* Of the Northern District of California, sitting by designation.

United States Court of Appeals

For the First Circuit

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No. 99-2124

UNITED STATES,

Appellee,

v.

ROBERT E. PARADIS,

Defendant, Appellant.

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APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MAINE

[Hon. D. Brock Hornby, U.S. District Judge]

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Before

Selya and Lynch, Circuit Judges,

and Schwarzer,* Senior District Judge.

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Thomas B. Wheatley, by appointment of the Court, for appellant.

Margaret D. McGaughey, Assistant United States Attorney, with whom

Jay P. McCloskey, United States Attorney, was on brief, for appellee.

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July 17, 2000

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SCHWARZER, Senior District Judge. We must decide whether a

defendant convicted of a single count of laundering the proceeds of

bankruptcy fraud was properly ordered to make restitution to the

bankruptcy trustee.

BACKGROUND

This case arises out of a scheme to conceal assets from the

bankruptcy court, the trustee and creditors in the bankruptcy

proceedings of Catherine Petit, defendant Robert Paradis's employer.

Prior to her bankruptcy, Petit was pursuing a multi-million dollar

claim against various parties. To help finance the litigation, Petit

and several associates (not including Paradis) persuaded investors to

purchase stakes in the outcome of the litigation. From 1989 until

1997, they raised roughly $8.2 million from numerous investors. In

June 1993, an involuntary Chapter 7 (later converted to Chapter 11)

petition was filed against Petit. During the course of the bankruptcy

proceedings, Petit falsely denied receiving any income from the sale of

her interest in the litigation. This fraud on the bankruptcy court

ultimately led to the October 1997 arrests of Petit, Paradis, and

several of Petit's associates.

Paradis's role in the scheme was to conceal Petit's

investment income from her creditors and the bankruptcy court. As

office manager of a company Petit controlled, Paradis received a

portion of the funds Petit raised through the investment scheme and
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deposited them in personal accounts held by him and his wife. From

those accounts, Paradis paid Petit's business and personal expenses.

All told, Paradis passed roughly $3 million through his accounts,

depriving Petit's bankruptcy estate and her creditors of potential

access to those funds.

Shortly after his arrest in October 1997, Paradis pled guilty

to one count of money laundering in violation of 18 U.S.C.

§ 1956(a)(1)(B)(i) and 18 U.S.C. § 2. The district court sentenced

Paradis to fifteen months in prison and three years of supervised

release, and ordered Paradis to pay $3 million in restitution to the

United States Trustee in Petit's bankruptcy case. On this appeal,

Paradis challenges the restitution order and the length of the term of

supervised release. We have jurisdiction under 28 U.S.C. §§ 1291 and

2253.

DISCUSSION

I. RESTITUTION

A. Standard of Review

We customarily review restitution orders for abuse of

discretion. See United States v. Vaknin, 112 F.3d 579, 586 (1st Cir.

1997). "To the extent that a challenge to a restitution order hinges

on a legal question, however, the sentencing court's answer to that

question is reviewed de novo." Id.

B. Application of Restitution to Money Laundering
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At sentencing, both Paradis and the government argued that

because in the usual case--laundering of the proceeds of drug

transactions--the victim is society, restitution is improper in a case

where money laundering is the only offense. The district court,

however, concluded that because Paradis's money laundering deprived the

bankruptcy trustee of the ability to distribute the laundered funds to

Petit's creditors, restitution was appropriate and the trustee was a

victim for purposes of 18 U.S.C. § 3663A. The court ordered Paradis to

pay restitution of roughly $3 million--the aggregate of the laundered

funds--to the trustee in Petit's bankruptcy case. On appeal, Paradis

urges us to reverse the restitution order on the same ground he argued

in the district court, i.e., that there can be no identifiable victim

for purposes of § 3663A because the victim of money laundering is

society. Although the government also took that position in the

district court, on appeal it defends the district court's order to

facilitate our consideration of this issue.

Paradis's argument rests on decisions applying the grouping

provisions of United States Sentencing Guideline § 3D1.2, under which

offenses are grouped for sentence calculation where they are based on

different acts but harm the same victims. He relies principally on

United States v. Lombardi, 5 F.3d 568 (1st Cir. 1993). The issue there

was whether a defendant's sentence for mail fraud and for money

laundering should have been included in a single group. In rejecting
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the defendant's argument that his mail fraud and money laundering

convictions involved the same victims for purposes of grouping under

the guidelines, we said, "[t]he guidelines are clear that, for purposes

of these subsections, the victim of fraud is the insurance company and

the victim of money laundering is society." The decision is not

apposite; it does not implicate the construction of the restitution

statute, 18 U.S.C. § 3663A, nor does it purport to decide that money

laundering could not produce an identifiable victim. For the same

reasons, the other decisions on which Paradis relies are inapposite.

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

1995) (securities fraud and money laundering); United States v. Gallo,

927 F.2d 815, 824 (5th Cir. 1991) (drug offenses and money laundering).

We turn now to the statute. Under 18 U.S.C. § 3663A,

restitution is mandatory where the defendant is convicted of "any . .

. offense against property under [Title 18], including any offense

committed by fraud or deceit . . . in which an identifiable victim or

victims has suffered a . . . pecuniary loss." 18 U.S.C. § 3663A(c)(1);

id. § 3663A(a)(1). Paradis does not dispute that money laundering is

an offense against property. See 18 U.S.C. § 1956(a)(1) ("Whoever,

knowing that the property involved in a financial transaction

represents the proceeds of some form of unlawful activity, conducts .

. . a financial transaction . . .") (emphasis added). A "victim" under

the statute is "a person directly and proximately harmed as a result of
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the commission of an offense for which restitution may be ordered . .

. ." 18 U.S.C. § 3663A(a)(2).

Here, Paradis diverted funds he knew were the proceeds of

Petit's fraud on the bankruptcy court from the bankruptcy estate. To

conceal the existence of those funds from the bankruptcy court, Paradis

channeled them through his own accounts, out of which he paid Petit's

personal and business expenses. The direct result of Paradis's actions

was to conceal from the bankruptcy court and from the estate $3 million

that could have been available to satisfy claims of creditors. On

these facts, Paradis's argument that society alone was the victim is

untenable and restitution may be appropriate to the extent identifiable

victims exist.

C. Identification of the Victim

The district court determined that the bankruptcy trustee was

the victim for purposes of § 3663A. The victim must be one who was

"harmed as a result of the commission of [the] offense." 18 U.S.C. §

3663A(a)(2). While the trustee may be a victim of bankruptcy fraud,

that was not the charge against Paradis. His offense was laundering

the proceeds of the fraud. There is no evidence that the trustee was

harmed as a result of this offense. Its effect was to conceal the

proceeds of the fraud and to divert those funds from the estate where

they could have been available to pay creditors who had filed claims.

But again there is no evidence of harm to creditors, i.e., no evidence
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of creditors who filed claims that went unpaid. Because there is no

evidence of identifiable victims who suffered harm as a result of

Paradis's money laundering, the restitution order must be vacated.

II. SUPERVISED RELEASE

For the first time on appeal, Paradis challenges the threeyear term of supervised release imposed as part of his sentence.

Because he did not raise this objection in the district court, our

review is for plain error. See United States v. Merric, 166 F.3d 406,

409 (1st Cir. 1999). Paradis must establish "an obvious and clear

error under law that seriously affect[s] the fairness, integrity or

public reputation of judicial proceedings." Id. at 409-10 (internal

quotations omitted). His argument is merely that three years of

supervised release is unnecessary. This falls well short of an

assertion of plain error. We therefore reject Paradis's challenge to

his term of supervised release.

CONCLUSION

The order of restitution is vacated. In all other respects,

the judgment is affirmed.