Court Opinion

ID: 199005
Source: CourtListenerOpinion
Date Created: 2011-02-07 04:22:43+00
Date Added: 2024-06-11T17:26:56.896302
License: Public Domain

219 F.3d 22 (1st Cir. 2000)
UNITED STATES, Appellee,v.ROBERT E. PARADIS, Defendant, Appellant.
No. 99-2124
United States Court of Appeals For the First Circuit
Heard June 5, 2000.Decided July 17, 2000

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE. Hon. D. Brock Hornby, U.S. District Judge.
Thomas B. Wheatley, by appointment of the Court, for  appellant.
Margaret D. McGaughey, Assistant United States Attorney, with  whom Jay P. McCloskey, United States Attorney, was on brief, for  appellee.
Before: Selya and Lynch, Circuit Judges, and Schwarzer,* Senior District Judge.
SCHWARZER, Senior District Judge.
We must decide whether  a defendant convicted of a single count of laundering the proceeds  of bankruptcy fraud was properly ordered to make restitution to the  bankruptcy trustee.
BACKGROUND
This case arises out of a scheme to conceal assets from  the bankruptcy court, the trustee and creditors in the bankruptcy  proceedings of Catherine Petit, defendant Robert Paradis's  employer.  Prior to her bankruptcy, Petit was pursuing a multi-million dollar claim against various parties.  To help finance the  litigation, Petit and several associates (not including Paradis)  persuaded investors to purchase stakes in the outcome of the  litigation.  From 1989 until 1997, they raised roughly $8.2 million  from numerous investors.  In June 1993, an involuntary Chapter 7  (later converted to Chapter 11) petition was filed against Petit. During the course of the bankruptcy proceedings, Petit falsely  denied receiving any income from the sale of her interest in the  litigation.  This fraud on the bankruptcy court ultimately led to  the October 1997 arrests of Petit, Paradis, and several of Petit's  associates.
Paradis's role in the scheme was to conceal Petit's  investment income from her creditors and the bankruptcy court.  As  office manager of a company Petit controlled, Paradis received a  portion of the funds Petit raised through the investment scheme and  deposited them in personal accounts held by him and his wife.  From  those accounts, Paradis paid Petit's business and personal  expenses.  All told, Paradis passed roughly $3 million through his  accounts, depriving Petit's bankruptcy estate and her creditors of  potential access to those funds.
Shortly after his arrest in October 1997, Paradis pled  guilty to one count of money laundering in violation of 18 U.S.C.  § 1956(a)(1)(B)(i) and 18 U.S.C. § 2.  The district court sentenced  Paradis to fifteen months in prison and three years of supervised  release, and ordered Paradis to pay $3 million in restitution to  the United States Trustee in Petit's bankruptcy case.  On this  appeal, Paradis challenges the restitution order and the length of  the term ofsupervised release.  We have jurisdiction under 28  U.S.C. §§ 1291 and 2253.
DISCUSSION
I.  RESTITUTION
A.  Standard of Review
We customarily review restitution orders for abuse of  discretion.  See United States v. Vaknin, 112 F.3d 579, 586 (1st  Cir. 1997).  "To the extent that a challenge to a restitution order  hinges on a legal question, however, the sentencing court's answer  to that question is reviewed de novo."  Id.
B.  Application of Restitution to Money Laundering
At sentencing, both Paradis and the government argued  that because in the usual case--laundering of the proceeds of drug  transactions--the victim is society, restitution is improper in a  case where money laundering is the only offense.  The district  court, however, concluded that because Paradis's money laundering  deprived the bankruptcy trustee of the ability to distribute the  laundered funds to Petit's creditors, restitution was appropriate  and the trustee was a victim for purposes of 18 U.S.C. § 3663A. The court ordered Paradis to pay restitution of roughly $3 million--the aggregate of the laundered funds--to the trustee in Petit's  bankruptcy case.  On appeal, Paradis urges us to reverse the  restitution order on the same ground he argued in the district  court, i.e., that there can be no identifiable victim for purposes  of § 3663A because the victim of money laundering is society. Although the government also took that position in the district  court, on appeal it defends the district court's order to  facilitate our consideration of this issue.
Paradis's argument rests on decisions applying the  grouping provisions of United States Sentencing Guideline § 3D1.2,  under which offenses are grouped for sentence calculation where  they are based on different acts but harm the same victims.  He  relies principally on United States v. Lombardi, 5 F.3d 568 (1st  Cir. 1993).  The issue there was whether a defendant's sentence for  mail fraud and for money laundering should have been included in a  single group.  In rejecting the defendant's argument that his mail  fraud and money laundering convictions involved the same victims  for purposes of grouping under the guidelines, we said, "[t]he  guidelines are clear that, for purposes of these subsections, the  victim of fraud is the insurance company and the victim of money  laundering is society."  The decision is not apposite; it does not  implicate the construction of the restitution statute, 18 U.S.C.  § 3663A, nor does it purport to decide that money laundering could  not produce an identifiable victim.  For the same reasons, the  other decisions on which Paradis relies are inapposite.  See, e.g., United States v. Kunzman, 54 F.3d 1522, 1531 (10th Cir. 1995)  (securities fraud and money laundering); United States v. Gallo,  927 F.2d 815, 824 (5th Cir. 1991) (drug offenses and money  laundering).
We turn now to the statute.  Under 18 U.S.C. § 3663A,  restitution is mandatory where the defendant is convicted of "any  . . . offense against property under [Title 18], including any  offense committed by fraud or deceit . . . in which an identifiable  victim or victims has suffered a . . . pecuniary loss."  18 U.S.C.  § 3663A(c)(1); id. § 3663A(a)(1).  Paradis does not dispute that  money laundering is an offense against property.  See 18 U.S.C.  § 1956(a)(1) ("Whoever, knowing that the property involved in a  financial transaction represents the proceeds of some form of  unlawful activity, conducts . . . a financial transaction . . .")  (emphasis added).  A "victim" under the statute is "a person  directly and proximately harmed as a result of the commission of an  offense for which restitution may be ordered . . . ."  18 U.S.C.  § 3663A(a)(2).
Here, Paradis diverted funds he knew were the proceeds of  Petit's fraud on thebankruptcy court from the bankruptcy estate. To conceal the existence of those funds from the bankruptcy court,  Paradis channeled them through his own accounts, out of which he  paid Petit's personal and business expenses.  The direct result of  Paradis's actions was to conceal from the bankruptcy court and from  the estate $3 million that could have been available to satisfy  claims of creditors.  On these facts, Paradis's argument that  society alone was the victim is untenable and restitution may be  appropriate to the extent identifiable victims exist.
C.  Identification of the Victim
The district court determined that the bankruptcy trustee  was the victim for purposes of § 3663A.  The victim must be one who  was "harmed as a result of the commission of [the] offense."  18  U.S.C. § 3663A(a)(2).  While the trustee may be a victim of  bankruptcy fraud, that was not the charge against Paradis.  His  offense was laundering the proceeds of the fraud.  There is no  evidence that the trustee was harmed as a result of this offense. Its effect was to conceal the proceeds of the fraud and to divert  those funds from the estate where they could have been available to  pay creditors who had filed claims.  But again there is no evidence  of harm to creditors, i.e., no evidence of creditors who filed  claims that went unpaid.  Because there is no evidence of  identifiable victims who suffered harm as a result of Paradis's  money laundering, the restitution order must be vacated.

II.  SUPERVISED RELEASE

1
For the first time on appeal, Paradis challenges the  three-year term of supervised release imposed as part of his  sentence.  Because he did not raise this objection in the district  court, our review is for plain error.  See United States v. Merric, 166 F.3d 406, 409 (1st Cir. 1999).  Paradis must establish  "an obvious and clear error under law that seriously affect[s] the  fairness, integrity or public reputation of judicial proceedings." Id. at 409-10 (internal quotations omitted).  His argument is  merely that three years of supervised release is unnecessary.  This  falls well short of an assertion of plain error.  We therefore  reject Paradis's challenge to his term of supervised release.

CONCLUSION

2
The order of restitution is vacated.  In all other  respects, the judgment is affirmed.

Notes:

*
   Of the Northern District of California, sitting by designation.