark Thomas bill the PEC $30,000 every six months between 1996 and 2003, identify these payments as "legal services rendered in connection with regulatory and legislative services," then have Clark Thomas pay Curtis $6,000 per month — $5,000 of which came from the PEC.
Fuelberg retired from the PEC in February 2008. One month later, the PEC's new general manager hired Navigant Consulting to investigate and prepare a report about the PEC's outside consulting expenditures during Fuelberg's tenure. Part of Navigant's investigation included PEC's payments to Clark Thomas. On December 15, 2008, Navigant issued its report (the Navigant Report), detailing Fuelberg and Demond's alleged scheme to transfer PEC funds to Curtis and Price through Clark Thomas.
At trial, and again on appeal, Demond asserts that Fuelberg had the authority to hire any outside consultant he deemed appropriate, and therefore there was nothing unlawful about Fuelberg's hiring Curtis and Price through Clark Thomas. Demond, in fact, testified that Fuelberg informed him that the PEC board was aware of and approved this arrangement. Demond contends that Curtis provided valuable lobbying services for the PEC and that having Price on retainer was inherently valuable for both the PEC and Clark Thomas. According to Demond, both he and Fuelberg believed that Curtis and Price were worth what the PEC paid them, and therefore Demond should not be subject to criminal liability merely because the State or the jury, in hindsight, disagreed with their valuation of Curtis's and Price's services.
Seven months after the Navigant Report was issued, Fuelberg and Demond were each indicted for first-degree felony misapplication of fiduciary property, first-degree felony theft by deception, and second-degree felony money laundering. See Tex. Penal Code §§ 31.03(e)(7) (making theft a first-degree felony if value of property stolen was more than $200,000), 32.45(c)(7) (same punishment range for misapplication of fiduciary property), 34.02(e)(3) (making money laundering a second-degree felony if value of fund is more than $100,000 but less than $200,000). Prior to trial, Fuelberg and Demond filed motions to disqualify or, alternatively, recuse the Honorable Daniel H. Mills from their respective cases. The motions asserted that as a PEC member, Judge Mills had a personal and pecuniary interest in this case and that a reasonable person might question Judge Mills's impartiality. Judge Mills declined to voluntarily recuse himself and referred the motions to the presiding judge, who assigned the motions to the Honorable Bert Richardson. See Tex.R. Civ. P. 18a (prescribing procedure for resolving motions to disqualify and recuse). Judge Richardson conducted a hearing, after which he denied Fuelberg's and Demond's motions.
Fuelberg and Demond were tried separately, with Demond's trial taking place three months after Fuelberg's. In Demond's trial, the State called a total of eighteen witnesses. Demond called a total of twenty-one witnesses, many of whom testified about the value of Curtis's lobbying work, including work on behalf of the PEC. Finally, Demond testified in his own defense, asserting that he believed Fuelberg had the authority to hire outside consultants of his choosing, that Fuelberg told him the PEC board was aware of these
The jury found Demond guilty of the lesser-included offense of second-degree felony misapplication of fiduciary property, first-degree felony theft by deception as alleged, and second-degree felony money laundering as alleged. The jury assessed punishment at ten years' imprisonment for each offense, but recommended that the sentences be suspended and that Demond be placed on community supervision. The trial court rendered judgment consistent with the jury's verdict and ordered Demond to serve a total of 500 days in jail as a condition of his community supervision. This appeal followed.
Demond raises eight issues on appeal, which we group into the following six complaints. First, Demond asserts that the evidence is insufficient to support his convictions. Second, he claims that there is a material variance between the indictment and the evidence adduced at trial. Third, he contends that the trial court could not require him to spend more than 180 days in jail as a condition of his community supervision. Fourth, Demond argues that his convictions for misapplication of fiduciary property and theft violate the prohibition against double jeopardy. Fifth, Demond asserts that Judge Mills should have been disqualified or recused from presiding over his case. Finally, Demond asserts that the trial court erred in dismissing a juror as disqualified based on the juror's temporary medical condition. We address Demond's material-variance argument first.
In his third appellate issue, Demond asserts that there is a material variance between the indictment and the evidence produced at trial. Specifically, Demond argues that the indictment cannot support the State's theory that he was a party to Fuelberg's misapplication of fiduciary property. See Tex. Penal Code § 32.45. Under the law of parties, the defendant is culpable only if the State proves that (1) a principal actor committed the charged offense and (2) the defendant encouraged, directed, aided, or attempted to aid that offense. See id. §§ 7.01-.02(a)(2). According to Demond, however, the indictment alleges that he misapplied property which he held as a fiduciary, and thus it was a material variance for the State to prove that he helped Fuelberg misapply property that Fuelberg held as a fiduciary.
"A `variance' occurs whenever there is a discrepancy between the allegations in the indictment and the proof offered at trial." Byrd v. State, 336 S.W.3d 242, 246 (Tex.Crim.App.2011) (citing Gollihar v. State, 46 S.W.3d 243, 246 (Tex.Crim. App.2001)). However, a variance is material — and thus reversible error — only if it "fails to give the defendant sufficient notice [of the offense alleged] or would not bar a second prosecution for the same" crime. See id. at 247-48. It is well established that the indictment need not "include notice that the State will attempt to prove its case under the law of parties." Marable v. State, 85 S.W.3d 287, 292 (Tex. Crim.App.2002) (Cochran, J., concurring) (internal citations omitted); see also Powell v. State, 194 S.W.3d 503, 506 (Tex.Crim. App.2006) (unanimous opinion citing Marable, 85 S.W.3d at 288, for same proposition). Therefore, an accused may be convicted as a party to the offense even if the indictment does not explicitly charge him as a party. See Boston v. State, 373 S.W.3d 832, 837 (Tex.App. — Austin 2012), aff'd, 410 S.W.3d 321, 327 (Tex.Crim.App. 2013).
Demond asserts that because the indictment alleges that he misapplied property that he held as the PEC's fiduciary, the State could not assert at trial that he was a party to misapplication of property that Fuelberg held as a fiduciary. See Tex. Penal Code §§ 7.01-.02(a)(2) (defining criminal liability for parties to an offense). This Court recently rejected a nearly identical argument in Rainey v. State, No. 03-11-00741-CR, 2013 WL 692477, at *3-5 (Tex.App. — Austin Feb. 22, 2013, pet. ref'd) (mem. op., not designated for publication).
In Rainey, a defendant convicted of aggravated sexual assault asserted that "because the indictment allege[d] that his sexual organ penetrated [the victim's] mouth, it was a material variance for the State to prove that [the victim's] mouth was actually penetrated by the sexual organ of" another. Id. at *4. We disagreed, explaining that "there is no reason why the indictment needs to provide notice that the law of parties as applied to the charged offense necessarily involved the use of another assailant's sexual organ." Id. at *5. Given that "there is nothing in the language of the penal code to indicate that `party liability is inappropriate' with respect to aggravated sexual assault," we concluded that the defendant's material-variance argument was inconsistent with both the sexual-assault statute and the law of parties. Id. (quoting McIntosh v. State, 52 S.W.3d 196, 200 (Tex.Crim.App.2001)).
Similarly here, for a defendant to be guilty as a party to misapplication of fiduciary property, another principal actor — in this case Fuelberg — would have to hold the property as a fiduciary, and the defendant would have to encourage, direct, aid, or attempt to aid the principal's misapplication of that property. Given that there is nothing in the language of the Penal Code to indicate that party liability is inappropriate with respect to misapplication of fiduciary property, the indictment did not need to specifically inform Demond that, under the law of parties, he would be liable for helping Fuelberg misapply property that Fuelberg held as a fiduciary. Therefore, we conclude that there is not a material variance between the indictment in this case and the evidence adduced at trial. We overrule Demond's third appellate issue.
In his first, second, and fifth issues on appeal, Demond argues that the evidence is insufficient to support his convictions in three respects. First, Demond claims that the evidence established that Fuelberg had the authority to hire any outside consultant he deemed appropriate without the need to seek the PEC board's approval. Second, Demond asserts that if the PEC received any benefit from Curtis's or Price's services, then the PEC's money was not stolen or misapplied as a matter of law. Third, Demond contends that he cannot be convicted of money laundering because the PEC's money did not become the "proceeds of criminal activity" until Curtis and Price received payment from
In reviewing the sufficiency of the evidence to support a conviction, we determine whether a rational trier of fact could have found that the essential elements of the crime were proven beyond a reasonable doubt. Brooks v. State, 323 S.W.3d 893, 895 (Tex.Crim.App.2010). In making this determination, we consider all evidence that the trier of fact was permitted to consider, regardless of whether it was rightly or wrongly admitted. Clayton v. State, 235 S.W.3d 772, 778 (Tex.Crim.App. 2007); Allen v. State, 249 S.W.3d 680, 688-89 (Tex.App. — Austin 2008, no pet.). We view this evidence in the light most favorable to the verdict. Clayton, 235 S.W.3d at 778. The jury, as the trier of fact, is the sole judge of the credibility of the witnesses and the weight to be given to their testimony. Id. Therefore, we presume that the jury resolved any conflicting inferences and issues of credibility in favor of the judgment. Id.
To prove misapplication of fiduciary property, the State was required to show beyond a reasonable doubt that Demond intentionally or knowingly
To establish theft, the State was required to prove that Demond (1) unlawfully appropriated the PEC's property (2) with the intent to deprive the PEC of its property. See Tex. Penal Code § 31.03(a). In this case, the appropriation was allegedly unlawful because "it [was] without the owner's effective consent." See id. § 31.03(a). Specifically, the indictment alleges that the PEC's consent was ineffective because it was induced by deception. See id. § 31.01(3)(A); see also Geick v. State, 349 S.W.3d 542, 547-48 (Tex.Crim. App.2011) (concluding that when indictment alleges theft by deception, State is limited to that theory of effective consent). Thus, the State was required to show that the PEC "actually relied upon the defendant's deceptive acts" when giving its consent. Daugherty v. State, 387 S.W.3d 654, 659 n. 18 (Tex.Crim.App.2013). A defendant intentionally "deprives" an owner of his property if the defendant "dispose[s] of property in a manner that makes recovery of the property by the owner unlikely." See Tex. Penal Code § 31.01(2)(C).
At trial, the State primarily asserted that Demond was liable as a party to Fuelberg's criminal conduct. For a defendant to be guilty as a party to an offense, another principal actor — in this case Fuelberg — would have to commit the underlying offense, and the defendant would have to intentionally encourage, direct, aid, or attempt to aid the principal's commission of that offense. See id. § 7.02. Therefore, with respect to this party theory of liability, the State was required to prove (1) that Fuelberg committed the above offenses; (2) that Demond acted with the intent to promote or assist the commission of those offenses; and (3) that Demond encouraged, directed, aided, or attempted to aid Fuelberg's commission of those offenses. See id. §§ 7.01-.02(a)(2).
Our analysis will focus on whether the evidence is sufficient to prove that Demond is liable as a party to Fuelberg's misapplication of fiduciary property. However, we will primarily consider whether Demond is guilty of theft by deception based on his own conduct. Circumstantial evidence may be used to prove the defendant is a party to an offense, and a factfinder may look to events occurring before, during, and after the commission of the offense that show an understanding or common design to do the prohibited act. See Gross v. State, 380 S.W.3d 181, 186 (Tex.Crim.App.2012).
In his first issue on appeal, Demond asserts that Fuelberg had the "actual authority" to hire Curtis and Price without notifying or seeking the approval of the PEC's board. According to Demond, "[t]here is no such thing as theft or misapplication by spending a company's money with the company's permission" and, therefore, Fuelberg could not be guilty of stealing or misapplying the PEC's money because he had the authority to hire outside consultants as he saw fit. Given that Fuelberg was not guilty of the charged offenses, Demond asserts that he could not be guilty as a party to Fuelberg's conduct. See Barnes v. State, 62 S.W.3d 288, 298 (Tex.App. — Austin 2001, pet. ref'd) ("If the State is to prove the accused's guilt as a party, it must first prove the guilt of another as the primary actor.").
Although not framed in these terms, we understand Demond's argument to be that the evidence is insufficient to prove that Fuelberg lacked the authority to hire Curtis and Price. With respect to theft by deception, Fuelberg's actual authority to hire outside consultants is not dispositive because if Fuelberg obtained or retained his authority through deception, then the PEC's grant of authority to Fuelberg would be ineffective. See, e.g., Bender v. State, No. 03-09-00652-CR, 2011 WL 1561994, *9-10 (Tex.App. — Austin Apr. 19, 2011, pet. ref'd) (mem. op., not designated for publication) (concluding evidence sufficient to show manager obtained investment capital through deception
The undisputed evidence admitted at trial established that Fuelberg had broad authority to hire both PEC employees and outside consultants. As one former PEC director stated, Fuelberg "had the authority to hire and fire whomever he wanted as long as it wasn't prohibited by the [PEC's] bylaws." The primary bylaw that was discussed at trial was the PEC's "Nepotism Policy," which stated that "the employment of close relatives shall be discouraged" and that "[c]ompensation, if any, of any officer or an employee who is also a director or close relative of a director shall be fixed by the board of directors." However, it is undisputed that Curtis and Price were outside consultants rather than PEC employees, and as such their salaries were not covered by the Nepotism Policy. There is no evidence to indicate that any other PEC bylaw limited Fuelberg's authority to hire outside consultants. Thus, although the PEC generally discouraged hiring close relatives, the evidence established that Fuelberg was not required to inform the PEC board or seek its approval before hiring outside consultants — including Curtis and Price.
Nevertheless, there was evidence adduced at trial which demonstrated that Fuelberg did not have the authority to spend PEC funds in a way that he knew would not benefit the PEC. Fuelberg's employment contract states that he was required to "perform all of his duties properly and faithfully in the best interest of the PEC." Similarly, the PEC's "Causes for Disciplinary Action" — applicable to all PEC employees since 1979 — states that "[d]ishonesty, willful damage and/or unauthorized appropriation of Cooperative funds or property" are grounds for immediately terminating employment. This is consistent with the testimony of two former PEC board members and Demond's law partner at Clark Thomas, all of whom stated that Fuelberg's broad authority to conduct the PEC's day-to-day operations did not include the authority to misappropriate PEC funds as additional income for himself or as gifts to his family and friends. See Bender, 2011 WL 1561994, at *9 (noting that written partnership agreement provided that manager could only use company funds for "legitimate business purposes").
Therefore, if the jury determined that Fuelberg knew that the PEC would receive little or no benefit from Curtis's and Price's employment, then the jury could have found beyond a reasonable doubt that Fuelberg did not have the authority to make these payments to Curtis and Price. Thus, if Fuelberg knew that the PEC would receive little or no benefit from these hires, then there is sufficient evidence to prove that Fuelberg's transfer of PEC funds to Curtis and Price was contrary to the agreement under which Fuelberg held the PEC's property. See Tex. Penal Code § 32.45(a)(2)(A). We overrule Demond's first appellate issue. Next, we will consider whether the evidence is sufficient to support the jury's determination that Fuelberg knew that the PEC would receive little or no benefit from Curtis's and Price's employment.
In his second issue on appeal, Demond asserts that if the PEC received any
Again, although not framed in these terms, Demond essentially argues that if the jury found that the PEC received any value from Curtis and Price, there cannot be sufficient evidence to support Demond's misapplication-of-fiduciary-property and theft convictions. Demond's argument can best be understood to mean that if Curtis and Price provided any value to the PEC, then Fuelberg and Demond must have believed that their estimation of Curtis's and Price's value was correct, and therefore Curtis and Price were not sham hires. Thus, according to Demond, unless the jury found that Curtis and Price produced no value for the PEC, there is no basis for the jury to infer that Fuelberg or Demond intentionally or knowingly misapplied or stole the PEC's money.
This argument relates to the sufficiency of the evidence to support three essential elements of theft and misapplication of fiduciary property: (1) Fuelberg's and Demond's culpable mental states, (2) Fuelberg's authority to hire Curtis and Price, and (3) the harm that resulted.
The problem with Demond's argument becomes apparent when we consider a slightly different set of facts. Assume that instead of lobbying, Curtis sold office supplies. If Fuelberg bought a $4,000 copy machine from Curtis for the PEC but then paid Curtis $5,000 for that copier, it would be obvious that Fuelberg misapplied and stole $1,000 from the PEC. Furthermore, if Fuelberg instructed Demond to have Clark Thomas purchase that same copier for the same $5,000, then have Clark Thomas bill the PEC for the expense, Demond could be culpable as a party to Fuelberg's theft and misapplication of PEC funds if Demond knew that the PEC was overpaying for the copier. Thus, the fact that PEC may have received some benefit from Fuelberg's purchase — and therefore
Admittedly, the value of professional services may be more open to interpretation than the value of tangible goods whose fair-market price is often readily identifiable. Arguably, this is even more true for lobbying services or legal work because an individual lobbyist or lawyer may be particularly valuable depending on his or her abilities, experience, and relationships with relevant legislators or judges, factors that may be difficult for a jury to evaluate. Thus, it is not enough that the jury simply believed that, in hindsight, Demond and Fuelberg overestimated Curtis's and Price's value. Rather, there must be sufficient evidence from which the jury could infer that Demond and Fuelberg intended to overpay Curtis and Price throughout the course of their alleged scheme. With this framework in mind, we consider whether the record supports the jury's determination that Fuelberg and Demond intended to overpay Curtis and Price.
There is ample evidence from which the jury could infer that Fuelberg and Demond never intended for the PEC to receive any benefit for Price's $2,000 monthly retainer. Admittedly, there was testimony that having a lawyer on retainer has value regardless of whether the lawyer ultimately performs any work. However, Price testified that he never knew that PEC was paying his retainer, was never advised that he might be doing work for the PEC, and was never given any work for the PEC. Furthermore, Demond admitted on cross-examination that during the years that Price was on retainer, Clark Thomas performed work for the PEC that Price was qualified to handle and the work would have cost less than $2,000, meaning that Price could have performed the work at no additional cost to the PEC. When pressed for an explanation as to why Price was not used on these projects, Demond simply stated "I wish I had thought of that."
Based on Price's testimony that he was never informed that the PEC was paying his retainer and Demond's inability to explain why Price was not given PEC work when it was available, the jury could have reasonably inferred that Fuelberg and Demond never intended for the PEC to receive any benefit from having Price on retainer. Thus, there is sufficient evidence to support the jury's conclusion that Fuelberg misapplied the entire $86,000 in PEC funds that was used to pay Price's retainer. In reaching this conclusion, we in no way seek to impugn Price's abilities or value as an attorney; we are merely explaining that the jury could have reasonably concluded that Demond and Fuelberg never intended to utilize Price's legal services for the benefit of the PEC.
There is, admittedly, more conflicting evidence concerning Curtis's value as a lobbyist for the PEC. Mike Williams is the president and chief executive officer of Texas Electric Cooperatives (the "Coop Association"), a trade association providing "legislative political advocacy services" on behalf of electric cooperatives in Texas, including the PEC. Williams testified that during the 1997 and 1999 legislative sessions, the Texas Legislature was in the process of deregulating electric utilities, which could have significantly impacted all utility cooperatives. See generally Cities of Corpus Christi v. Public Util. Comm'n, 188 S.W.3d 681, 687 (Tex.App. — Austin 2005, pet. denied) (discussing legislative history and purpose of utility deregulation). According to Williams, Fuelberg
Demond testified that Fuelberg approached him in October 1996 — the same month that Curtis stopped working for the Coop Association — and suggested that Demond call Curtis to get his opinion about how deregulation might affect the PEC. Demond recalled that he was impressed with Curtis's knowledge and suggested that the PEC or Clark Thomas pay Curtis for his advice. According to Demond, Fuelberg agreed and suggested that Clark Thomas hire Curtis as a consulting lobbyist, with the PEC contributing $5,000 per month for Curtis's salary and Clark Thomas contributing an additional $1,000 or $2,000. Demond hired Curtis, telling him to "keep Pedernales Electric happy."
Curtis testified that he was a "legislative consultant," rather than a lobbyist, for the PEC. As Curtis explained, a legislative consultant keeps a client "informed of what's going on legislatively" but does not directly lobby legislators to "affect the out-come of legislation." Curtis admitted that he did not register as a lobbyist for the PEC and, therefore, was legally prohibited from contacting legislators or agency officials on behalf of the PEC. See Tex. Gov't Code § 305.003(b) (requiring lobbyists to register with Texas Ethics Commission). Furthermore, Curtis conceded that apart from Clark Thomas, no client had ever paid him more than $4,000 per month and that when he was receiving $4,000 per month, it was from large organizations like the Coop Association or American Electric Power during significant legislative sessions.
Several witnesses, including four current and former members of the Texas legislature, testified that Curtis was a well-respected and effective lobbyist. Some members of the legislature knew, or at least assumed, that Curtis was representing the PEC during legislative sessions despite the fact that Curtis was not registered as a lobbyist for the PEC. However, Williams testified that Curtis did not participate in the utility cooperatives' negotiations concerning deregulation in the 1997 and 1999 legislative sessions. Furthermore, Curtis's salary from the PEC — paid indirectly through Clark Thomas — did not change between 1996 and 2007, despite the fact that the PEC employed other lobbyists during this time and that there were no other potential legislative matters that would have impacted the PEC as much as deregulation. The jury could have reasonably inferred from this that Fuelberg intended to pay Curtis the same salary regardless of the amount of
Arguably the most damning evidence was the considerable testimony and documentation concerning the lengths to which Demond and Fuelberg went in order to conceal Curtis's employment from the PEC. See King v. State, 29 S.W.3d 556, 565 (Tex.Crim.App.2000) (noting that defendant's false statements to conceal crime evidences consciousness of guilt); Alvarez v. State, No. 03-02-00262-CR, 2003 WL 22095777, at *8 (Tex.App.-Austin Sept. 11, 2003, no pet.) (mem. op., not designated for publication) (discussing how "insistence on secrecy" after commission of crime is strong indication of intent). On cross-examination, Demond admitted that he initially included a "line item for Curtis Fuelberg" in Clark Thomas's bill to the PEC, but Fuelberg called Demond and told him that "he didn't want his brother's name on the bill" because "he didn't want every clerk in the [PEC's] accounting department to know." Demond suggested that they identify Curtis's salary as "legislative consultant," but Fuelberg said that was also unacceptable. Finally, Demond and Fuelberg agreed to label Curtis's payment as "for legal services rendered in connection with regulatory and legislative matters" — despite the fact that Curtis was not a lawyer or other legal professional and therefore could not provide legal services.
Furthermore, there was evidence that Demond evaded the PEC's inquiries into the monthly $7,000 fees that were being used to pay Curtis's salary and Price's retainer. Demond testified that when Luis Garcia, the PEC's legal services manager who was in charge of reviewing the PEC's outside legal fees, called Demond about these fees, Demond called Fuelberg to ask whether he should respond. Fuelberg instructed Demond to ignore Garcia's inquiry and to send all of Clark Thomas's bills directly to Fuelberg for approval. Garcia testified that this form of "block billing" made it impossible for the PEC to determine what it was being charged for.
Demond testified that he and Fuelberg concealed Curtis's employment from the PEC because Fuelberg was concerned that if other PEC employees knew about this arrangement, they might try to secure similar PEC consulting positions for their relatives. Assuming that this was a plausible explanation for not listing Curtis's name in Clark Thomas's bills, the jury could have reasonably determined that it did not explain why Curtis's lobbying work was listed as "legal services in connection with regulatory and legislative matters" — a heading which mischaracterizes the nature of the work being performed. Thus, the record reflects that Demond and Fuelberg concealed not only who was working for PEC, but also the nature of the work being performed, and therefore the jury could have reasonably discredited Demond's explanation of why he and Fuelberg concealed Curtis's employment from the PEC.
Additionally, there was evidence that Demond arguably misled other partners at Clark Thomas about the fact that the PEC was paying most of Curtis's salary and all of Price's retainer. David Duggins, a partner at Clark Thomas during the years relevant to this case, testified that Demond approached him in November of 2007 to ask if Clark Thomas should allow Curtis's and Price's contracts to expire. Duggins asked Demond if the PEC was paying for these contracts, and Duggins testified that Demond "told me no." Shortly after that conversation, Duggins heard "something about the PEC's share" of Curtis's and Price's contract. Duggins again asked Demond whether the PEC was paying for these contracts, and it was only after being asked a second time that Demond explained
Duggins conceded that when he initially asked Demond about Curtis's and Price's contracts, the PEC actually had stopped contributing payments for those contracts, and thus Demond's original answer that the PEC was not paying for Curtis and Price was technically true at that time.
The Court does not lack sympathy for Demond's concern that a jury should not be allowed to determine the value of a business decision made by a company's executive. Whether a given business decision is motivated by an intent to deprive a company of its property is an inherently difficult issue to determine and will inevitably turn on the particular facts of a given case. However, juries are required to make such value judgments under the Penal Code, and it is not the Court's place to second-guess the jury so long as its decision is supported by evidence in the record.
In this case, the jury heard testimony that:
Similarly, the jury heard considerable evidence about the lengths that Demond went to in order to assist Fuelberg in concealing Curtis's salary and Price's retainer. Demond himself admitted that he mischaracterized Curtis's lobbying work as legal services. Additionally, when Garcia — who was responsible for overseeing the PEC's expenditures on outside legal work — asked Demond to explain Clark Thomas's bill, Demond immediately asked Fuelberg if he had to respond and then accepted Fuelberg's instruction to ignore Garcia's inquiry and direct all bills directly to Fuelberg for approval. Based on this evidence, the jury could have reasonably concluded that Demond intentionally assisted Fuelberg's misapplication of PEC funds, and therefore Demond was liable as a party to that offense. See id. § 7.01(a).
Because the State alleged that Demond committed theft by deception, the relevant unlawful conduct for theft is slightly different from that which would support misapplication of fiduciary property. See Geick, 349 S.W.3d at 547-48 (concluding that if indictment alleges theft by deception, State is limited to that theory of theft). To constitute theft by deception, the victim's consent to the defendant's control over the property is ineffective because the consent was "induced by deception," meaning that the victim relied on the defendant's deceptive act when giving his consent. Tex. Penal Code § 31.01(3)(A); see also Daugherty, 387 S.W.3d at 659 n. 18 (citing Swope v. State, 723 S.W.2d 216, 223 (Tex.App.-Austin 1986), aff'd on other grounds, 805 S.W.2d 442 (Tex.Crim.App. 1991)). "The reliance need not be the sole, or even controlling, reason why the victim decided to provide [his consent], but it must be a substantial or material factor in the decision-making process." Daugherty, 387 S.W.3d at 659 n. 18 (internal citations omitted).
It is somewhat difficult to envision how these deceptive acts induced the PEC to give Fuelberg broad authority to hire outside consultants. A PEC director testified that Fuelberg was given this broad authority decades before any of the alleged wrongdoing in this case. Furthermore, there is no allegation that Fuelberg secured this initial grant of authority through any express or implied promise, factual assertion, or other misrepresentation that is relevant here.
In considering Demond's liability as a principal actor, there is evidence that his deceptive billing practices induced the PEC to unknowingly reimburse Clark Thomas for Curtis's salary and Price's retainer. See Higginbotham v. State, 356 S.W.3d 584, 589-90 (Tex.App.-Texarkana 2011, pet. ref'd) (concluding that evidence sufficient to prove theft by deception where contractor billed customer for expenses that contractor did not incur). As discussed above, Demond mislabeled Clark Thomas's bill for Curtis's salary as legal services even though Curtis was not a lawyer. Similarly, when Price began his retainer with Clark Thomas, Demond began adding a $7,000 line-item expense to Clark Thomas's bill to the PEC to cover both Curtis's salary and Price's retainer. There was testimony that because this block-billing did not identify what the PEC was paying for, it was impossible for the PEC to discover that these payments were being made for Curtis and Price. However, there is no direct testimony that if Clark Thomas's bills had accurately reflected that payments were being made to Curtis and Price, the PEC would not have consented to reimburse Clark Thomas for those payments.
Thus, we must consider whether there is sufficient circumstantial evidence from which the jury could infer that the PEC's decision to reimburse Clark Thomas for
The PEC's assistant general manager testified that he approved several of the $30,000 payments to Clark Thomas that were each used to pay six months of Curtis's salary. The assistant manager stated that had he known that Clark Thomas was billing the PEC for Curtis's salary, he likely would have reported the matter first to Fuelberg, and then potentially to the PEC board of directors. Furthermore, the assistant general manager explained that if employees at the PEC had learned that Curtis was being paid as an outside consultant, "all hell would have broken loose" because employees might complain that Fuelberg was allowed to hire his relatives while other employees were not. This, according to the assistant manager, would have created a morale issue amongst PEC employees which would have become "an important consideration to management."
The three current and former PEC directors who testified at trial all stated that they would like to have known that Curtis and Price were being paid with PEC funds through Clark Thomas. According to these directors, although Fuelberg had the authority to hire outside consultants as he saw fit, given the general nepotism policy applicable to PEC employees, Fuelberg should have informed them of Curtis's and Price's status as outside consultants. One former director, Edwin Smith, stated that he was "pretty hot when he found out" that Fuelberg and Demond concealed Curtis's and Pirce's employment.
Although there was testimony that PEC employees would have reacted negatively to the revelation that Fuelberg authorized payments to Curtis and Price, there was no testimony that such morale issues would have prevented any PEC employee from authorizing these payments to Curtis and Price. Furthermore, although the PEC board members testified that they would like to have known that the PEC was indirectly paying Curtis's salary and Price's retainer, none of the directors testified that the board would have stepped in and blocked these payments. Similarly, none of the directors testified that had they known that Curtis and Price were being paid through Clark Thomas, they would have recommended that the PEC's nepotism policy be modified to cover outside consultants. Finally, no witness testified that had either the PEC's accounting department or board of directors known about these payments, they would have considered terminating Fuelberg's employment or reining in his authority.
Thus, we conclude that the evidence is insufficient to support a finding that either Demond's or Fuelberg's deception induced the PEC to make payments it otherwise would not have made. Although it is understandable that the PEC board wished that Demond or Fuelberg had been more forthcoming, that frustration, standing alone, is not sufficient to prove beyond a reasonable doubt that their deceptive conduct induced the PEC to pay Clark Thomas for Curtis's and Price's salaries. Because the State indicted Demond for theft by deception, it was limited to that theory of theft, and was required to prove that some deceptive act induced the PEC's consent.
In his fifth appellate issue, Demond asserts that the "State's theory of money laundering is incorrect as a matter of law." Specifically, Demond argues that even if the evidence is sufficient to establish that he misapplied the PEC's funds, that misapplication was not complete until the money was transferred to Curtis and Price. Therefore, according to Demond, the PEC's funds did not become "proceeds of criminal activity" within the meaning of the Penal Code until after those funds had already been transferred through Clark Thomas, and thus Demond's alleged transfer of funds from Clark Thomas to Curtis and Price could not constitute the transfer of proceeds of criminal activity.
Relevant here, a person commits money laundering if he knowingly "(1) acquires or maintains an interest in, conceals, possesses, or transfers ... the proceeds of criminal activity or (2) conducts, supervises, or facilitates a transaction involving the proceeds of a criminal activity." Tex. Penal Code § 34.02(a)(1)-(2). "Criminal activity" is defined as any offense that is "classified as a felony under the laws of this state...." Id. § 34.01(1)(A). "Proceeds" are "funds acquired or derived directly or indirectly from, produced through, realized through, or used in the commission of ... an act." Id. § 34.01(4)(A). The predicate criminal activity alleged in the indictment is "misapplication of fiduciary property with an aggregate value of $100,000 or more." See id. § 34.02(e)(3) (classifying money laundering as second-degree felony if value of funds laundered more than $100,000 but less than $200,000). Therefore, the State was required to prove that Demond either (1) acquired or maintained an interest in, concealed, possessed, or transferred the proceeds of misapplication of fiduciary property or (2) conducted, supervised, or facilitated a transaction involving the proceeds of such a misapplication.
Demond contends, and the State appears to agree, that for purposes of the money-laundering statute, money does not become proceeds of criminal activity until the underlying criminal offense is complete. See id. § 34.01. The parties rely on federal cases interpreting the federal money-laundering statute for this assertion.
To prove misapplication of fiduciary property, the State was required to show that Fuelberg (1) "failed to apply the funds according the terms of the agreement" under which they were held and (2) the misapplication created a substantial risk of loss to the PEC. See Merryman v. State, 391 S.W.3d 261, 270 (Tex. App.-San Antonio 2012, pet. ref'd). "The actual disposition of the money is immaterial, and the State is not required to prove how the fiduciary applied the funds `if the State has proved that the fiduciary failed to apply the funds according to the terms of the agreement.'" Skillern v. State, 355 S.W.3d 262, 268-69 (Tex.App.-Houston [1st Dist.] 2011, pet. ref'd) (emphasis added) (quoting Little v. State, 699 S.W.2d 316, 318 (Tex.App.-San Antonio 1985, no pet.)); see also Merryman, 391 S.W.3d at 270 (same). Therefore, the State was not required to prove that the PEC's funds ultimately were received by Curtis and Price to establish misapplication, and the jury could have reasonably concluded that the misapplication of fiduciary property was complete when Fuelberg transferred the funds from the PEC to Clark Thomas. See Merryman, 391 S.W.3d at 270; Skillern, 355 S.W.3d at 268-69. Similarly, the jury could have reasonably concluded that the PEC's funds became proceeds of criminal activity when they were received by Clark Thomas, that Demond's subsequent transfer of those funds to Curtis and Price was a transaction involving the proceeds of criminal activity, and therefore that Demond was guilty of money laundering. See Tex. Penal Code § 34.02(a)(2).
This analysis is consistent with federal cases dealing with similar federal statutes. In United States v. Allen, 76 F.3d 1348, 1352-53 (5th Cir.1996), a bank executive conspired to hire his business associates as consultants for the bank, pay the associates substantially more than their work would justify, and then have the associates "kickback" a portion of their consultant salaries to the executive. The executive and associates asserted that their misapplication of bank funds was not complete until the bank executive received his kickback and, therefore, none of the preceding transfers between the parties could constitute laundering of proceeds from that misapplication. See id. at 1360; see also 18 U.S.C. §§ 656 (misapplication of bank funds), 1956(a)(1)(B)(i) (money laundering).
The Fifth Circuit disagreed, concluding that the "[d]efendants' contentions fail because the funds at issue in each of the transactions became proceeds at the moment the money left the control of [the bank] and was deposited into the account of a consultant...." Allen, 76 F.3d at 1361 (internal citation omitted). The subsequent transfer from a consultant's account to another bank account constituted the transfer of proceeds of the misapplication, and thus money laundering. Id. To illustrate the point that the misapplication was complete as soon as the bank lost
Id.
Similarly here, Fuelberg committed misapplication of fiduciary property by authorizing payments to Clark Thomas to pay Curtis's salary and Price's retainer when he knew that the PEC was, at a minimum, overpaying for those services. Had Demond decided to cheat and not pay any of the PEC's money to Curtis and Price, either keeping it for himself or leaving it with Clark Thomas, the PEC's property still would have been misapplied, Fuelberg would still be guilty of misapplication of fiduciary property, and Demond would still be guilty as a party to Fuelberg's conduct.
Demond asserts that because the indictment alleges that he committed misapplication of fiduciary property "by making or causing payments to be made to" Curtis and Price, the State cannot now assert that the misapplication was complete when the PEC's property was transferred to Clark Thomas. Although Demond raises this issue as a sufficiency claim, the underlying argument may be more properly characterized as a material-variance issue similar to the party liability argument discussed above. See generally Byrd, 336 S.W.3d at 246 (discussing material variance). "[I]mmaterial variances are to be disregarded in the sufficiency of the evidence." Id. Therefore, if the allegation that the misapplication was committed by making payments to Curtis and Price is immaterial, then the State was not limited to that method of misapplication at trial, and the State could prove that the misapplication of fiduciary property was complete when the funds were transferred to Clark Thomas. See id.
There are three categories of variances: (1) "a variance involving statutory language that defines the offense," such as the theft-by-deception allegation discussed above; (2) "a variance involving a non-statutory allegation that describes an `allowable unit of prosecution' element of an offense," such as misidentifying the name of a murder victim; and (3) "other types of variances involving immaterial non-statutory allegations." See Johnson v. State, 364 S.W.3d 292, 298-99 (Tex.Crim. App.), cert. denied, ___ U.S. ___, 133 S.Ct. 536, 184 L.Ed.2d 351 (2012). The first category of variances is always material, and when an indictment alleges a specific statutory manner and means of committing an offense, then the State must prove that specific manner and means. See, e.g., Geick, 349 S.W.3d at 547-48 (concluding that if indictment alleges theft by deception, State is limited to that theory of theft). The second category involves non-statutory allegations that are "descriptive of an element of the offense that defines or helps define the allowable unit of prosecution," such as the name of the victim in an assault case or the property that was stolen in a theft case. See Johnson, 364 S.W.3d at 297. A variance in this second category can be material if it is "significant enough that we could not conclude whether the State had proved the same" offense alleged in the indictment. Id.; see also Byrd, 336 S.W.3d at 256-57 (noting that theft of property belonging to store manager would be completely separate offense than theft of property belonging to store, and thus misidentifying who owned the
The variance at issue in this case clearly does not fit into the first category because how a person commits misapplication of fiduciary property does not involve a statutorily defined manner and means of that offense. Cf. Geick, 349 S.W.3d at 547-48 (discussing how theft statute defines various ways that victim's consent can be ineffective). Similarly, the variance in this case is not descriptive of an element that defines or helps define the allowable unit of prosecution for misapplication of fiduciary property. See Johnson, 364 S.W.3d at 297. As discussed above, the actual disposition of fiduciary property is immaterial, "and the State is not required to prove how the fiduciary applied the funds." Skillern, 355 S.W.3d at 268-69. Rather, the State is required to show that the disposition of the property violated the fiduciary agreement under which it was held. Id. Thus, unlike the identity of the victim, the property allegedly misapplied, or the fiduciary agreement under which that property was held, the manner in which Demond misapplied the PEC's property is not descriptive of an element that helps define the allowable unit of prosecution for misapplication of fiduciary property, and therefore the variance at issue in this case does not fit within the second category of variances discussed above. See Johnson, 364 S.W.3d at 297 (noting that in theft prosecution, victim and property are two elements that affect unit of prosecution).
Therefore, we conclude that the indictment's allegation that Demond misapplied property by causing payments to be made to Curtis and Price is in the third category of variances — i.e., types of variances involving immaterial non-statutory allegations. See id. Similar to the manner in which an assailant causes his victim's bodily injury, the manner in which Demond misapplied the PEC's property does not affect the allowable unit of prosecution for this offense, and thus a variance between the indictment and the evidence adduced at trial on this issue is immaterial. See id. Therefore, in considering the sufficiency of the evidence to prove when the misapplication of fiduciary property was complete, neither the State nor the jury was limited to the disposition of the PEC's property that was alleged in the indictment.
For the reasons stated above, we conclude that the evidence is sufficient to prove that the misapplication of fiduciary property was complete when Fuelberg authorized PEC funds to be transferred to Clark Thomas. See Merryman, 391 S.W.3d at 270 (noting that actual disposition
In his sixth appellate issue, Demond asserts that the trial court erred in ordering him to submit to 500 days in jail as a condition of his community supervision.
The court of criminal appeals has specifically rejected this argument, concluding that article 42.12, section 12(a) authorizes terms of confinement of up to 180 days per felony conviction. See Kesaria v. State, 189 S.W.3d 279, 279 (Tex.Crim.App.2006). Demond does not assert that there has been any intervening change in the statute or case law, but instead claims that the court of criminal appeals failed to properly analyze the statute. Even if we were to agree with Demond on this issue, we are bound to conform our opinions to those of the court of criminal appeals. See State v. DeLay, 208 S.W.3d 603, 607 (Tex.App.-Austin 2006), aff'd sub. nom., State v. Colyandro, 233 S.W.3d 870 (Tex.Crim.App. 2007). Therefore, we overrule Demond's sixth issue on appeal.
However, because we have vacated Demond's conviction for theft by deception, Demond is no longer on community supervision for that offense. See Kesaria, 189 S.W.3d at 279 (concluding that trial court may order 180-day confinement as condition of community supervision for each felony conviction). Therefore, we modify the trial court's order imposing conditions of community supervision to delete the requirement that Demond submit to 180 days confinement for theft by deception. See supra n.11. As modified, we affirm the trial court's conditions of community supervision.
In his seventh appellate issue, Demond asserts that as a PEC customer, Judge Mills (1) had a disqualifying pecuniary interest in this case, (2) had a disqualifying personal interest in this case, and (3) should have been recused because his impartiality might reasonably be questioned. These identical appellate issues were raised and fully addressed in this Court's two prior opinions concerning Fuelberg's
In this appeal, Demond adopted Fuelberg's appellate brief with regard to Judge Mills's recusal and disqualification in its entirety. For the reasons stated in our previous opinions, we conclude that Judge Mills was not disqualified and the assigned judge did not abuse his discretion in concluding that Judge Mills should not be recused. Therefore, we overrule Demond's seventh issue on appeal.
In his eighth and final appellate issue, Demond asserts that the trial court abused its discretion by removing a juror as disabled when the juror complained of a bladder infection. Specifically, Demond asserts that the infection was only temporary and the juror stated that she might be able to return the following day. This temporary illness, according to Demond, is not the type of illness that would make a juror "disabled from sitting" for purposes of article 36.29 of the Code of Criminal Procedure. Therefore, according to Demond, the trial court abused its discretion in concluding that the juror was disabled.
If a juror, "as determined by the judge, becomes disabled from sitting," the judge may remove the juror and allow the trial to proceed with fewer than twelve jurors. Tex.Code Crim. Proc. art. 36.29(a). "Disabled, as used [in article 36.29], means any condition that inhibits the juror from fully and fairly performing the functions of a juror." Griffin v. State, 486 S.W.2d 948, 951 (Tex.Crim.App.1972). Such a condition can include "physical illness, mental condition, or emotional state which hinders one's ability to perform one's duties as a juror." Landrum v. State, 788 S.W.2d 577, 579 (Tex.Crim.App.1990) (internal citations omitted); see also Granados v. State, 85 S.W.3d 217, 235 (Tex.Crim.App. 2002) (noting that juror's bias against defendant can make juror disabled if bias prevents juror from following court's instruction). "The determination as to whether a juror is disabled is within the discretion of the trial court." Brooks v. State, 990 S.W.2d 278, 286 (Tex.Crim.App. 1999). Therefore, we will only reverse the trial court's ruling if it is outside the zone of reasonable disagreement. See id.
Midway through the second day of trial, an empaneled juror notified the court that she was ill with what was "[p]robably some kind of bladder infection" that was causing her significant pain. The juror stated that she generally took "AZO" when this type of pain begins and that medication "is supposed to clear up a minor infection," meaning she could likely return to court the following day. However, the juror did not know if this was a minor infection and was not certain that she would be better the next day. Based on the juror's statements, the trial court found that the juror was "physically incapable of proceeding because of her pain" and, over Demond's objections, dismissed the juror as disabled.
Demond asserts that because the juror believed she could return to court the following day, the trial would likely only have been delayed for half of a day. This type of temporary illness, according to Demond, does not constitute the type of illness that would justify finding a juror disabled. This Court, however, along with several of our sister courts of appeals, has rejected the argument that a temporary illness does not constitute a disability. See Moore v. State, 82 S.W.3d 399, 406-07 (Tex.App.-Austin 2002, pet. ref'd) (concluding
Demond does not cite to any cases in which an appellate court has concluded that a trial court abused its discretion by finding a juror to be disabled based on a temporary illness. Therefore, we adhere to our ruling in Moore and conclude that it is within the trial court's discretion to determine whether a temporary illness disables a juror. See id. Given that the juror in this case stated that her bladder infection caused her so much pain that she could not focus on the trial and that the juror was not certain that she would be able to return to court the next day, the trial court could have reasonably concluded that the juror's illness prevented her from performing her function as a juror. Therefore, we cannot conclude that the trial court abused its discretion in finding that the juror was disabled. We overrule Demond's eighth issue on appeal.
Having concluded that the evidence is insufficient to support Demond's conviction for theft by deception, we reverse and vacate the trial court's judgment of conviction for that offense. Similarly, we modify Demond's conditions of community supervision to delete the requirement that he submit to 180 days' confinement for theft by deception. Having overruled Demond's remaining appellate issues, we affirm the trial court's judgments of conviction in all other respects.
