Full opinion text
MEMORANDUM AND ORDER CROW, Senior District Judge. On March 10, 1997, trial in this case commenced. The second superseding indictment in this case charged Douglas 0. Rued-linger with ten counts of mail fraud, two counts of wire fraud and five counts of money laundering. An eighteenth count seeking forfeiture of certain assets pursuant to 18 U.S.C. § 982 and 21 U.S.C. § 853 was bifurcated prior to trial. On April 7, 1997, the jury returned a verdict finding the defendant, Douglas 0. Ruedlinger, guilty of all ten counts of mail fraud, both counts of wire fraud and one count of money laundering (Count 17). A copy of the jury’s verdict is attached to this memorandum and order. This ease comes before the court upon Ruedlinger’s “Motion for Judgment of Acquittal and/or New Trial” (Dk. 127). Rued-linger’s motion primarily challenges the sufficiency of the evidence. Ruedlinger contends, inter alia, that he must be innocent, as FAA members lost no money from their participation in the Partners in Protection (“PIP”) agreement. In regard to the money laundering conviction, Ruedlinger contends it must be set aside under the Tenth Circuit’s decision in United States v. Johnson, 971 F.2d 562 (10th Cir.1992) and its progeny. In addition, Ruedlinger alleges that several specific errors deprived him of a fair trial. The government responds, arguing that the evidence overwhelmingly supports the jury’s verdict in this case. The government contends that evidence of Ruedlinger’s knowing participation in a scheme to defraud — a scheme that enabled him to live- an extravagant and lavish lifestyle — was proven by the testimony of several witnesses. In short, the government contends that the evidence made it absolutely clear that despite the fact that Ruedlinger knew that no reserves existed, he continued to inform high school athletic associations who had entered the PIP agreement that their $1.6 million in financial reserves existed and were safely deposited in money market certificates as required by the terms of the agreement. In regard to the trial errors alleged by Ruedlinger, the government contends that no errors occurred and that he received a fair trial. Although the court did not set a time for filing a reply brief, on June 6, 1997, Rued-linger filed a pleading titled “Defendant’s Reply to Opposition of the Government to the Defendant’s Motion for Judgment of Acquittal and/or New Trial.” (Dk. 144). In his reply, Ruedlinger suggests that the government’s brief “takes wide latitude with numerous facts and/or evidence presented to the Court during the trial in reaching its assertion of ‘overwhelming evidence.’ ” Ruedlinger again points to the final audit of FAA which showed a negative reserve balance for the member associations. Ruedlinger also attempts to distance himself from the persons “actually” responsible for the purported misrepresentations. Ruedlinger again argues that he reasonably relied upon the glowing assurances from the persons actually running his companies that everything was being managed in a proper and lawful manner. The court, having considered the briefs of counsel, the evidence presented at trial and the applicable law, denies the defendant’s motion. The court will address the defendant’s arguments seriatim. Sufficiency of the Evidence To review the sufficiency of the evidence supporting a criminal conviction, the court must examine the evidence in the light most favorable to the prosecution to determine whether any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. United States v. Miller, 987 F.2d 1462, 1464 (10th Cir.1993). In reviewing the sufficiency of the evidence, the court must consider both direct and circumstantial evidence, as well as reasonable inferences to be drawn from that evidence. United States v. Davis, 1 F.3d 1014, 1017 (10th Cir.1993) (citing United States v. Fox, 902 F.2d 1508, 1513 (10th Cir.), cert. denied, 498 U.S. 874, 111 S.Ct. 199, 112 L.Ed.2d 161 (1990)). “ ‘A jury will not be allowed to engage in a degree of speculation and conjecture that renders its finding a guess or mere possibility. Such a finding is infirm because it is not based on the evidence.’ ” United States v. Jones, 49 F.3d 628, 633 (10th Cir.1995) (quoting Sunward Corp. v. Dun & Bradstreet, Inc., 811 F.2d 511, 521 (10th Cir.1987) (quoting Daniels v. Twin Oaks Nursing Home, 692 F.2d 1321, 1326 (11th Cir.1982))). The line between a reasonable inference that may permissibly be drawn by a jury from basic facts in evidence and an impermissible speculation is not drawn by judicial idiosyncrasies. The line is drawn by the laws of logic. If there is an experience of logical probability that an ultimate fact will follow from a stated narrative or historical fact, then the jury is given the opportunity to draw a conclusion because there is a reasonable probability that the conclusion flows from the proven facts. Jones, 49 F.3d at 632 (quoting Tose v. First Pennsylvania Bank, N.A., 648 F.2d 879, 895 (3d Cir.), cert. denied, 454 U.S. 893, 102 S.Ct. 390, 70 L.Ed.2d 208, (1981)). “Additionally, ‘the essential requirement is that mere speculation be not allowed to do duty for probative facts after making due allowance for all reasonably possible inferences favoring the party whose case is attacked.’” Jones, 49 F.3d at 632 (quoting Galloway v. United States, 319 U.S. 372, 395, 63 S.Ct. 1077, 1089-90, 87 L.Ed. 1458 (1943)). The court must accept the jury’s resolution of conflicting evidence and its assessment of the credibility of witnesses. Davis, 1 F.3d at 1017 (citing United States v. Youngpeter, 986 F.2d 349, 352 (10th Cir.1993)). Standards for Motion for New Trial A court may grant the defendant a new trial “if required in the interest of justice.” Fed.R.Crim.P. 33. Courts view motions for new trial with disfavor and grant them only with great caution. United States v. Chatman, 994 F.2d 1510, 1518 (10th Cir.), cert. denied, 510 U.S. 883, 114 S.Ct. 230, 126 L.Ed.2d 185 (1993); United States v. Leeseberg, 767 F.Supp. 1091, 1093 (D.Kan.1991). The defendant has the burden of proving the necessity of a new trial. United States v. Davis, 15 F.3d 526, 531 (6th Cir.1994); United States v. Cooley, 787 F.Supp. 977, 984 (D.Kan.1992), vacated in part on other grounds, 1 F.3d 985 (10th Cir.1993). For purposes of this case, the relevant rule is that a new trial should be granted upon “[a]ny error of sufficient magnitude to require reversal on appeal.” 3 Charles A. Wright, Federal Practice and Procedure § 556 (1982); see United States v. Stiner, 765 F.Supp. 663, 664 (D.Kan.1991), aff'd, 952 F.2d 1401 (10th Cir.1992) (Table); United States v. Suntar Roofing, Inc., 709 F.Supp. 1526, 1530 (D.Kan.1989), aff'd, 897 F.2d 469 (10th Cir.1990). The decision of whether or not to grant a new trial is committed to the sound discretion of the district court. See United States v. Patterson, 41 F.3d 577, 579 (10th Cir.1994). Overview Although this court has handled criminal matters involving as many as 81 counts, this was one of the most complex criminal cases this court has heard. This complexity was due in part to the fact that the second superseding indictment alleged a scheme to defraud spanning almost a decade in time. Despite this general observation, the court believes that the jury’s verdict is supported by sufficient evidence and that none of the errors alleged by Ruedlinger deprived him of a fair trial. Before turning to the arguments of the parties, the court will briefly comment on the conduct of counsel during trial. Counsel for both the government and the defendant were extremely well prepared. Although a large number of bench conferences were held during trial, the complexity of this case and the pendency of the second case justified most of those discussions. Counsel for the government presented a mass of evidence regarding the defendant’s activities in an efficient and intelligible manner. Counsel for the defendant zealously represented the interests of his client in a very professional manner. Both counsel are to be commended for their conduct during this trial. The court attributes the jury’s verdicts of guilty to the substantial weight of the evidence against the defendant and not any deficiency in his counsel’s performance. Second Superseding Indictment In relevant part, the second superseding indictment substantially states: INTRODUCTION That at all times material to this indictment: 1. The defendant DOUGLAS O. RUED-LINGER, transacted business within the state of Kansas as and through Wheatland Group Holdings, Inc. (“WGHI”), and his affiliated subsidiary companies; including, but not limited to, Fund Administrators Association,. Inc. (“FAA”), of Topeka, Kansas. RUEDLINGER owned 100% of the stock of WGHI. In turn, WGHI owned 100% of the stock of the affiliated companies domiciled in the state of Kansas. 2. RUEDLINGER agreed to administer a program called Partners in Protection Program (“PIP”) through his company, FAA. This program was devised and promoted to state school activities associations by RUED-LINGER as a means of providing liability protection for the school associations. Any school activities association, such as the Kansas State High School Activities Association, participating in this program, was required to make an annual deposit to RUEDLINGER, the administrator of the PIP Program. RUEDLINGER was entitled to 25% of the deposit as a administrator’s fee, and the balance of the deposit, after deduction of insurance costs, was to be held in trust by RUED-LINGER, as a reserve against the payment of claims on behalf of the FAA members. RUEDLINGER agreed to hold and invest reserves in.“money market instruments” and all interest earned from this investment was to be credited to each member’s reserve account on a pro rata basis. THE SCHEME 3. Commencing in or about 1984, the exact date being unknown to the grand jury, and continuing until 1993, in the District of Kansas and elsewhere, DOUGLAS O. RUEDLINGER, did devise, and intend to devise and participate in a scheme and artifice to defraud state school activities associations of money, funds, and credits that consisted of reserves that DOUGLAS O. RUEDLINGER had agreed to hold and invest on behalf of the school activities associations. 4. It was part of said scheme and artifice to defraud that RUEDLINGER represented or caused to be represented to participating state school activities associations that the balance of annual deposits, submitted by member associations, would be held in reserves and invested in money market instruments, with all interest credited to the associations’ reserve accounts on a pro rata basis. 5. It was a part of said scheme and artifice to defraud that RUEDLINGER caused annual deposits of state school activities associations, to be commingled with operating funds and monies of all RUEDLINGER operations, and used for his own personal use and benefit, including, but not limited to: the paymént of operating expenses of all RUED-LINGER companies; RUEDLINGER’S annual salary of $600,000 to $1,400,000; and, acquisition, improvement and maintenance of a jet airplane, a horse farm in Florida, condominiums in Florida and Vermont, and a residence in Florida appraised in excess of $2,000,000.00. 6. It was part of said scheme and artifice to defraud that RUEDLINGER would prepare, or cause to be prepared, spreadsheets that were presented annually to members of the board of FAA which falsely represented that there were positive reserve accounts for most member associations, when in truth and in fact as RUEDLINGER well knew, no such funded reserves existed. 7. It was a part of said scheme and artifice to defraud that RUEDLINGER would use, or cause to be used, the United States Mail to send to member associations, Reserve Statements, that would falsely represent to most member associations that they had positive reserve balances on account, and that interest had been credited to these reserves, when in truth and in fact as RUED-LINGER well knew, no funded reserves existed, and therefore no interest had been earned. 8. It was a part of said scheme and artifice to defraud that RUEDLINGER would use the mail and interstate telephone communications, to falsely represent to FAA members, and their lawful representatives, that the reserve balances were growing, and that reserve balances were in banks, but that he could not disclose the whereabouts of the banks, because of pending litigation; when in truth and in fact, as RUEDLINGER well knew, no funded reserves existed. 9. It was part of said scheme and artifice to defraud that RUEDLINGER falsely represented to the board of FAA, Inc., that he would provide to them a “certified bank statement” at their July 1992 meeting, showing that the reserve balances were in banks, when in truth and in fact as the defendant well knew, he intended to dissolve FAA prior to the meeting. 10. It was a part of said scheme and artifice to defraud that RUEDLINGER, as part of an effort to conceal the fact that reserves did not exist, and make the PIP program appear to be operating as promised, operated or caused to be operated a “Ponzi” scheme, where claims and obligations for PIP were paid out of incoming premiums of FAA members, as well as other insurance products sold by RUEDLINGER. MAIL FRAUD IN VIOLATION OF TITLE 18 UNITED STATE CODE, SECTIONS 2 & mi 11. Having devised the aforesaid scheme and artifice to defraud, set forth in paragraphs 3 through 10, the defendant, DOUGLAS 0. RUEDLINGER for the purpose of executing the aforesaid scheme and artifice, and attempting so to do, knowingly caused to be delivered, from and to the District of Kansas, and elsewhere, by the United States Postal Service, according to the instructions thereon, letters which contained the following: Count Date Mailed On or About Document Recipient 1 07/16/91 6/30/91 Kansas Reserve Statements Kansas State High 'School Activities Ass’n 2 07/16/91 6/30/91 Oklahoma Reserve Statements Oklahoma Secondary School Activities Ass’n 3 07/16/91 6/30/91 National Federation Reserve Statements National Federation of State High School Ass’ns 4 07/16/91 6/30/91 Washington Reserve Statements Washington Interscholastic Activities Ass’n 5 06/11/92 Doug Ruedlinger memo to Nelson Hartman Kansas State High School Activities Ass’n 6 06/10/92 Doug Ruedlinger memo to The Fund Board Nelson Hartman 7 07/10/92 6/30/92 Kansas State High School Activities Ass’n Reserve Statements Kansas State High School Activities Ass’n 07/10/92 6/30/92 Nat’l Federation of State High School Ass’ns Reserve Statements National Federation of State High School Activities Ass’ns Count Date Document Mailed On or About Recipient 9 07/10/92 6/30/92 Oklahoma Statement Reserve Oklahoma Secondary School Activities Ass’n 10 07/10/92 6/30/92 Washington Statements Reserve Washington Interscholastic Activities Ass’n WIRE FRAUD IN VIOLATION OF TITLE 18 UNITED STATES CODE, SECTIONS 2 & ISIS 12. Having devised the aforesaid scheme and artifice to defraud, set forth in paragraphs 3 through 10, the defendant DOUGLAS O. RUEDLINGER for the purpose of executing the aforesaid scheme and artifice, and attempting so to do, knowingly caused to be transmitted by means of wire, radio or television communication in interstate commerce, in Kansas and elsewhere, certain signs, signals, pictures or sounds, to wit: interstate telephone communications as follows: COUNT DATE COMMUNICATION PARTICIPANTS 11 06/05/92 interstate telephone Douglas 0. Ruedlinger Richard Neal Tommy Henry Bernie Saggau Nelson Hartman Lamar Cole Clarke Coover Dan Freund Gina Chappell 12 06/10/92 interstate telephone Douglas O. Ruedlinger Randall Forbes ENGAGING IN MONETARY TRANSACTIONS IN PROPERTY DERIVED FROM SPECIFIED UNLAWFUL ACTIVITY IN VIOLATION OF TITLE 18 UNITED STATES CODE, SECTIONS 2 & 1957 13. On or about the dates set forth below, in the District of Kansas and elsewhere, the defendant, DOUGLAS O. RUEDLINGER did knowingly and wilfully engage and attempt to engage in a monetary transaction, affecting interstate or foreign commerce, in criminally derived property of a value greater than $10,000, that is, the deposit of funds in, or the transfer of funds to, a federally insured financial institution, such property having been derived from the specified unlawful activity of mail and wire fraud in violation of Title 18 United States Code, Sections 1341 and 1343, as follows: Count Deposit/Transfer Date On or About Payor Amount Deposit Location 13 06/26/91 (deposit) Kansas State High School Activities Assn $ 14,455.95 Merchants Nat’l Bank, Topeka, KS (MNB) 074-330 14 10/31/91 (deposit) National Federation of State High School Ass’ns $214,224.00 MNB 074-330 15 06/25/91 (deposit) Oklahoma Secondary School Activities Ass’n $ 17,815.66 MNB 074-330 16 07/24/91 (deposit) Washington Interscholastic Activities Ass’n $ 21,717.89 MNB 074-330 17 09/01/92 (transfer) Washington Interscholastic Activities Ass’n $ 15,257.52 SunBank, Daytona Beach, FL 0546055905738 Evidence Introduced at Trial During its case-in-chief, the government presented 18 witnesses and introduced 76 exhibits. The defendant called 5 witnesses and introduced 67 exhibits, The following is a summary of the evidence introduced at trial, viewed in the light most favorable to the government. Doug Rued-linger was engaged in the insurance business for over thirty years. Ruedlinger apparently entered the field selling, inter alia, insurance to high schools and high school athletic associations. Undoubtedly, Ruedlinger carved out a substantial niche in the “student athlete” market. Across time Ruedlinger’s market grew, apparently selling a wide variety of types of insurance to high schools and high school athletic associations across the United States. In a brochure titled “the Ruedlinger Companies” Ruedlinger claims that his company’s innovations “helped us grow from a small, one-man insurance agency to a multimillion dollar corporation, boasting the largest student and athletic insurance business in the United States, providing a full range of insurance services to customers throughout the United States.” See Government Exhibit #19 at 1. In addition to providing liability insurance for organizations such as school districts and athletic associations, Ruedlinger’s companies offered accident and life insurance to student athletes and cheerleaders. During most of the relevant time frame, Ruedlinger transacted business within the state of Kansas through the Wheatland Group Holdings, Inc. (WGHI), and his affiliated subsidiary companies which included Doug Ruedlinger, Inc. (DRI) and Fund Administrators Association, Inc. (FAA), of Topeka, Kansas. Ruedlinger owned 100% of the stock of WGHI. In turn, WGHI owned 100% of the stock of the affiliated companies domiciled in the state of Kansas. For simplicity, when referring to all of Ruedlinger’s companies in the collective, the court will generally describe them as DRI. In addition to the typical coverage generally offered by insurance companies, Ruedlinger’s companies also supplied “hard to find” insurance to high schools and high school athletie associations. In the 1970’s, based upon the substantial rise in student athlete tort litigation, insurance premiums for liability insurance for high school athletic associations skyrocketed. At some point in time, many athletic associations were unable to obtain liability insurance at any cost. Apparently sensing an opportunity to fill that gap in the insurance market, Ruedlinger proposed the formation of the Partners in Protection (PIP) program. PIP was administered under the FAA. The PIP program was essentially a self-insured pooling agreement. In return for their initial deposit and continued participation in the program, member high school associations were able to build reserves for possible future losses and to distribute the risk among the other members. Annual contributions were based upon a complicated formula. In large part, the annual contribution that a member was required to make was based upon the amount of any claims made by that member against the pool. Money that was paid under the PIP agreement was divided as follows: The first 25% off the top was given to the administrator, DRI, as a service fee. The next portion of the money went to cover the cost of purchasing liability reinsurance. An additional amount went to the purchase of excess insurance. Funds deposited were used to pay actual claims and related expenses. Any remainder was added to each member’s reserve. According to the terms of the PIP agreement, reserve funds were to be placed in interest bearing money market certificates. Members of the program that submitted substantial claims could actually have negative balances, requiring a member to repay the negative sum across time. Several members of the program did have negative reserve balances. However, most members of the program enjoyed positive reserve balances and the pool as a whole had a positive reserve balance. FAA’s board of directors was comprised of the heads of sections of the state high school athletic associations. Each year, the FAA board of directors and members of the PIP program would receive annual reports which summarized each member’s beginning reserve, deposits, fees, interest earned, FAA expense allocation, claims pooled, reinsurance assessment, additional insurance fees, reserve balances and net balances for each association and the pool as a whole. For example, the June 30, 1992, annual report (Government’s Exhibit # 18A) showed a “Total Positive Reserve Balances” for all member associations in the amount of $1,955,419.08, adding back “Negative Reserve Balances” of $326,054.76, for a net amount of $1,629,364.20. Annual reports were sent through the United States mails to member associations. In 1990-91, DRI had gross revenue of approximately $35 million. All American Life Insurance Company accounted for the majority of DRI’s annual revenue. All American underwrote DRI’s student insurance business. FAA, the primary subject of the second superseding indictment, was only a small portion of DRI’s total business, representing less than five percent of DRI’s annual gross revenue. Because most of DRI’s revenue was derived from school related activities, the vast majority of its income would be earned in the months of August, September and October, coinciding with the beginning of each school year. Ruedlinger is a person accustomed to a lavish lifestyle. Evidence of Ruedlinger’s affluent lifestyle was directly relevant to specific charges in paragraph five of the second superseding indictment which alleged that Ruedlinger had converted the funds intrusted to him for his own personal use. Rued-linger himself valued his Florida residence to be worth $2,000,000 Ruedlinger also purchased condominiums and a horse ranch. During several years of DRI’s operation, it owned a jet airplane. The jet was primarily used by Ruedlinger. Although used by Ruedlinger for legitimate business purposes, the jet was generally viewed as an extravagance incurring bills in excess of a half-a-million dollars per year. During its case, the government introduced Ruedlinger’s tax returns which reported adjusted gross income in the following amounts: Year Adjusted Gross Income 1988 $1,407,505 1989 $1,053,459 1990 $ 612,338 1991 - $ 602,597 Around the end of 1989 and throughout 1990, DRI began to encounter dire financial straits. On or about the Labor Day weekend of 1990, Ruedlinger scheduled a meeting to discuss the management structure of DRI. Prior to the meeting, Greg Smart had acted as Chief Executive Officer of DRI. As CEO, Smart called many of the shots for DRI. At a meeting held on the Tuesday after the Labor Day weekend, Ruedlinger announced that there would be a change in management style: Ruedlinger at the top and then the next layer of management consisting of four equal parts of responsibility split between Smart, Mark Nordstrom (executive vice-president in charge of marketing), John Diet-rick (general counsel) and Jim Steele (chief financial officer). During that same meeting, Steele made a presentation to the management group regarding DRI’s desperate financial condition. Most significantly, DRI was at that time unable to properly fund the insurance reserves that it was contractually obligated to maintain, including FAA’s reserves. Nordstrom testified that Ruedlinger gave no indication of surprise to Steele’s announcement. Conversely, Nordstrom testified that he was personally “devastated” and “shocked” by the announcement. Part of DRI’s financial difficulties were directly attributable to the embezzlement of at least $220,000 by Greg Smart. Through various accounting tricks, Smart successfully skimmed money out of the DRI coffers to finance the building of his home, to purchase several major appliances and to buy other personal items including sporting equipment. Smart’s activities were discovered near the time of the 1990 Labor Day meeting with senior management. After Smart’s embezzlement was discovered by DRI, Ruedlinger, who was then living in Florida, came to Topeka for a meeting with senior management to determine what to do about Smart. Despite the discovery of Smart’s chicanery, Ruedlinger did not want to fire him. Only the persistent badgering of DRI’s senior officers, Mark Nordstrom and John Dietrick, persuaded Ruedlinger to terminate Smart’s employment with DRI. Smart was terminated in September of 1990. DRI and Smart entered a confidentiality agreement regarding the terms and conditions of his termination. Following Smart’s departure, DRI’s senior officers and management team consisted of Nordstrom, Dietrick and Steele. After Smart’s termination, Nordstrom was named president of DRI and Wheatland Group Holdings. Dietrick remained as general counsel; Steele remained as chief financial officer. However, Ruedlinger, in his role as chairman of the board, was the person ultimately in charge of DRI and was consulted or copied on every major decision. Rued-linger had daily contact by telephone with the members of the management team and was provided a nightly package of all communications and correspondence throughout the company for him to review. Particularly after Smart’s termination, Ruedlinger was intimately involved in the operation of FAA. Subsequent to the discovery of Smart’s embezzlement, Steele, DRI’s chief financial officer, embarked on an effort to access the damage caused by Smart’s activities and to ascertain the current financial status of DRI. In a memo dated October 4, 1990, Steele reiterated the statements he had made during the post-Labor Day weekend management meeting, and opined: On Friday, September 21,1 met with Ed Carpenter and Dave Carpenter. The purpose of this meeting was to discuss reserve accounts held by DRI and to discuss long term plans for our treatment of those reserves. The meeting expanded beyond that question into corporate financing and specifically financing for our real estate. In this memo the term “reserves” or “trusted funds” means amounts held for payment of claims under agreements with insurance companies or the National Federation under the partners in Protection Program. These reserves are not insurance company reserves. The reserve is an amount otherwise payable to an insurance company as premium, but under agreement with that insurance company, is withheld and trusted with DRI in order to fund claims payments under the policies sold. We have agreement within the corporation and from outside counsel that we must work toward funding the reserves. The reserve amount must be funded by cash or other appropriate investments. The reserve amount must at all times be available in its entirety to fund claims payments. In addition, the reserve amount should be sheltered from general creditors or our corporations to the extent that that is possible. This concept is important to ongoing corporate operations and is important to the insurance companies and the Partners In Protection fund. The reserve amount must ultimately be unencumbered except for the responsibility to the insurance company and to insureds to make claims payments under the policies sold. Today we cannot fund the reserve amount. Our companies have expended part of the reserve amount for other corporate operations. Our companies have encumbered funds otherwise available for reserves in order to capitalize our insurance company. The first issue decided was whether or not a reserve fund should be established today knowing that it cannot be properly funded today. It was the consensus that establishing the reserve fund today is important. It is important because it will establish the fixed responsibility of our other corporations to fund the reserve. It is important because it will establish the commitment for our corporations to fund the reserve. And finally, it is important to establish with the insurance companies our position and intent to properly fund the reserves. The next issue is how to get to a wholly funded unencumbered reserve fund. The facts are that we cannot accomplish this overnight. It will require a reasonable and practical plan. It will require discipline on the part of our companies and our management. We discussed time tables and spoke in terms of a 48 month time table during which the reserves would be fully funded and the reserve fund would be unencumbered. We discussed the immediate formation of a reserve corporation. The reserve corporation would receive transfer of assets from DRI representing the reserve fund. That transfer would probably include a transfer of certificates of deposit now held at Merchants National Bank. Those CDs total $3,060,000. Those CDs are hypothecated or pledged to secure debt at Merchants National Bank. The debt is $3,000,-000. As the debt is repaid the pledge or lean (sic) on these CDs would be released thereby creating unencumbered funds in the reserve corporation. The transfer of hypothecated CDs will not fully fund the reserves. We discussed the funding of the remaining reserves by issuing a note payable from DRI to the reserve corporation. The note would call for periodic payment of principle (sic) and interest payments would be made as due. Government’s Exhibit #23. In addition to funds taken by Smart, the money that was supposed to have been held in reserve in a fiduciary capacity had apparently been used to satisfy general operating expenses and to capitalize United International Insurance Company, a subsidiary of WGHI. The new management team’s efforts to upright DRI were largely unsuccessful. Although it appeared that All American would loan sufficient money to DRI in 1992 to permit the business to survive, during the summer of 1991, DRI’s cash shortage was so severe that it did not appear that it could make it until the fall .of 1991. In June of 1991, DRI was “totally, completely out of money.” At that point in time, WGHI and its subsidiaries were already indebted to Merchants National Bank for several million dollars. On June 19, 1991, in an effort to obtain additional financing from Merchants National Bank, Nordstrom wrote a letter to the president of Merchants National Bank in which he projected as “a virtual certainty” gross revenue for DRI in the amount of approximately $40,000,000 for 1991-92. However, DRI’s projections of future financial success were dependent upon the occurrence of several events, some disclosed, some not disclosed to Merchants National Bank. In order for DRI to survive, some or all of the following events would had to have occurred: curtailing DRI operating expenses (including cutting the number of employees, selling the corporate jet, selling DRI’s newly constructed building and leasing it back and possibly reducing Ruedlinger’s voluminous salary), recapturing money used to capitalize United International Insurance Company, obtaining reimbursement from reinsurers and successfully obtaining substantial financing from All American. The June 19, 1991, letter to Merchants National Bank assumed continuing and on-going business with All American. Ruedlinger and WGHI’s senior officers met with Merchants National Bank to obtain additional financing. Ruedlinger indicated to Merchants National Bank that DRI would fold without an additional extension of credit. As DRI and its companies already owed Merchants National Bank millions, the prospect of loaning more money apparently seemed more palatable to Merchants National Bank than losing the entire loan. Under what might aptly be characterized by the adage “in for a penny, in for a pound,” Merchants National Bank advanced additional funds to DRI. In return for its loans to DRI, Merchants National Bank enjoyed a blanket security interest in “all aspects of all Ruedlinger companies.” Exhibits 1-4, 7-10 are spreadsheets prepared and presented to the Board of Directors of FAA. Those spreadsheets were sent through United States mails. On each of those reports the final tabulations show positive reserve balances for the recipient member as of 6/30/91. Ostensibly, those reports indicate that the members’ reserves in fact existed and were earning interest in accordance with the terms of the PIP agreement. In reality, and as Ruedlinger and his management team knew several months before, no such reserves existed. In October of 1991, Nordstrom left DRI based upon his belief that it would not be possible to fund the reserves or to keep DRI afloat. Dietrick left WGHI in November of 1991. Nordstrom and Dietrick subsequently formed their own company, Monarch Management Corporation, which essentially stepped into the place of DRI in its relationship with All American. DRI apparently sued Nordstrom and Dietrick for a violation of a non-competition clause that was part of their DRI employment contracts. Ultimately that litigation resulted in Nordstrom and Dietrick executing a promissory note agreeing to pay DRI $2,000 per month for ten years. Jim Steele left DRI in January of 1992. Dennis Miller replaced Steele as chief financial officer. John Frazier assumed the role of CEO. Despite their efforts to save the company, DRI was destined for financial ruin. In April of 1992 All American gave notice that it was terminating its relationship with DRI. The departure of DRI’s largest revenue source signaled the beginning of the end. On May 21, 1992, Merchants National Bank exercised its right of setoff against DRI’s funds deposited in its bank. In total, Merchants National Bank seized approximately $363,000 from DRI’s accounts. See Government’s Exhibit # 58; Trial transcript at 432. Part of the funds seized on May 21, 1992, were all of the funds in the FAA account, a total of only $52.28. After Merchants National Bank exercised its right of setoff, DRI still owed Merchants National Bank “several million dollars.” Trial transcript at 457. Word of DRI’s severe financial distress soon spread. Parties to the PIP agreement grew concerned about the security of their reserve accounts. Based upon the perception that DRI was dead in the water, members were also concerned that the demise of DRI and FAA would also result in a lapse in liability coverage. Members sponsoring sporting events during the summer of 1992 were concerned that FAA’s demise would necessitate the cancellation of such events unless alternative liability insurance could be obtained. In response to a mounting number of concerns, on June 5, 1992, Ruedlinger conducted a telephone conference meeting of the FAA board of directors. Persons participating in the phone call were situated in different states. During that conference call, members of the board expressed their concern about the location of the members’ reserves and whether the members were currently covered by liability insurance. Despite his general assurances that everything was “Ok”, many of the members were not satisfied with Ruedlinger’s limited explanations regarding the location of the reserves. Ruedlinger grew agitated during the conversation. In pertinent part, the following is an excerpt from the transcript of that conversation: Dick Neil (Member of FAA Board of Directors): Doug, as Board Members, it has been mentioned by most of us already. We have some responsibilities and feel that we need to be accountable. We probably should see FAA financials as soon as possible so that we know, and have documentation, that in fact that Partners in Protection is solvent. Douglas Ruedlinger: For what it’s going to be worth, I will step out of bounds here and talk about the financial situation and I would like to trust the confidence of you peoples at, I’ll go out of bounds and do this. My lawyers are probably going to shoot me for doing this, but I am going to do it. The situation that is going on between All American and us is a situation involving, again, lost reinsurance. But as we got into discovery, it was discovered that All American owes me something in the neighborhood of $14 million, and that’s a big number. All American feels, and I do rightfully, I’ll be happy to admit this, that we owe them probably maybe $1 or $2 million because of a hole in a reinsurance policy on some college help. Now, the part of the court case that is getting very hairy is, okay, we want to see all of these reserves. The Ruedlinger Companies are about six or seven companies, one of which is the Fund Administrators Association. We want to see all of the assets, we want to see all of the deposits and we have fought that we have told them to go straight to hell. The only thing that they can look at is Doug Ruedlinger, Inc. And they, quite frankly, are fighting on it. I will admit the other day, I said, “Nelson, I’ll be happy to send you the bank balance on the Fund Administrators Association and show it to you.” I had mentioned that to our attorneys and they said, “Jesus, God, don’t do that. They’ll go to Nelson. They’ll subpoena him and, boom, he has got to disclose that.” Right now, it’s my battle. This is substantial sum of money, I mean gentlemen, we’re talking about a potential award to me from All American in the neighborhood of $60-$100 million for what they have done to us. And you can take all the stories you have heard in the streets out there about All American this, and All American that, and Doug Rued-linger this, and Doug Ruedlinger that. I have a New York law firm that said, “Doug, we generally operate only, only on a straight hourly fee basis. We’ll take this one on contingent. It’s too damn good.” I know we are going to walk away from this with big dollars. I have got to be protected. I have got to protect our information. I will bring it to the board meeting. When we hand out the spreadsheets, you will see your bottom lines and you will see certified bank statements that the money is there in banks. Transcript of Exhibit 11. Based upon Rued-linger’s personal assurances that all of the information the directors desired would soon be disclosed, most of the board seemed temporarily satisfied and relieved. Ruedlinger’s promises only temporarily stemmed the rising tide of suspicion and discontent. On June 10, 1992, Randall Forbes, an attorney representing the Kansas High School Activities Association, placed a telephone call to Ruedlinger in Florida. During that telephone call Forbes asked Ruedlinger questions regarding the existence and location of his client’s reserves. Rued-linger indicated that the reserves were fully available and adequately protected. Despite his general assurances regarding the existence and sanctity of the reserves, Ruedlinger would not divulge their actual location. In a memo to the FAA board dated June 10, 1992, Ruedlinger summarizes his version of the June 5, 1992, conference call. The memo was also prepared “to give you food for thought as to what insurance role the Fund Administrator Association (The Fund) and you as directors play with regard to the insurance programs for the future.” Rued-linger also summarizes the history of FAA and the achievements made by the board through the PIP agreement. Foreshadowing future events, the memo further states: As mentioned in the telephone conversation, it is my intention to offer to The Fund board three alternatives: (1) continue the current program with Homestead as the lead insurer and our current block of reinsurers; (2) the Board consider commercially underwritten converages which would, 'as best as possible, duplicate the program that they now have in effect (without litigation liability); (3) totally disband the Fund Administrators Association, commence a runoff of existing claims, advise the members to purchase their coverages locally (the same we did with the auto coverage) and refund the reserves in accordance with the agreement. To be very honest, I can live with any of the above. Government Exhibit # 6 at 3-4. The letter essentially blames unnamed self-serving members of the FAA board for the deterioration of the organization’s commitment to the ideals upon which it was founded and intended to serve. In a letter dated June 11, 1992, addressed to Nelson Hartman, Executive Secretary of the Kansas State High School Activities Association, (Government’s Exhibit # 5), Rued-linger takes Forbes to task for his June 10, 1992, telephone call. Ruedlinger’s letter essentially takes umbrage at Forbes’ questions regarding the amount and location of FAA reserves. Ruedlinger reiterates the position that he took during the June 5, 1992, telephone conversation, indicating that he was unable to disclose the amount and location of FAA’s reserves based upon his legal dispute with All American. Ruedlinger also states that he intends “to follow through with what I pledged to the Board regarding information that will be presented at the board meeting.” As scheduled, on June 30, 1992, the persons comprising the FAA board of directors met in Fort Lauderdale, Florida. Upon their arrival, Ruedlinger distributed a letter to the board members. In pertinent part, the June 30,1992, letter states: Dear Friends: At a stockholders meeting on Monday, June 29, 1992, the shareholder dissolved the Fund Administrators Association, Inc., effective immediately. Doug Ruedlinger, Inc., will obviously no longer be needed to serve as administrator. The former Board has been removed, and will cease to function. A final certified audit will commence immediately and any obligations resulting will be accounted for, satisfied, or pursued, as the case may be. We have effected binders for former members into like coverages for a period of ten (10) [subsequently changed to 20] working days. A letter fully explaining this transítion and an application will be received in the former members’ offices via FAX or Federal Express within ten working days. Complete details regarding the coverages will be included in the information sent to the members. Those desiring to continue with the proposed insurance coverages may do so by acknowledging this offer within ten working days of the receipt of same, and completing and referencing the enclosed application. The coverage will be placed for the new group for the 92/93 school year. All aspects of the program, plus other options will be offered and explained. It should be clearly understood that the Life Time Catastrophe Coverage will be renewed without changes, and it is not affected in anyway (sic) by this action. Anyone desiring additional information regarding this action may do so by calling Doug Ruedlinger, 904-423-1100, or via FAX 904-423-3617. Sincerely, FUND ADMINISTRATORS ASSOCIATION, INC. By: Douglas O. Ruedlinger Therefore, instead of providing the information regarding the amount and location of FAA reserves as previously promised, Rued-linger had simply dissolved the corporation. Many members of the board were incensed by Ruedlinger’s actions. Many directors were concerned about the status of other insurance programs purchased from DRI. In response to those inquiries, Ruedlinger indicated that any former FAA member who wanted to guarantee continued coverage, including coverage of injured students under other DRI insurance programs, would have twenty days to join a “new” insurance package offered by Ruedlinger. Otherwise, those other coverages, including insurance for any seriously injured student, would no longer receive benefits from any DRI insurance program. As indicated in the June 30, 1992, letter distributed to the FAA board of directors, a certified audit was subsequently performed. The audit was performed by Braunsdorf, Carlson and Clinkinbeard (BCC), certified public accountants. Despite contractual assurances that the PIP agreements were separate and distinct from other DRI insurance programs such as LifeCat, the final audit setoff amounts purportedly owed to DRI by the member associations from other insurance programs purchased from DRI. According to that audit, FAA members did not have a cumulative positive reserve balance, but in total actually owed FAA an additional $543,-138. In response to confirmation letters sent by the auditing company, most of the members contested the “setoff’ procedure used to arrive at the negative final reserve balance. Instead, members believed that Ruedlinger was using the “setoff’ procedure as a means of cheating the FAA members out of approximately $1.6 million. Ultimately, FAA members who did not withdraw from the PIP agreement prior to June of 1992 did not receive any of their reserves. Several FAA members sought and obtained judgment against DRI and/or Rued-linger personally. However, virtually all of the judgment creditors’ efforts to actually collect on their judgments have apparently been unsuccessful. Defendant’s Case Ruedlinger did not testify on his own behalf. However, Ruedlinger did present substantial evidence in his own defense. Ruedlinger’s defense was multi-faceted. One constant throughout each witness’ testimony was the fact that until April of 1992 — the time that All American cancelled its relationship with Ruedlinger — every insured’s claim and every duty to defend was apparently fulfilled by DRI and its subsidiaries. However, after the termination of its relationship with its largest revenue source, DRI and its related companies essentially collapsed. Ruedlinger’s prognostications of multimillion dollar verdicts against All American did not come to fruition. Instead, All American prevailed against Ruedlinger in that legal dispute. During trial, Ruedlinger suggested that the loss of his legal dispute with All American was attributable to a lack of finances to properly litigate his claims on the merits. Similarly, Ruedlinger suggested that the lack of sufficient resources precluded him from defending against several legal claims, including a claim by the National Federation of State High School Athletic Association. Ruedlinger settled that case by permitting judgment to be entered against him in the amount of $1,000,000. See, Government Exhibit # 74. Ruedlinger introduced evidence of several instances of philanthropy during the time he was selling insurance to high schools and high school athletics association. Ruedlinger also produced character witness testimony from longtime associates who firmly believed that Ruedlinger had an excellent reputation for truth, honesty and integrity. Standing as the centerpiece to Ruedlinger’s defense was his contention that he was an outstanding member of the community who had provided valuable insurance throughout the thirty year operation of his legitimate business. Flowing from Ruedlinger’s “legitimate business” argument was the corollary that DRI’s management team was comprised of numerous respected professionals, including attorneys, and that he had relied on them in conducting the day to day affairs of his companies. In addition to internal monitoring by DRI employees, Ruedlinger pointed to numerous outside audits by interested parties including All American and the fact that his operation was able to pass the scrutiny of trained accountants. Moreover, the FAA directors themselves were provided with sufficient information to evaluate DRI’s operations and that the directors were personally motivated to act as watchdogs for their own self-interest. Rued-linger pointed to the final audit by Braunsdorf, Carlson and Clinkinbeard as further evidence that he did not profit, illegally or otherwise, from FAA. Conversely, Ruedlinger pointed the finger of blame at others for his company’s demise. The embezzlement by Greg Smart and its impact on DRI was repeatedly explored. Ruedlinger, however, primarily focused his financial demise on the actions of All American and its decision to terminate its relationship with DRI. Ruedlinger also challenged the government’s allegations that he did not act as promised and that he breached his fiduciary duties to FAA members. In regard to DRI’s obligation to place FAA members’ reserves in money market certificates, Ruedlinger pointed to the fact that at the end of every day the money on deposit at Merchants National Bank was “swept” and placed in interest earning devices. Verdict and Subsequent Events On April 7, 1997, the jury returned a verdict finding the defendant, Douglas 0. Rued-linger, guilty of all ten counts of mail fraud, both counts of wire fraud and on one count of money laundering (Count 17). The jury found the defendant not guilty on four counts of money laundering. Trial on the bifurcated issue of forfeiture was set to commence on April 21, 1997. On April 10, 1997, the government filed a motion to dismiss Count 18, indicating that upon further reflection of the current state of the law and the status of other pending matters against the defendant it wished to pursue the forfeiture issue civilly. On April 11, 1997, the court granted the government’s motion to dismiss Count 18. On that same day the jury was notified telephonically that their service was no longer necessary in light of the dismissal of Count 18; the jury was discharged. Sufficiency of the Evidence: Wire and Mail Fraud Elements of Wire and Mail Fraud The elements of wire fraud under 18 U.S.C. § 1343 are: “(1) a scheme or arti- fice to defraud or obtain money by false pretenses, representations or promises; and (2) use of interstate wire communications to facilitate that scheme.” United States v. Drake, 932 F.2d 861, 863 (10th Cir.1991). A scheme to defraud focuses on the intended end result and affirmative misrepresentations are not essential; by contrast a scheme to obtain money by false pretenses, representations or promises focuses instead on the means by which the money is obtained and particular false pretenses, representations or promises must be proved. United States v. Cronic, 900 F.2d 1511,1513-14 (10th Cir.1990). “[A] scheme to defraud is conduct intended or reasonably calculated to deceive persons of ordinary prudence or comprehension.” United States v. Hanson, 41 F.3d 580, 583 (10th Cir.1994). The objective reference to “persons of ordinary prudence or comprehension” assists in determining whether the accused’s conduct was “calculated to deceive.” Drake, 932 F.2d at 864. Fraudulent intent is required. United States v. Themy, 624 F.2d 963, 965 (10th Cir.1980). That said, a scheme to defraud by false representations may be accomplished by patently false statements or statements made with a reckless indifference as to their truth or falsity, and deceitful concealment of material facts may constitute actual fraud. Williams v. United States, 368 F.2d 972, 975 (10th Cir. 1966), cert. denied, 386 U.S. 997, 87 S.Ct. 1317, 18 L.Ed.2d 345 (1967); Gusow v. United States, 347 F.2d 755, 756 (10th Cir.), cert. denied, 382 U.S. 906, 86 S.Ct. 243, 15 L.Ed.2d 159 (1965). “[Ejven though a defendant may firmly believe in his plan, his belief will not justify baseless or reckless representations.” Themy, 624 F.2d at 965. United States v. Cochran, 109 F.3d 660, 664-65 (10th Cir.1997). The elements of mail fraud are virtually identical to the elements of wire fraud, the one exception being that the government must prove that the defendant used the United States mail to facilitate the scheme instead of interstate wire communication facilities. See United States v. Czubinski 106 F.3d 1069, 1076 n. 10 (1st Cir.1997) (“Identical standards apply in determining the ‘scheme to defraud’ element under the mail and wire fraud statutes.”) (quoting United States v. Boots, 80 F.3d 580, 586 n. 11 (1st Cir.1996)). The mail fraud “statute clearly contemplates a separate mail fraud count each time the mail is used to help execute the fraudulent scheme — not each time a misrepresentation is made.” United States v. Kennedy, 64 F.3d 1465, 1476 (10th Cir.1995); see United States v. Pepper, 51 F.3d 469, 472-73 (5th Cir.1995) (although the government must prove the existence of the scheme to obtain money or property by misrepresenta-' tions, “[t]here is no statutory requirement that direct misrepresentations must be made to the victims of the scheme”). Analysis Based upon the direct and circumstantial evidence introduced at trial, a rational factfinder could easily have found Rued-linger guilty of each count of which he was convicted. As summarized above, at least by the fall of 1990, Ruedlinger personally knew that DRI was out of money and that all of the reserves that it was supposed to be holding in a fiduciary capacity, including the funds supposed to be held for FAA members, did not exist. Despite that knowledge, Ruedlinger did not inform the FAA members of that fact. In fact, Ruedlinger specifically instructed the management team not to disclose DRI’s financial condition. Instead, Ruedlinger sent materially misleading information through the United States mails which was designed to lull FAA members into believing that their reserves existed, were on deposit and earning interest. Although other moneys flowed through DRI’s coffers after the fall of 1990, based upon the precarious financial status of Ruedlinger’s companies, including the outstanding loans and encumbrances on DRI’s assets, Rued-linger had to know that all written communications distributed to the FAA board of directors and FAA members indicating that the reserves existed were absolutely false. After Merchants National Bank setoff DRI’s accounts on May 21, 1992, under no circumstance could Ruedlinger have believed that the FAA members’ reserves actually existed. No evidence suggested that Rued-linger’s assurances that the reserves were being held in a secret location was anything but a transparently thin ruse to hide the fact that the money had already been dissipated. As noted above, on May 21, 1992, the FAA account contained reserves equalling $52.28, over $1.6 million short of the amount that was supposed to have been held as reserves. Armed with that knowledge, Ruedlinger still persisted in perpetuating the scheme to defraud FAA members by informing them that their reserves actually existed and that they were earning interest in some mystery location known only to him. Both interstate telephone calls — one made on June 5, 1992, the other made on June 10, 1992 — were clearly designed to lull the FAA members into forestalling any further efforts to aseertain the whereabouts of their reserves. All of those communications, both written and oral, clearly fall within conduct respectively prohibited by federal mail and wire fraud statutes. See United States v. Sampson, 371 U.S. 75, 81, 83 S.Ct. 173, 176, 9 L.Ed.2d 136 (1962) (“We cannot hold that such a deliberate and planned use of [lulling letters in] the United States mails by defendants engaged in a nationwide, fraudulent scheme in pursuance of a previously formulated plan could not, if established by evidence, be found by a jury ... to be ‘for the purpose of executing’ a scheme within the meaning of the mail fraud statute.”) (quoting 18 U.S.C. § 1341); United States v. Massey 48 F.3d 1560, 1566-67 (10th Cir.) (“Lulling letters can further a fraudulent scheme for the purposes of the mail fraud statute.”), cert. denied, 515 U.S. 1167, 115 S.Ct. 2628, 132 L.Ed.2d 868 (1995); United States v. Kelley, 929 F.2d 582, 585 (10th Cir.) (“[M]ailings which facilitate concealment of a fraudulent scheme meet the ‘furtherance’ requirement [of section 1341].”), cert. denied, 502 U.S. 926, 112 S.Ct. 341, 116 L.Ed.2d 280 (1991); see also United States v. Griffith, 17 F.3d at 874 (lulling theory applies equally to wire fraud convictions). As this court has previously stated, it is enough then if the communications are important in maintaining the operation of an ongoing fraudulent scheme. In his motion, Ruedlinger contends that even if any statement disseminated by either mail or wire were “misrepresentations,” those misrepresentations were not material. Ruedlinger suggests that the information he imparted to FAA members was “mere puffing or exaggeration.” Ruedlinger also contends that any misrepresentations attributable to him could not have been calculated to deceive persons of ordinary prudence. On their face these arguments fail as it is obvious that no member enjoying a positive balance would have continued to contribute money to the fund or would not have immediately made every effort to withdraw their reserves if Ruedlinger had honestly reported the current status of the members’ reserves at any point after the fall of 1990. These arguments also ignore the testimony of several witnesses who represented members of the FAA. From that evidence the jury could have reasonably concluded that Ruedlinger’s numerous misrepresentations regarding the existence of the reserves were material and that they were calculated to deceive persons of ordinary prudence. Ruedlinger occupied a position of trust. Ruedlinger’s personal assurances in written and oral form clearly duped sophisticated persons into operating under the mistaken belief that their reserves were secure. Based upon their belief that the reserves as reported by DRI actually existed, some members of FAA even carried their FAA reserves on their respective accounting books as assets. Ruedlinger’s misrepresentations were clearly material. Even if Ruedlinger labored under the misapprehension that someday everything might work out and that DRI might someday pull out of its financial nosedive, that belief would not have justified the multitude of untrue material misrepresentations disseminated to FAA members. See United States v. Pap- pert, 112 F.3d 1073, 1076 (10th Cir.1997); United States v. Reddeck, 22 F.3d 1504, 1507 (10th Cir.1994) (“ ‘[E]ven though a defendant may firmly believe in his plan, his belief will not justify baseless or reckless representations.’ ” (quoting United States v. Themy, 624 F.2d 963, 965 (10th Cir.1980))). Ruedlinger clearly acted with a fraudulent intent in both his written and oral communications to the FAA board of directors and FAA members. BCC’s Post-Mortem Audit As he did at trial, Ruedlinger contends that he must be factually innocent of making any fraudulent misrepresentations based upon the calculations contained within the final audit of FAA performed by BCC. As indicated above, the BCC final audit reaches the conclusion that FAA members collectively did not have a positive reserve balance, but instead actually owed the fund $543,138. Based upon its verdict, the jury clearly sided with the government’s contention that the BCC final audit did not accurately measure each individual member’s reserves or the total amount of FAA’s reserves. That finding was a reasonable and appropriate construction of the evidence regarding FAA and its interrelationship with other DRI programs. FAA members clearly contested the reserve amounts calculated by BCC, primarily based upon their contention that it was improper to use amounts purportedly owed to LifeCat to offset FAA reserves. Because the underlying premise of the audit was ill-founded, the jury was fre