United States v. Chorney

• Court: Court of Appeals for the First Circuit
• Decided: August 24, 1995
• Docket: 94-1343
• Status: Published

Opinion

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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