Court Opinion

ID: 2963600
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:12:50.519279+00
Date Added: 2024-06-11T11:42:43.813364
License: Public Domain

USCA1 Opinion

	

                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                 ____________________

        No. 94-1343

                              UNITED STATES OF AMERICA,

                                      Appellee,

                                          v.

                                  HAROLD F. CHORNEY,

                                Defendant, Appellant.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                           FOR THE DISTRICT OF RHODE ISLAND

                [Hon. Raymond J. Pettine, Senior U.S. District Judge]
                                          __________________________

                                 ____________________

                                        Before

                                Boudin, Circuit Judge,
                                        _____________

                           Campbell, Senior Circuit Judge,
                                     ____________________

                              and Stahl, Circuit Judge.
                                         _____________

                                 ____________________

            Scott A. Lutes for appellant.
            ______________
            Sean   Connelly,  Department   of  Justice,   with  whom   Sheldon
            _______________                                            _______
        Whitehouse,  United  States  Attorney,  Seymour  Posner  and  Margaret
        __________                              _______________       ________
        Curran,  Assistant  United States  Attorneys,  were on  brief  for the
        ______
        United States.  

                                 ____________________

                                   August 24, 1995
                                 ____________________

                 BOUDIN,  Circuit  Judge.   Appellant Harold  Chorney was
                          ______________

            convicted  of  seven counts  of  making  false statements  or

            reports to a federally insured bank, 18 U.S.C.   1014, and he

            now appeals  to challenge  both his conviction  and sentence.

            We set forth  the evidence in the light most favorable to the

            verdict.  United States v. Tuesta-Toro, 29 F.3d 771, 773 (1st
                      _____________    ___________

            Cir. 1994), cert. denied, 115 S. Ct. 947 (1995).
                        ____________

                 Chorney was president and owner of Cumberland Investment

            Corporation  ("Cumberland"),  a  coin-trading   company  that

            specialized  in  U.S.  silver  dollars.   During  the  1980s,

            Cumberland  obtained a series of loans from the Eastland Bank

            in Woonsocket, Rhode Island.   To secure such loans, Eastland

            Bank required pledged assets worth twice as much as the loans

            themselves.  Most of Cumberland's collateral comprised silver

            dollars.  The gravaman of the charge against Chorney was that

            he engineered a false appraisal.

                 The  pledged silver  dollars  were appraised  by William

            Tebbetts of  the Mayflower Coin  and Stamp Company.   Chorney

            submitted  the  Tebbetts  appraisal to  Eastland  Bank, which

            relied upon the  appraisal in  deciding how much  to loan  to

            Chorney.  The value of an uncirculated silver dollar turns on

            its condition, which is rated on a "mint state" ("MS") scale.

            A  silver dollar in MS-65 condition is considered a "gem" and

            is  worth substantially more than  a coin of  MS-64 or lesser

            quality.

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                 Tebbetts  testified that  in March  1985 he  purchased a

            coin  business, renamed Mayflower, with money given to him by

            Chorney.  Tebbetts assigned all his rights in the business to

            Cumberland, and  Cumberland employed him at  a weekly salary.

            In  June  1985, Tebbetts  examined  hundreds  of the  pledged

            silver dollars  being held by  Eastland Bank and  graded them

            all  between MS-62 and MS-64.   According to Ann Fiumefreddo,

            Chorney's secretary, Chorney directed her to type a letter to

            Eastland Bank on Mayflower letterhead stating that all of the

            silver  dollars  that Tebbetts  had  examined  were of  MS-65

            quality.  Tebbetts  stated that he signed the  letter because

            he wanted to "keep [his] job."

                 In  August   1985,  Tebbetts  signed  an   appraisal  on

            Mayflower  letterhead  appraising Cumberland's  silver dollar

            collection,  including  the coins  pledged to  Eastland Bank.

            Tebbetts graded all the coins as being MS-65, because Chorney

            told him to  do so even  though Tebbetts  knew that this  was

            untrue.   The  letter identified  Tebbetts as the  chief coin

            appraiser  for Mayflower  but did  not disclose  that Chorney

            owned  Mayflower and  employed  Tebbetts.   Fiumefreddo,  who

            typed the  appraisal for  Tebbetts, asked Chorney  whether he

            could have  a company that he owned  appraise another company

            that  he owned.    Chorney replied,  "You're  better off  not

            knowing or don't ask questions; something to that effect."

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                 In mid-1985, Cumberland already had  an outstanding loan

            balance  from Eastland Bank  of over half  a million dollars.

            But after  the false appraisal just  recounted, Eastland Bank

            made additional extensions and renewals of the loans in  late

            1985  and again in each of the next  four years.  As the bank

            increased  and renewed  its loans,  it took  additional coins

            from  Cumberland.   By May  1989, the  balance stood  at $2.5

            million.  Bank officials testified that, starting in the fall

            of  1985, the bank relied on the Tebbetts appraisal in making

            the loan extensions and renewals.

                 Ultimately,  in 1989, Sotheby's  auction house appraised

            the  silver dollars--now  numbering  7,820--that Chorney  had

            pledged to Eastland  over the years  as collateral to  secure

            the loans.   The Sotheby's  appraisal determined that  of the

            7,820 coins,  only one percent  were in  MS-65 condition  and

            that the  overwhelming majority  of the  coins were MS-63  or

            lower.   In  the wake  of that  information, Cumberland  went

            bankrupt,  defaulted on  the loans, and  criminal proceedings

            against Chorney followed.

                 On  May 27, 1993, the jury found Chorney guilty of seven

            counts  of making a false report and statement to a federally

            insured bank.  18 U.S.C.   1014.  Chorney was  acquitted on a

            related  conspiracy count, 18 U.S.C.   371, and on ten counts

            of  mail fraud,  18  U.S.C.    1341.   On  May  9, 1994,  the

            district  court sentenced Chorney to 27 months' imprisonment,

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            followed by three years'  supervised release, and ordered him

            to  pay  $569,469  in  restitution  to  the  Federal  Deposit

            Insurance   Corporation   (Eastland   Bank's   successor   in

            interest),  and $28,000  to  cover  the  cost of  his  court-

            appointed attorney.

                 1.  On this appeal, Chorney's opening set  of challenges

            is  to his conviction.  The first of these--that the district

            court erred in denying his  motion to appear as  co-counsel--

            need  not  detain  us  long.    We  have  held  that  "hybrid

            representation,"  by counsel  and  the defendant,  "is to  be

            employed sparingly and, as  a rule, is available only  in the

            district court's  discretion."  United States  v. Nivica, 887
                                            _____________     ______

            F.2d  1110, 1121 (1st Cir. 1989), cert. denied, 494 U.S. 1005
                                              ____________

            (1990).

                 Here,  Chorney's  request  was  based primarily  on  his

            desire to  present certain constitutional issues  in the pre-

            trial  phase,  although  there  was also  some  reference  to

            Chorney's  desire to  cross-examine witnesses.   The district

            court  gave defense  counsel additional  time to  present the

            constitutional  issues, none  of  which are  pressed on  this

            appeal.   We  see  neither an  abuse  of discretion  nor  any

            indication of prejudice in  the district court's decision not

            to  allow Chorney  to act  as his  own counsel  in presenting

            those issues.

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                 Chorney's next claim of  trial error, based on  Brady v.
                                                                 _____

            Maryland,  373  U.S.  83  (1963),  concerns the  government's
            ________

            failure  to provide  him with  videotapes, photographs  and a

            transcript; all  were made in connection  with the bankruptcy

            trustee's seizure  of assets, including 8,641 silver dollars,

            from  Cumberland's offices on August 17,  1990.  Chorney says

            that  the government  gave him  one inadequate  videotape but

            that he did not learn of the additional materials until after

            he filed this appeal.

                 The additional materials are  not part of the  record on

            appeal, having never been  filed in the district court.   See
                                                                      ___

            Fed. R. App. P. 10(a).  The proper means for Chorney to raise

            his contention was by a motion for a new trial  under Fed. R.

            Crim. P. 33.  See United States  v. Lau, 647 F. Supp. 33,  34
                          ___ _____________     ___

            (D.  P.R. 1986), aff'd, 828  F.2d 871 (1st  Cir. 1987), cert.
                             _____                                  _____

            denied, 486 U.S.  1005 (1988).  Rule 33 permits such a motion
            ______

            to be made at  any time within two years after  judgment, and

            that time has not yet expired.  

                 The requirement of a motion in the district court is not

            some  esoteric formality.   In  present case,  the government

            argues  that the materials in dispute were not covered by the

            Brady doctrine,  and several of the arguments  (e.g., lack of
            _____                                           ____

            materiality) involve issues of fact or  fact-based judgments.

            This court  is not in a good position to resolve those issues

            in the first  instance, and  there is every  reason why  they

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            normally should be winnowed by the trial judge.  Accordingly,

            we decline  to address  the Brady  issue at this  time.   See
                                                                      ___

            generally UnitedStates v.Slade, 980F.2d 27,30 (1stCir. 1992).
            _________ ____________   _____

                 In  his last claim of trial error, Chorney says that the

            district court  erred when  it excused  a juror  during final

            jury deliberations and permitted  an 11-member jury to return

            a verdict.  Fed.  R. Crim. P.  23(b) permits this course,  in

            the  trial  court's  discretion,   "if  the  court  finds  it

            necessary to excuse a juror for just cause" after the case is

            submitted to the full  jury.  Chorney objects that  the court

            abused  its discretion  and, in  addition,  failed to  make a

            formal finding of just cause.

                 The case was submitted  to the jury on the  afternoon of

            Monday, May 24, 1993.   Deliberations continued the next day.

            On  the morning of Wednesday,  May 26, juror  Giguere did not

            appear  because his eldest son  had been killed while working

            on  a construction job.  After Chorney declined to consent to

            an  11-member jury, the trial judge said that he was inclined

            to adjourn for six  days (Monday, May 30, being a holiday) to

            see   whether   Giguere  would   be   able   to  rejoin   the

            deliberations, but  the judge  expressed some  concerns about

            this delay.

                 The   court  then  summoned   the  jury,  explained  the

            situation, indicated  its tentative solution,  but also  said

            that the delay "may be just  enough to break the momentum, to

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            break your  chain of thought .  . . ."   Without objection by

            either  side, the court asked the jury to reflect and provide

            its own assessment.  The jury retired and returned to express

            a   preference  for  continuing  its  deliberations.    After

            reflecting,  the district  court allowed  the jury  to resume

            deliberations  on  Thursday,  May  27, and  the  verdict  was

            rendered later that day.

                 In managing juries,  trial judges  are constantly  faced

            with  practical   problems,  ranging  from   jurors'  dentist

            appointments to personal disputes  among jury members to rare

            family  tragedies like this one.   Quite often  some costs or

            risks  attend every alternative open to the court.  Where the

            trial judge  takes the time to hear  counsel and thoughtfully

            weighs the  options, we  will not  second guess  the decision

            unless the balance struck is manifestly unreasonable.  Accord

            United States v. Doherty,  867 F.2d 47, 71 (1st  Cir.), cert.
            _____________    _______                                _____

            denied, 492 U.S. 918 (1989).
            ______

                 The facts  already described  make it evident  that this

            was a classic close call.  It is true, as  Chorney says, that

            the  district   court  did   not  seek  to   contact  Giguere

            immediately  to see  whether he  thought he  could resume  on

            Tuesday; but  whatever the answer, the  substantial delay and

            the disruption of ongoing deliberations would  have occurred.

            As  for  the  lack of  a  formal  "just  cause" finding,  the

            standard is not  especially informative and we think that the

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            finding   is   implicit   in   the  trial   court's   careful

            consideration of the matter.

                 2.   At sentencing,  the district  court began  with the

            base offense level of  six for bank fraud, U.S.S.G.    2F1.1,

            and added two levels for more than minimal planning, U.S.S.G.

               2F1.1(b)(2).1    The  court  found  that  the   amount  of

            financial loss involved was $569,469, and added an additional

            eight levels for that loss, U.S.S.G.    2F1.1(b)(1)(I), for a

            total offense level of  16.  Chorney challenges the  district

            court's calculation of loss.

                 Application Note 7(b) to   2F1.1 provides:

                      In fraudulent loan application  cases and
                      contract procurement cases,  the loss  is
                      the actual loss to  the victim (or if the
                      loss has not yet come about, the expected
                      loss).    For  example,  if  a  defendant
                      fraudulently    obtains    a   loan    by
                      misrepresenting the value of  his assets,
                      the loss  is the  amount of the  loan not
                      repaid  at  the   time  the  offense   is
                      discovered,  reduced  by  the amount  the
                      lending institution has recovered (or can
                      expect  to  recover)   from  any   assets
                      pledged to secure the loan.

            U.S.S.G.      2F1.1,  comment   (n.7(b))  (1992).     Because

            Application  Note  7(b),  as  quoted,  went  into  effect  on

            November 1, 1992, it  was not in the guidelines  edition used

                                
            ____________________

                 1Because of  ex post facto concerns,  the district court
                              _____________
            used the  1987 edition of the Sentencing Guidelines in effect
            during the period in which the offenses were committed rather
            than the version applicable  at the time of sentencing.   See
                                                                      ___
            United States v. Harotunian, 920 F.2d 1040, 1041-42 (1st Cir.
            _____________    __________
            1990).   Citations are  to the 1987  edition unless otherwise
            indicated.

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            by  the  district  court.   Nevertheless,  Note  7(b) can  be

            considered  because it generally  represents a clarification,

            not  a substantive change.  United States v. Bennett, 37 F.3d
                                        _____________    _______

            687, 694-95 n.11 (1st Cir. 1994).

                 When the offense was discovered in May 1989, the balance

            of unpaid loans  was about $2.5  million.   To arrive at  the

            loss figure  of $569,469,  the court  first reduced the  $2.5

            million by the value  of the silver dollars and  other assets

            that Chorney had pledged to secure the loan.  Next, the court

            subtracted from the balance an additional $336,951, the value

            of  the 8,641 unpledged  silver dollars that  had been seized

            from Cumberland.   Chorney claims the  $336,951 figure should

            have been higher.

                 The $336,951  figure represents  the value of  the 8,641

            coins, as stipulated to by the parties, when they were seized

            on August 17,  1990.   Chorney says that  the district  court

            should have valued those  coins as of May 5, 1989,  when they

            were worth  $590,602.30, again by stipulation.  Had the court

            used the May  5, 1989,  date, Chorney's  total offense  level

            would have been 15 instead of 16, and  would have resulted in

            a sentencing range of  18 to 24 months, instead  of the range

            of 21 to 27 months actually employed.

                 The   declining  value  of   the  coins   resulted  from

            fluctuations in  the market for  silver dollars.   During the

            sentencing  hearing, the government argued that the unpledged

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            coins should  be valued as  of February 4,  1994, the  day of

            sentencing, when their stipulated value had  declined further

            to $284,401.  By  contrast, Chorney pressed for the  court to

            use the May 5, 1989 date, the date the fraud  was discovered.

            The district  court observed  that prior  to the  August 1990

            seizure of  the coins, the  unpledged silver dollars  were in

            Chorney's possession; by contrast, once the coins were seized

            by the  bankruptcy trustee, they were  removed from Chorney's

            control and more likely  to be available to satisfy  Eastland

            Bank's claims.

                 Obviously, in a case like this one, the selection of any

            specific date  has an element of  arbitrariness; the property

            in question  declined in  value because of  market conditions

            and  no actual  sale  price was  available  to fix  the  loss

            definitively.  On the  other hand, the defendant's misconduct

            in the  first instance  deprived the  bank of pledged  assets

            that,  if they had  been as  falsely represented,  would have

            given  the bank  a 100  percent margin of  protection against

            declines.  As  for the  unpledged assets,  they could  hardly

            have  been used to offset  the bank's losses  until they came

            into the possession of the trustee.

                 We are dealing here with an issue part way between a raw

            question of  law and one  of concrete fact; the  issue is the

            application  of  generally   phrased  guideline  language  to

            specific, but undisputed  facts.  It  is sufficient that  the

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            district court  reached a reasonable outcome.   See generally
                                                            _____________

            Reich v. Newspapers of New England, Inc., 44 F.3d 1060, 1069-
            _____    _______________________________

            70 (1st Cir. 1995).  As there was no cross-appeal, we have no

            occasion to consider various arguments of the government that

            suggest  that  the  district  court was  unduly  generous  to

            Chorney  both in  its valuation  date and  in giving  him any

            credit at all for the seized but unpledged coins.

                 As to the loss computations, Chorney also complains that

            the district court refused to allow him to call witnesses who

            would have testified that Cumberland assets  had been sold by

            the trustee  in an  unreasonable manner for  less than  their

            fair value.  The only specific assets to which Chorney points

            are  coins  that were  pledged  to another  bank.   Chorney's

            position  is that,  if those  coins had  been sold  for their

            proper value, there would have been money left over to reduce

            the losses of Eastland Bank.

                 Under Application Note 7 adopted in 1992  (and quoted in

            text above),  the assets  pledged to  another  bank would  be

            excluded  automatically because  they  were  not  pledged  to

            Eastland Bank.  Without  mechanically reading this limitation

            back into the 1987  edition of the guidelines, we  think that

            the 1987  guidelines also should be read  to disallow general

            excursions designed to explore a defendant's other assets not

            pledged to  the lender.  Our reason for this view goes beyond

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            the   government's   legitimate   concern   with   protracted

            proceedings to something more basic.

                 The governing guideline's emphasis  on loss, as the main

            variable in fixing the offense level, is primarily as a proxy

            for the seriousness of  the fraud aimed at by  the defendant.

            Indeed, from  the outset,  the guidelines have  directed that

            "intended" loss be  used if greater  than actual loss.  E.g.,
                                                                    ____

            U.S.S.G.   2F1.1, comment (n.7) (1988).   A wealthy defendant

            who  commits a  large  fraud is  not  entitled to  a  minimum

            sentence  simply  because  the  victim can  recoup  from  the

            defendant's  other assets.   Some might think  the crime even

            more serious  on account of  a defendant's wealth;  few would

            think it less so.

                 Where a bank loan is fraudulently procured, the original

            loan or  the outstanding balance  is a presumptive  proxy for

            the actual or threatened  loss.  Reducing that amount  by the

            value  of assets pledged to the lender reflects the fact that

            the real sum at risk for the lender is the difference between

            the  amount loaned  and  the collateral.    But to  give  the

            defendant credit for other, unpledged assets is simply a free

            ride  for the wealthy defendant  and wholly at  odds with the

            underlying purpose of the guideline.

                 This  is, of  course, a  generalization.   Perhaps there

            might  be occasions, at least  for cases not  governed by the

            1992 application note,  where a narrow argument might be made

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            for taking account of  unpledged assets, although none occurs

            to us offhand.  Still, in the ordinary case it is the illegal

            transaction  that is  to  be appraised--not  the  defendant's

            overall  wealth--and no  reason  is provided  for making  any

            exception here.

                 Finally, Chorney  challenges the district  court's order

            that he  pay,  as  a condition  of  his  supervised  release,

            $28,000 to  cover the costs of  his court-appointed attorney.

            The statute provides that  "[w]henever the . . .  court finds

            that funds are available  for payment from or on  behalf of a

            person  furnished representation," it may authorize or direct

            payment to  the appropriate parties.   18 U.S.C.     3006A(c)

            and  (f).  "Payment, however,  may not be  directed without a

            finding  that the  funds are  available."   United States  v.
                                                        _____________

            Santarpio, 560  F.2d 448, 455  (1st Cir.), cert.  denied, 434
            _________                                  _____________

            U.S. 984 (1977).  Chorney says that the district court failed

            to make this required finding.

                 As Chorney did not object to the order below, our review

            is for plain error.   Although the district  court apparently

            did not formally find that Chorney had funds available to pay

            the  cost of  his attorney,  the court  did make  the $28,000

            payment subject to  periodic reviews  of Chorney's  financial

            condition.   Although  this  extra safeguard  does not  quite

            comport  with Santarpio,  it  does lessen  the impact  of the
                          _________

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            district  court's  failure  to  determine   that  funds  were

            available.

                 In all events,  the issue of available  funds could have

            been  resolved if  Chorney  had  raised  the issue  with  the

            district court.   We conclude  that Chorney has  not met  his

            burden under the plain error standard to demonstrate that the

            order  "involve[ed]  either  a   miscarriage  of  justice  or

            deviations that seriously impair the fundamental fairness and

            basic  integrity of  the  trial proceedings."   E.g.,  United
                                                            ____   ______

            States  v. Bullard, 37 F.3d  765, 767 (1st  Cir. 1994), cert.
            ______     _______                                      _____

            denied, 115 S. Ct. 1809 (1995).
            ______

                 Affirmed. 
                 ________

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