UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v. No. 97-4970

THOMAS R. FILIPPI,

Defendant-Appellant.

Appeal from the United States District Court

for the Southern District of West Virginia, at Charleston.

Charles H. Haden II, Chief District Judge.

(CR-97-47)

Submitted: February 9, 1999

Decided: February 23, 1999

Before LUTTIG, WILLIAMS, and MICHAEL, Circuit Judges.

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Affirmed by unpublished per curiam opinion.

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COUNSEL

James F. Humphreys, James A. McKowen, JAMES F. HUMPHREYS & ASSOCIATES, L.C., Charleston, West Virginia, for

Appellant. Rebecca A. Betts, United States Attorney, Hunter P.

Smith, Jr., Assistant United States Attorney, Philip J. Combs, Assistant United States Attorney, Charleston, West Virginia, for Appellee.

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Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

Thomas R. Filippi was convicted by a jury of sixty-six counts of

mail fraud, see 18 U.S.C. §§ 1341, 2 (1994), one count of obstruction

of justice, see 18 U.S.C.A. § 1503 (West Supp. 1998), and six counts

of money laundering, see 18 U.S.C. § 1957 (1994). Filippi appeals his

conviction, contesting a number of the district court's evidentiary rulings. He also appeals his 57-month sentence, challenging the district

court's determination that he abused a position of trust, see U.S. Sentencing Guidelines Manual § 3B1.3 (1997), its decision to place the

mail fraud counts and the money laundering counts in separate

groups, see USSG § 3D1.2, and its decision to make an obstruction

of justice adjustment in each group, see USSG § 3C1.1. We affirm.

In 1994, Filippi started Creative Counseling Corporation, working

out of his home. Filippi was president and treasurer of the company.

Joan Upole was the only other shareholder. The company had three

divisions. The first, Managed Health Services, did vocational rehabilitation counseling, primarily for the Workers' Compensation Division

of the West Virginia Bureau of Employment Programs. Filippi ran

this part of the company. Upole was involved with Options Counseling Associates, which offered private counseling services and generated only a small amount of income to the corporation. The third

division, Creative Counseling Services, never became functional.

From June 1994 until December 20, 1994, Filippi did all the vocational rehabilitation work for the corporation. During this time, he

billed 3,441 hours of work to Workers' Compensation, although a

normal yearly work schedule of forty hours of work for fifty-two

weeks would be 2080 hours. In November 1994, Filippi billed an

average of 24.75 hours per day. In December 1994, Filippi billed an

average of 39.51 hours per day. In late December 1994, Filippi hired

the first of five employees who, from then on, did most of the voca-

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tional rehabilitation work, with Filippi functioning chiefly as an

administrator. He reviewed and edited the employees' case expense

reports, which they faxed to him, and submitted bills to Workers'

Compensation. The case expense reports detailed the hours worked,

travel time, and other expenses. Filippi consistently overbilled Workers' Compensation by inflating the hours worked and travel time

expended, by billing for services not performed and undocumented in

the employees' case reports, and by billing more than once for services performed. The district court determined at sentencing that

Filippi had been overpaid by about $200,000.1

During his trial, Filippi conceded that he had been overpaid and

that he owed money to Workers' Compensation. He testified that he

did not know how much he owed. However, between 1994 and 1996,

Filippi wrote corporate checks for $14,781 in payment of a debt owed

by his domestic partner; for $14,233 to pay off the balance of the

mortgage on the house he shared with his partner; for $75,000 to pay

for house remodeling; and for $30,145 to buy a sports car. He also

transferred $65,000 to his investment account.

In April 1995, Workers' Compensation began an investigation of

possible fraud. In February 1996, Filippi and the corporation received

subpoenas for corporate records and meetings of the board of directors, corporate tax returns, and some claimant files. In early March

1996, Filippi and Upole met and drafted corporate minutes and resolutions which were backdated to 1994 and 1995. One resolution

authorized payment of a $150,000 bonus to Filippi; another, dated

July 1995, authorized a loan of $176,747 to him. Filippi told Upole

that the latter resolution would "take care of taxes." Afterward, Filippi

gave Upole $100 as a bonus.

Following Filippi's conviction, the probation officer calculated his

guideline range by placing the mail fraud and money laundering

counts in separate groups. He grouped the obstruction of justice count

with the money laundering counts, and recommended adjustments for

obstruction of justice in both the mail fraud group and the money

laundering group.

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1 In 1994, Filippi was paid $164,770 by Workers' Compensation. In

1995, he was paid $381,303.

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The probation officer recommended a base offense level of 6 for

the mail fraud counts, see USSG § 2F1.1, increased to 20 by specific

offense characteristics and adjustments for abuse of a position of trust

and obstruction of justice. He recommended a base offense level of

17 for the money laundering counts, see USSG§ 2S1.2, increased to

22 by enhancements for knowing use of proceeds of unlawful activity, the amount of loss, and obstruction of justice. Because the

obstruction of justice count carried an adjusted offense level of 16, the

probation officer used the higher offense level for the money laundering counts as the offense level for that group. See USSG § 3D1.4.

The probation officer also recommended an adjustment for abuse

of a position of trust in connection with the mail fraud counts. This

adjustment increased the combined adjusted offense level, even

though the money laundering/obstruction of justice group had a

higher offense level, because the multiple count unit increase would

have been lower if the offense level for the mail fraud group had been

more than four levels less serious than the money laundering/obstruction of justice group. See USSG§ 3D1.4.

Under the multiple counts rules, two levels were added because

there were two groups of counts and the offense level for the less serious group (the mail fraud group) was within four levels of the more

serious group (the money laundering/obstruction of justice group).

See USSG § 3D1.4. This calculation yielded a final offense level of

24. Because Filippi was in criminal history category I, the resulting

guideline range was 51-63 months. At sentencing, the district court

overruled all Filippi's objections to the presentence report and sentenced him to serve 57 months imprisonment.

I. Abuse of a Position of Trust

Whether a defendant occupied a position of trust is a factual question reviewed for clear error. See United States v. Adam, 70 F.3d 776,

782 (4th Cir. 1995). To earn the adjustment, the defendant must have

"abused a position of public or private trust . .. in a manner that significantly facilitated the commission or concealment of the offense

. . . ." USSG § 3B1.3. Application Note 1 of the commentary states

that a position of public or private trust "is characterized by professional or managerial discretion (i.e., substantial discretionary judg-

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ment that is ordinarily given considerable deference)." The position

must have assisted the defendant, for example, "by making the detection of the offense . . . more difficult." Id. The determination is made

from the perspective of the victim. See United States v. Glymph, 96

F.3d 722, 727 (4th Cir. 1996).

In Adam, this Court held that a physician who commits welfare

fraud abuses a position of trust because "physicians exercise enormous discretion: their judgments with respect to necessary treatments

ordinarily receive great deference and it is difficult to prove that those

judgments were made for reasons other than the patients' best interests." Adam, 70 F.3d at 782. Ordinary commercial relationships, by

contrast, do not constitute a trust relationship sufficient to justify an

adjustment under § 3B1.3. See United States v. Moore, 29 F.3d 175,

179-80 (4th Cir. 1994).

Filippi argues that his relationship with Workers' Compensation

was an ordinary commercial relationship. However, before he could

receive referrals from Workers' Compensation, he had to sign a provider agreement in which he agreed to provide only medically necessary services and to bill only for services actually provided. Filippi

was not supervised and Workers' Compensation trusted him to bill

honestly for hours worked providing rehabilitation services. On these

facts, we find that Filippi's relationship with Workers' Compensation

was more than an ordinary commercial relationship. In fact, it more

closely resembled that of a doctor participating in a government program. Therefore, we find that the district court did not clearly err in

finding that Filippi abused a position of trust.

II. Obstruction of Justice Adjustments

Guideline section 3C1.1 provides for a two-level adjustment "[i]f

a defendant willfully obstructed or impeded, or attempted to obstruct

or impede, the administration of justice during the investigation . . .

of the instant offense . . . ." At sentencing, Filippi contested only the

obstruction of justice adjustment applied by the probation officer to

the money laundering group. Defense counsel stated that "[o]ur position is that the two level enhancement should only apply to the mail

fraud group." On appeal, he maintains that the adjustment should not

have been made in either group. With regard to the mail fraud group,

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the issue is reviewed for plain error only. See United States v. Olano,

507 U.S. 725, 732 (1993). For the money laundering group, the issue

is reviewed for clear error because the district court made a factual

determination that Filippi's attempt to obstruct the investigation

extended to his money laundering activities. See United States v.

Daughtrey, 874 F.2d 213, 217 (4th Cir. 1989).

With regard to the mail fraud counts, Filippi argues that the adjustment was erroneous because he cooperated with the investigation and

created the false corporate records solely so he could comply fully

with the subpoena or for tax purposes. He suggests that, because he

was not charged with any tax offenses, his conduct did not obstruct

the investigation of the mail fraud offenses or any relevant conduct.

He relies on United States v. Self, 132 F.3d 1039 (4th Cir. 1997), cert.

denied, 118 S. Ct. 1573 (1998), which holds that "offense" as used in

§ 3C1.1 means the offense of conviction and all relevant conduct.

Under Self, an adjustment is not warranted if the defendant obstructs

the investigation of "an offense committed by the defendant that is

neither the offense of conviction nor relevant conduct to the offense

of conviction." Id. at 1043.

We find that the district court did not plainly err in making the

adjustment because Filippi created the false corporate records in an

effort to avoid tax consequences flowing from the mail fraud offense.

Relevant conduct includes acts by the defendant which occurred "in

the course of attempting to avoid detection or responsibility for [the

offense of conviction]." USSG § 1B1.3(a)(1). Filippi clearly was

seeking to impede the investigation into his business practices and

was taking steps to minimize his exposure to criminal penalties of any

kind. Having failed to report the ill-gotten gains from the mail fraud,

he obviously feared prosecution for tax offenses. Although he was

never charged with any tax offenses, the creation of the false corporate documents was intended to frustrate the investigation of the mail

fraud, which he reasonably feared might lead to a tax prosecution.

Filippi makes a similar argument concerning the obstruction of justice adjustment to the money laundering counts. For the reasons

explained above, the district court did not clearly err in finding that

the adjustment also applied to the money laundering counts. Filippi's

creation of the false documents was intended to obstruct not only a

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possible tax prosecution, but the entire investigation relating to his

overbilling, including his use of the illegally-acquired funds.

III. Grouping

Counts involving substantially the same harm are deemed "closely

related counts" and are placed in the same group for purposes of calculating the guideline range. See USSG § 3D1.2. The district court's

decision to group the mail fraud and money laundering counts separately is one involving interpretation of the guidelines and is reviewed

de novo. See United States v. Toler, 901 F.2d 399, 402 (4th Cir.

1990).

Filippi asserts that the mail fraud and money laundering counts

should have been grouped together under either § 3D1.2(b) or (d), or

both. Section 3D1.2(b) provides that counts are closely related when

they "involve the same victim and two or more acts or transactions

connected by a common criminal objective or constituting part of a

common scheme or plan." Filippi argues that Workers' Compensation

was the victim of both offenses and that both offenses were part of

a common scheme. However, his argument fails because society, not

Workers' Compensation, was the victim of the money laundering

offense. See United States v. Kunzman, 54 F.3d 1522, 1531 (10th Cir.

1995) (victim of fraud is defrauded individual, but society is victim

of money laundering); accord United States v. Lombardi, 5 F.3d 568,

570 (1st Cir. 1993). Therefore, the "same victim" requirement was not

met.

Section 3D1.2(d) provides that counts are closely related:

[w]hen the offense level is determined largely on the basis

of the total amount of harm or loss, the quantity of a substance involved, or some other measure of aggregate harm,

or if the offense behavior is ongoing or continuous in nature

and the offense guideline is written to cover such behavior.

We have held that money laundering counts may be grouped with

other offenses if they are both part of an ongoing or continuous

scheme. See United States v. Walker, 112 F.3d 163, 167 (4th Cir.

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1997). In Walker, an insurance agent deposited money received from

customers for annuities into his own account, then sent false documents to the customers and used some of the defrauded funds to make

false interest payments. Because the defendant pled guilty to money

laundering under 18 U.S.C.A. § 1956(a)(1)(A)(i) (West Supp. 1998),

which forbids laundering "with the intent to promote the carrying on

of [the] specified unlawful activity," we found that he had conceded

that his "money laundering was part of his fraudulent scheme . . . ."

Id. However, in United States v. Porter, 909 F.2d 789, 793 (4th Cir.

1990), where the defendant purchased a house with the proceeds of

an illegal gambling operation and later sold it again, we held that the

gambling and money laundering counts were not closely related

because there was no evidence that the sale "was in any way integrated with the gambling operation or connected to any particular

gambling transactions." Id.2 Porter reasoned that, "[t]o hold otherwise would mean that every act of money laundering would be

closely related to the underlying crime which produced the laundered

money." Id.

Unlike the defendant in Walker, Filippi was convicted of money

laundering under § 1957, which simply involves spending more than

$10,000 of unlawful proceeds. He contends that he used the unlawful

proceeds to further the fraudulent scheme when he remodeled the

house in which he had his office, bought a sports car, hired staff and

provided them with computers, printers, fax machines, and telephones.

Clearly, some of Filippi's business proceeds were legitimate and

were used to carry on his legitimate business activities. However, he

also withdrew a large amount of money from the corporation and

used it for his personal benefit. It appears from the record that Filippi

put most, if not all, of the money which was unlawfully obtained to

personal uses having nothing to do with furthering either his vocational rehabilitation business or the mail fraud. Consequently, we find

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2 The defendant in Porter pled guilty to money laundering pursuant to

§ 1956(a)(1)(B)(i), which prohibits financial transactions with proceeds

of unlawful activity knowingly designed "to conceal or disguise the

nature, the location, the source, the ownership, or the control of the proceeds . . . ."

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that this case is governed by Porter rather than by Walker. We therefore find no error in the district court's decision to place the mail

fraud and money laundering counts in separate groups.

IV. Admission of Filippi's 1995 Amended Tax Return

On the day of trial, defense counsel moved to exclude a copy of

Filippi's 1995 amended tax return, on which he reported $164,304 in

income. Of this amount, $150,000 was identified as a bonus. On his

first tax return, Filippi had reported only $14,000 in income. The

court denied the motion on the government's representation that the

tax return would establish a motive for Filippi's creation of the false

corporate documents, that is, to avoid prosecution for under-reporting

income. On appeal, Filippi claims that the amended return was unduly

prejudicial3 and was irrelevant because he was not charged with any

tax offenses.

Relevant evidence is defined as "evidence having any tendency to

make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be

without the evidence." Fed. R. Evid. 401. The district court has broad

discretion to determine whether evidence is relevant. See United

States v. Fernandez, 913 F.2d 148, 155 (4th Cir. 1990). As the government maintains, the amended return showed that Filippi was concerned that the investigation might subject him to prosecution for tax

offenses, and it corroborated Upole's testimony that Filippi said the

creation of the corporate resolution authorizing a non-taxable

$176,747 loan to him would "take care of taxes." Even though he was

not charged with tax offenses, the amended return was relevant

because it showed that Filippi's motive for creating the false corporate documents was to obstruct the pending investigation.

Relevant evidence may be excluded if it is unduly prejudicial. See

Fed. R. Evid. 403. However, evidence is not unduly prejudicial

merely because it is probative, see United States v. Queen, 132 F.3d

991, 999 (4th Cir. 1997), but only if it will cause the jury to decide

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3 Although the government asserts that Filippi failed to preserve the

issue of prejudice, defense counsel preserved the issue by arguing that

the amended return was prejudicial.

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the case on emotion rather than reason. Id. The amended tax return

was not evidence of this kind. Therefore, the district court did not

abuse its discretion in permitting the government to introduce it.

V. Other Evidentiary Rulings

Before trial, the government moved to exclude from evidence four

letters Filippi had written to Workers' Compensation between February and July 1995 complaining of delays in payment and of confusion

in the billing process. The district court ruled initially that the letters

could not be mentioned in opening arguments. Later, the court permitted Filippi to introduce any letters he sent to Workers' Compensation

before May 1995, when Filippi testified that he learned that he and

his corporation were under investigation. The court required redaction

of hearsay in the letters about advice that personnel at Workers' Compensation allegedly gave to Filippi concerning his billings. Ultimately, Filippi offered two letters, one written in February 1995, the

second written in April 1995. The district court's evidentiary rulings

are reviewed for abuse of discretion. See United States v. Bostian, 59

F.3d 474, 480 (4th Cir. 1995).

Filippi first argues that the district court erred in granting the government's motion in limine to prohibit mention of the letters in opening statements. He offers no authority to support his position.

Generally, opening statements should avoid references to evidence of

doubtful admissibility because such statements may, if the evidence

is not admitted, trigger a mistrial. See United States v. Sloan, 36 F.3d

386, 397-99 (4th Cir. 1994) (defense opening statement); United

States v. Brockington, 849 F.2d 872, 874-75 (4th Cir. 1988) (prosecutor's opening statement). Because the district court had not yet ruled

on the admissibility of the letters Filippi sought to introduce, it did not

abuse its discretion in prohibiting reference to the letters in opening

statements.

Filippi also contends that the requirement to redact hearsay from

the letters was an abuse of discretion because hearsay is admissible

when it occurs in regular business records. Again, he has no authority

for his position. While regular business records fall within a recognized exception to the hearsay rule, see Fed. R. Evid. 803(6) (records

of regularly conducted activity), Rule 805 requires that hearsay within

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hearsay is admissible only if it also comes within an exception to the

hearsay rule. See Precision Piping v. E.I. du Pont de Nemours, 951

F.2d 613, 619 (4th Cir. 1991); United States v. Portsmouth Paving

Corp., 694 F.2d 312, 321 (4th Cir. 1982).

The hearsay Filippi sought to introduce consisted of advice about

his billing which he alleged certain employees of Workers' Compensation had given him, i.e., that he should resubmit bills which were

not paid promptly and that he should change the date of the services

rendered so as not to confuse the computers at Workers' Compensation. None of the employees who allegedly gave him this advice were

called as witnesses, and the statements they allegedly made did not

come within any hearsay exception. Consequently, the district court

did not abuse its discretion in requiring redaction of these hearsay

statements from the letters admitted into evidence.

Third, Filippi argues that the court abused its discretion in excluding those letters he wrote after he learned that he was being investigated because all four letters should have been admissible as business

records. However, business records may be excluded if "the source of

information or the method or circumstances of preparation indicate

lack of trustworthiness." Fed. R. Evid. 803(6). Business documents

prepared with litigation in mind are not admissible because litigation

is not a regularly conducted business activity and because there may

be an obvious motive to misrepresent. See AMPAT/Midwest v. Illinois

Tool Works, 896 F.2d 1035, 1045 (7th Cir. 1990); cf. United States

v. Frazier, 53 F.3d 1105, 1110 (10th Cir. 1995) (regular audit prepared by neutral third party deemed trustworthy and admissible).

Here, Filippi's letters to Workers' Compensation were not a regular

activity of his business and he had a clear motive to use them to create

an exculpatory explanation of his billing practices. Consequently, this

case is distinguishable from United States v. Baxter, 492 F.2d 150,

165 (9th Cir. 1973) (drug dealer's business records admissible even

after he became informant), on which Filippi relies. The district court

did not abuse its discretion in excluding the letters written after

Filippi became aware of the investigation.

Finally, in a claim submitted pursuant to Anders v. California, 386

U.S. 738 (1967), Filippi asserts that the district court abused its discretion in allowing West Virginia State Trooper Bennett to compare

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the hours Filippi worked, as recorded on his case expense reports,

with the hours he billed to Workers' Compensation, as shown on the

Workers' Compensation computer printouts, because the two were

"apples and oranges," and the evidence was"not based on fact."

Defense counsel argued that the billing printouts covered an entire

reporting period (about twenty-one days), rather than just the date

shown on the printout, while the case expense reports showed work

done on a specific day. However, Bennett testified about the hours

reflected on all the case expense reports pertaining to each client for

the whole period covered in the billing printout, as well as the hours

billed for each client during the period. We find that the testimony

was not misleading, lacking in foundation, irrelevant, or unduly prejudicial.

For the reasons discussed, we affirm the conviction and the sentence. We dispense with oral argument because the facts and legal

contentions are adequately presented in the materials before the court

and argument would not aid the decisional process.

AFFIRMED

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