Source: https://law.justia.com/cases/federal/appellate-courts/F3/142/46/506880/
Timestamp: 2020-08-13 08:49:54
Document Index: 173316994

Matched Legal Cases: ['§ 1341', '§ 1346', '§ 1341', '§ 1215', '§ 20', '§ 27', '§ 2', '§ 3663', '§ 2']

United States, Appellee, v. Charles S. Christopher, A/k/a Chris Christopher, Defendant, Appellant, 142 F.3d 46 (1st Cir. 1998) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › First Circuit › 1998 › United States, Appellee, v. Charles S. Christopher, A/k/a Chris Christopher, Defendant, Appellant
United States, Appellee, v. Charles S. Christopher, A/k/a Chris Christopher, Defendant, Appellant, 142 F.3d 46 (1st Cir. 1998)
U.S. Court of Appeals for the First Circuit - 142 F.3d 46 (1st Cir. 1998) Heard Sept. 8, 1997. Decided April 27, 1998
Following the judgment of conviction, "we sketch the facts in the light most favorable to the jury verdict, consistent with record support." United States v. Pitrone, 115 F.3d 1, 3 (1st Cir. 1997).
Here, Christopher is simply splitting hairs. The funds that paid for the purchase of Diamond came out of Diamond's LACOP money and contradicted California's express order that no part of the purchase price for Diamond could come from Diamond's assets. To call them "loans" makes no difference. The later "credits" did not legitimate the transaction, but, the jury reasonably could have found, were merely part of a shell game Christopher devised to hide the nature of the transfers. See United States v. Jimenez-Perez, 869 F.2d 9, 10 (1st Cir. 1989) ("[The jury] could legitimately have presumed that the fabrication[s] w[ere] all the more proof of [defendant's] guilt.").2
Christopher challenges the validity of his conviction in light of McNally v. United States, 483 U.S. 350, 107 S. Ct. 2875, 97 L. Ed. 2d 292 (1987). In McNally, the Supreme Court reversed a fraud conviction based on a deprivation of state citizens' right to honest government services and held that " § 1341[is] limited in scope to the protection of property rights." Id. at 360, 107 S. Ct. at 2882.3
According to Christopher, his conviction exceeds the McNally limitation. First, he reasons that he did not deprive any state of "property," as the states' regulatory interest in his acquisitions amounted to nothing more than the public's right to honest government services--precisely the result forbidden in McNally. Second, Christopher contends that the deception of the state insurance regulators, resulting in increased risk and actual losses of policyholders was at most a form of indirect victimization not prohibited by the wire fraud statute. Christopher says the wire fraud statute requires "convergence"--that is, the scheme must deceive the same person whom it deprives of money of property. This is an issue that has generated a split of authority. Compare United States v. Blumeyer, 114 F.3d 758, 767-68 (8th Cir.) (expressly rejecting convergence doctrine), cert. denied, --- U.S. ----, 118 S. Ct. 350, 139 L. Ed. 2d 272 (1997), with United States v. Lew, 875 F.2d 219, 221-22 (9th Cir. 1989). We deal with these arguments in reverse order, turning first to "convergence" and then the question whether "property" is involved.
We reject Christopher's argument that this court has already adopted the convergence theory. Christopher relies for this proposition on McEvoy Travel Bureau, Inc. v. Heritage Travel, Inc., 904 F.2d 786 (1st Cir. 1990), and United States v. Sawyer, 85 F.3d 713 (1st Cir. 1996). Neither case mentions the term "convergence."
Christopher also seizes on a footnote from our opinion in United States v. Sawyer, 85 F.3d 713 (1st Cir. 1996), a prosecution for a scheme to deprive another of the right to honest government services under the revised § 1346. Sawyer was a lobbyist who, in violation of a state statute, gave gifts to state legislators. This court vacated Sawyer's mail fraud convictions based on defective jury instructions. We then rejected the prosecution's alternative theory that Sawyer's deception of his employer (he had hidden the gratuities) was a prohibited scheme to defraud. The footnote relied on by Christopher stated in relevant part:
Turning to whether we should now adopt a convergence theory, we see little reason to do so. Nothing in the mail and wire fraud statutes requires that the party deprived of money or property be the same party who is actually deceived. The phrase "scheme or artifice ... for obtaining money or property by means of false or fraudulent pretenses, representations, or promises," 18 U.S.C. § 1341, is broad enough to include a wide variety of deceptions intended to deprive another of money or property. McNally itself says nothing about convergence. See United States v. Evans, 844 F.2d 36, 39 (2d Cir. 1988). We see no reason to read into the statutes an invariable requirement that the person deceived be the same person deprived of the money or property by the fraud. If, for example, the role of a government regulator is to protect the monetary interests of others, a scheme to mislead the regulator in order to get at the protected funds will affect "property rights" as required in McNally.
The deception in the present case did not simply relate to depriving the citizens of California, Arizona and Rhode Island of the honest services of government officials in some abstract sense. The three states' insurance codes each provided that its regulators may disapprove an acquisition of an insurance company when "[t]he financial condition of an acquiring person is such as might jeopardize the financial stability or prejudice the interests of its policyholders." Cal. Ins.Code § 1215.2(d) (3) (West 1998); see also Ariz.Rev.Stat. Ann. § 20-481.07(A) (6) (West 1997) (same); R.I. Gen Laws § 27-35-2(d) (1) (iii) (1997) (same). Christopher was accused of intentionally subverting requirements imposed by state insurance regulators designed to protect the financial health of two insurance companies during their purchase by Resolute, Christopher and his associates. By his deceptive representations and by making a deliberate end run around those requirements, Christopher siphoned over $26 million from the coffers of the two companies, diverting to his own purposes funds the regulators sought to protect. Thereafter, both companies became insolvent, threatening or causing actual monetary loss to policyholders and to special funds established under state law to protect policyholders in the event of a company's insolvency. The purpose and result of the fraud plainly related to money. While the true victims were not merely the deceived regulators, the causal connection between the deception and the loss of property is obvious. See McEvoy Travel 904 F.2d at 793.5
We doubt that Christopher made a sufficient showing of good faith reliance on counsel to justify a finding in his favor on that basis. But we need not decide the issue since we have held that "[a] separate instruction on good faith is not required in this circuit where the court adequately instructs on intent to defraud." United States v. Camuti, 78 F.3d 738, 744 (1st Cir. 1996). The district court told the jury here that conviction required a finding that Christopher "knowingly" participated in a scheme to defraud, and defined "knowingly" to mean an act done "voluntarily and intentionally and not because of mistake or accident or other innocent reason." Moreover, the court instructed the jury that Christopher was guilty only if he "knew he was violating the law." Similar instructions were given on the counts for interstate transportation of stolen goods. Because the district court's instructions "sufficiently convey[ed] the defendant's theory," United States v. DeStefano, 59 F.3d 1, 2-3 (1st Cir. 1995) (citation omitted), the refusal to give a reliance-of-counsel instruction was not error.
Taking the instructions as a whole, as they must be taken, see United States v. Arcadipane, 41 F.3d 1, 8 (1st Cir. 1994), they did not encourage the jury simply to equate a violation of the regulatory orders with the commission of wire fraud. That much was evident based on the instruction that "[t]he violation of an insurance regulatory order is not itself a crime." Wire fraud was described as the "transmission of a wire communication in interstate commerce in furtherance of a scheme to defraud." A rational jury could scarcely have applied the evidence of regulatory violations to elements other than whether Christopher knowingly participated in a scheme to defraud and whether he did so with a specific intent to defraud.
Christopher argues that the trial court erred in failing to undertake any actual loss computation, in light of evidence showing offsetting economic value to Diamond and American, especially the remaining value of the collateral. Under the "economic reality approach" adopted by other courts, see United States v. Kopp, 951 F.2d 521, 531 (3d Cir. 1991), Christopher contends, the loss calculation must be based on the net economic loss caused or intended by the defendant. He also places some weight on Application Note 7(b) to § 2F1.1 (providing that "[i]n fraudulent loan application cases and contract procurement cases, the loss is the actual loss to the victim").
Christopher argues that the district court erred in blaming him for the full $26.7 million loss and in not taking into account other causes of the financial harm to American and Diamond.6 The loss figures in the Guidelines are based on the assumption that "the defendant alone is responsible for the entire amount of the victim loss." United States v. Gregorio, 956 F.2d 341, 347 (1st Cir. 1992). Christopher points to evidence presented at trial of two other causes for Diamond's and American's losses: (1) their poor insurance practices before and after his short tenure, and (2) the role of Wayne Reeder, Resolute's majority owner, who owned the properties that served as collateral for the acquisitions (and which were encumbered by liens of over $21 million), as compared with the $548,000 of lien obligations on Mydar-related (and Christopher-owned) properties.
Under the version of the statute applicable to Christopher's case, "the court shall not impose restitution with respect to a loss for which the victim has received or is to receive compensation." 18 U.S.C. § 3663(e) (1) (1988) (repealed 1996). Christopher points out several aspects of his scheme that resulted in the insurance companies' receiving some remuneration. One error below is stipulated: the government agrees with Christopher that restitution of the entire $5.4 million of the Mydar loan is inappropriate because the only counts in the indictment relating to that loan (Counts 5 (wire fraud) and 20 (interstate transportation of stolen property)) involved a wire transfer of only $138,000. Thus, restitution should have been at most $21,438,000 rather than $26,600,000 as ordered below. Although Christopher failed to make this argument below, the government concedes that it is plain error to impose restitution based on losses for which the defendant was not charged in the indictment. See United States v. Gilberg, 75 F.3d 15, 20-22 (1st Cir. 1996).
Christopher claims that the court erred in imposing a one-level upward departure to his sentence based on his violations of regulatory orders including the Rhode Island conditional order. See USSG § 2F1.1(b) (3) (B) (allowing sentencing court to depart upward based on "violation of any judicial or administrative order"). We think there is adequate evidence that regulatory orders as well as less formalized promises were violated. Christopher's argument that this guideline applies only to recidivists is unfounded. See United States v. Shadduck, 112 F.3d 523, 530 (1st Cir. 1997) (reading guideline as permitting departure for any violation of order or decree imposed pursuant to "formal proceedings"); United States v. Newman, 49 F.3d 1, 9-10 (1st Cir. 1995) (affirming enhancement based on defendant's violation of consent decree entered into with insurance regulators)
We note that several other courts have upheld wire fraud convictions based on very similar facts. See United States v. Cooper, 132 F.3d 1400, 1404 (11th Cir. 1998) (upholding conviction based on deception of insurance regulators that harmed policyholders); Blumeyer, 114 F.3d at 767-68 (affirming conviction based on misrepresentations made to insurance regulators that allowed victimization of others); United States v. Cosentino, 869 F.2d 301, 307 (7th Cir. 1989) ("[I]n misleading the Department of Insurance, the scheme permitted the agency to remain in business past the point it would have had the Department been aware of the defendants' activities--and that additional time allowed the defendants more time to take [the victims'] money.")
We note that Christopher is not arguing that others' responsibility for the entire amount of victim loss required the district court to depart downward. See United States v. Shattuck, 961 F.2d 1012, 1016-17 (1st Cir. 1992)