1996 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

4-18-1996

United States v. Sokolow

Precedential or Non-Precedential:

Docket 95-1292,95-1367

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1 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

___________ 

Nos. 95-1292/1367 

___________ 

 UNITED STATES OF AMERICA 

 vs. 

 CRAIG B. SOKOLOW, 

 Appellant

___________ 

Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

(D.C. Crim. No. 93-cr-00394) 

___________ 

 Argued 

January 22, 1996 

BEFORE: MANSMANN and SCIRICA, Circuit Judges, 

and RESTANI, Judge, Court of International Trade.0

(Filed April 18, 1996) 

___________ 

John Rogers Carroll 

Johanna E. Markind 

Carroll & Carroll 

400 Market Street, Suite 850 

Philadelphia, PA 19106 

Peter Goldberger (Argued) 

Anna M. Durbin 

Pamela A. Wilk 

50 Rittenhouse Place 

Ardmore, PA 19003-2276 

 COUNSEL FOR APPELLANT 

Michael R. Stiles 

United States Attorney 

Walter S. Batty, Jr. 

 

0

 * Honorable Jane A. Restani, Judge, United States Court of 

International Trade, sitting by designation. 
2 

Chief of Appeals 

Joseph T. LaBrum, III (Argued) 

Maryanne Donaghy 

Sarah L. Grieb 

Assistant United States Attorneys 

615 Chestnut Street, Suite 1250 

Philadelphia, PA 19106-4476 

 COUNSEL FOR APPELLEE 

___________ 

OPINION OF THE COURT 

___________ 

RESTANI, Judge. 

 Defendant Craig B. Sokolow ("Sokolow") appeals from his 

conviction in the United States District Court for the Eastern 

District of Pennsylvania following a two month jury trial. On 

March 18, 1994, Sokolow was convicted of 107 counts of mail fraud 

in violation of 18 U.S.C. § 1341 (1988), 17 counts of money 

laundering in violation of 18 U.S.C. § 1957 (1988), and one count 

of criminal forfeiture in violation of 18 U.S.C. § 982 (1988). 

Following several sentencing hearings, the district judge 

sentenced Sokolow to 92 months in prison, to be followed by three 

years supervised release, and ordered a $50,000 fine, $6200 in 

special assessments, $690,246.34 in restitution, and the 

forfeiture of $2.1 million. On appeal, defendant challenges both 

his conviction and sentencing. For the reasons stated herein, we 

will affirm the conviction, sentencing, and the order of 

forfeiture, but remand for reconsideration of the restitution 

order. 

I. BACKGROUND 
3 

 The events leading to Sokolow's indictment and subsequent 

conviction occurred between May 1, 1987 and July 23, 1990. 

Sokolow, an attorney and licensed insurance agent, offered health 

benefits plans to the public in Pennsylvania and several other 

states through a series of corporations that he established and 

controlled, but primarily through the National Independent 

Business Association, Inc. ("NIBA").0 The plans were marketed to 

small business employers, their employees, and their families. 

Association Insurance Marketing, Inc. ("AIM"), a corporation 

established and controlled by Sokolow, served as the primary 

marketing arm of NIBA. Through AIM, Sokolow received commissions 

on all premiums received for the sale of NIBA policies. 

 Prior to May 1987, NIBA members were fully insured by NIBA's 

group insurance contract with World Life and Health Insurance 

Company ("World Company"). On May 1, 1987, Sokolow replaced 

World Life with Independence Blue Cross and Pennsylvania Blue 

Shield to administer and process NIBA's health care claims. 

Sokolow purchased stop-loss coverage from Blue Cross, whereby 

NIBA assumed responsibility for the payment of NIBA members' 

medical care claims up to the first $25,000. Blue Cross would 

pay any remaining claims in excess of $25,000. The indictment 

charged that Sokolow falsely represented to the public that NIBA 

 

0

 In 1984, Sokolow began offering his health benefits plan 

through the Pennsylvania Independent Business Association, Inc. 

("PIBA"). NIBA was established as a successor to PIBA in 1987. 

In 1988, NIBA was succeeded by the American Independent Business 

Alliance, Inc. ("AIBA"), the association existing until the time 

of liquidation on February 15, 1990. For convenience, "NIBA" 

will be used throughout the opinion to refer to the various 

corporations. 
4 

was fully-insured by Blue Cross, when, in fact, it was a selffunded plan, thus defrauding members of their premiums. In 

addition, Sokolow allegedly used the Blue Cross logo on marketing 

and billing materials, in violation of NIBA's agreement with Blue 

Cross, to foster the impression that NIBA was the equivalent of a 

Blue Cross fully-insured health benefits plan. 

 On June 30, 1988, Blue Cross terminated its service plan 

with NIBA when Sokolow failed to pay approximately $2 million in 

claims for which Blue Cross sought reimbursement. Sokolow then 

contracted with another company for higher stop-loss coverage 

that required NIBA to pay the first $50,000 of a member's medical 

care claims. The indictment alleged that Sokolow again 

misrepresented that NIBA was fully insured by the new coverage, 

when, in fact, it was self-funded. 

 After receiving complaints concerning NIBA's claims 

administration in late 1988, the Pennsylvania Insurance 

Department (the "Department") began to investigate NIBA's 

operations. The Department determined that Sokolow had been 

operating NIBA as an illegal, unlicensed insurer in Pennsylvania. 

Sokolow objected to the Department's inquiries on the basis that 

NIBA was a Multi-Employer Welfare Arrangement ("MEWA") that could 

file a benefits plan under ERISA and, thus, was not subject to 

state regulation.0 The Department disagreed with Sokolow's 

 

0

 Although Sokolow represented to the Department that he could

have filed the NIBA plan under ERISA, the evidence at trial 

indicated that Sokolow represented to Virginia and Maryland 

insurance regulators that the NIBA health plan was, in fact, 

filed as an ERISA plan with the United States Department of 

Labor, and, thus, not subject to state regulation. Trial 
5 

contentions and, on May 2, 1989, suspended NIBA's operations. On 

August 31, 1989, the Commonwealth Court of Pennsylvania ruled 

that NIBA did not constitute a valid MEWA plan, but was a 

commercial enterprise "marketing insurance, without the benefit 

of a licensed company status, while purporting to be a valid 

ERISA plan, such that state licensing would not be necessary."0

Appellant's App. [hereinafter "App."] at 1193. Consequently, 

NIBA was ordered liquidated by the commonwealth court on February 

15, 1990. 

 Sokolow collected more than $34 million in premiums from 

NIBA plan members who were allegedly defrauded by Sokolow during 

the period covered by the indictment. The indictment alleged 

that Sokolow converted approximately $4 million of the premiums 

for his personal benefit. He received $2,239,575.67 in 

commissions through AIM and two other related insurance 

companies0 ($1,837,152.30 of those commissions went to AIM) and 

$1,806,259.23 in salary, officer's loans, and other 

disbursements. These monies were deposited into AIM and NIBA 

accounts. The indictment alleged that Sokolow laundered these 

 

testimony established, however, that Sokolow never filed the NIBA 

plan with ERISA for the years 1987 through 1990. 

0

 For purposes of determining insurance agents' liability, a 

later en banc ruling of the commonwealth court found that NIBA 

was a MEWA and not an insurance entity operating under 

Pennsylvania state law. Pennsylvania Ass'n of Life Underwriters 

v. Foster, 645 A.2d 907, 911-12 (Pa. Commw. Ct. 1994) (en banc), 

aff'd without op., 668 A.2d 1113 (Pa. 1995) (per curiam). 

0

 The related companies were Sokolow & McMillan, and Sokolow, 

McMillan & O'Leary, two "in-house" insurance agencies of which 

Sokolow was a partner, and which sold NIBA health benefits plans. 
6 

funds through a number of bank and brokerage accounts, as well as 

real property and mortgages. 

 The jury trial commenced on January 10, 1994, and concluded 

on March 18, 1994, with the return of guilty verdicts on all 

counts considered by the jury. Sentencing proceedings were held 

on January 6 and 11, and February 6, 1995, during which 

sentencing issues were argued, and evidence of forfeiture, loss 

calculations, and restitution was presented. On March 14, 1995, 

the district court filed three separate Memorandum Opinions and 

Orders, inter alia, determining the Sentencing Guidelines 

calculations, and ordering the restitution and forfeiture 

obligation. Following entry of judgment, Sokolow filed this 

timely appeal challenging both his conviction and sentence. 

II. CHALLENGES TO THE CONVICTION 

 A. Evidentiary Challenges

 Sokolow challenges three evidentiary rulings made by the 

district court. Sokolow claims that the district court (1) erred 

in admitting into evidence Government Exhibit B-110 ("Gov't Ex. 

B-110"), a summary of unpaid insurance claims of NIBA members; 

(2) improperly allowed evidence of NIBA's alleged operation as an 

unlicensed insurance company; and (3) abused its discretion in 

admitting irrelevant and highly prejudicial victim impact 

testimony. To the extent the district court's admission of 

evidence was based on an interpretation of the Federal Rules of 

Evidence, our standard of review is plenary. See United States 

v. Furst, 886 F.2d 558, 571 (3d Cir. 1989), cert denied, 493 U.S. 
7 

1062 (1990). Our review of a district court's ruling to admit or 

exclude evidence, if premised on a permissible view of the law, 

however, is only for an abuse of discretion. See id.; see also

United States v. Versaint, 849 F.2d 827, 831 (3d Cir. 1988). We 

will address each of Sokolow's evidentiary challenges in turn. 

 1. Government Exhibit B-110

 Sokolow contends that Gov't Ex. B-110 is inadmissible 

hearsay. Gov't Ex. B-110 is a compilation and summary of over $7 

million in unpaid insurance claims of NIBA members. The document 

was prepared for the Department in July 1992 by Inservco, a 

third-party administrator hired to adjust the unpaid claims after 

the commonwealth court ordered the liquidation of NIBA. 

Originally, NIBA members' claims were documented in the course of 

regularly conducted business by NIBA's third party administrators 

-- National Benefits Corp., Insurance Benefits Services ("IBS"), 

and Independent Insurance Administrators ("IIA"). The companies 

processed NIBA claims and kept records on behalf of NIBA, which 

Sokolow later authorized to be turned over to the Department's 

Statutory Liquidator in connection with NIBA's liquidation. As 

custodian of the NIBA plan records, the Statutory Liquidator made 

the records available to Inservco for the adjustment of unpaid 

claims. 

 Over Sokolow's objection, the district court admitted the 

exhibit as an admission by Sokolow, under Federal Rule of 

Evidence 801(d)(2)(C).0 The district court reasoned: 

 

0

 Rule 801(d)(2)(C) provides that 
8 

Inservco summarized information held by the Statutory 

Liquidator, who in turn obtained the information from 

another administrator hired by Sokolow. Each entity 

that held the information had the express authorization 

of [Sokolow]. As such, Exhibit B-110 is a party 

admission . . . . 

United States v. Sokolow, No. 93-394-01, 1994 WL 613640, at *5 

(E.D. Pa. Nov. 1, 1994). We disagree with the district court's 

reasoning. 

 Rule 801(d)(2)(C) specifically excludes from the definition 

of hearsay any statements used against a party which were made by 

another person authorized by the party to make a statement 

concerning the subject. Fed. R. Evid. 801(d)(2)(C); Lightning 

Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1198 (3d Cir. 1993). We 

find, and the government admits, that Inservco's adjustments to 

the NIBA members' claims were not "done with Sokolow's consent or 

at his direction," and, thus, are not admissions by Sokolow. See

Appellee's Br. at 23. The government continues to assert, 

however, that the collection of these claims by NIBA's thirdparty administrators constitutes an admission by Sokolow, and 

are, thus, not hearsay. This argument is untenable. Rule 

801(d)(2)(C) requires that the declarant be an agent of the 

party-opponent against whom the admission is offered. Kirk v. 

Raymark Indus., Inc., 61 F.3d 147, 164 (3d Cir. 1995), cert. 

denied, 116 S.Ct. 1015 (1996). We find that neither the 

underlying claims submitted by NIBA insurance beneficiaries to 

 

[a] statement is not hearsay if . . . [t]he statement 

is offered against a party and is . . . a statement by 

a person authorized by the party to make a statement 

concerning the subject. 

Fed. R. Evid. 801(d)(2)(C). 
9 

NIBA's third-party administrators nor Sokolow's subsequent 

release of these records to the Department constitutes an 

admission by Sokolow. Thus, Gov't Ex. B-110 is hearsay because 

the entries of NIBA members' claims, whether or not adjusted by 

Inservco, were written out-of-court statements offered to prove 

not merely the existence but the genuineness of the claims, and 

ultimately, the underfunding of Sokolow's enterprise. 

 We now turn to whether Gov't Ex. B-110 falls within one of 

the exceptions to the hearsay exclusion. The government argues 

that Gov't Ex. B-110 is admissible under the business records 

exception to the hearsay rule.0 This exception allows the 

admission of hearsay documents provided a foundation is laid by 

"the custodian or other qualified witness" that: 

(1) [t]he declarant in the records had personal 

knowledge to make accurate statements; (2) the 

declarant recorded the statements contemporaneously 

with the actions that were the subject of the reports; 

(3) the declarant made the record in the regular course 

of the business activity; and (4) such records were 

regularly kept by the business. 

 

0

 Pursuant to Rule 803(6), the following are not excluded by the 

hearsay rule even though the declarant is available as a witness: 

 Records of regularly conducted activity. A memorandum, 

report, record, or data compilation, in any form, of acts, 

events, conditions, opinions, or diagnoses, made at or near 

the time by, or from information transmitted by, a person 

with knowledge, if kept in the course of a regularly 

conducted business activity, and if it was the regular 

practice of that business activity to make the memorandum, 

report, record, or data compilation, all as shown by the 

testimony of the custodian or other qualified witness, 

unless the source of information or the method or 

circumstances of preparation indicate lack of 

trustworthiness. 

Fed. R. Evid. 803(6). 
10 

United States v. Pelullo, 964 F.2d 193, 200 (3d Cir. 1992). 

 We find that Gov't Ex. B-110 is admissible under the 

business records exception. Contrary to Sokolow's contentions, 

the NIBA members' claims were collected in the course of 

regularly conducted business of NIBA's original claims 

administrators. IIA initially received NIBA plan member 

information from IBS, a prior third party administrator, with 

Sokolow's consent and authorization. Pursuant to the liquidation 

order, Sokolow specifically authorized the IIA to "release any 

and all data base information as required concerning [NIBA] on 

the in-house history tapes and claims system to the 

[Department]." App. at 826. Joseph DiMemmo testified that as 

the representative of the Statutory Liquidator, he took custody 

of all NIBA records. We find that a clear chain of custody and 

foundation for this data, upon which Inservco based its claims 

adjustment, was established. 

 As to the claim adjustments made by Inservco, and summarized 

in Gov't Ex. B-110, we find that this data also falls within the 

business records exception. As a third party administrator, 

Inservco contracted with the Department to administer NIBA health 

insurance claims. The claims adjustments made by Inservco were 

the same type of adjustments NIBA's third party administrators 

would have had to make if NIBA had stayed in business. Margaret 

Lee attested to the authenticity of Gov't Ex. B-110 and laid the 

foundation for its admission. Lee testified that Gov't Ex. B-110 

was derived from Inservco's claims processing system and that 

these records were made and kept in Inservco's regular course of 
11 

business. In sum, we find that the government properly 

established the admissibility of Gov't Ex. B-110 under the 

business records exception to the hearsay rule. 

 Defendant asserts, however, that the methods and 

circumstances under which Inservco prepared the summary of claims 

were untrustworthy and unreliable. Sokolow argues that many 

claims were not checked for pre-existing conditions, double 

submissions, or the timeliness of the claims. We disagree. 

Inservco adjusted the claims according to NIBA policy guidelines, 

and these adjustments were subject to committee review and 

oversight by the Department. Final approval of the claim 

adjustments was made by the Department. Although the adjustments 

made by Inservco did not take into account the timeliness of 

claims, trial testimony indicated that this information could not 

be determined from the submissions made to the Department. 

Further, Sokolow offers no specific evidence that the claims were 

not properly inspected by Inservco. Much of the evidence 

indicates the contrary. In any event, such questions go to the 

weight to be given to Gov't Ex. B-110, and not its admissibility. 

 Finally, Sokolow claims that Gov't Ex. B-110 is a public 

report under Federal Rule of Evidence 803(8)(C),0 and, thus, 

 

0

 Rule 803(8)(C) excepts from the hearsay rule, even though the 

declarant is available as a witness: 

 Public records and reports. Records, reports, 

statements, or data compilations, in any form, of 

public offices or agencies, setting forth, . . . in 

civil actions and proceedings and against the 

Government in criminal cases, factual findings 

resulting from an investigation made pursuant to 

authority granted by law, unless the sources of 
12 

should be excluded under the rationale set forth in United States 

v. Oates, 560 F.2d 45 (2d Cir. 1977). There the court held that, 

"police and evaluative reports not satisfying the standards of 

[Federal Rules of Evidence] 803(8)(B) and (C) may not qualify for 

admission under [Rule] 803(6) or any of the other exceptions to 

the hearsay rule." Id. at 77. Generally, a public report 

consisting of "factual findings resulting from an investigation 

made pursuant to authority granted by law," is not admissible 

against a criminal defendant under Rule 803(8)(C). We agree with 

Sokolow that Gov't Ex. B-110 contains some indicia of a public 

report under Rule 803(8)(C). In processing NIBA members' claims, 

Inservco was performing a fact-finding function and acting 

essentially as the agent of the Department, which was required to 

liquidate NIBA pursuant to state law. We disagree, however, with 

Sokolow's contention that the findings made by the Department, 

i.e. Inservco's adjustments, were inadmissible under the Oates

rule. 

 Criticizing Oates as an unduly broad interpretation of Rule 

803(8), many courts have declined to import the limitations of 

Rule 803(8)(B)0 and (C) into other hearsay exceptions. See, 

 

information or other circumstances indicate lack of 

trustworthiness. 

Fed. R. Evid. 803(8)(C). 

0

 Rule 803(8)(B) excepts from the hearsay rule, even though the 

declarant is available as a witness: 

 Public records and reports. Records, reports, 

statements, or data compilations, in any form, of 

public offices or agencies, setting forth, . . . 

matters observed pursuant to duty imposed by law as to 

which matters there was a duty to report, excluding, 
13 

e.g., United States v. Picciandra, 788 F.2d 39, 44 (1st Cir.) 

(upholding admission of DEA report against criminal defendants 

under Rule 803(5) (past recollection recorded)), cert. denied, 

479 U.S. 847 (1986); United States v. Metzger, 778 F.2d 1195, 

1201 (6th Cir. 1985) (declining to read Rule 803(8)(C) 

limitations into Rule 803(10) (absence of public record or 

entry)), cert. denied, 477 U.S. 906 (1986). Although we have not 

specifically addressed this issue,0 the Seventh and Tenth 

Circuits have held that Rule 803(8)(C) does not compel the 

exclusion of documents properly admitted under Rule 803(6) where 

the author testifies. See United States v. Hayes, 861 F.2d 1225, 

1230 (10th Cir. 1988); United States v. King, 613 F.2d 670, 672-

73 (7th Cir. 1980). The Hayes court stated that the Oates rule 

does not apply in such circumstances "because such [investigator] 

testimony protects against the loss of an accused's confrontation 

rights, the underlying rationale for Rule 803(8) and the basis of 

the court's concern in Oates." 861 F.2d at 1230 (citation 

omitted). We reach the same conclusion here. 

 

however, in criminal cases matters observed by police 

officers and other law enforcement personnel. 

Fed. R. Evid. 803(8)(B). 

0

 In United States v. Wright-Barker, 784 F.2d 161, 173 (3d Cir. 

1986), we declined to address the applicability of the Oates rule 

to the admission of a Coast Guard report against criminal 

defendants under Rule 803(6), the business records exception. 

Even assuming inadmissibility, we found any error to be harmless. 

Id. We also noted the many exceptions to the Oates rule, such as 

the admission of law enforcement reports under Rule 803(6) where 

the author is available to testify at trial. Id. at 173 n.12. We 

declined, however, to decide the appropriateness or applicability 

of such exceptions. Id.
14 

 Here, Margaret Lee, the Inservco employee who supervised the 

claims adjustments, testified and was cross-examined at some 

length. Lee personally audited part or all of each submitted 

claim and stated that Gov't Ex. B-110 represented the results of 

Inservco's processing of the NIBA members' claims. We find that 

the circumstances surrounding the preparation of Gov't Ex. B-110 

were probed and there was no loss of confrontation rights. Thus, 

Gov't Ex. B-110 was properly admissible under the business 

records exception of Rule 803(6), and we will affirm on that 

basis. 

 2. Evidence of NIBA's Non-Licensure

 At trial, the district court permitted the reading into 

evidence of portions of a ruling made by the Commonwealth Court 

of Pennsylvania upholding the NIBA suspension order entered by 

the Department.0 Denying Sokolow's motion to strike, the 

 

0

 Relevant excerpts read as follows: 

The activities conducted by [NIBA] clearly indicate to 

the Court as a matter of fact and law that [NIBA's] 

business operation clearly was not a valid ERISA 

employment benefit plan. 

. . . . 

 The Court finds that NIBA was a means by which its 

principal[,] Craig Sokolow[,] was marketing insurance 

without the benefit of licensed company status while 

purporting to be a valid ERISA plan, such that state 

licensing would not be necessary. 

 . . . . 

Since [NIBA] conducted business in Pennsylvania as an 

insurer without a license, it was appropriate for the 

Commissioner to intervene and take the drastic action 

of suspension. 
15 

district court ruled that "the probative value [of the opinion] 

outweigh[ed] the prejudicial value." App. at 608. In addition, 

various testimony regarding the non-licensure of NIBA was 

permitted to be addressed. 

 Sokolow asserts that the district court erred in admitting 

this evidence. He argues that (1) the allegations of violations 

of state law were confusing and unduly prejudicial, (2) NIBA's 

alleged non-licensure was not an element of the mail fraud scheme 

alleged in the indictment, (3) prejudicial effect is highlighted 

by the fact that the deliberating jury requested Judge Colins's 

opinion, and (4) the groundlessness of Judge Colins's opinion is 

supported by an en banc decision in a related case by the 

commonwealth court, which found NIBA was a MEWA and not an 

insurance entity under state law. See supra note 3. 

 We find that the district court did not abuse its discretion 

in admitting this evidence. Under Federal Rule of Evidence 403, 

"[relevant] evidence may be excluded if its probative value is 

substantially outweighed by the danger of unfair prejudice, 

confusion of the issues, or misleading the jury." Fed. R. Evid. 

403. According to the government, the evidence of non-licensure 

and the reading of Judge Colins's opinion was for the purpose of 

providing background information regarding the suspension and 

liquidation of NIBA. The non-licensure of NIBA was a factual 

allegation in the indictment which would demonstrate the nature 

 

App. at 560-61, 1193 [hereinafter "Judge Colins's opinion"]. 
16 

of the fraud scheme and show the factual predicate for NIBA's 

suspension and liquidation. 

 Sokolow asserts that the evidence of non-licensure was 

unduly prejudicial and confusing, as evidenced by the jury's 

request for Judge Colins's opinion. We disagree. In responding 

to the jury's request, the district judge submitted the following 

instruction, agreed to by the parties, rather than the requested 

opinion:0

 [Judge Colins's opinion] was referred to in the 

evidence to give a historical background of the 

proceedings. The opinion of Judge Collins [sic] is 

just that, an opinion. Judge Collins [sic] was not a 

witness to the facts. You have seen and heard the 

witnesses. You must make your decision on the basis of 

the witnesses['] testimony, exhibits relating to facts 

and the stipulations of counsel - pursuant to my 

instructions on the law. 

App. at 1203. We find that any prejudicial effect was remedied 

by this instruction. Additionally, as indicated, Judge Colins's 

ruling formed the basis for the liquidation of NIBA, and although 

non-licensure was not an element of the mail fraud or money 

laundering charges, it was a necessary factual predicate to the 

mail fraud scheme. Sokolow claimed to have created a valid 

health benefits plan filed with the Department of Labor and 

operating under ERISA, when in fact, no such filing was ever 

made. Accordingly, we find the district court did not abuse its 

discretion in admitting evidence of NIBA's non-licensure.0

 

0

 Sokolow's counsel, although agreeing to the instruction, 

continued his objection to the admissibility of Judge Colins's 

opinion. 

0

 Sokolow also contends that the district court's ruling on this 

issue amounted to collateral estoppel against him. See United 

States v. Pelullo, 14 F.3d 881, 897 (3d Cir. 1994) 
17 

 3. Victim Impact Testimony

 Sokolow asserts that the district court abused its 

discretion in permitting highly prejudicial victim impact 

testimony to be admitted at trial. The district court allowed 20 

NIBA members to testify that they were denied payment of their 

claims. Some witnesses were also permitted to testify as to 

collateral losses that they suffered. One witness, Kenneth 

Harris, who was injured in an auto race, was permitted to testify 

as to $238,111.46 in unpaid claims, and to his long 

hospitalization and prolonged rehabilitation. Additionally, he 

was permitted to testify as to problems with collection agencies. 

A year after the jury's verdict, the district court found that 

Harris's claims were "caused by non-covered activity," and, thus, 

he was not entitled to restitution. Sokolow also points to the 

testimony of Frank Yeager, who became a quadriplegic as a result 

of a gunshot wound. Sokolow asserts that collateral testimony as 

to this witness's injury, and repeated reference to the injury by 

government counsel in closing arguments, were unduly prejudicial. 

 In general, to satisfy the elements for mail fraud, "[p]roof 

of actual loss by the intended victim is not necessary." United 

States v. Copple, 24 F.3d 535, 544 (3d Cir.), cert. denied, 115 

 

(holding that defendant's prior conviction by jury for wire fraud 

could not be used as collateral estoppel to establish predicate 

act for violation of RICO in trial before second jury). Sokolow's 

claim is unavailing. The district court denied the government's 

motion in limine to preclude re-litigation of whether NIBA was an 

unlicensed insurer or qualified as a MEWA under ERISA. Further, 

as indicated, NIBA's non-licensure was a factual allegation in 

the mail fraud scheme charged in the indictment. The government 

established at trial that NIBA was neither properly filed with 

the Department of Labor, nor operating under ERISA, as Sokolow 

had falsely represented to various state insurance regulators. 
18 

S.Ct. 488 (1994). Evidence of loss, however, may be treated as 

evidence of the schemer's intent to defraud. See id. at 545. In 

Copple, we found that extensive victim impact testimony as to 

collateral losses "went beyond anything that was reasonable to 

prove [defendant's] specific intent to defraud." Id. In that 

case, some of the objectionable collateral impact testimony 

included testimony that money used to pay back losses came from 

savings for children's college educations, that paying back the 

money had affected the witnesses' health, caused weight loss, and 

required depletion of all personal savings. Id. at 545-46. 

Accordingly, the court found that the district court erred in 

allowing the testimony as the "[t]estimony was designed to 

generate feelings of sympathy for the victims and outrage toward 

[defendant] for reasons not relevant to the charges [defendant] 

faced." Id. at 546. 

 In the case before us, the victims testified to a careful 

account of the dollar value of the loss suffered as a result of 

the fraud. Many of the victims also provided significant 

embellishment concerning adverse personal consequences, similar 

to the victims in Copple.

0

 By asking every victim who testified 

whether he or she suffered any adverse consequences from the 

 

0

 For example, Suzanne Plattner testified that she had been 

hassled by collection agencies, suffered from depression, and was 

completely tormented; David Ahakinian testified that "his life 

had been destroyed," that he was a "nervous wreck," and that he 

had attorney's bills to pay because his claim was denied. He 

further testified that Sokolow had "created a monster company." 

In addition, it appears that the claims of David Ahakinian and 

Kenneth Harris were properly denied coverage, yet the district 

court allowed into evidence their testimony regarding economic 

loss as well as adverse consequences. 
19 

unpaid claims, the government was attempting to highlight the 

personal tragedies of the victims. 

 Such testimony has little, if any, probative value and may 

be unfairly prejudicial. While normally the balancing under 

Federal Rule of Evidence 403 is done by the district court, for 

purposes of this discussion, we can assume, arguendo, that the 

testimony was in fact prejudicial because we believe that its 

admission was harmless.0 "Trial error is harmless if it is 

highly probable that the error did not affect the judgment." Id.

(citing United States v. Simon, 995 F.2d 1236, 1244 (3d Cir. 

1993)). We stated in Simon that a high probability exists where 

the court has a "'sure conviction that the error did not 

prejudice the defendant.'" 995 F.2d at 1244 (quoting United 

States v. Asher, 854 F.2d 1483, 1500 (3d Cir. 1988) (citation 

omitted), cert. denied, 488 U.S. 1029 (1989)). In making this 

determination, we are not required to "disprov[e] every 

'reasonable possibility of prejudice.'" Id. (citations omitted). 

 Here the error of admitting the adverse consequences 

testimony was harmless because, as in Copple, 24 F.3d at 526-47, 

the evidence of the scheme to defraud and of Sokolow's specific 

intent was overwhelming. As we have set forth above, the record 

is replete with proof of Sokolow's intentional misrepresentations 

to small business employers and employees and concealment of 

material facts which induced them to purchase what they believed 

 

0

 Except for the testimony of Kenneth Harris, Judge Scirica does 

not believe the other victims' testimony was prejudicial. In any 

event, the errors, if any, were harmless. 
20 

to be fully insured health care coverage. Substantial evidence 

of the actual scheme to defraud was also presented at trial. 

Eighteen of the twenty victim-witnesses who testified were 

improperly denied coverage even though they paid premiums for 

what they believed to be a fully insured health care plan. 

Sokolow was forced to deny claims to make up for a shortage in 

the claims reserve fund, since he diverted a large portion of the 

collected premiums to his personal bank accounts. Thus, it is 

"highly probable" that Sokolow would have been convicted of mail 

fraud even without adverse consequences testimony. Any error, 

therefore, was harmless. 

 B. Defendant's Challenges to Jury Instructions

 1. Scienter Element for Violation of Money Laundering 

Under 18 U.S.C. § 1957

 Sokolow asserts that the district court improperly 

instructed the jury on the scienter element of 18 U.S.C. §1957.0 

 

0

 The district court's instructions to the jury regarding the 

money laundering offense, read as follows: 

[T]here are five elements in money laundering: 

1. The Government must prove beyond a reasonable 

doubt the defendant knowingly engaged or attempted 

to engage in a monetary transaction. 

2. The defendant knew the transaction involved in 

this case, I am going to use the word money, 

monies that were criminally received. 

3. The criminally derived property must have a value 

in excess of $10,000. 

4. The criminally derived property must have been in 

fact derived from a specified unlawful activity. 

That's the money laundering counts. 

5. The money transaction must have taken place in the 

United States of America. 

App. at 944-45. 
21 

That section makes it unlawful for a person to " knowingly 

engage[] or attempt[] to engage in a monetary transaction in 

criminally derived property of a value greater than $10,000 and 

is derived from specified unlawful activity." Id. The elements 

necessary to prove a violation of § 1957 are that 

(1) the defendant engage or attempt to engage (2) in a 

monetary transaction (3) in criminally derived property 

that is of a value greater than $10,000 (4) knowing 

that the property is derived from unlawful activity, 

and (5) the property is, in fact, derived from 

'specified unlawful activity.' 

United States v. Johnson, 971 F.2d 562, 567 n.3 (10th Cir. 1992). 

 Defendant contends that the knowledge requirement of § 1957 

requires "proof that Sokolow knew his conduct was prohibited by 

law." As Sokolow never objected to the instructions at issue, 

the court's review is limited to plain error, that is, the error 

must be "plain" and "affect[] substantial rights." See United 

States v. Retos, 25 F.3d 1220, 1228-29 (3d Cir. 1994) (quoting

United States v. Olano, 113 S.Ct. 1770, 1777 (1993); see also

Fed. R. Crim. P. 52(b) ("Plain errors or defects affecting 

substantial rights may be noticed although they were not brought 

to the attention of the court."). 

 In support of his argument, Sokolow relies primarily upon 

the Supreme Court decision in Ratzlaf v. United States, 114 S.Ct. 

655 (1994). In Ratzlaf, the defendant was charged with violating 

31 U.S.C. § 5324, which makes it unlawful for a person to 

"structure" numerous transactions with several banks to evade the 

banks' obligation to report cash transactions exceeding $10,000. 
22 

See id. at 658. Section 5322(a), Title 31, United States Code, 

imposes criminal penalties for a "person willfully violating" the 

antistructuring provision. At issue was the trial court's 

instruction that the government did not have to prove the 

defendant knew the "structuring" in which he engaged was 

unlawful, but only that the defendant knew of the reporting 

obligation and attempted to evade that obligation. In reversing 

the court of appeals, which upheld the conviction, the Supreme 

Court held that in order to give effect to § 5322(a)'s 

"willfulness" requirement, the government must prove that the 

defendant knew the structuring in which he was engaged was 

unlawful. 114 S.Ct. at 663. The Court was unpersuaded by 

arguments that the offense of structuring is "so obviously 'evil' 

or inherently 'bad' that the 'willfulness' requirement [of § 5324 

is] satisfied irrespective of the defendant's knowledge of the 

illegality of structuring." Id. at 662. 

 Sokolow claims that the offense of money laundering is 

analogous to the offense at issue in Ratzlaf. He argues that 

engaging in monetary transactions, such as bank depositing, with 

known criminal proceeds is not conduct that is "obviously evil or 

inherently bad." Sokolow contends the jury must find that he 

knew his spending and regular bank transactions were prohibited 

by law. 

 Absent a "willfulness" requirement, however, we will not 

require proof of knowledge of illegality to sustain a conviction 

under the money laundering provision of 18 U.S.C. § 1957. In 

United States v. Zehrbach, 47 F.3d 1252, 1261 (3d Cir.), cert. 
23 

denied, 115 S.Ct. 1699 (1995), in discussing the proof necessary 

for bankruptcy fraud, we stated that "[t]he statutory requirement 

that the underlying acts be performed 'knowingly' requires only 

that the act be voluntary and intentional and not that a person 

knows that he is breaking the law." In Zehrbach, we 

distinguished Ratzlaf on the basis of the "willfulness" element 

required under the structuring offense. Id.; see also United 

States v. Hilliard, 31 F.3d 1509, 1518 (10th Cir. 1994) (Ratzlaf

proof of knowledge of illegality requirement not applicable to, 

inter alia, § 1957 money laundering provision); United States v. 

Santos, 20 F.3d 280, 284 n.3 (7th Cir. 1994) (Ratzlaf not 

applicable to § 1956 money laundering provision because of 

absence of willfulness requirement). Similarly, as § 1957 does 

not contain a willfulness requirement, we decline to adopt 

Ratzlaf for the money laundering provision at issue in this case. 

 Moreover, Sokolow's citation to our decision in United 

States v. Curran, 20 F.3d 560 (3d Cir. 1994), is distinguishable. 

In Curran, we followed Ratzlaf in construing the "willfulness" 

component of 18 U.S.C. § 2(b), which makes it unlawful to 

deliberately cause another person to perform an act that would 

violate federal criminal law. 20 F.3d at 566-68. In that case, 

defendant was charged with causing election campaign treasurers 

to submit false reports to the Federal Election Commission in 

violation of 18 U.S.C. §§ 2(b) and 1001, the false statement 

statute. Id. at 562. Thus, unlike the money laundering statute 

involved here, "willfulness" was an element of the crime at issue 

in Curran. See id. at 567-68. In sum, we find the district 
24 

court properly instructed the jury on the scienter element of 

Sokolow's money laundering violation. 

 2. Criminally Derived Property Element of § 1957

 Sokolow asserts that the district court committed plain 

error in the jury instruction as to the element of § 1957 that 

requires the criminally derived property in a monetary 

transaction to have a value in excess of $10,000. Specifically, 

Sokolow asserts that in the court's explanation of "tracing" 

criminal proceeds, the district court erred in stating the 

following: 

[T]he Government need not prove that there [sic] $20,000 

came from this sale over here, because as I understand it, 

the Government's theory is these different sums -- they have 

to initially prove they came from NIBA. It has to prove 

that it came from NIBA, initially, but not what NIBA 

account. 

 So the matter goes from $20,000 from NIBA to Sokolow & 

Associates and then Sokolow & Associates spends the money or 

spends a similar sum of money some places. They don't have 

to prove it's the same $20,000 that went from Sokolow's 

[account] to Sokolow & Associates. The Government need not 

prove that all the property involved in the transaction was 

the proceeds of the money laundering. It is sufficient if 

the Government proves at least part of the property 

represents such proceeds.

App. at 945 (emphasis on alleged error). Sokolow alleges that 

the instruction "allowed the jury to convict simply on a showing 

that even $1 of the proceeds of fraud were deposited into a 

Sokolow account and later used to pay, in part, for the items 

charged [in the counts] of the indictment." We find this 

contention is without merit. 

 It is clear from the full context of the district judge's 

explanation of the concept of proceeds that he is addressing the 

absence of a legal requirement that the government trace the 
25 

funds constituting criminal proceeds when they are commingled 

with funds obtained from legitimate sources. See United States 

v. Johnson, 971 F.2d at 570 (noting that there is no requirement 

that government "show that funds withdrawn from the defendant's 

account could not possibly have come from any source other than 

the unlawful activity."). We find no error in the district 

court's jury instructions in this regard. 

 3. Sokolow's Responsibility for Actions of His Agents

 Sokolow alleges error in the district court's jury 

instructions as to Sokolow's responsibility for actions of his 

agents, particularly as it relates to "insurance agents' improper 

use of the Blue Cross logo on advertisements as part of the fraud 

scheme." The instruction read as follows: 

 In order to sustain the burden of proof in this 

matter, it is not necessary in either of these counts 

to prove -- these types of crimes -- to prove that the 

defendant did everything, every act. A person can act 

through his agent, and therefore, if the acts or 

conduct of another were ordered by the defendant or 

directed by the defendant or authorized by the 

defendant, the law holds the defendant responsible for 

the acts, just as if he had personally done them. That 

includes both human beings and corporate agents. 

App. at 945. According to Sokolow, the jury instruction is 

erroneous in that 

the jury could have found Sokolow guilty of mail fraud 

if he authorized employees to prepare marketing 

materials for his plan, and those employees on their 

own misrepresented the extent of Blue Cross 

underwriting in such materials. No proof that Sokolow 

directed the misrepresentations with an intent to 

defraud was demanded. 

Appellant's Br. at 26. Sokolow quotes the court in Curran, 20 

F.3d at 567, which stated that, "Section 2(b) [of Title 18, 

United States Code] imposes criminal liability on those persons 
26 

who possess the mens rea to commit an offense and cause others to 

violate a criminal statute." 

 As defendant did not object to the jury instruction, we 

review the district court's failure to provide a specific 

instruction for plain error only. See United States v. Xavier, 2 

F.3d 1281, 1287 (3d Cir. 1993). Reading the jury instructions in 

context, the district judge clearly explains the scienter 

requirements to convict Sokolow of both the mail fraud and money 

laundering offenses. See App. at 941 ("[T]he defendant, Mr. 

Sokolow, is charged with knowingly and unlawfully devising and 

intend[ing] to defraud the members of [NIBA] . . . and that he 

knowingly caused the United States [mails] to be used to execute 

these schemes or this scheme."); App. at 944 ("[T]he Government 

must prove beyond a reasonable doubt that there was -- that not 

only was there a fraudulent activity, but the defendant had a 

conscious intent to defraud. . . . [T]he defendant himself did 

not have to mail anything. He may or he can order someone to do 

it."); App. at 945 ("The Government must prove that the 
27 

defendant knew that property involved in the money transaction 

constituted or was derived, either directly or indirectly from a 

criminal offense . . . . [H]e has to know he received this money 

through fraudulent means. He has to be conscious of that."). The 

jury was instructed properly that intent to defraud was required. 

Thus, we find no plain error in the district court's instruction 

and we affirm Sokolow's conviction. 

III. CHALLENGES TO SENTENCING 

 A. Calculation Under the Sentencing Guidelines

 In determining the sentencing guideline range, the district 

court grouped together Sokolow's mail fraud and money laundering 

counts pursuant to U.S.S.G. § 3D1.2(c)0. The higher offense 

level for the two groups, the money laundering offense, was used 

for computing the sentence. Sokolow does not contest the 

grouping of the counts. 

 1. The "value of funds"

 Sokolow asserts that the district court incorrectly applied 

the Sentencing Guidelines to determine the "value of funds" 

involved in the money laundering offense. The "value of funds" 

involved in a money laundering offense is a specific offense 

characteristic. U.S.S.G. § 2S1.2(b). Under § 1B1.3, specific 

offense characteristics are determined by "relevant conduct," 

defined, inter alia, as 

 

0

 All references to the United States Sentencing Guidelines 

Manual are to the 1988 version, as used in the presentence 

investigation report ("PSR") and apparently adopted by the 

district court, unless otherwise noted. See Appellant's Br., 

Addendum D at 2 n.2. 
28 

(1) all acts and omissions committed or aided and 

abetted by the defendant, or for which the 

defendant would be otherwise accountable, that 

occurred during the commission of the offense of 

conviction, in preparation for that offense, or in 

the course of attempting to avoid detection or 

responsibility for that offense, or that otherwise 

were in furtherance of that offense; 

(2) solely with respect to offenses of a character for 

which §3D1.2(d) would require grouping of multiple 

counts, all such acts and omissions that were part 

of the same course of conduct or common scheme or 

plan as the offense of conviction. 

U.S.S.G. § 1B1.3(a)(1)-(2). When reviewing a district court's 

sentencing decisions, the court has plenary review over questions 

as to the meaning of the Sentencing Guidelines. United States v. 

Edmonds, 52 F.3d 1236, 1244 (3d Cir. 1995). Factual 

determinations underlying the application of the guidelines are 

reviewed under the clearly erroneous standard. Id. 

 As to the money laundering counts, the presentence 

investigation report ("PSR") determined that over $2.2 million in 

proceeds from the unlawful mail fraud scheme had been laundered 

by Sokolow. PSR at 6. This amount represented the commissions 

received by Sokolow through AIM, and the related insurance 

agencies, Sokolow & McMillan, and Sokolow, McMillan & O'Leary. In 

addition to this amount, the district court added the additional 

$1.8 million Sokolow received in salary, officer's loans, and 

other disbursements to calculate the "value of funds" involved in 

the money laundering offenses under the Sentencing Guidelines. 

The district court concluded that Sokolow had converted $4 

million from the mail fraud scheme for personal benefit, and, 

therefore, this amount represented the "accurate measure of harm 
29 

from Defendant's money laundering offenses."0 See Appellant's 

Br., Addendum D, at 13. Sokolow argues the district court 

erroneously included the $1.8 million as relevant conduct of the 

money laundering offense, without determining whether that amount 

independently satisfied the elements of §1957, namely, that 

Sokolow engaged in monetary transactions in criminally derived 

property of a value greater than $10,000. We disagree with 

Sokolow's contention. 

 We have previously noted that the commentary to U.S.S.G. 

§2S1.1 does not define "the value of funds." United States v. 

Thompson, 40 F.3d 48, 51 (3d Cir. 1994), cert. denied, 115 S.Ct. 

1390 (1995). In Thompson, we stated that "[the Commentary] 

states that '[t]he amount of money involved is included as a 

factor because it is an indicator of the magnitude of the 

criminal enterprise, and the extent to which the defendant aided 

the enterprise.'" Id. In United States v. Johnson, 971 F.2d 

562, 576 (10th Cir. 1992), the court stated that "the measure of 

harm under § 2S1.1 is the total amount of the funds involved." In 

dicta, the Johnson court noted that 

[F]unds associated with uncharged instances of money 

laundering can be added in to determine the offense 

level under § 2S1.1 if those acts are within the scope 

 

0

 Section 2S1.2(b)(2) (Engaging in Monetary Transactions in 

Property Derived from Specified Unlawful Activity) of the 

Sentencing Guidelines provides that: 

If the value of the funds exceeded $100,000, increase 

the offense level as specified in § 2S1.1(b)(2). 

U.S.S.G. § 2S1.2. Section 2S1.1(b)(2) lists the value of funds 

and the corresponding increase in offense level. The Guidelines 

prescribe a seven level increase in the offense level when the 

value of funds exceeds $3,500,000. 
30 

of relevant conduct under § 1B1.3(a)(2). Thus, in 

determining the 'value of funds' under § 2S1.1, the 

district court is not necessarily limited only to the 

funds identified with the counts of conviction. 

Id. at 576 n.10. 

 We find that the district court did not err in finding the 

additional $1.8 million as "relevant conduct" within the meaning 

of the sentencing guidelines. As previously noted, this amount 

was derived from Sokolow's unlawful mail fraud scheme. Further, 

Sokolow's accountant testified that the $4 million represented 

the total amount of funds disbursed from NIBA to Sokolow during 

the period relevant to the mail fraud scheme. As such acts were 

"part of the same course of conduct or common scheme or plan as 

the offense of conviction," U.S.S.G. § 1B1.3(a)(2), we find that 

the $1.8 million was properly considered "relevant conduct" under 

the Sentencing Guidelines even though this amount was not charged 

in the money laundering counts. See United States v. Rose, 20 

F.3d 367, 372-73 (9th Cir. 1994) (finding that uncharged acts of 

money laundering may be considered in determining appropriate 

sentence under Sentencing Guidelines). 

 2. Abuse of position of trust enhancement.

 Sokolow received a two-level enhancement for abuse of 

position of trust under U.S.S.G. § 3B1.3. That section states, 

in relevant part: 

If the defendant abused a position of public or private 

trust, or used a special skill, in a manner that 

significantly facilitated the commission or concealment 

of the offense, increase by 2 levels. 

U.S.S.G. § 3B1.3. At the time of the relevant offenses, 

Application Note 1 in the commentary to this section stated the 

following: 
31 

The position of trust must have contributed in some 

substantial way to facilitating the crime and not 

merely have provided an opportunity that could as 

easily have been afforded to other persons. This 

adjustment, for example, would not apply to an 

embezzlement by an ordinary bank teller. 

U.S.S.G. § 3B1.3, comment. (n.1).0 In applying this section, "a 

sentencing court must determine whether a defendant was placed in 

a position of trust, and if he was, whether he abused that 

position in a way that significantly facilitated his crime." 

United States v. Craddock, 993 F.2d 338, 340 (3d Cir. 1993). The 

inquiry into whether someone obtains a position of trust 

approaches a purely legal determination for which de novo review 

is appropriate. Id.; see also United States v. Lieberman, 971 

F.2d 989, 993 (3d Cir. 1992). Whether or not a defendant abuses 

a position of trust more closely resembles a question of fact and 

is reviewed for clear error. Craddock, 993 F.2d at 340. 

 Sokolow argued before the district court, as he does here on 

appeal, that enhancement for abuse of position of trust is 

 

0

 Application Note 1 of the Commentary has since been clarified 

as follows: 

'Public or private trust' refers to a position of 

public or private trust characterized by professional 

or managerial discretion (i.e., substantial 

discretionary judgment that is ordinarily given 

considerable deference). Persons holding such 

positions ordinarily are subject to significantly less 

supervision than employees whose responsibilities are 

primarily non-discretionary in nature. For this 

enhancement to apply, the position of trust must have 

contributed in some significant way to facilitating the 

commission or concealment of the offense (e.g., by 

making the detection of the offense or the defendant's 

responsibility for the offense more difficult). 

U.S.S.G. § 3B1.3, comment. (n.1) (1994). 
32 

inappropriate because Sokolow was not in a position of trust and 

because there were no "victims" to the money laundering counts.0 

Relying upon United States v. Lowder, 5 F.3d 467, 473 (10th Cir. 

1993), the district court rejected Sokolow's argument. In Lowder, 

the Tenth Circuit upheld an enhancement for abuse of position of 

trust for a money laundering conviction where (1) as a CPA, 

defendant provided tax and financial advice to elderly and 

unsophisticated clients; (2) he advised his clients to place 

their money with him and promised them security; and (3) as 

president of the fraudulent investment corporations, he was free 

to spend that money, without oversight. Id. In this case, the 

district court determined that Sokolow, as CEO and President of 

NIBA, abused a position of trust in facilitating the commission 

 

0

 At sentencing, Sokolow received a two-level upward adjustment 

for his organizer/leader role in the mail fraud offenses under 

U.S.S.G. § 3B1.1. See Appellant's Br., Addendum D, at 5; PSR, ¶ 

27, at 6. Under the sentencing guidelines in effect on the date 

of defendant's sentencing, the abuse of a position of trust 

adjustment would also apply to the mail fraud offenses, in 

addition to the organizer/leader role enhancement. See U.S.S.G. § 

3b1.3 (1994). It appears, however, that because the new 

guidelines would result in an increased sentence, the district 

court adopted the PSR's use of the sentencing guidelines in 

effect at the time defendant committed the offenses. See

Appellant's Br., Addendum D, at 2 n.2. Thus, an upward 

adjustment for the abuse of position of trust could "not be 

employed in addition to that provided for in §3B1.1." U.S.S.G. 

§3B1.1. Accordingly, the abuse of position of trust enhancement 

could only apply to the money laundering counts. See U.S.S.G. 

§1.B1.11 (b)(1) ("If the court determines that use of the 

Guidelines Manual in effect on the date that the defendant is 

sentenced would violate the ex post facto clause of the United 

States Constitution, the court shall use the Guidelines Manual in 

effect on date that the offense of conviction was committed."); 

see also United States v. Corrado, 53 F.3d 620, 623 (3d Cir. 

1995) ("to apply a change in the guidelines that enhances the 

penalty would offend the ex post facto clause of the United 

States Constitution"). 
33 

of the money laundering offenses. The court relied upon the fact 

that Sokolow marketed his insurance plans to small-business 

owners and self-employed persons, and was freely able to spend 

the derived monies as he wished. 

 We agree with the district court's conclusion. In United 

States v. Pardo, 25 F.3d 1187, 1192 (3d Cir. 1994), we explained 

that in determining whether a position constitutes a position of 

trust for purposes of § 3B1.3, a court must consider: 

(1) whether the position allows the defendant to commit 

a difficult-to-detect wrong; (2) the degree of 

authority which the position vests in defendant vis-avis the object of the wrongful act; and (3) whether 

there has been reliance on the integrity of the person 

occupying the position. 

Id. The court further stated that, "[t]hese factors should be 

considered in light of the guiding rationale of the section--to 

punish 'insiders' who abuse their position rather than those who 

take advantage of an available opportunity." Id.

 Applying the Pardo factors to this case, we find that 

Sokolow held a position of trust under U.S.S.G. § 3B1.3. First, 

as President of NIBA, Sokolow was able to commit difficult-todetect wrongs, as he had sole control over NIBA's accounts 

without oversight or supervision. Second, Sokolow exercised the 

requisite degree of authority over the object of his wrong. It 

was within Sokolow's authority to withdraw funds from NIBA and 

that authority was necessary for the commission of the money 

laundering offenses.0 Finally, as the district court noted, the 

 

0

 Our reference to the money laundering offenses is only to the 

three money laundering counts that involved the laundering of 

monies from NIBA accounts to other assets that Sokolow owned or 

controlled. The remaining counts appear to us to have involved 
34 

funds to be laundered were derived from Sokolow's marketing of 

NIBA insurance plans to small business owners and self-employed 

persons. In selecting the NIBA health benefits plan for their 

employees and families, these members clearly placed a measure of 

reliance on the integrity of Sokolow in his position as President 

of NIBA. NIBA members testified to receiving materials regarding 

the health benefits plan, signed by Sokolow in his capacity as 

President. 

 Sokolow argues that no fiduciary relationship existed with 

NIBA members in connection with the submission of premiums. 

Unlike in Lowder, where the defendant induced elderly and 

unsophisticated clients to entrust money to him to invest 

securely on their behalf, Sokolow contends that NIBA members had 

no similar expectation with premiums entrusted to NIBA. We 

disagree. NIBA members submitted premiums with the expectation 

that their health care claims would be covered by NIBA. As 

president of NIBA, Sokolow was entrusted with the proper use of 

those funds. Thus, Sokolow held a formal position of trust visa-vis NIBA members. 

 As Sokolow occupied a position of trust, it must be 

determined whether he abused this position "in a manner that 

significantly facilitated the commission or concealment of the 

 

only transfers of criminally derived monies from personal 

accounts that Sokolow owned or controlled to other assets or 

accounts that Sokolow owned or controlled. As to these money 

laundering counts, we find no position of trust warranting the 

enhancement. See United States v. Hickman, 991 F.2d 1110, 1112 

(3d Cir. 1993) ("To abuse a position of trust, a defendant must, 

by definition, have taken criminal advantage of a trust 

relationship between himself and his victim."). 
35 

offense." U.S.S.G. § 3B1.3. As indicated, the district court 

found that Sokolow's role as president facilitated the commission 

of the money laundering offenses. Sokolow had significant 

authority over the distribution of NIBA funds. As the district 

court noted, Sokolow was "free to spend the money as he wished." 

Accordingly, we find that the district court did not clearly err 

in finding an abuse of position of trust. In sum, we will affirm 

the district court's application of the Sentencing Guidelines. 

 B. The Restitution Order

 The district court ordered Sokolow to pay $690,246 in 

restitution to 17 NIBA members in the amount of unpaid claims for 

medical care and treatment. According to the government, the 

basis for calculating the losses was Gov't Ex. B-110, the 

Inservco compilation of adjusted, unpaid claims. The restitution 

amount excluded $238,111.46 claimed by Kenneth Harris for 

uncovered medical care claims. The district court stated that 

"[t]he evidence at trial and the sentencing hearing does not 

support any other reductions in the amount of restitution." 

 Generally, the "district judge must point to evidence in the 

record supporting the calculation of loss to the victims." 

Copple, 24 F.3d at 549-50. Sokolow argues that other factual 

evidence in the record warrants further adjustment to many of the 

alleged unpaid claims. Sokolow cites five examples of NIBA 

members whose alleged unpaid claims should have been reduced. 

 (1) Martha Mosher submitted a $12,000 claim, 

which was valued by the liquidator at $512. The court 

awarded her $51,834.99. In Gov't Ex. B-110, this 
36 

amount is listed as an adjusted unpaid claim for Shawn 

Mosher. 

 (2) Patricia and Gerald Ferrier's claims were valued 

by the statutory liquidator at zero. This amount is 

reflected in Gov't Ex. B-110. Yet, the district court 

granted them $3492 in restitution. 

 (3) Olivia Anderson submitted no documents in support 

of her claim, and a letter from the statutory liquidator 

stated that all her bills had been paid but one. The court 

granted her $47,654. Further, she is not listed in the 

excerpts of Gov't Ex. B-110, and the parties have not 

indicated from where this amount derives. 

 (4) David Ahakinian and William Vincent Bradford were 

allegedly not paid claims because they misrepresented 

preexisting conditions. They disputed these allegations on 

the witness stand. The district court awarded them $45,450 

and $277,377 respectively. 

See Appellant's Br. at 39-40. 

 Sokolow correctly contends that the basis upon which the 

restitution awards was granted is unclear from Gov't Ex. B-110, 

and often contradicted by trial testimony. We will remand the 

restitution order for the district court to make specific factual 

findings regarding the actual amount of recoverable loss 

sustained by these claimants. 

 C. The Forfeiture Order

 The district court ordered Sokolow to forfeit $2,141,108.67, 

plus the contents of a Commonwealth Federal Savings and Loan 

Account, all to be satisfied from substitute assets. 

 1. Identifiable Forfeitable "Property"

 Sokolow challenges the validity of the special verdict forms 

used by the jury with regard to 17 money laundering counts. As 

an example, the verdict forms for the counts read as follows: 

ITEM 1. $125,000.00 
37 

We the jury find that the property identified as Item 1 is: 

a) Property involved in the violation of money laundering 

(18 U.S.C. § 1957) charged in Count 126 of the 

Indictment and[/]or property traceable to such 

property. 

YES ________ 

NO ________ 

App. at 974. The jury marked "YES" for each of the monetary 

amounts listed for the money laundering counts. The criminal 

forfeiture provision provides as follows: 

The court, in imposing sentence on a person convicted 

of an offense in violation of [inter alia, 18 U.S.C. 

§1957], shall order that the person forfeit to the 

United States any property, real or personal, involved 

in such offense, or any property traceable to such 

property. 

18 U.S.C § 982(a) (1994). Sokolow argues that the special 

verdict forms are invalid because they failed to identify 

specifically the property involved. We disagree. Federal Rule 

of Criminal Procedure 7(c)(2) provides that 

[n]o judgment of forfeiture may be entered in a 

criminal proceeding unless the indictment or the 

information shall allege the extent of the interest or 

property subject to forfeiture. 

Fed. R. Crim. P. 7(c)(2). Further, Rule 31(e) provides that 

[i]f the indictment or the information alleges that an 

interest or property is subject to criminal forfeiture, 

a special verdict shall be returned as to the extent of 

the interest or property subject to forfeiture, if any. 

Fed. R. Crim. P. 31(e). The indictment specifically alleges the 

amounts involved, and from where the amounts are derived. We 
38 

find that the special verdict forms elicited the proper findings 

from the jury. 

 2. Substitutable Assets

 Sokolow argues that the forfeiture of substitute assets on 

the basis of the invalid special verdict forms was improper. As 

noted above, however, the verdict forms were appropriate, and, 

thus, Sokolow's argument on this ground is without merit. 

 Sokolow also challenges the order of forfeiture of 

substitute assets on the basis that the government failed to 

demonstrate that this action was appropriate. In general, we may 

not set aside the district court's factual findings unless they 

are clearly erroneous. United States v. One 1973 Rolls Royce, 43 

F.3d 794, 804 (3d Cir. 1994). Forfeiture of substitute assets 

may be ordered if the property traceable to money laundering, as 

a result of any act or omission of the defendant, 

(1) cannot be located upon the exercise of due 

diligence; (2) has been transferred or sold to, or 

deposited with, a third party; (3) has been placed 

beyond the jurisdiction of the court; (4) has been 

substantially diminished in value, or (5) has been 

commingled with other property which cannot be divided 

without difficulty. 

21 U.S.C. § 853(p) (1994). In this regard, the district court 

found that Sokolow diminished the value of certain real estate 

property owned by him, and transferred much of his assets to 

other parties and family members, over whom he still exercised 

control. We find no clear error in the district court's order of 

forfeiture of substitute assets. 

 3. Criminal Forfeiture Under Count 126
39 

 Count 126 charged Sokolow with a money laundering 

transaction involving $125,000 made on October 4, 1988. The most 

recent amendment to the forfeiture statute, however, became 

effective on November 18, 1988. Sokolow asserts that, on ex post 

facto grounds, this forfeiture should be vacated. 

 Prior to November 18, 1988, 18 U.S.C. § 982 permitted the 

forfeiture of 

any property, real or personal, which represents the 

gross receipts the person obtained, directly or 

indirectly, as a result of such offense, or which is 

traceable to such gross receipts. 

18 U.S.C. § 982(a) (Supp. V 1987) (emphasis added). The 

legislative history of the statute suggested a narrow reading of 

the statute stating that "gross receipts" meant "only the 

commission earned by the money launderer . . ., and not the 

corpus laundered itself." S. Rep No. 433, 99th Cong., 2d Sess. 

23 (1986). According to Sokolow, only later was the statute 

amended to cover "any property, real or personal, involved in 

such offense, or any property traceable to such property." 

Appellant's Br. at 48-49 (quoting Anti-Drug Abuse Act of 1988, 

Pub. L. No. 100-690 § 6463, 102 Stat. 4374 (1988)). 

 Neither party has cited any case law interpreting "gross 

receipts" to mean the "corpus laundered." The government argues, 

however, that where, as here, the defendant committed the 

specified unlawful activity as well as the money laundering 

violation, the corpus of the money is the "gross receipts" to the 

defendant and is thus forfeitable. We agree. 
40 

 As Sokolow was the person committing the unlawful activity 

of mail fraud and also laundering money derived from that 

unlawful activity, it is clear that he obtained the total 

$125,000 as the "gross receipts" of the money laundering offense. 

There is no need for a finding that "Sokolow paid himself a 

commission for laundering his own money." See Appellant's Br. at 

49. The money was derived from unlawful activity, and there is 

no evidence indicating that this does not represent the "gross 

receipts" of his money laundering scheme. As review by this 

court is for plain error (Sokolow did not challenge this issue at 

trial), we find that the district court did not err in 

instructing the jury to determine whether the $125,000 was the 

amount "involved in the violation of money laundering." 

IV. CONCLUSION

 In light of the foregoing, we will affirm the judgment of 

conviction and sentence, and the forfeiture order. We will 

remand for entry of a new restitution order in accordance with 

this opinion.