1995 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

8-23-1995

United States v Coyle

Precedential or Non-Precedential:

Docket 94-2208

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Recommended Citation

"United States v Coyle" (1995). 1995 Decisions. Paper 233.

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1 

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT 

 

N0. 94-2208 

 

UNITED STATES OF AMERICA 

v. 

MICHAEL C. COYLE, 

 Appellant

 

On Appeal from the United States District Court 

for the Eastern District of Pennsylvania 

(D.C. No. 93-cr-00329) 

 

Argued July 17, 1995 

Before: SLOVITER, Chief Judge, SCIRICA, Circuit Judge, 

and AMBROSE, District Judge298

(Filed August 23, 1995) 

 

Elizabeth K. Ainslie (Argued) 

Ainslie & Bronson 

Philadelphia, PA 19107 

 Attorney for Appellant 

Robert E. Goldman 

Tammy E. Avery (Argued) 

Office of United States Attorney 

Philadelphia, PA 19106 

 Attorneys for Appellee 
2 

OPINION OF THE COURT

SLOVITER, Chief Judge. 

 Michael C. Coyle appeals his conviction and sentence on 

three counts of mail fraud, 18 U.S.C. § 1341, five counts of 

making false statements on documents required by ERISA, 18 U.S.C. 

§ 1027, and two counts of blackmail, 18 U.S.C. § 873. 

I.

Facts and Procedural Background

 Michael C. Coyle was the Chief Financial Officer for 

Health Corporation of America (HCA) from December 1986 through 

October 1990. HCA, a publicly traded corporation, was in the 

business of designing, operating and administering medical, 

dental and vision care plans. It had two subsidiaries: the North 

American Dental Administrators (NADA) and the Cytex Corporation. 

Through the assistance of Larry Smith, the principal of Eastern 

State Casualty Associates, HCA was awarded three contracts by the 

United Paper Convertors Local 286 Welfare Trust Fund to 

administer plans providing health care benefits to members of the 

Paper Convertors Local 286. These are employee benefit plans 

subject to Title I, as amended, of the Employee Retirement Income 

Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1145. The 

duration of these particular contracts is unclear from the record 

although it appears that the contracts were renewed prior to 

their eventual termination in 1990. 

 NADA administered the Fund's dental plans for members 

in New Jersey (New Jersey dental plan). Cytex administered the 
3 

Fund's dental plan for members in Pennsylvania and Delaware 

(referred to here as the Pennsylvania dental plan). A division 

of Cytex, National Vision Plan (NVP), administered the Fund's 

vision care plan. The companies will be referred to collectively 

as HCA. 

 HCA received monthly premiums from the Fund, which were 

calculated at a fixed rate per covered employee per month, and 

HCA made the payments to participating physicians, dentists and 

laboratories. The Pennsylvania dental contract covered about 

2700 members while the New Jersey dental contract covered about 

300. Under the contracts covering the vision care plan and the 

New Jersey dental plan, all premium payments not disbursed to 

participating physicians or laboratories or retained as 

administrative costs were to be returned to the Fund. There was 

no similar provision for refund of surplus premiums in the 

Pennsylvania dental contract although the contracts appear to 

have functioned similarly in all respects. In particular, there 

was no refund of any premiums under any of the contracts. 

 All three contracts contained provisions for assuring 

disclosure to and record inspection by the Fund, and required HCA 

to prepare and submit to the Fund annual reports containing 

complete and accurate accounting of all funds received and 

disbursements made. 

 Under ERISA, the Fund was required to file a federal 

Form 5500, also referred to as the "annual report," showing 

financial information of, inter alia, assets and liabilities, 

income and expenses, including the amounts and purposes of 
4 

disbursements and money retained. See 29 U.S.C. § 1023. Form 

5500 is filed with the Internal Revenue Service which provides 

copies to the Department of Labor and the Pension Benefit 

Guaranty Corporation. Schedules A, attached to Form 5500, must 

be filed for every defined benefit plan when any benefits are 

"purchased from and guaranteed by an insurance company, insurance 

service, or other similar organization." 29 U.S.C. § 1023(e). In 

addition, ERISA obliges "an insurance carrier or other 

organization which provides some or all of the benefits under the 

plan, or holds assets of the plan" to transmit and certify 

certain information to the plan administrator, here the Fund, to 

assist in its preparation of the annual report. See 29 U.S.C. 

§1023(a)(2)(A). The information received by the Fund must be 

maintained publicly. 29 U.S.C. § 1026(a). 

 It was Coyle's responsibility to approve all 

disbursements to service providers on behalf of the Fund and to 

prepare or to direct the preparation of the financial reports 

submitted to the Fund. Pursuant to the Fund's request, Coyle 

prepared or supervised the preparation of the Schedules A for 

1986, 1987 and 1988 which HCA transmitted to the Fund's 

accountants for inclusion with the federal Forms 5500. 

 Joseph R. Cusumano, the Chief Executive Officer of HCA 

until 1990, devised a scheme whereby HCA would conceal the true 

amount of disbursements and administrative costs, and thereby 

retain as administrative retention a higher amount than reported 

to the Fund or than permissible under at least some of the 

contracts and under New Jersey law. See Dental Plan Organization 
5 

Act, N.J. Stat. Ann. §§ 17:48D-1 to 17:48D-24 (West 1985 and 

Supp. 1995). In order to effectuate this scheme, Coyle prepared 

the Schedules A with false or distorted figures, overstating the 

amounts paid to medical service providers and understating the 

amounts retained by HCA. Agent James L. Black, Department of 

Labor, Office of Labor Racketeering, testified that Coyle 

understated the amount of premiums retained by HCA by $84,000 in 

1986, and $214,000 in 1987 and 1988. The government's evidence 

shows an understatement of administrative retention by $298,000 

during the relevant period. Coyle does not contest that the 

figures provided by HCA were false or that he was responsible for 

submitting them falsely. 

 When the scheme was uncovered, Coyle was indicted on 

charges of mail fraud, false statements on documents required by 

ERISA, and blackmail of Cusumano. By the time of Coyle's trial, 

Cusumano, who had been convicted by a jury in 1990 on a 49-count 

indictment for defrauding another welfare benefit plan, see

United States v. Cusumano, 943 F.2d 305 (3d Cir. 1991), cert.

denied, 502 U.S. 1036 (1992), was no longer involved with HCA. In 

fact, Cusumano testified for the prosecution at Coyle's trial in 

this case. The jury returned a verdict against Coyle on all 

counts, and Coyle was sentenced to twenty-seven months 

incarceration with three years supervised release and restitution 

of $298,330.00. 

 On appeal, Coyle challenges the sufficiency of the 

evidence on the mail fraud counts, the propriety of the jury 

instructions on the false statements and blackmail counts, and 
6 

the district court's imposition of enhancements under the 

sentencing guidelines for abuse of trust and the amount of the 

fraud loss incurred by the Fund. 

II.

Mail Fraud Conviction

 Coyle first argues that the evidence with respect to 

the mail fraud was insufficient for the jury to find that he 

engaged in a scheme intended to defraud the Fund or that the 

mailings of the Schedules A were in furtherance of the fraudulent 

scheme. When the sufficiency of the evidence at trial is 

challenged, we must view the evidence in the light most favorable 

to the government. Glasser v. United States, 315 U.S. 60, 80 

(1942). A claim of insufficiency of evidence places a very heavy 

burden on the appellant. We must affirm the convictions if a 

rational trier of fact could have found defendant guilty beyond a 

reasonable doubt, and the verdict is supported by substantial 

evidence. United States v. Gonzalez, 918 F.2d 1129, 1132 (3d 

Cir. 1990), cert. denied, 498 U.S. 1107, and cert. denied, 499 

U.S. 968, and cert. denied, 499 U.S. 982 (1991). 

 The mail fraud statute, 18 U.S.C. § 1341, proscribes 

any "scheme or artifice to defraud" in which the defendant 

participated with the specific intent to defraud and in which the 

mails were used "in furtherance of the fraudulent scheme." United 

States v. Hannigan, 27 F.3d 890, 892 (3d Cir. 1994). The scheme 

"need not be fraudulent on its face but must involve some sort of 

fraudulent misrepresentations or omissions reasonably calculated 

to deceive persons of ordinary prudence and comprehension." 
7 

United States v. Pearlstein, 576 F.2d 531, 535 (3d Cir. 1978) 

(citation omitted). Proof of specific intent is required, id. at 

537, which "may be found from a material misstatement of fact 

made with reckless disregard for the truth." Hannigan, 27 F.3d at 

892 n.1. 

 Coyle argues that the Fund was not induced to enter 

into these contracts by fraud. The issue before us is not 

whether there was fraud in the inducement of the contract, but 

whether Coyle intentionally engaged in a scheme by which the Fund 

was defrauded of premiums under the guise of administrative 

costs. There is sufficient evidence that there was such a 

scheme, and that Coyle knowingly participated in it. 

 There was testimony that the amounts reported on the 

Schedules A which Coyle prepared for the Fund did not accurately 

reflect the administrative costs retained and the amounts paid to 

providers. App. at 259-64. Cusumano, who was intimately 

involved in the scheme, testified that "we reported improperly, 

with my full knowledge, and kept more dollars for administration 

than we were supposed to where we were compelled to by the New 

Jersey contract and kept more dollars in Pennsylvania by not 

paying the dentists as many dollars as we were supposed to pay 

them, through various functions, we kept an excessive amount of 

dollars for administration so that we could keep the company 

going." App. at 54. 

 Cusumano also testified that Coyle was the HCA 

representative who dealt with the Fund. App. at 56. Moreover, 

it was Coyle who supervised the preparation of the Schedules A by 
8 

the HCA staff and he personally provided the figures for 

administrative costs. App. at 44. 

 HCA accountant Keith Geyer explained that, rather than 

following standard accounting procedures, Coyle set an amount to 

report for administrative retention and directed him to subtract 

that amount plus the amount of Smith's commissions from the 

premiums received to arrive at the amount HCA reported as "claims 

paid." Cusumano testified that a fair retention rate for 

administrative costs would have been at most in the low 20% of 

the total premiums received, App. at 60, and Alex Johns, a 

consultant hired by the Fund, testified that 10% was a fair rate. 

Agent Black produced documents evidencing that HCA's actual 

retention rate (including the amount paid in commissions) was 

between 30% and 70%. See App. at 251-64. 

 Coyle argues that the Fund Trustees were not deceived 

by HCA because they knew that HCA was not accounting to the Fund 

based on HCA's actual payments to the providers but was instead 

accounting to the Fund on the basis of the "usual, customary and 

reasonable" value of the providers' services. Coyle notes that 

although Johns had advised the Trustees that the Fund might be 

entitled to a refund from HCA and that it should cancel its 

contracts with HCA, the Fund did not take that advice. In 

addition, Coyle argues that the government failed to produce any 

evidence that the Fund Trustees reviewed the Schedules A. 

 To the extent that Coyle is arguing the Fund was 

negligent in ignoring Johns' advice and in failing to review the 

Schedules A, we reject the relevance of those allegations, even 
9 

if true. The negligence of the victim in failing to discover a 

fraudulent scheme is not a defense to criminal conduct. United 

States v. Kreimer, 609 F.2d 126, 132 (5th Cir. 1980). As 

Cusumano explained, the false reporting was necessary to the 

scheme to retain the excessive administrative costs, because the 

consequence of accurate reporting would have been that they 

"would have had to lower the price for the ensuing year" for that 

contract. App. at 54. As for the Fund's reliance, Jack Klein, 

the Fund's accountant, testified that he had no obligation to 

independently verify the validity of the figures provided by HCA 

and, therefore, did not do so. An employer trustee for the Fund, 

Theodore Seidenberg, who was later co-chair of Local 286's health 

and welfare and pension boards, testified that the Trustees would 

never have agreed to contract with HCA if they had known that HCA 

was withholding between 50% and 70% for administrative costs. 

App. at 165. A rational jury could infer that the Fund was 

deceived by the intentional actions of Coyle and his associates. 

Coyle's participation in HCA's unlawful activities by preparing 

the Schedules A or directing their preparation with false figures 

and the knowledge that the Schedules A would be sent to the 

Fund's accountant and, eventually, to the IRS fully supports the 

conclusion that he intended that the scheme's illicit objectives 

be achieved. Pearlstein, 576 F.2d at 541. 

 Coyle also contends that even if the three Schedules A 

on which the three mail fraud counts are predicated were intended 

to conceal HCA's true profits from the Fund, the mailings did not 

further the scheme. The three mailings which formed the basis of 
10 

the three mail fraud counts were a mailing of a Form 5500 with a 

Schedule A by the Fund to the IRS in 1987, (Count One), a mailing 

of a Schedule A by HCA to the Fund's accountant in 1988, (Count 

Two), and a mailing of a Form 5500 with the Schedule A by the 

Fund's accountant to the IRS in 1990, (Count Three). 

 The federal mail fraud statute reaches only the use of 

the mails when that mailing is part of the execution of a fraud. 

Schmuck v. United States, 489 U.S. 705, 710 (1989) (citing Kann 

v. United States, 323 U.S. 88, 95 (1944)). However, the use of 

the mails need not be an essential element of the scheme. Id.

(citing Pereira v. United States, 347 U.S. 1, 8 (1954)). It is 

sufficient if the mailings are "'incident to an essential part of 

the scheme' or 'a step in [the] plot.'" Id. at 710-11 (quoting 

Badders v. United States, 240 U.S. 391, 394 (1916)). We have 

held that the mailings must be sufficiently closely related to 

the scheme to bring the conduct within the ambit of the mail 

fraud statute, United States v. Lebovitz, 669 F.2d 894, 896 (3d 

Cir.), cert. denied, 456 U.S. 929 (1982), and the "scheme's 

completion [must] depend[] in some way on the charged mailings." 

United States v. Otto, 742 F.2d 104, 108 (3d Cir. 1984), cert. 

denied, 469 U.S. 1196 (1985). Even mailings made after the 

fruits of the scheme have been received may come within the 

statute when they are "designed to lull the victims into a false 

sense of security, postpone their ultimate complaint to the 

authorities, and therefore make the apprehension of the 

defendants less likely than if no mailings had taken place." Id.

(citation and quotation omitted). 
11 

 In this case, there was a basis for the jury to 

conclude that the mailings induced the Fund Trustees to accept 

the accuracy of the financial figures on the Schedules A and made 

apprehension of HCA's fraudulent scheme less likely. There was 

sufficient evidence for the jury to infer that but for the 

mailings of the Schedules A with the false amounts HCA would have 

been unable to carry out its scheme either because the true 

figures would have prompted an investigation by the Department of 

Labor, see Transcript of Jury Trial, Dec. 1, 1993 (9:30 a.m.) at 

103-16 (Testimony of Howard Hensley, Chief of Division of 

Reporting and Disclosure, Department of Labor), or because the 

Fund's accountants or consultant would have alerted the Fund to 

the amount of HCA's profit, see Transcript of Jury Trial, Dec. 1, 

1993 (9:30 a.m.) at 25-55 (Testimony of Alex Johns), and 

Transcript of Jury Trial, Nov. 30, 1993 (9:30 a.m.) at 133-52 

(Testimony of Jack Klein). 

 Thus, the mailings were incident to an essential part 

of the scheme, i.e., concealing HCA's true profits. We hold that 

there was sufficient evidence to sustain Coyle's conviction on 

the three counts of mail fraud. 

III.

False Statements Conviction

 Counts Four through Eight charged Coyle with making 

false statements on documents required by ERISA in violation of 

18 U.S.C. § 1027. That section, which can be read and understood 

more easily with some editorial emphasis and bracketed numerical 

insertions, reads: 
12 

Whoever, in any document required by title I 

of the [ERISA] to be published, or kept as 

part of the records of any employee welfare 

benefit plan or employee pension benefit 

plan, or certified to the administrator of 

any such plan, [1] makes any false statement

or representation of fact, knowing it to be 

false, or [2] knowingly conceals, covers up, 

or fails to disclose any fact the disclosure 

of which is required by such title or is 

necessary to verify, explain, clarify or 

check for accuracy and completeness any 

report required by such title to be published 

or any information required by such title to 

be certified, shall be fined under this 

title, or imprisoned not more than five 

years, or both. 

18 U.S.C. § 1027 (emphasis and bracketed numbers added). This 

court has previously stated that the three elements necessary to 

sustain a conviction under section 1027 are (1) the defendant 

made a false statement; (2) knowing it to be false; and (3) in a 

document required by ERISA. United States v. Furst, 886 F.2d 

558, 568 (3d Cir. 1989), cert. denied, 493 U.S. 1062 (1990). 

 Coyle does not argue that the government failed to 

prove that he made false statements knowing them to be false. 

Instead he argues that the district court erred in "refus[ing] to 

give the instruction proposed by the defense limiting the jury's 

consideration to only those factual disclosures on the Schedule A 

forms which were legally compelled." Appellant's Brief at 20. In 

another, but related contention, Coyle argues that the indictment 

charged only one of the disjunctive methods of violating 18 

U.S.C. § 1027, but that the court instructed the jury about both, 

and that this led to a fatal variance. 
13 

 Generally, we review the district court's refusal to 

give certain jury instructions under an abuse of discretion 

standard although where, as here, the question is whether the 

jury instructions stated the proper legal standard, our review is 

plenary. See Government of the Virgin Islands v. Isaac, 50 F.3d 

1175, 1180 (3d Cir. 1995). As on all occasions when we consider 

jury instructions we consider the totality of the instructions 

and not a particular sentence or paragraph in isolation. In Re 

Braen, 900 F.2d 621, 626 (3d Cir. 1990), cert. denied, 498 U.S. 

1066 (1991). 

 Each of the five false statement counts alleges that 

Coyle "in a document required to be published by ERISA . . . and 

required to be kept as part of an employee welfare benefit plan 

by ERISA" unlawfully and knowingly caused the making of a false 

statement and representation of fact, and that those acts 

violated 18 U.S.C. §§ 1027 and 2 (emphasis added). Each of the 

false statements counts unambiguously charges that the false 

information consisted of "the amounts of claims paid, [HCA's 

payments to the physician and dentist providers]," 

"administrative service or other fees" and "total retention." 

Each false statement count unambiguously charges that the false 

reports with which Coyle is charged appeared in the Schedules A 

prepared by HCA and filed by or on behalf of the Fund as part of 

the Forms 5500. 

 We discern what appear to be several different threads 

to Coyle's challenge to his false statements conviction, none of 

which are convincing. We do not understand Coyle to argue that 
14 

the documents, i.e., the Schedules A, were not documents that 

were required by ERISA to be published or kept. He argues 

instead, in somewhat abbreviated fashion, that HCA does not fall 

within the statutory sections that impose the obligation to make 

the factual disclosures that were proven to be false. However, 

inasmuch as the false factual statements were in documents 

required by ERISA to be published or kept, Coyle's argument 

misses the mark. 

 29 U.S.C. § 1023 requires an annual report to be 

published and filed with the Secretary of Labor for every covered 

employee benefit plan, and that it contain specified information. 

Subsection (a)(2)(A) requires that if some of the information 

that the administrator, here the Fund Trustees, needs to submit 

the annual report and to comply with title I of ERISA is 

maintained by "an insurance carrier or other organization which 

provides some or all of the benefits under the plan, or holds 

assets of the plan in a separate account," that organization must 

transmit and certify the accuracy of such information to the 

administrator. (emphasis added). See also 29 C.F.R. § 2520.103-

5(a). Subsection (e) requires that information as to, inter 

alia, total claims paid, commissions paid, and administrative 

fees paid be enumerated on a statement included in the annual 

report (the Schedule A) "[i]f some or all of the benefits under 

the plan are purchased from and guaranteed by an insurance 

company, insurance service, or other similar organization." 

(emphasis added). 
15 

 Coyle contends that HCA is not an "other similar 

organization." The district court instructed the jury that as a 

matter of law HCA was "a medical service provider" and therefore 

subject to the obligation to transmit and certify information 

needed by the administrator to file its annual report. In doing 

so, the court relied on our decision in United States v. 

Martorano, 767 F.2d 63 (3d Cir.) (per curiam), cert. denied, 474 

U.S. 949 (1985). In Martorano, a welfare fund had contracted 

with AMMA Health Center, Inc. to provide outpatient medical 

coverage to union members. Id. at 64. The Fund requested that 

AMMA prepare utilization reports which it needed to complete Form 

5500. Martorano, who prepared AMMA's reports, significantly 

understated its profits on the utilization reports, and was 

indicted under 18 U.S.C. § 1027 for making false statements in 

documents required by ERISA. 

 We rejected Martorano's argument that 18 U.S.C. § 1027 

applies only to fiduciaries of union pension and welfare funds 

and does not apply to medical service providers. We held that by 

selling medical services to the Fund, AMMA fell under the 

statutory coverage of 29 U.S.C. § 1023(e) of ERISA. Id.

Therefore, the "understatement of profits by a health care 

organization that furnishes outpatient medical coverage to 

members of a health and welfare fund governed by ERISA 

constitutes a violation of [18 U.S.C. § 1027]." Id. at 64; see

also United States v. Sarault, 840 F.2d 1479 (9th Cir. 1988) 

(false statements made by attorney representing an assetless 

insurance company). We concluded that the language in 18 U.S.C. 
16 

§ 1027 is broad enough to cover medical service providers and 

reasoned that such a construction would promote the goals of 

ERISA because "[i]f medical service providers are not sanctioned 

for providing false information, plan participants will suffer." 

Martorano, 767 F.2d at 65. 

 Although AMMA, unlike HCA, itself provided the medical 

services, it was HCA that undertook to design, contract for 

and administer the dental and vision care benefit plans for Local 

286's Fund, and it was only HCA that maintained the records and 

was in the position to supply the Fund with the information to 

which 29 U.S.C. §§ 1023(e) and 1023(a)(2)(A) refer. Moreover, it 

was HCA which held the premiums, i.e., the "assets of the plan" 

as referred to in the statute, in a separate account. See

Transcript of Jury Trial, Nov. 30, 1993 (9:30 a.m.) at 140 

(Testimony of Jack Klein). Therefore, we agree with the district 

court that HCA had the reporting and record-retaining obligations 

that ERISA imposes. 

 Coyle also seems to argue that the false statements can 

be excused because they were made in response to questions on 

Schedules A that apply only if the contracts were "experiencerated," and Coyle contends the Fund's plans were not because they 

did not set group premiums by evaluating participant utilization 

of medical services. This is a red herring. Coyle admits that 

HCA completed the Schedules A on behalf of the Fund for the years 

in question as though the contracts were "experience-rated," and 

that the figures for claims paid and administrative costs 

retained in the responses to those questions were false. Coyle's 
17 

argument on the "experience-rated" issue seems based on his 

premise that the crime charged was that of making false 

statements as to factual "disclosures" which were required, but 

as discussed above the crime charged and proven was that the 

false statements appeared on ERISA-required "documents." 

 Moreover, the Fund specifically requested that HCA 

prepare the Schedules A. HCA was obliged by the statute to 

certify the accuracy of its statements. See 29 U.S.C. 

§1023(a)(2)(A). It also had an obligation under title I of ERISA 

to maintain records which provide in sufficient detail 

information from which required documents might be verified and 

checked for accuracy and completeness. See 29 U.S.C. § 1027. HCA 

purported to comply with its obligations by reporting to the Fund 

on the Schedules A it prepared. Even if HCA erred by completing 

the section for experience-rated contracts, the information it 

did provide was proven false, thus violating the prohibition of 

18 U.S.C. § 1027 against "making any false statement or 

representation of fact, knowing it to be false" in a document 

ERISA requires be published or kept. 

 Coyle offers no authority to support the implicit and 

rather bold proposition that one may make false statements or 

supply information to the government on required forms, but avoid 

liability if the false information voluntarily supplied may have 

been more than required. Such an argument would undercut one of 

the purposes of section 1023 of ERISA, which is to enable the 

Department of Labor to use the annual reports and the Schedules A 

to carry out its statutory responsibilities, including the 
18 

initiation and conduct of investigations to assure the integrity 

of the individual plans and the $205 trillion estimated to be in 

ERISA plan assets. We thus reject Coyle's contention that the 

court should have limited the jury's consideration to required 

factual "disclosures." 

 Coyle's other argument, i.e., that the instruction the 

court did give was erroneous because the indictment charged only 

one of the two methods of violating 18 U.S.C. § 1027 but the 

court charged as to both, also stems from Coyle's preoccupation 

with the "disclosure" language. Admittedly, in this respect the 

indictment could have been more carefully drawn, but we see no 

reversible error in the charge. 

 To understand we return to the statute, and the 

disjunctive crimes set forth in 18 U.S.C. § 1027. The statute as 

read by this court, and as read by Coyle, is set forth in the 

Appendix to this opinion. 

 The district court's comprehensive charge correctly 

delineated both crimes. The court explained that the indictment 

charged Coyle, inter alia, with "false statements and concealment 

of facts in relation to documents required by [ERISA]." App. at 

422-23 (emphasis added). After explaining that the jury must 

find that the Fund fell within ERISA, the court stated that the 

Government must prove beyond a reasonable doubt "that [1] the 

defendant made or caused the making of a false statement or 

representation of fact knowing it to be false or [2] knowingly 

concealed, covered up or failed to disclose any fact, the 

disclosure of which is necessary to verify, explain, clarify or 
19 

check for accuracy and completeness any form 5500 Schedules A 

published by the Local 286 Paper Converters Welfare Trust Fund." 

App. at 423 (bracketed material and emphasis added). The court 

then told the jury it must find that the Schedules A submitted by 

Coyle to the Fund were documents required by ERISA, and that 

Coyle acted knowingly. 

 Coyle reads the statute to set out the following two 

methods of violation, i.e., "[t]he first method is by making a 

false statement of fact (or by covering up or failing to disclose 

such fact) the disclosure of which fact is required by Title I of 

ERISA," Appellant's Brief at 19, and the second method is "making 

a false statement of fact, the disclosure of which is not

required by ERISA, but is nonetheless necessary to verify, 

explain, clarify or check the accuracy or completeness of reports 

which are required to be filed." Id. at 20. Coyle misreads the 

statute. 

 The court correctly told the jury that to establish a 

violation the government must prove (1) the knowing making of a 

false statement or representation of fact in an ERISA-required 

document or (2) the knowing concealment, cover-up, or failure to 

disclose any fact the disclosure of which is required or is 

necessary to verify, explain, etc. One violation deals with the 

making of a false statement, the other with the omitting or 

concealment of relevant facts. They are separated by an "or" 

with verbs on either side, i.e., "makes any false statement" or

"knowingly conceals . . ." The statute would charge a violation 

in grammatical terms even if the language describing one or the 
20 

other prong were completely eliminated. In contrast, Coyle's 

reading of the statute erroneously divides the violations in an 

ungrammatical manner. This is evident from the Appendix to this 

opinion. 

 Coyle's theory of a variance between the indictment and 

the charge may stem from the fact that the indictment contained 

surplus language relating to facts the "disclosure of which is 

required" by ERISA, added to what we have referred to as the 

"making false statement" prong of 18 U.S.C. § 1027. That 

language more appropriately belongs with the "knowing 

concealment" prong of 18 U.S.C. § 1027, i.e., concealment or 

nondisclosure of a fact "disclosure of which is required . . . or 

is necessary to verify," etc. The indictment does not expressly 

charge that second violation, although it is arguable that the 

concealment of a necessary fact is but the mirror image of 

supplying false statements of fact, i.e., not disclosing or 

concealing the true facts. 

 Coyle is not entitled to a reversal because of the 

inclusion of the unnecessary "disclosure of which is required" 

language which, at most, is mere surplusage. It is a longstanding principle of criminal procedure that "[a] part of the 

indictment unnecessary to and independent of the allegations of 

the offense proved may normally be treated as 'a useless 

averment' that 'may be ignored.'" United States v. Miller, 471 

U.S. 130, 136 (1985) (quoting Ford v. United States, 273 U.S. 

593, 602 (1927)). Moreover, if the additional language created 

any confusion, the explanation following the "that is" language 
21 

of the same sentence made absolutely clear what the charge 

against Coyle was. Three false statement counts ended with the 

language, "that is, that defendant caused the filing of a 

Schedule A with the IRS reporting falsely the amounts of claims 

paid, administrative service or other fees, and total retention, 

knowing these amounts to be false." App. at 16. The other two 

are similar in respects relevant here. These charges were 

supported by substantial evidence. 

 Because Coyle contends there was a lack of proof that 

the factual disclosures were required, he frames an argument of a 

fatal variance between the indictment and the proof. This is a 

far cry from the classic fatal variance case on which Coyle 

relies. In Stirone v. United States, 361 U.S. 212 (1960), the 

Court held that the trial evidence and the instruction so 

broadened the possible bases for conviction that they "destroyed 

the defendant's substantial right to be tried only on charges 

presented in an indictment returned by a grand jury." Id. at 

217. 

 Here, the concealed facts were the very facts that were 

the subject of the false statements, i.e., the accurate facts as 

to payments to doctors and dentists and HCA's administrative 

costs. Thus, the court's instruction did not prejudice Coyle. 

See United States v. Pelullo, 964 F.2d 193, 216 (3d Cir. 1992). 

In order to convict Coyle for the crime charged, under both the 

indictment and the court's instructions the jury would have had 

to find that there were false statements made on the Schedules A. 

The indictment identified the false statements made in the 
22 

Schedules A with the requisite specificity. See Fed. R. Crim. P. 

7. There were no other allegedly false documents before the 

jury. Therefore, the variance, if any, did not alter the 

elements of the offense charged. See United States v. Asher, 854 

F.2d 1483, 1497 (3d Cir. 1988), cert. denied, 488 U.S. 1029 

(1989). See also Turner v. United States, 396 U.S. 398, 420 

(1970) ("[W]hen a jury returns a guilty verdict on an indictment 

charging several acts in the conjunctive . . . the verdict stands 

if the evidence is sufficient with respect to any one of the acts 

charged."). 

 We reject Coyle's contention that the evidence was 

insufficient to sustain a conviction or that the district court 

erred in its instruction. 

IV.

Blackmail Conviction

 Coyle contends that the district court erred in its 

jury instruction on the blackmail charge. In so arguing, Coyle 

notes correctly that the case law on blackmail is "sparse." 

Nonetheless, we find no ambiguity in the statutory language 

relevant here. 

 The blackmail statute provides: 

Whoever, under a threat of informing, or as a 

consideration for not informing, against any 

violation of any law of the United States, 

demands or receives any money or other 

valuable thing, shall be fined under this 

title or imprisoned not more than one year, 

or both. 
23 

18 U.S.C. § 873. The court's instruction closely tracked the 

statutory language. App. at 429-30. 

 Two blackmail letters were identified in the indictment 

and at trial the government produced evidence of a series of five 

letters written by Coyle to Cusumano beginning October 18, 1990 

and continuing until October 29, 1990. They alternate between 

vague threats, accusations and demands. App. at 81-96. 

 In one of these letters, Coyle advised Cusumano that he 

had "been contacted by the FBI to discuss their investigation of 

the expense accounts you provided them earlier this year," 

stated, "I really don't wish to be involved and hope to stonewall 

the request based on unavailability and a lack of a clear memory 

at this time," and then -- in language that leaves no doubt as to 

its purpose -- stated, "Any attempt to tamper with my severance, 

deferred compensation or paid time off adjustment pay or any 

other moneys due me could reflect in my decision. I know you 

understand." App. at 87-88. 

 Coyle engages in semantic sophistry when he argues that 

because the payment of the benefits was to come from HCA rather 

than Cusumano, he did not "demand" anything from Cusumano within 

the meaning of the statute. But the statute does not require 

that the quid pro quo be a two-party transaction. Coyle's offer 

"to stonewall" the FBI in exchange for receiving Cusumano's 

assistance in securing (or forbearance in interfering with) his 

severance pay from HCA falls within the language of the statute. 

 Coyle argues that the district court erred in denying 

his proposed instruction that he could not be convicted if he was 
24 

entitled to the benefits he demanded. He argues that something 

to which he was entitled could not be "consideration." However, 

what is made unlawful by the blackmail statute is Coyle's use of 

the offer not to report the fraudulent activity or not to 

cooperate with the authorities as leverage over Cusumano, see

United States v. Smith, 228 F. Supp. 345, 348 (E.D. La. 1964), 

whether or not Coyle had a claim of right to the benefits. The 

blackmail statute thus reaches those who would evade their 

responsibility to inform the authorities about a violation of the 

law by exchanging the promise to forebear from giving such 

information for some benefit. It is the use of the information 

in this manner that Congress sought to penalize. A jury could 

find that this is exactly what Coyle did. The district court did 

not err in rejecting Coyle's attempt to restrict the scope of the 

blackmail statute. 

V.

Calculation of Sentence

 Finally, Coyle raises two claims of error in the 

calculation of his sentence. 

 Coyle claims that the district court erred in enhancing 

his offense level by two points for abuse of a position of trust 

pursuant to U.S.S.G. § 3B1.3. A sentencing court must first 

determine whether the defendant held a position of trust, a 

purely legal question for which our review is de novo. United 

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

question, whether defendant abused his position in a way that 
25 

significantly facilitated the crime, is a question of fact which 

we review for clear error. Id.

 "[O]ne has been placed in a position of trust when, by 

virtue of the authority conferred by the employer and the lack of 

controls imposed on that authority, he is able to commit an 

offense that is not readily discoverable." Id. at 342; see also

United States v. Lieberman, 971 F.2d 989, 993 (3d Cir. 1992). In 

both Craddock and Lieberman this court affirmed the two-level 

enhancement, finding it significant that the defendants' 

positions--a Western Union teller and a bank vice president, 

respectively--provided them with the "freedom to commit a 

difficult-to-detect wrong." See Lieberman, 971 F.2d at 993 

(citation and quotation omitted). 

 In this case, Coyle's position as Chief Financial 

Officer of HCA afforded him the authority to conceal HCA's true 

profits and the evidence fully supports the conclusion that the 

Fund's reliance on his accounting expertise allowed him to commit 

a "difficult-to-detect" wrong. Coyle's arguments that the 

government was obliged to offer proof that he was in some way a 

fiduciary or that the Trustees were naive are unavailing. The 

district court's imposition of the two-level enhancement was 

proper. 

 Coyle also challenges the calculation of fraud loss. 

Because Coyle is challenging the district court's legal 

interpretation of "fraud loss," our review is plenary. United 

States v. Badaracco, 954 F.2d 928, 936 (3d Cir. 1992). 
26 

 Under the applicable guideline, the base offense level 

for fraud is six, U.S.S.G. § 2F1.1(a), which must be increased 

according to the size of the loss attributable to the fraud, 

U.S.S.G. § 2F1.1(b). The district court set the amount of fraud 

loss at $298,330, and accordingly enhanced Coyle's offense level 

by eight. U.S.S.G. § 2F1.1(b)(1)(I). This amount was derived 

from testimony at trial about the difference between the amount 

HCA reported to be its administrative retention on the Schedules 

A and the amount it actually retained. The government contended 

that this was a reasonable estimate of the fraud loss because 

there was testimony that if the actual amount of administrative 

retention had been accurately reported, the Fund would have 

renegotiated the contract and demanded a refund. See App. at 164 

(Testimony of Theodore Seidenberg) and App. at 336-41, 351 

(Testimony of Alex Johns). 

 Coyle recognizes that the government's figure may 

accurately measure the magnitude of HCA's misrepresentation of 

its actual costs. He argues that it does not measure any loss 

suffered by the Fund because the Fund could have at most 

renegotiated lower premium contracts and that the amount of fraud 

loss should be reduced by the percentage of the loss which 

derives from the Pennsylvania dental contract because there was 

no obligation to refund premiums under that contract. 

 "As in theft cases, [fraud] loss is the value of the 

money, property, or services unlawfully taken." U.S.S.G. §2F1.1, 

comment. (n.7); see also United States v. Mummert, 34 F.3d 201, 

204 (3d Cir. 1994). Our precedents establish that "fraud 'loss' 
27 

is, in the first instance, the amount of money the victim has 

actually lost" revised upward to the "intended or probable loss 

if either amount [is] higher and determinable." United States v. 

Kopp, 951 F.2d 521, 523, 536 (3d Cir. 1991). But that is not the 

exclusive method of measuring fraud loss. Under the guidelines 

and our precedent, "the offender's gain from committing the fraud 

is an alternative estimate that ordinarily will underestimate the 

loss." U.S.S.G. § 2F1.1, comment. (n.8); see also Badaracco, 954 

F.2d at 938. Also, "[t]he loss need not be determined with 

precision [and] [t]he court need only make a reasonable estimate 

of the loss." U.S.S.G. § 2F1.1, comment. (n.8). 

 In Badaracco, we recognized that certain breaches of 

fiduciary duty comparable to embezzlement may justify estimating 

fraud loss by using the "gross gain" alternative, as expressly 

authorized in Application Note 8. 954 F.2d at 938. In 

Badaracco, a bank president used his position to approve 

financing for real estate developments on the condition that the 

borrowers distribute subcontracting work to companies in which he 

or members of his family had a financial interest. The district 

court calculated the fraud loss by adding together the value of 

the contracts awarded to defendant's family companies. Defendant 

appealed, claiming that the court should have calculated the loss 

based on the net profit earned by the family companies rather 

than the face value of the contracts. Id. at 936. 

 In affirming this aspect of the sentence, we referred 

to our opinion in Kopp, where we declined to accept an automatic 

equation between loss in fraud cases and in theft cases. In 
28 

theft cases, "loss" was defined as "amount taken." In Kopp, we 

had explained that "embezzlement," which is placed under the 

theft guideline, involves "not only a taking but also an action 

akin to a breach of fiduciary duty, which might justify always 

using the amount taken as 'loss.'" 951 F.2d at 530 n.13. Thus, 

we held that under the circumstances in Badaracco, i.e., "the 

officer of a financial institution [who] uses his or her position 

for personal benefit, there is a breach of fiduciary duty 

comparable to that implicated by embezzlement." 954 F.2d at 938. 

This justified using the defendant's "gross gain" as set forth in 

Application Note 8. 

 For similar reasons, we hold that it was appropriate 

for the district court to adopt "amount taken" or "gross gain" as 

the measure of fraud loss, i.e., the difference between the 

amount reported and the amount retained. Inasmuch as this 

encompasses "gross gain," we reject Coyle's contention that the 

amount of fraud loss should be reduced by the amount of 

administrative retention attributable to the Pennsylvania 

contract even though there was no explicit requirement that 

surplus funds be returned in that contract. The circumstances of 

this scheme have a strong resemblance to embezzlement, and HCA's 

position vis-a-vis the Fund had elements strongly comparable to 

those of Badaracco's relationship to the bank. Thus, the 

district court's use of the $298,330 fraud loss figure was in 

keeping with the applicable guidelines, and the district court's 

decision to increase Coyle's base offense level by eight was not 

error. 
29 

VI.

Conclusion

 For the foregoing reasons, we will affirm the judgment 

of conviction and sentence imposed by the district court. 

____________________________ 

TO THE CLERK: 

 Please file the foregoing opinion. 

 _________________________ 

 Chief Judge 
30 

A P P E N D I X

18 U.S.C. § 1027 (with emphasis and bracketed numbers supplied by 

court): 

Whoever, in any document required by title I 

of the [ERISA] to be published, or kept as 

part of the records of any employee welfare 

benefit plan or employee pension benefit 

plan, or certified to the administrator of 

any such plan, [1] makes any false statement

or representation of fact, knowing it to be 

false, or [2] knowingly conceals, covers up, 

or fails to disclose any fact the disclosure 

of which is required by such title or is 

necessary to verify, explain, clarify or 

check for accuracy and completeness any 

report required by such title to be published 

or any information required by such title to 

be certified, shall be fined under this 

title, or imprisoned not more than five 

years, or both. 

18 U.S.C. § 1027 (with emphasis and bracketed numbers supplied by 

Coyle, Appellant's Brief at 19): 

Whoever, in any document required by title I 

of the [ERISA] to be published, or kept as 

part of the records of any employee welfare 

benefit plan or employee pension benefit 

plan, or certified to the administrator of 

any such plan, makes any false statement or 

representation of fact, knowing it to be 

false, or knowingly conceals, covers up, or 

fails to disclose any fact [1] the disclosure 

of which is required by such title or [2] is 

necessary to verify, explain, clarify or 

check for accuracy and completeness any 

report required by such title to be published

or any information required by such title to 

be certified, shall be fined under this 

title, or imprisoned not more than five 

years, or both. 
31 

 

298

 Honorable Donetta W. Ambrose, United States District Judge for 

the Western District of Pennsylvania, sitting by designation.