Court Opinion

ID: 194640
Source: CourtListenerOpinion
Date Created: 2011-02-07 02:21:46+00
Date Added: 2024-06-11T12:06:04.465321
License: Public Domain

March 30, 1993      UNITED STATES COURT OF APPEALS
                    FOR THE FIRST CIRCUIT
                                         
No. 92-1790

                  UNITED STATES OF AMERICA,

                          Appellee,

                              v.

                       JOHN M. CRONIN,

                    Defendant, Appellant.

                                         

No. 92-1791

                  UNITED STATES OF AMERICA,

                          Appellee,

                              v.

                      ROBERT E. STARCK,

                    Defendant, Appellant.

                                         

No. 92-1792

                  UNITED STATES OF AMERICA,

                          Appellee,

                              v.

                    NATHANIEL M. MENDELL,

                    Defendant, Appellant.

                                         

        APPEALS FROM THE UNITED STATES DISTRICT COURT

              FOR THE DISTRICT OF MASSACHUSETTS

         [Hon. William G. Young, U.S. District Judge]
                                                    

                                         

                                         

                            Before

                     Breyer, Chief Judge,
                                        

                Aldrich, Senior Circuit Judge,
                                             

                  and Selya, Circuit Judge.
                                          

                                         

Annemarie Hassett with  whom Federal Defender Office was on  brief
                                                    
for appellant John M. Cronin.
Richard C. Driscoll, Jr.,  with whom Driscoll  and Mattingly, P.C.
                                                                  
was on brief for appellants Robert E. Starck and Nathaniel M. Mendell.
Mark  J.  Balthazard,  Special Assistant  United  States Attorney,
                    
with whom A. John Pappalardo, United States Attorney, was on brief for
                        
appellee.

                                         

                        March 30, 1993
                                         

          ALDRICH,  Senior Circuit Judge.  Defendants Cronin,
                                        

Starck and Mendell were  variously convicted on some 15  of a

20 count  indictment for  mail fraud and  inducing interstate

transportation to obtain property by fraud, 18 U.S.C.    1341

and  2314.  Cronin was  sentenced as an  organizer or leader;

Starck and Mendell as managers or supervisors.   They appeal,

claiming that the evidence did not warrant findings of guilt,

or, in any event,  justify these added characterizations, and

that the orders for  restitution were excessive.  We  affirm,

except as to the last.

          The  fraud  involved  sales  of time  shares  in  a

proposed Cape Cod resort, Village Green.  Although there were

many  subsidiary misrepresentations of consequence, the basic

ones  were   that  Village   Green  was  a   sound  long-term

investment;  that  its  property,  then  a  motel,  would  be

renovated for the  1989 season; and that  it was a  member of

RCI, Resort  Condominium International, Inc.   Membership  in

RCI would permit exchanging  time at Village Green for  other

resorts, and was a  most attractive inducement.  In  point of

fact  Village Green had  no financing even  sufficient to get

off the  ground; initial obligations  were not met,  and, not

long  after the  start, foreclosure  and bankruptcy  were not

only  inevitable,  but imminent.    Second,  with respect  to

renovation,  there was  no  bona fide  prospect of  financial

ability  to accomplish it.  Third, the sales pitch was larded

                             -3-

with  RCI  posters;  brochures  were offered  many  customers

(contrary  to RCI's instructions),  and the  sales agreements

recited   membership,  whereas,   in  fact,   the  membership

application was never  completed, and was  rejected.  In  sum

total,  some  $272,000  was  collected of  which  little  was

returned,  with sales  continuing while  other protests  were

ignored.

          Each defendant denies guilt, or, at the least, says

that the  others were more responsible.  According to Cronin,

"[T]he prosecution's  evidence amounted to  nothing more than

mere association between defendant and the sales people (sic)

who  made the  misrepresentations. . .  .    The  prosecution

presented  no substantial  evidence that  defendant had,  or,

more importantly, exercised control  over the manner in which

the  time shares were sold. . .   There was  no evidence that

defendant  read, reviewed, discussed,  or otherwise  knew the

contents of the sales documents. . .   The evidence was  that

the  salespeople   . . .  not  defendant,   told  prospective

purchasers  that  Village Green  was  a member  of  RCI . . .

These  salespeople   were  under  the  direct   and  constant

supervision of Hart, the Project Director."

          In point  of fact Cronin was the  originator of the

development.   He had made contact with one Hatfield, who led

him  to  Starck  and  Mendell  to  provide  financing.    The

financing was never  completed, as he knew, and Hatfield told

                             -4-

him it was essential.   Cronin obtained a sizeable  six month

loan  at 24%  interest  annually, subject  to endorsement  by

Starck  and  Mendell.   He was  to  receive $400,000  for his

contribution to the  development, and was  said not to  share

with Starck and  Mendell as  owners because he  had had  some

difficulty at the  Registry of  Deeds.   He took  a note  and

third mortgage, which, surely, maintained his interest.

          As  to Cronin's  innocence  of what  was going  on,

Hart, the  Project Director,  was partly  hired  by him,  and

reported  to  him.    Cronin,  in  fact,  was  in  charge  of

marketing, and was said to be present every day.  He had been

in  charge of marketing at an earlier development, and was no

amateur.   He  could not  help but  see  the RCI  posters and

brochures having,  in fact,  directed the installation  of an

RCI room, and he told at least one salesman they were already

a member.   (Others said he  said it was  going through as  a

matter of course, which  was equally untrue.)  The  rosy view

painted in his brief is not  what we consider.  The most that

might be said is that the enterprise may have started on good

intentions,  but when that paving ran out it proceeded on the

backs of prone customers.

          We  mention briefly Cronin's objection to testimony

that he instructed  the contract secretary to  place the name

Bernard Cohen on the weekly payroll request at $1,500, at the

same time  telling her that Cohen  was a dead friend  of his.

                             -5-

Cronin  asserts  this  to  have been  irrelevant  and  highly

prejudicial.  Rather, it was highly relevant.  In addition to

showing  that  Cronin  was  improperly  milking  the  scheme,

contrary to  his denial "that money was  paid [him]" (payroll

distributions were in cash), it showed the degree to which he

was in charge.  The court's finding that  relevancy prevailed

over prejudice was well warranted.

          We  pause here to say that enough has been shown to

justify the court's finding, with reference to sentence, that

Cronin was an organizer or leader.  U.S.S.G.   3B1.1(a).

          Turning to Starck  and Mendell, they,  as trustees,

were  the  title  owners,  and had  personally  endorsed  the

purchase note.  The jury  found in their favor on  some early

counts.   They contend, for this and other reasons, that they

did  not  "devise  the  scheme."    Passing  the   fact  that

defendants  can take no  comfort from  inconsistent verdicts,

Harris  v.  Rivera,  454 U.S.  339,  345  (1981),  it is  not
                  

necessary that  a defendant be an original organizer.  United
                                                             

States v. Serrano,  870 F.2d 1,  6 (1st Cir.  1989).  On  the
                 

issue  of the RCI alone there were ample incidents to warrant

conscious deceit.  On top of this, these defendants could not

have been  ignorant of the many  financial difficulties that,

in due course, presaged ruin.

          As  to   the  sentencing  increase   because  these

defendants were found to be managers or supervisors, U.S.S.G.

                             -6-

  3B1.1(b), Starck  and Mendell were, after  all, the owners.

We review  only  for clear  error,  United States  v.  Panet-
                                                             

Collazo, 960 F.2d 256, 261 (1st Cir.), cert. denied sub nom.,
                                                            

Diaz v. United States, 113 S.Ct. 220 (1992), and we see none.
                     

Manifestly they  cannot  deny responsibility  for  deliberate

misrepresentation by salesmen of  which they were aware, even

to the point  of receiving complaints,  simply on the  ground

that they were not  the ones who devised the procedure.  This

would be a happy day for vendors with loose consciences.  The

record   is   replete   with   misrepresentations,   and   of

defendants', at  least  occasional,  awareness  and  lack  of

concern.

          With  reference  to sentences,  Starck  and Mendell

complain  that  the  court   charged  them  with  points  for

obstructing  justice  by  committing  perjury.     Our  prior

rejection  of  this  contention,  United  States v.  Batista-
                                                             

Polanco, 927 F.2d 14,  21-22 (1st Cir. 1991), has  since been
       

confirmed.   United  States  v. Dunnigan,  122  L. Ed.2d  445
                                        

(1993).

          Next, defendants  complain  that their  scheme  had

commenced  prior  to  the  Guidelines.    As  to  the  prison

sentences, they  were concurrent, and even  though mail fraud

counts are separate offenses, see United States v. Lilly, 983
                                                        

F.2d   300  (1st  Cir.  1992),  there   can  be  no  possible

constitutional question.   There  is a problem,  though, with

                             -7-

regard to restitution.  Although Starck  and Mendell state in

their brief that  the court ordered restitution for  the full

amount obtained, this was not  so individually.  No defendant

was convicted on  all counts,  and as to  each defendant  the

court  ordered deducted from the full amount the counts as to

which he  had been acquitted.   This, however,  still charged

him  for more than  the counts on  which he was  convicted --

there  had been  much more  collected than  was named  in the

indictment's  20  counts.    The government  argued  that  in

determining the length of  sentence it was proper to  look at

the entire picture.   This is correct, United States  v. Fox,
                                                            

889 F.2d  357 (1st  Cir. 1989);  indeed, even  to considering

offenses  found by  the court  though there  had been  a jury

acquittal.  United States  v. Mocciola, 891 F.2d 13,  17 (1st
                                      

Cir.  1989).   This,  however, is  for enhancement  of prison

terms  within  the guidelines.    Restitution  is a  separate

matter.  18 U.S.C.    3663.  In United States v.  Hughey, 495
                                                        

U.S. 411  (1990), the defendant, charged,  in several counts,

with  the  use of  stolen credit  cards,  pled guilty  to the

fraudulent  use of one.   The order  for restitution included

use  of others.  The  Court reversed, saying  the outer limit

was "the loss caused by the conduct underlying the offense of

conviction."   Id. at 420.   This decision,  however, did not
                 

entirely clear the air, and the circuits have split as to its

application in mail fraud cases.

                             -8-

          As of  the moment, five circuits  have answered, or

appear disposed  to answer, that the  "offense of conviction"

is  the particular  mailing charged.   See  United States  v.
                                                         

Pivorotto, No. 92-3207,  1993 U.S. App.  LEXIS 2835, at  *10,
         

n.5  (3d Cir. Feb. 22, 1993); United States v. Seligsohn, 981
                                                        

F.2d  1418, 1421 (3d Cir. 1992); United States v. Jewett, 978
                                                        

F.2d 248, 252  (6th Cir. 1992);  United States v.  Streebing,
                                                            

1993  U.S.  App. LEXIS  3303, at  *18-*24  (6th Cir.  Mar. 2,

1993); United  States v. Gravatt, 1991 U.S. App. LEXIS 30671,
                                

at *10-*14 (6th  Cir. Dec.  27, 1991) (rep'd  mem., 951  F.2d
                                                 

350);  United States v. Sharp, 941 F.2d 811, 814-15 (9th Cir.
                             

1991); United  States v. Angelica,  951 F.2d 1007,  1009 (9th
                                 

Cir. 1991); United States v. Wainwright, 938 F.2d 1096, 1097-
                                       

98  (10th Cir. 1991); United  States v. Stone,  948 F.2d 700,
                                             

703-04 (11th Cir. 1991); see also United States v. Marsh, 932
                                                        

F.2d  710, 712-13 (8th Cir. 1991) (Heaney, J., with the other

two  judges concurring in  the result).   Two  circuits have,

however, answered that the  offense includes the scheme as  a

whole.  See United  States v. Stouffer, 1993 U.S.  App. LEXIS
                                      

4737,  *30-*34 (5th Cir. Mar. 16, 1993) (Garza, J., with whom

Smith, J.  concurred; Reavley,  J. dissented on  this issue);

United  States v. Bennett, 943 F.2d 738, 740 (7th Cir. 1991),
                         

cert.  denied,  112 S.  Ct.  2970  (1992); United  States  v.
                                                         

Brothers,  955 F.2d 493, 497 (7th Cir.), cert. denied, 113 S.
                                                     

Ct. 142 (1992); United States v. Langer, 962 F.2d 592, 600-01
                                       

                             -9-

(7th  Cir. 1992); United States v. Turino, 978 F.2d 315, 317-
                                         

19 (7th Cir. 1992).

          This  is   a  difficult  question,   and  we   well

understand the split.  Congress, meanwhile, since defendants'

offenses,  has   amended  the  statute  in   favor  of  broad

restitution.1   Under  these  circumstances  we forego  total

analysis, and  for the brief pre-amendment  period covered by

the present case are content  to accept the lenient  majority

view.   The  sentence  with respect  to  restitution must  be

limited  to the amounts in the counts on which the particular

defendant was found guilty.

          Affirmed, except remanded  for correction of orders
                                                             

for restitution in accordance with this opinion.
                                               

                    

1.        (2)  For the purposes  of restitution,  a
          victim of an offense that involves as  an
          element  a  scheme,  a  conspiracy,  or a
          pattern  of  criminal activity  means any
          person directly harmed by the defendant's
          criminal conduct  in  the course  of  the
          scheme, conspiracy, or pattern.

  3663(a)(2).   Added  by Pub.  L.  No. 101-647,    2509, 104
Stat. 4789, 4863 (Crime Control Act of 1990).

                             -10-