United States Court of Appeals

For the First Circuit

No. 99-1756

UNITED STATES OF AMERICA,

Appellee,

v.

GERALD P. COVIELLO,

Defendant, Appellant.

No. 99-1782

UNITED STATES OF AMERICA,

Appellee,

v.

ROBERT S. SIMONS,

Defendant, Appellant.

No. 99-1783

UNITED STATES OF AMERICA,

Appellee,

v.

MARC N. ROSENGARD

Defendant, Appellant.
No. 99-1814

UNITED STATES OF AMERICA,

Appellee,

v.

MAXINE SIMONS

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. George A. O'Toole, Jr., U.S. District Judge]

Before

 Torruella, Chief Judge

Lipez, Circuit Judge

and Schwarzer, Senior District Judge.*

John J. Barter for appellant Gerald P. Coviello. 

James L. Sultan, with whom Charles W. Rankin, Michelle

Menken, and Rankin & Sultan were on brief, for appellants Robert

Simons and Maxine Simons.

Paul M. Yee for appellant Marc N. Rosengard.

Ben T. Clements, Assistant United States Attorney, with whom

Donald K. Stern, United States Attorney, was on brief, for

appellee. 

September 7, 2000

* Of the Northern District of California, sitting by

designation.
1For the sake of convenience, we will identify the Simonses

by their first names, Robert and Maxine, following the

convention used by their counsel. 

-3-

LIPEZ, Circuit Judge. Crazy Bob's, a discount computer

products store in Wakefield, Massachusetts, sold stolen

Microsoft software. The owners of Crazy Bob's, Robert Simons

and his wife Maxine,1 and several employees were charged with,

inter alia, a conspiracy to transport stolen property in

interstate commerce. Robert and Crazy Bob's buyer, Marc

Rosenberg, pled guilty and now appeal their sentences. Maxine

and Gerald Coviello (a friend of Robert's who sold some of the

stolen merchandise) went to trial, and now appeal their

convictions and sentences. 

The central issue, common to all appellants, is whether

the district court erred in calculating the "loss" caused by the

crime under the United States Sentencing Guidelines. See USSG §

2B1.1(b)(1). The appellants also assert other sentencing

errors: (1) the Simonses and Rosengard argue that they were not

"in the business" of receiving and selling stolen property, id.

§ 2B1.1(b)(4)(B); (2) Robert argues that restitution and

supervised release should not be imposed because of errors in

his Fed. R. Crim. P. 11 colloquy; (3) Coviello argues that he

was a "minimal" or "minor" participant, USSG § 3B1.2; and (4)
-4-

Rosengard claims he was entitled to a greater downward

departure. Maxine and Coviello raise trial errors as well,

claiming that the court should have dismissed the stolen

property counts because the physical discs containing the

software were "virtually worthless" and that the court should

not have given a "willful blindness" jury instruction. Maxine

also challenges the district court's ruling that the government

could impeach a witness by establishing that the witness had

been represented by Maxine's trial counsel during grand jury

proceedings. We reject all of these arguments and affirm the

convictions and sentences. 

I. Background

During the 1990s, Robert and Maxine Simons operated a

discount computer products outlet in Wakefield, Massachusetts

known as Crazy Bob's. In 1994, Robert and Maxine met David

LaPointe and, acting through Crazy Bob's, began purchasing

computer diskettes, tapes, and CDs which had been stolen from

KAO Infosystems ("KAO"), a computer disc manufacturer. LaPointe

obtained the products through several KAO employees, including

John Costello. Each shipment of stolen goods was either

delivered by LaPointe to Crazy Bob's or picked up from

Costello's shed by Marc Rosengard, a long-time employee and

buyer for Crazy Bob's. 
-5-

In June 1996, LaPointe obtained more than 10,000

Microsoft Windows 95 ("Windows") CD-ROMS, which were sold to

Crazy Bob's for fifteen dollars each even though the wholesale

value was approximately $165 per disc. Almost all of the discs

were sold to Crazy Bob's without any legitimate packaging

materials, such as Microsoft boxes, licenses, manuals, or

certificates of authenticity. Instead, the discs were packaged

on spindles of 100 discs each and shrink-wrapped in plastic.

Crazy Bob's then resold the stolen Windows discs to companies in

Great Britain and California. LaPointe told Crazy Bob's buyer

Rosengard that he insisted on cash for the Windows discs so that

there would be no "paper trail." This request was approved by

Bob and Maxine Simons and more than $240,000 in cash was

delivered to LaPointe over the course of several transactions,

mostly by Rosengard. Maxine often structured these payments so

that each check for cash would be for less than $10,000, thereby

avoiding the requirement that banks file with the Treasury

Department a currency transaction report of any cash transaction

of $10,000 or more. 

In December 1996, LaPointe met with Rosengard and

Robert Simons to negotiate the sale of at least 32,000 Microsoft

Office 97 Professional Edition ("Office") CD-ROMs. Robert

agreed to pay LaPointe in a series of installment payments
-6-

because, as Robert explained, he would have to sell the discs

slowly to avoid attracting suspicion. Maxine Simons then wrote

a $116,000 check to Costello for his role in obtaining the

stolen property, falsely documenting his status with the IRS so

that he would appear to be a Crazy Bob's employee. Like the

Windows discs, the Office discs did not contain Microsoft

packaging materials and were on spindles of 100 discs apiece.

As the stolen discs did not include the "key codes" necessary to

access the software, Rosengard and other Crazy Bob's employees

devised a formula for creating their own key codes and printed

key code stickers. Between February and July 1997 Crazy Bob's

sold a total of 13,962 Office discs, at prices ranging from

fifty to one hundred dollars per disc, for a total of $908,108.

On March 22, 1997, Costello was arrested by the FBI.

At Robert's direction, Crazy Bob's began executing documents to

transfer $425,000 of stolen property proceeds from Crazy Bob's

bank account through another account, which was then closed so

that checks could be distributed to Bob, Maxine, and their

children. When the FBI interviewed Maxine about Costello, she

informed them that he was a "consultant" for the store and that

LaPointe had sold back-up tapes to Crazy Bob's on one occasion.
-7-

Crazy Bob's was able to remove at least 8,000 of the

Office discs before the FBI obtained a search warrant and seized

the remainder. Robert then offered to sell the 8,000 discs to

Jasper "Jay" Knabb, who operated a computer store in North

Carolina, informing him that they were "hot" and would need to

be sold out of the country and for cash. Knabb reported these

conversations to Microsoft and to the FBI, and agreed to

cooperate. Knabb then told Robert that he had a customer in

South America who would buy the discs. After settling on a

price, they agreed that defendant Gerald Coviello (a friend of

Robert's) would handle the transaction and receive ten dollars

per disc (which amounted to over $80,000) for his troubles.

Coviello negotiated a cash payment from Knabb and set a meeting

in a restaurant parking lot to deliver the discs. At that

meeting, he was arrested.

Robert, Maxine, Coviello and Rosengard (along with

three co-defendants not parties to this appeal) were all

indicted for conspiracy to transport stolen property in

interstate commerce, in violation of 18 U.S.C. § 371. Robert,

Maxine, and Rosengard were charged with sixteen counts of

interstate transportation of stolen property. See id. § 2314.

Robert and Maxine were also charged with one count of conspiracy

to launder money, in violation of 18 U.S.C. § 371, and eleven
2The money laundering counts against Maxine were dismissed

prior to trial. 

-8-

counts of money laundering, in violation of 18 U.S.C. §

1956(a)(1)(B)(i).2 Finally, Maxine was charged with three counts

of structuring to evade reporting requirements, in violation of

31 U.S.C. § 5324, and one count of making false statements to

federal agents, in violation of 18 U.S.C. § 1001. 

Robert and Rosengard pled guilty and were sentenced to

seventy months and thirty-three months imprisonment,

respectively. Maxine and Coviello were convicted on all counts

following a jury trial, and were sentenced to thirty-three and

thirty months each.

We will first address the loss calculation issue,

raised by all appellants, and then turn to the other sentencing

and trial error issues. 

II. Loss Calculation

The Simonses, Coviello and Rosengard all argue that the

district court misapplied Section 2B1.1(b)(1) of the Sentencing

Guidelines. Section 2B1.1(b)(1) provides for enhancements to

the base offense level in cases involving the transfer of stolen

property depending on the amount of "loss." The application

notes explain that "'[l]oss' means the value of the property

taken, damaged, or destroyed" and that "[o]rdinarily, when
-9-

property is taken or destroyed the loss is the fair market value

of the particular property at issue." USSG § 2B1.1(B)(1)

(Comment n.2); see also United States v. Carrillo-Figueroa, 34

F.3d 33, 43 (1st Cir. 1994); United States v. Skrodzki, 9 F.3d

198, 203 (1st Cir. 1993). We note that "the loss need not be

determined with precision" and that the court need only "make a

reasonable estimate of the loss, given the available

information." USSG § 2B1.1 (Comment n.3); see also United States

v. Paquette, 201 F.3d 40, 44 (1st Cir. 2000). 

The district court calculated the loss by considering

the "valu[e] of the property at the time it [was] taken from the

rightful owner." Applying this standard, the court determined

that Microsoft was the owner of the property for purposes of 

§ 2B1.1(b)(1) (despite the fact that the discs were stolen from

KAO) and that the loss should be based on Microsoft's wholesale

prices for these products. Relying on testimony from Microsoft

and one of its large wholesale customers, the court concluded

that Microsoft could have sold the 32,000 Office CD-ROMs

wholesale for $486 each and that it could have sold the 10,000

Windows CD-ROMs wholesale for $165 each. Thus the loss caused

by the Simonses and Rosengard through the sale of all of these

discs was $17 million, resulting in the seventeen-level

enhancement that applies to loss between $10 and $20 million.
-10-

See § 2B1.1(B)(1)(R). The court found Coviello responsible only

for the 8,000 Office discs he attempted to sell, resulting in a

loss figure of $3.9 million and a sentencing enhancement of 15

levels. See § 2B1.1(B)(1)(P) (15 level enhancement for loss

between $2.5 and $5 million). 

The appellants' challenges to the loss calculation fall

into three basic categories. First, they claim that the

district court erred in identifying Microsoft (rather than KAO)

as the victim, resulting in a higher loss figure. Second,

accepting the "fair market value" approach to loss calculation

used by the district court, the appellants make several related

arguments that the discs had a lower market value than the

district court identified. Third, the appellants suggest that

some method other than the "fair market value" approach should

have been employed. 

We analyze each of these claims in turn, keeping in

mind that the defendants bear a "heavy burden of demonstrating

that the district court finding is clearly erroneous," and that

loss does not have to be determined with precision. Skrodzki,

9 F.3d at 203; see also United States v. Tardiff, 969 F.2d 1238,

1283 (1st Cir. 1992) (district court's finding reversed only if

"outside the universe of acceptable computations"). As the

Simonses and Rosengard received the seventeen-point enhancement
-11-

applicable to losses between $10 and $20 million, they can only

prevail on appeal if they demonstrate that the loss was clearly

less than $10 million rather than the $17 million the district

court identified. Similarly, as Coviello received the fifteen

point enhancement for losses falling within the $2.5 to $5

million range, he can only prevail by showing that the loss was

below $2.5 million rather than the $3.9 million the district

court found. 

A. Identifying the Victim

The appellants claim that because the CD-ROMs were

stolen from the custody of KAO, and because KAO was required to

indemnify Microsoft for lost discs, the "victim" in this case

was KAO, and the district court should have considered the loss

caused to it, not to Microsoft. There is much at stake in this

argument. Although Microsoft sold Windows for $165 and Office

for $486, the fair market value of the discs to KAO would be no

more than the $7 they charged Microsoft for the duplication

services. Indeed, the appellants even argue that the discs were

"overages" and destined for destruction, having no market value

to KAO whatsoever. They also note that KAO could replace the

discs for thirty-six cents per unit.
3Notably, the appellants simply ignore the most relevant

"risk of loss provision" in the Agreement--the one that requires

KAO to pay 55% of the retail price of the software (rather than

-12-

The argument that KAO should have been treated as the

victim is flawed in several ways. First, there was sufficient

evidence for the district court to conclude that Microsoft had

a more significant ownership interest in the CD-ROMs. Kristi

Bankhead, a product ID specialist at Microsoft, testified that

although KAO was under contract to manufacture and package the

discs, Microsoft retained ownership rights in the software. The

Facility Agreement between KAO and Microsoft provides additional

support, as it states that the entire inventory of discs is held

by KAO "exclusively for distribution to Customers as authorized

by Microsoft and for no other purpose, use or disposition,

except as may be directed in writing by Microsoft." While the

Facility Agreement did give KAO some ownership interest in the

physical CD-ROMs in its possession, the substantial value here

was not the discs themselves, but the computer programs on those

discs--intellectual property that plainly belonged to Microsoft.

Appellants attempt to defeat this finding by noting

that the Agreement gave KAO some interest in the physical CDROMs, and that the Agreement required KAO to indemnify Microsoft

for lost or damaged product, typically at the rate of

Microsoft's replacement cost.3 However, the district court is
the mere replacement costs) if KAO fails to take "reasonable

security precautions" or if it loses more than 25,000 copies of

software. 

-13-

not charged with resolving a contract dispute. It is charged

with assessing the value of the property so that the §

2B1.1(b)(1) determination comports with the magnitude of the

theft. Whatever the arrangements between KAO and Microsoft on

the duplication of thirty-six cent discs, those discs contained

intellectual property, indisputably belonging to Microsoft, with

a wholesale market value of $168 for Windows and $486 for

Office. It was this intellectual property that Crazy Bob's was

interested in buying and selling, not the KAO plastic on which

it was contained. Treating KAO as the "victim" and measuring

loss in terms of the value of the CD duplication services rather

than the value of the intellectual property would simply be

ignoring reality. See United States v. Lyons, 992 F.2d 1029,

1033 (10th Cir. 1993) ("In an age where the intangible

intellectual property value of goods may vastly exceed the

intrinsic worth of accompanying tangible goods, application of

the letter and intent of the Sentencing Guidelines mandates that

courts include intangible value when thefts of tangible objects

occur.").

B. Calculation of Market Value
-14-

The appellants argue that even if Microsoft owned the

discs, the court erred in relying on the price of $486 per unit

of Office and $165 per unit of Windows. Appellants advance

several related arguments as to why the "fair market value"

should be calculated on the basis of lower wholesale prices. 

 First, they claim that the wholesale price the

district court relied upon was too high because Microsoft

sometimes sold its products at lower rates. Bankhead of

Microsoft stated that the standard wholesale price of Windows

was $165 and that the wholesale price of Office was $486. A

representative from Staples, an international office supplies

store, stated that these were the prices it paid for Microsoft

products during the relevant time period. While there was

evidence, as the district court noted, that "Microsoft on

occasion disposed of its product in channels other than the

regular wholesale distribution channel," there was no evidence

that the stolen discs were destined for such lower price sales.

Under these circumstances, it was not clear error for the

district court to reason that the full wholesale price was the

appropriate figure since Microsoft "would have the option to

dispose of [the property] at the higher rather than lower

price." See United States v. Colletti, 984 F.2d 1339, 1345 (3d

Cir. 1992) (value of stolen jewelry properly calculated based on
4The government also acknowledges that when the FBI searched

Crazy Bob's it found some scratched Office discs that had been

dumped, unwrapped, into a large box. As the evidence was clear

that the discs were delivered to Crazy Bob's in shrink-wrapped

spindles, it was not erroneous for the district court to

conclude that any scratches were caused by Crazy Bob's.

-15-

retail value, despite evidence that victim sold product at

discount); United States v. Ellerbee, 73 F.3d 105, 109 (6th Cir.

1996) (compact discs valued at full retail price, despite fact

that victim actually sold discs for less).

The appellants also argue that the discs were worth

much less (or even nothing at all) because they were

"blemished." In support, the appellants point out that John

Costello, the KAO employee who stole the discs, testified that

there was a minor silkscreen blemish on the disc artwork.4

However, the record supports the district court's conclusion

that the discs were not blemished. Bankhead testified that she

had the expertise to identify flaws in the discs; based on her

examination, they had no defects. LaPointe described the discs

as in "perfect condition." There is no evidence that the

purchasers of the discs were told of defects or ever complained

of them. Although the defense had samples of the stolen discs

(as did the court), they offered no expert or other witnesses on

this point. 
-16-

The appellants next claim that the price should be

discounted because the CD-ROMs did not contain legitimate

licenses. We easily reject this claim. The lack of a license

did not prevent the users from accessing the software. It

simply prevented them from doing so with Microsoft's blessing.

This argument, then, boils down to the claim that the loss

should be discounted because the goods were "hot" and therefore

could not be sold at the market price for legitimate products.

Obviously, the fact that a product is sold for less because it

is stolen provides no basis for lowering the loss calculation,

which is based on the wholesale price in a legitimate market

rather than the black market price. See e.g., United States v.

Pervaz, 118 F.3d 1, 10 (1st Cir. 1997); United States v.

Carrington, 96 F.3d 1, 5-6 (1st Cir. 1996). 

Finally, we reject the appellants' related claim that

the wholesale price of the discs should be discounted because

the discs did not contain packaging materials. For the Simonses

and Rosengard to prevail on this theory, they would have to show

that the lack of packaging reduced the fair market value of the

discs from $17 million by approximately forty percent to the

less than $10 million required for a lower enhancement under the

Guidelines. Coviello would have to demonstrate that the missing

packaging reduced the value from $3.9 million by approximately
-17-

thirty-five percent to less than $2.5 million. The district

court did not clearly err in failing to make such a dramatic

reduction. 

Bankhead stated that "almost all of the value in the

$486 price charged by Microsoft for [Office] and the $165 price

charged for Windows[] derived from the intellectual property–-

that is, the software code contained on the CD-ROM." Indeed,

Microsoft paid KAO only seven dollars per unit for its services

in performing disc duplication and adding packaging. Even

assuming that the lack of packaging or any other offset (such as

a blemish on the disc artwork) warranted some reduction in the

market value, this would only be a minor discount that would not

affect the sentences. The court supportably found that the

market value of the software attributable to the Simonses and

Rosengard was between $10 and $20 million and the value

attributable to Coviello was between $2.5 and $5 million. 

C. Alternative Measures of Loss

The appellants suggest that "fair market value" may be

an inappropriate measure of loss in this case. Coviello

actually proposes that the replacement cost of the discs should

be the basis for calculating loss–-thirty-six cents per unit

(for a total of $2,880 rather than $3.9 million). Acknowledging

that this replacement cost would be inadequate, the Simonses
-18-

propose that loss should be measured by the gain for the

defendants, about $1.3 million. Rosengard suggests a similar

approach. 

In support of departing from fair market value, the

appellants point to an application note which states that

"[w]here the fair market value is difficult to ascertain or

inadequate to measure harm to the victim, the court may measure

loss in some other way, such as reasonable replacement cost to

the victim." USSG § 2B1.1 (Comment n.2). Courts have noted

that market value is inadequate in cases where the products--

such as government documents--have no market value. See, e.g.,

United States v. Gottfried, 58 F.3d 648, 651 (D.C. Cir. 1995)

(government documents, with no market value, considered in terms

of replacement costs); United States v. Berkowitz, 927 F.2d

1376, 1390 (7th Cir. 1991) (same). Here, however, the

Microsoft products had a market value and, as the above analysis

indicates, one that can be calculated with sufficient precision

under the Guidelines. See USSG § 2B1.1(B)(1) (Comment n.3)

("The court need only make a reasonable estimate of the loss,

given the available information."). It does not matter, as

appellants claim, that Crazy Bob's sales might not have

displaced $17 million worth of legitimate Microsoft product.

What matters is that the stolen CD-ROMs contained intellectual
5Coviello claims that the high loss should have served as a

basis for a downward departure. The court's discretionary

refusal to depart downward is not subject to appellate review.

See United States v. Harotunian, 920 F.2d 1040, 1044 (1st Cir.

1990). 

-19-

property that was worth between $10 million and $20 million if

they had been sold legitimately. Appellants present no

authority or persuasive argument as to why the ordinary market

value approach should be abandoned here.5

III. Other Alleged Sentencing Errors

A. "In the Business of Receiving and Selling Stolen Property"

The Simonses and Rosengard argue that the district

court erred in finding that they, through Crazy Bob's, were "in

the business of receiving and selling stolen property," so as to

warrant a four-level guideline enhancement under USSG §

2B1.1(b)(4)(B). In determining whether the "in-the-business" or

"ITB" enhancement should apply, the district court must consider

"the totality of the circumstances, with particular emphasis on

the regularity and sophistication of a defendant's operation."

United States v. Richardson, 14 F.3d 666, 674 (1st Cir. 1994);

see also United States v. McMinn, 103 F.3d 216, 222 (1st Cir.

1997); United States v. St. Cyr., 977 F2.d 698, 703 (1st Cir.

1992). While de novo review applies with respect to the

"meaning and scope" of the ITB enhancement, St. Cyr, 977 F.2d at
-20-

701, challenges to the evidentiary support are reviewed only for

clear error, see Richardson, 14 F.3d at 673. 

The Simonses argue that they cannot be considered "inthe-business" of buying and selling stolen property because

Crazy Bob's was a legitimate business that sold many lawful

products. We disagree. There is nothing in the Guidelines, the

commentary or our case law to suggest that the enhancement

applies to a "fence" who sells only stolen goods, but not to a

"fence" who sells stolen goods through the cover of a legitimate

business. To the contrary, we have noted that the concern with

those in the business of receiving and selling stolen property

is "especially serious . . . when the professional fence

utilizes a legitimate 'front,' such as a pawn shop or an outlet

dealing in distressed goods at sharply lower prices." McMinn,

103 F.3d at 221 n.4; see also United States v. Koehler, 24 F.3d

867, 871 (6th Cir. 1994) (rejecting argument that the business

enhancement was precluded by defendant's claim that he "was a

legitimate businessman who, in his 24 years in the auto parts

business, had engaged in only two transactions regarding stolen

property"). 

The district court did not clearly err in determining

that the Simonses, through Crazy Bob's, were in the business of

receiving and selling stolen property. The "most important
6The Simonses suggest that the business enhancement is

particularly inappropriate for Maxine. However, Maxine was

highly involved in Crazy Bob's business of selling stolen

property. She was the President, director, and sole officer of

the company, and, as the 60% owner, received 60% of the profits.

She was personally involved with the sale of stolen property,

issuing forty-nine checks for payment to LaPointe, falsely

documenting the $116,000 payroll check to Costello, approving

the purchase prices for the stolen goods, structuring financial

transactions to conceal the profits from stolen property, and

personally receiving the stolen property from LaPointe. 

-21-

[factor] . . . the regularity of defendant's dealings in stolen

merchandise," Richardson, 14 F.3d at 674, was easily satisfied.

 Likewise, the sales "proceeded with all the accouterments of a

business." Id. at 675. From late 1994 until the arrest of John

Costello in March 1997, Crazy Bob's purchased, in multiple

transactions, roughly 40,000 stolen Windows and Office CD-ROMs

worth approximately $17 million, as well as recordable compact

discs, back-up tapes, and other items stolen from KAO. These

transactions involved a number of Crazy Bob's employees, and

they generated some of the largest profits the business had ever

seen. Finally, the Simonses conducted the fencing operation in

a sophisticated fashion, see id. at 674, selling to multiple

out-of-state and foreign buyers to avoid attracting suspicion

and laundering the proceeds through various bank accounts.6

While Rosengard does not challenge the district court's

finding that Crazy Bob's was in the business of receiving and

selling stolen property, he claims that the enhancement cannot
-22-

apply to him as a mere employee. The government responds that

even a "delivery boy" involved in the sale of stolen property is

subject to the enhancement, citing United States v. Cottman, 142

F.3d 160, 166 (3rd Cir. 1998) (rejecting argument that in the

business enhancement cannot apply to "low level delivery boy" in

fencing scheme). 

The evidence shows that Rosengard was far more than a

delivery boy. As Crazy Bob's buyer, Rosengard was LaPointe's

primary contact in virtually all of the stolen property

dealings, arranging which items would be purchased, for how

much, and how LaPointe was to be paid. Moreover, Rosengard

personally delivered the payments to LaPointe and personally

received the stolen Microsoft software. Rosengard was the only

defendant personally involved with making sales of the stolen

Office discs to some of Crazy Bob's buyers. Rosengard's claim

that "he did not sell the Windows95 or the Office 97 for his own

gain or business" is belied by his admission that he received

"approximately $20,000" in commissions for his role in the

purchase and sale of the stolen Office discs. Indeed, from

March 6 to July 10, 1997–-when most of the Office discs were

stolen-– Rosengard's salary jumped from $500 per week to $2,350

per week. The district court did not err in applying the ITB

enhancement.
7The government suggests that Robert waived the right to

challenge the Rule 11 errors by proposing supervised release and

restitution in his sentencing memorandum, and hence cannot

challenge these errors on appeal. However, we find no waiver

because these recommendations at the time of sentencing did not

amount to "an intentional relinquishment or abandonment" of the

claim that the Rule 11 colloquy was defective. United States v.

Mitchell, 85 F.3d 800, 807 (1st Cir. 1996). These

recommendations are relevant, however, to the Rule 11 harmless

error inquiry. See infra. 

-23-

B. Robert Simons' Restitution and Supervised Release

Robert Simons pled guilty and received a sentence of

seventy months imprisonment, three years supervised release, and

restitution of $908,108. He now argues, for the first time,

that because he was not warned of the possibility of restitution

or supervised release in his Fed. R. Crim. P. 11 plea colloquy,

we should eliminate these portions of his sentence. Under these

circumstances, where there has been a failure by the defendant

to raise the error in the Rule 11 colloquy before the trial

court, we nevertheless will determine Rule 11 compliance for the

first time on appeal. See United States v. Martinez-Martinez, 69

F.3d 1215, 1219 (1st. Cir. 1995).7 

The government concedes that Robert did not receive

these warnings. There is no question that the district court

should have warned Robert of the possibilities of supervised

release and restitution, as Rule 11(c)(1) explicitly requires.

The omission represented a partial failure to address Rule 11's
8It is not entirely clear whether a defendant raising a Rule

11 challenge for the first time on appeal must satisfy only the

harmless error test in Rule 11(h), or whether the defendant must

also show "a fundamental defect which inherently results in a

complete miscarriage of justice" or "an omission inconsistent

with the rudimentary demands of fair procedure." Martinez, 69

F.3d at 1219; see also Bierd, 217 F.3d at 19 (noting two

standards); Noriega-Milan, 110 F.3d 162, 166 n.4 (1st Cir. 1997)

(same); United States v. Miranda-Santiago, 96 F.3d 517, 522 &

n.9 (1st Cir. 1996) (same). We need not address this issue as

Robert's claim fails under either standard. 

-24-

"core concern" that the defendant have "knowledge of the

consequences of the guilty plea." United States v. Bierd, 217

F.3d 15, 19 (1st Cir. 2000). However, even the partial failure

to address a core concern is harmless under Rule 11 if it does

not affect "substantial rights." Fed. R. Crim. P. 11(h) ("Any

variance from the procedures required by this rule which does

not affect substantial rights shall be disregarded.").8

Substantial rights are not affected by

a failure to fully explain the consequence of the guilty plea

where the defendant had no reason to expect a lesser penalty

than he ultimately received. See United States v. Raineri, 42

F.3d 36, 42 (1st Cir. 1994). 

The failure to warn of supervised release was harmless

because Robert "receive[d] a combined sentence of imprisonment

and supervised release that was less than the maximum term of

imprisonment" of which he was warned." Id. (noting that in such

cases the error is ordinarily harmless). With respect to
-25-

restitution, we have previously held that "where a defendant who

is not warned of the potential for restitution is nevertheless

ordered to pay such restitution, but in an amount less than the

total potential criminal fine of which he was warned, the

arguable error is harmless." United States v. Gonzalez, 202

F.3d 20, 28 (1st Cir. 2000); see also Padin-Torres, 988 F.2d at

284. This principle, however, does not dispose of Robert's

claim. Although he was warned of the possibility of fines, the

plea colloquy did not make clear that the monetary assessment

could reach $908,108.

Still, there is no indication that the missing

information "led [Robert] to expect a lesser penalty than he

actually received." Raineri, 42 F.3d at 42. Robert has never

alleged that he was unaware that the restitution would be

ordered at the time he entered his plea, let alone that he pled

guilty in reliance on that belief. Moreover, the evidence

indicates that Robert was aware at the time of his plea that

monetary remunerations in these amounts could be required. At

the arraignment, Robert was told that the maximum fines on each

of the twenty-five counts against him ranged from $250,000 to

$925,000. Finally, Robert affirmatively requested a restitution

order at the time of his sentencing, suggesting that he had been

well aware of this possibility at the time of the plea hearing.
-26-

As the Rule 11 errors were harmless, we need not consider the

unusual remedy Robert seeks (vacating the challenged portions of

the sentences rather than withdrawing the guilty plea). Cf.

Padin-Torres, 988 F2d at 284 (discussing this remedy). 

C. Coviello's Role In Offense Adjustment

Coviello argues that the district court should have

found him to be a "minimal participant" (entitled to a fourlevel decrease) or "minor participant" (entitled to a two-level

decrease) pursuant to USSG § 3B1.2. To be eligible for either

"role in the offense" adjustment, the defendant must demonstrate

that he was "substantially less culpable than the average

participant." United States v. Ocasio, 914 F.2d 330, 333 (1st

Cir. 1990) (quoting USSG § 3B1.2 commentary, background).

Coviello contends that he is entitled to at least "minor

participant" status because he participated in only one

transaction (the sale of 8,000 stolen Office discs) during the

two-year long conspiracy. Our review is for clear error. See

id.

For Coviello to obtain a "role in the offense,"

adjustment, he cannot simply show that he was a minimal or minor

participant in the conspiracy overall. He must demonstrate that

he was a minimal or minor participant in the conduct that formed

the basis of his sentence. See, e.g., United States v. James,
-27-

157 F.3d 1218, 1220 (10th Cir. 1998) (where sentence "was based

not on the collective amount of drugs distributed by all members

of the conspiracy, but only on the amount of drugs distributed"

by the defendant, no role reduction is appropriate); United

States v. Atanda, 60 F.3d 196, 198 (5th Cir. 1995) ("When a

sentence is based on an activity in which a defendant was

actually involved, § 3B1.2 does not require a reduction in the

base offense level even though the defendant's activity in a

larger conspiracy may have been minor or minimal."); cf. United

States v. Neal, 36 F.3d 1190, 1211 (1st Cir. 1994) (defendant

"mistakenly refers to the overall conspiracy encompassing five

robberies as the benchmark for arguing that he played a minimal

role," rather than the offenses for which he was convicted).

Coviello's offense level was not based on the broader two-year

conspiracy: it was based only on the single transaction in which

Coviello engaged. Coviello received a fifteen-level increase

for his participation in the attempted sale of $3.9 million

worth of stolen Office discs. He did not receive the full

seventeen-level increase other defendants received for selling

all $17 million worth of stolen property. 

Given these principles, the district court properly

found that Coviello's sentence was based on "his part in this

aspect of the conspiracy, as to which he was a full, not a minor
-28-

participant." Coviello played a critical role in the sale of

the 8,000 stolen Office discs–-the largest single sale attempted

by Crazy Bob's, representing twenty-five percent of the total of

32,000 stolen Office discs. Coviello made the final

arrangements with the buyer; he sent sample discs; he had

custody of the stolen property and he delivered the property.

Coviello was also set to keep a full one-third of the proceeds

for the sale, amounting to about $80,000. 

D. Downward Departure for Rosengard

Rosengard received a two-level downward departure

because the court found such a departure was needed "to provide

a rough proportionality amongst the various sentences for all

the participants so that this sentence, dictated by the

guidelines, is not out of sync . . . with the other sentences,

some of which have been arrived at by departures as well for

other reasons." Rosengard now argues that the district court

did not depart far enough because he was less culpable than

other defendants who received downward departures. 

We have "no jurisdiction to review the extent of a

departure merely because the affected defendant is dissatisfied

with the quantification of the district court's generosity." 

United States v. Pighetti, 898 F.2d 3, 4 (1st Cir. 1990); United

States v. Fisher, 3 F.3d 456, 464 (1st Cir. 1993) (no
-29-

jurisdiction to hear claim that defendant was entitled to

greater downward departure because his sentence was "excessive

in light of the amount of time given to codefendant"). The

government also notes that any downward departure based solely

on the perceived need "to equalize sentencing outcomes for

similarly situated codefendants" is unlawful. United States v.

Kneeland, 148 F.3d 6, 16 (1st Cir. 1998) (collecting cases); see

also United States v. Rodriguez, 162 F.3d 135, 153 (1st Cir.

1998). As the government has not cross-appealed, this issue is

not before us. See United States v. Gonzalez-Vazquez, Nos. 98-

2108 & 98-2109, 2000 WL 967224, at *5 (1st Cir. July 18, 2000).

IV. Trial Errors

Maxine Simons and Coviello–-the two appellants who went

to trial–-raise several alleged errors by the trial court. 

A. Motion for Judgment of Acquittal

The National Stolen Property Act applies, in relevant

part, to "[w]hoever transports, transmits, or transfers in

interstate or foreign commerce any goods, wares, merchandise,

securities or money, of the value of $5,000 or more, knowing the

same to have been stolen, converted or taken by fraud." 18

U.S.C. § 2314. Maxine argues that the district court should

have granted her motion for judgment of acquittal on the stolen
-30-

property counts because the property consisted solely of CD-ROM

discs which were "virtually worthless," aside from the

intellectual property contained on them. Maxine relies on

Dowling v. United States, 473 U.S. 207, 216 (1985), in which the

Supreme Court held that 18 U.S.C. § 2314 does not apply to the

theft of copyrighted material without "physical taking of the

subject goods."

Maxine ignores the fact that Crazy Bob's committed

high-tech piracy the old-fashioned way--by buying and selling

more than 40,000 pieces of tangible stolen property. There is

no authority for Maxine's proposition that when the physical

property derives most of its value from its intellectual

content, the defendant cannot be prosecuted under § 2314.

Indeed, Dowling itself forecloses Maxine's argument. In

discussing the law of

§ 2314, the Supreme Court stated:

Nor does it matter that the item owes a

major portion of its value to an intangible

component. See, e.g., United States v.

Seagraves, 265 F.2d 876 (CA3 1959)

(geophysical maps identifying possible oil

deposits); United States v. Greenwald, 479

F.2d 320 (CA 6 1973) (documents bearing

secret chemical formulae) [citation]. But

these cases and others prosecuted under §

2314 have always involved physical "goods,

wares [or] merchandise" that have themselves

been "stolen, converted or taken by fraud."
-31-

473 U.S. at 216. See also United States v. Brown, 925 F.2d

1301, 1308 n.14 (10th Cir. 1991) ("[F]or § 2314 to apply there

must be some tangible item taken, however insignificant or

valueless it may be, absent the intangible component.") 

B. References To Maxine's Trial Attorney

Leatha Bowdoin, an employee of Crazy Bob's, testified

for the government at trial pursuant to a grant of immunity.

Although she had implicated Maxine Simons in her grand jury

testimony, her trial testimony presented Maxine as playing a

more minimal role. On redirect examination, the government

attempted to demonstrate that Bowdoin had a motive to slant her

testimony in favor of the defense. The government asked Bowdoin

whether Maxine was paying her attorney's fees, to which Bowdoin

answered "Maxine or myself. It hasn't been determined yet."

The government then asked whether, at her initial grand jury

appearance, she was represented by "the same or different

counsel as who was representing Robert and Maxine Simons at the

time." When Bowdoin answered "I believe it was the company's

lawyers," the government asked whether this meant she had been

represented by Mr. Sultan, one of Maxine's trial counsel.

Bowdoin responded that Sultan was indeed her lawyer during the

grand jury and she admitted that Crazy Bob's had paid those

fees. 
-32-

Maxine objected to this line of questioning and now

argues that the district court abused its discretion in

admitting the evidence because it was irrelevant, see Fed. R.

Evid. 401, and, even if relevant, unduly prejudicial, see Fed.

R. Evid. 403. In support, she cites our recent decision in

United States v. Gaines, 170 F.3d 72, 82 (1st Cir. 1999), as

laying down a broad rule against such evidence. It does no such

thing. In that case, Gaines was accused of supplying drugs to

Franklin, a government witness. As Gaines's defense was that he

barely knew Franklin and did not know he was involved in drugs,

we found Franklin's testimony that Gaines had once referred him

to an attorney to defend him on a drug charge "highly relevant."

Id. However, given that the actual identity of the lawyer was

not necessary to challenge Gaines' defense, we were troubled

that the government had "needlessly" elicited the fact that the

lawyer Franklin was referred to was the very same lawyer

defending Gaines at trial. Id. Although we found any error

harmless, we noted that this irrelevant fact "created the

troubling possibility that Gaines's choice of a trial attorney

could be used by the jury to draw a negative inference about

Gaines's involvement with drugs." Id.

While Gaines makes clear that some evidence of prior

representations may be irrelevant and unduly prejudicial, the
-33-

evidence of prior representation in this case was neither.

Bowdoin's trial testimony minimized Maxine's role in the

conspiracy and contradicted earlier statements. Thus, she

opened the door for the government to attack her credibility.

To show bias, it was relevant to show that Maxine might pay for

Bowdoin's attorney's fees at trial; that Maxine in fact had paid

these fees during the grand jury proceedings; and that Crazy

Bob's lawyers had provided the prior representation. The

government only brought out the fact that it was Maxine's trial

counsel, Sultan, who had provided the shared prior

representation when Bowdoin evaded a more general question about

whether they had shared the same lawyer during grand jury

proceedings. The only inference the jury might have drawn-–

that Bowdoin was slanting her testimony to protect Maxine in

part because she had been represented by Crazy Bob's lawyers and

might have her legal fees paid by Maxine–-was permissible.

Contrary to Maxine's protestations, where evidence of prior

representation is relevant and not unduly prejudicial, there is

no per se rule barring its admission. See United States v.

Frazier, 944 F.2d 820, 823-27 (11th Cir. 1991) (allowing

evidence of source of defendant's attorney's fees to show, in

perjury prosecution, the defendant's motive to cover up for her

employer); cf. United States v. Simmons, 923 F.2d 934, 948-49
9The court stated: 

In addition, you may infer that a defendant

had knowledge of a particular fact if you

find beyond a reasonable doubt that he or

she deliberately avoided information about

the fact that would otherwise have been

obvious . . . . [This] does not mean that a

person's carelessness or mistake in failing

to learn about a fact would support an

inference of knowledge; it would not. There

must be a deliberate effort to remain

ignorant of the fact. 

-34-

(2d Cir. 1991) (holding that when members of alleged conspiracy

all used same attorney, and one member paid for attorney, the

multiple representation could be used to show the association

between clients provided other evidence existed of the

association).

C. Willful Blindness

The sole defense offered by Coviello and Maxine Simons

was that they lacked knowledge that the software was stolen.

The government requested, and the district court gave, a

standard "willful blindness" instruction.9 Maxine and Coviello

objected to the instruction, and they now appeal this ruling.

We review the propriety of a willful blindness instruction for

abuse of discretion. See United States v. Cunan, 152 F.3d 29,

39 (1st Cir. 1998). 

A willful blindness instruction is appropriate "if [1]

a defendant claims a lack of knowledge, [2] the facts suggest a
10In her reply brief, Maxine argues for the first time on

appeal that the willful blindness instruction was inappropriate

because she was not raising a "lack of knowledge" defense. The

well-settled rule is that arguments made for the first time in

a reply brief are waived. See United States v. Brennan, 994 F.2d

918, 922 n.7 (1st Cir. 1993). In any event, the argument is

frivolous, as both Maxine's closing and her cross-examination

made plain that her only defense was that she did not know the

products were stolen. 

-35-

conscious course of deliberate ignorance, and [3] the

instruction, taken as a whole, cannot be misunderstood as

mandating an inference of knowledge." United States v.

Richardson, 14 F.3d 666, 671 (1st Cir. 1994). Maxine and

Coviello challenge the second element,10 claiming that the facts

did not suggest that they were deliberately avoiding knowledge

that the products were stolen. In determining whether the

facts suggest the type of deliberate avoidance warranting an

instruction, we must consider whether the record evidence

reveals "flags" of suspicion that, uninvestigated, suggest

willful blindness. Richardson, 14 F.3d at 668, 671-672; see

also Gabriele, 63 F.3d at 66-67 (looking to presence of red

flags); Cunan, 152 F.3d at 39 (same). 

There were sufficient "flags of suspicion" to justify

the instruction. Maxine knew that: (1) the supplier of the

stolen goods, LaPointe, used a business name ("Dave's Media")

that had no bank account or place of business, and that he told

her he was having trouble cashing checks in the business name;
-36-

(2) that LaPointe insisted upon being paid in cash as the volume

of their dealings increased; (3) when LaPointe delivered goods

to Maxine, he never provided invoices, receipts or other

paperwork; (4) LaPointe discussed with Maxine issuing a $116,000

check to John Costello, whom Maxine falsely documented as an

employee. The jury could have also inferred that Maxine was

aware, through her employee Rosengard, that the computer goods

were picked up at a shed at a private home and that LaPointe

told Rosengard "ask me no questions and I'll tell you no lies"

on the one occasion when Rosengard asked about the source of the

goods. 

Similarly, there were sufficient "flags" that Coviello

should have taken note of, including the fact that: (1) Knabb

referred to the Office discs in code as "Wheaties Boxes"; (2)

the $245,000 payment for the discs would be made in cash, after

delivering the CDs to a restaurant parking lot; (3) Coviello was

to personally receive about $80,000 for simply finalizing the

deal and delivering the product; (4) the Office discs did not

include any legitimate licenses, manuals, or other packaging;

(5) Crazy Bob's created a formula to fabricate unauthorized key

codes to access the software, which Coviello provided to Knabb;

and (6) the goods were unaccompanied by any documentation such

as a bill of sale, invoice or receipt. 
-37-

Coviello further argues that even if the "flags of

suspicion" were present, the instruction was inappropriate in

his case because he was prosecuted only for conspiracy, and the

instruction might cause a jury to conclude that he could join a

conspiracy without actually entering an agreement. This

argument is unpersuasive. The district court first gave

complete instructions on the conspiracy elements (emphasizing

that the evidence must show "that the defendant knowingly and

intentionally became a participant or member of the

conspiracy"), and only then turned to the instructions on the

substantive crimes, including the willful blindness instruction.

It is plain that the willful blindness instruction related to

whether the defendants knew that the property was stolen, not to

joining the conspiracy. As such, the instruction was proper.

See United States v. Hurley, 63 F.3d 1, 10 (1st Cir. 1995)

(instruction proper where district court gave detailed

explanation of conspiracy count and then gave willful blindness

instruction "aimed at the 'knowing' requirements of the

substantive counts"); United States v. Brandon, 17 F.3d 409, 453

n.75 (1st Cir. 1994) (rejecting claim that willful blindness

instruction was improper in conspiracy case where the

instruction "had to do with the finding that 'defendant acted
-38-

knowingly' and not with a finding that defendant willfully

joined the conspiracy.") 

Affirmed.