Opinion ID: 529953
Heading Depth: 2
Heading Rank: 1

Heading: The Embezzlement Charges

Text: 28 In counts III and IV of the indictment Furst was charged with violations of 18 U.S.C. Sec. 664 which provides that: 29 Any person who embezzles, steals, or unlawfully and willfully abstracts or converts to his own use or the use of another, any moneys, funds, securities, premiums, credits, property or other assets of any Employee Welfare Benefit Plan or Employee Benefit Plan [is guilty of a crime]. 30 It is indisputable that one substantive element of 18 U.S.C. Sec. 664 is that the account from which funds are embezzled must be one of the two types of accounts defined in the statute; if the account is not governed by ERISA, section 664 is inapposite. Consequently, if the government did not produce evidence from which the jury could conclude that the account from which funds were embezzled was an ERISA account, Furst's motion for acquittal on the section 644 charges should have been granted. 31 Our standard of review is whether the record, when viewed in the light most favorable to the government, contains substantial evidence to support the jury's determination of guilt. See Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942); United States v. Aguilar, 843 F.2d 155, 157 (3d Cir.), cert. denied, --- U.S. ----, 109 S.Ct. 305, 102 L.Ed.2d 324 (1988). 32 The stock transactions which formed the basis for these counts were made in three steps. In step 1 appreciated stock was removed from a non-ERISA account and placed in a second account, WOA Escrow, in return for which the non-ERISA account was to be paid the price for which it had purchased the stock and market interest on that sum. Thus, in step 1 the portion of the stock's value that reflected appreciation over market interest was removed from the non-ERISA account without compensation. The indictment, however, did not charge Furst with any crime with respect to the non-ERISA accounts and any wrongful acts of Furst as to those counts would not constitute a violation of 18 U.S.C. Sec. 644. 33 In step 2 Furst caused an ERISA account to purchase the appreciated stock in Machine Vision or Rocking Horse then held by the second account, WOA Escrow, and the consideration was paid into the second account. The purchase price did not exceed the price at which stock in those companies then publicly traded, although it was significantly in excess of the price at which the non-ERISA account had sold the stock to WOA Escrow in step 1. 34 In step 3 the second account made good its obligation to the non-ERISA account in step 1 and the balance of funds, representing the appreciation in the stock which was removed from the non-ERISA account without compensation, was disbursed to accounts in which Furst had made the FCCB/FFCM investments which had gone bad. 35 The government's theory charges that the purchase by the ERISA accounts in step 2 depleted the ERISA funds. However, this theory is dependent on evidence that the ERISA accounts paid a price in excess of the market value of the stock and without such proof Furst's conviction under 18 U.S.C. Sec. 644 cannot be affirmed. 36 The government asserts that there is evidence that the Machine Vision and Rocking Horse stock had a lower value than claimed by Furst and that the ERISA accounts were accordingly overcharged. The first basis of this argument is the observation that the Machine Vision stock purchased in step 1 at $2.00 per share was sold the same day in step 2 at $4.40 per share, that the Rocking Horse stock purchased in step 1 for $3.25 per share was sold the same day in step 2 at $4.35 per share, and that the WOA Escrow account was used as a sham intermediary for these transactions. See brief for appellee at 31. The second basis of this argument is that the market values asserted by Furst reflect the value of unrestricted stock, that is, stock as to which there was no restriction on sale, while the stock subject to these transactions was severely restricted, although it apparently could be internally traded by NC Bank. The government argues that unrestricted stock is worth more than restricted stock. 9 37 The problem with the first observation is that we have no basis to assume that the ERISA accounts were overcharged, for it may well be that instead the non-ERISA accounts were underpaid. Consequently, the government theory relying on the alleged overcharges in step 2 requires some proof of value to demonstrate the overcharge in addition to the difference in stock prices, so that Furst would not be convicted of an overcharge in step 2 simply because the government had made out a case for under-compensation in step 1. There was no such proof. 38 The problem with the government's second argument that the ERISA funds were depleted is that the government does not contend that it produced any testimony regarding the specific relationship of the market value of restricted and unrestricted stock in Machine Vision and Rocking Horse so that reasonable conclusions could be reached as to the discount from market value to be taken in valuing restricted stock. 39 The government bears the burden of proof on each and every substantive element of a criminal offense. While the government may contest the values Furst associated with the stock which formed the subject of these transfers, it had the burden of affirmatively establishing that the value of the stock was below that which Furst caused the ERISA accounts to pay for it. When the government's prosecution under 18 U.S.C. Sec. 664 arises in the context of a sale of property, the government accordingly bears the burden of producing evidence that the property was worth less than the ERISA accounts paid. 40 The government did not meet its burden of proof in this case. Consequently, though the transactions are certainly disturbing, Furst's motion for acquittal should have been granted on counts III and IV and we will reverse his conviction on those counts and remand for entry of a judgment of acquittal on them. 10