United States v. Copple

• Court: Court of Appeals for the Third Circuit
• Decided: May 17, 1994
• Docket: 93-3003
• Status: Unknown

Opinion

Opinions of the United 1994 Decisions States Court of Appeals for the Third Circuit

5-17-1994

United States of America v. Copple, et al. Precedential or Non-Precedential:

Docket 93-3003

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This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova University School of Law Digital Repository. It has been accepted for inclusion in 1994 Decisions by an authorized administrator of Villanova University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu. UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _________________

No. 93-3003 _________________

UNITED STATES OF AMERICA,

Appellee

v.

COPPLE, JOHN R., an individual; MECHEM FINANCIAL INCORPORATED, a corporation,

JOHN R. COPPLE,

Appellant

_________________________________________________

On Appeal From the United States District Court for the Western District of Pennsylvania (D.C. Criminal No. 91-00026-1E) _________________________________________________

Argued: August 27, 1993

Before: BECKER, NYGAARD and ALITO, Circuit Judges.

(Filed: May 17, 1994)

LEONARD G. AMBROSE III (Argued) WILLIAM P. WEICHLER Ambrose, Friedman & Weichler 319 West 8th Street Erie, PA 16502-1495

Attorneys for Appellee

THOMAS W. CORBETT, JR. United States Attorney BONNIE R. SCHLUETER (Argued) Assistant U.S. Attorney Office of the United States Attorney 633 U.S. Post Office and Courthouse Pittsburgh, PA 15219 Attorneys for Appellant

_________________________

OPINION OF THE COURT _________________________

BECKER, Circuit Judge.

John Copple, former President of Mechem Financial,

Inc., ("Mechem"), an investment firm specializing in the

management of "pre-need" funeral funds, was convicted by a jury

of mail fraud, 18 U.S.C. §§ 1341, 1342, and income tax evasion,

26 U.S.C. § 7201. The district court sentenced him to 71 months

imprisonment, a $100,000 fine and three years supervised release,

and ordered him to pay over $4 million in restitution. In this

appeal, Copple challenges both his conviction and sentence.

Copple challenges his conviction on two principal

grounds. First, he argues that the government failed to comply

with the requirements of 26 U.S.C. § 6103(h)(5) (which requires

the IRS to report whether a prospective juror has been the

subject of an audit or other tax investigation) when it limited

the scope of the investigation into the jurors' tax records to

records since 1986. According to Copple, he is entitled to a new

trial because the district court did not strike the entire jury

panel after the limitation on the investigation had been

disclosed. Reading a reasonableness limitation into the statute,

however, we conclude that the requirements of § 6103(h)(5) were met in this case and that the district court did not err when it

refused to strike the jury panel. Second, Copple argues that the

district court abused its discretion in admitting victim impact

testimony that was irrelevant and highly prejudicial. Although

we agree with Copple that the admission of the victim impact

testimony was error, we believe the error was harmless given the

overwhelming evidence of Copple's guilt. We therefore affirm the

conviction.

However, we must vacate the judgment of sentence and

remand the case for resentencing for two reasons. First, the

district court increased Copple's offense level four levels

because of the amount of money involved and the large number of

victims, which, whether viewed as an enhancement under

§2F1.1(b)(2) or as an upward departure, was improper; second, the

court ordered Copple to pay restitution without making the

required findings about Copple's ability to pay. On remand, the

district court is free to reconsider alternative grounds for

upward departure or increase in the offense level mentioned in

the original presentence report but not factored into the

original sentence. It also must support any order of restitution

with factual findings about Copple's ability to pay the order,

the financial need of his family, and the relationship between

the loss caused and Copple's conduct.

I. BACKGROUND

Over the years a practice has developed in the funeral

home business whereby persons who wish to rest assured that their funeral needs are taken care of in the event of a sudden or

unexpected death may purchase "pre-need" funeral plans with the

funeral director of their choice. In 1986, two Pennsylvania

funeral directors, W. James Scott and Michael Orlando, realizing

that many funeral directors who had sold "pre-need" funeral plans

did not have the time or expertise to manage the plan funds, or

to deal with the tax, accounting, and disbursement problems

associated with the funds even when they had turned the funds

over to conventional trust management plans, conceived of a

business idea -- a money management firm specializing in "pre-

need" funeral accounts. As funeral directors themselves,

however, Scott and Orlando lacked the expertise needed to make

such a company successful, and hence they sought the aid of

someone with considerable experience as an insurance agent and

financial planner, defendant Copple.

Copple jumped at the chance to run a money management

business like the one Scott and Orlando proposed. He offered to

put up $50,000 if Scott and Orlando would contribute their

expertise in the funeral business to the venture. They agreed,

and Mechem was formed. Copple became president, and Scott and

Orlando became "silent partners." Copple promised to oversee the

investment decisions himself and to invest the money in "the

safest place."0

0 Soon after the company was formed, both Scott's and Orlando's relationship with Copple deteriorated. Copple presented Scott and Orlando with bills for start-up costs. Scott countered by suing Copple. Orlando's response was to give up his stock in the company in return for a fee for consulting services. As a result of these disputes, Scott and Orlando ceased to have meaningful Copple sold funeral directors on Mechem's services with

promises of high yields and low risk. He directed his staff to

tell the funeral directors that Mechem invested the "pre-need"

funds in high yield, low risk annuities and treasury bonds.

Mechem sent letters via the United States mail stating that the

money had been invested with reputable insurance companies like

John Hancock, Connecticut Mutual, New England Mutual Life, and

others. One letter told the funeral directors that "[o]ur

investments have been made in insurance companies, annuities, T-

bills, long term municipal bond funds, short-term CD's and money

markets. Our performance has reflected our excellent investment

posture for the last fifteen years."

Copple also had Mechem send out letters representing

that it was fidelity bonded. In particular, the letters pointed

to a policy issued by an agent named James Domino, a bond issued

by the Maryland Casualty Insurance Company, and certain Lloyds of

London bond certificates. In addition, Mechem issued quarterly

statements to the funeral directors reporting the interest that

had accrued on their "pre-need" funds. The sales technique

worked. Eventually, about $5 million in "pre-need" account money

from Pennsylvania funeral directors made its way into Mechem's

responsibilities at Mechem. In 1987, when an accountant reviewed the Mechem corporate records, the officers were listed as Copple, his brother Charles Copple, and G. Gustave McGovern. The records made no mention of Scott or Orlando having any formal association with the company. coffers. Ohio and Massachusetts funeral directors deposited an

additional $7 million.0

Although Mechem and Copple promised the funeral

directors high yields and low risk, they gave them neither.

Copple did not invest any of the money he received for Mechem in

annuities, treasury bills or any similar investments. Mechem had

never purchased any fidelity bond. The Maryland Casualty Bond,

for example, was actually a general liability policy that a

salesman had altered, at Copple's direction, to make it look like

a fidelity or surety bond. And the quarterly reports of interest

earned were complete fabrications.

Copple actually used most of the money for speculative

investments and conspicuous personal consumption. During the

three year life of Mechem corporation, Copple bought $5.7 million

of rare coins, used $2.8 million to run Mechem, applied $1

million to pay death claims, and spent about $2.5 million on

himself. His personal expenses during the time he was running

Mechem were lavish to say the least. They included: $228,000 for

a building project on his home, $196,334 for furniture, $62,081

for jewelry from Les Crago, $70,279 for jewelry from Fortunoff's,

$398,000 for jewelry from Neiman-Marcus, $48,712 for a sable

0 Copple did not spend his entire time operating Mechem. He also acted as a financial advisor to a number of individuals. The three relevant to this case include: Audrey Garfield Woo, a widow who gave Copple $55,000 that she had inherited from her husband to invest for her grandchildren's education, Patrick Mastrian who gave Copple $50,000, and Virginia Sczepanski who gave him $25,000. All of this money was commingled with the Mechem "pre- need" trust money. coat, $480,000 for gifts to his family, and a host of similar

purchases.

The inevitable occurred in 1989. After rumors surfaced

that Mechem could no longer pay the funeral expenses for the

"pre-need" accounts and that Copple had invested all of the money

in rare coins, the funeral directors made a run on Mechem. Many

of the funeral directors asked Mechem to "roll-over" their funds

into other money management companies, but Mechem no longer had

the money to meet these demands. It filed for bankruptcy in

1990.

While administering the bankruptcy, the trustee

discovered Copple's serious mishandling of the Mechem "pre-need"

account funds. He discovered that all but $250,000 of the

individual "pre-need" account money that had been initially

placed in the Mechem investment account had been transferred to

the John R. Copple account, from which both business and personal

disbursements were made. Some of the assets were still in

Copple's hands. Copple turned over to the trustee the rare

coins, which were sold at auction for $209,045. The trustee took

control of four bank accounts which contained $68,875.73 and an

escrow account containing $210,480.78. He also secured the

return of a $110,000 deposit that Copple had placed at Neiman-

Marcus for the purchase of a 38.33 carat diamond. Most of the

money, however, was gone. At last count, the creditors,

including the funeral directors, will recoup about twelve cents on the dollar.0 The total amount of money lost by the victims

relevant to this criminal case was $4,257,940.45.

On October 17, 1991 a grand jury in the Western

District of Pennsylvania returned a 37-count indictment charging

Copple and Mechem with mail fraud and tax evasion. Counts 1-16,

18-27, 29-32, and 34 charged Copple and Mechem with mail fraud of

the funeral directors. Counts 17, 28, and 33 charged Copple and

Mechem with mail fraud of individual investors.0 Counts 35-37

charged Copple with income tax evasion for failing to file

returns for 1986, 1987 and 1988.0

After a trial lasting about a month, the jury found

Copple guilty on all counts. On December 18, 1992, the district

court sentenced Copple on the counts covered by the Sentencing

Guidelines (the "Guidelines") to 71 months imprisonment, a

$100,000 fine, and three years supervised release. He also

ordered Copple to pay $4,257,940.45 in restitution to be made

through the bankruptcy trustee. On the counts not covered by the

Guidelines, the court sentenced Copple to five years imprisonment

to be served concurrently with the Guidelines sentence. Copple

0 The Pennsylvania Board of Funeral Directors and the Pennsylvania Attorney General required the funeral directors, as a condition of keeping their licenses, to replace the money that had been taken from the "pre-need" trusts. 0 At trial, the district court granted a motion to dismiss Mechem from the indictment because the corporation was defunct. 0 During the three years he ran Mechem, Copple did not file any personal tax returns. At trial, the IRS estimated Copple's total tax liability to be $753,323; minus withholdings and credits, the IRS claimed that Copple owed taxes of $665,859 for the three years. has filed a timely appeal challenging both his conviction and

sentence.

II. COPPLE'S CHALLENGES TO HIS CONVICTION

A. The 26 U.S.C. § 6103(h)(5) Claim The first issue we address is Copple's claim that we

should reverse his conviction because the requirements of

§6103(h)(5) were not met.0 Section 6103(h)(5) provides in

relevant part: in connection with any judicial proceeding [related to tax administration] to which the United States is a party, the Secretary shall respond to a written inquiry from . . . any person (or his legal representative) who is a party to such proceeding as to whether an individual who is a prospective juror in such proceeding has or has not been the subject of any audit or other tax investigation by the Internal Revenue Service. The Secretary shall limit such response to an affirmative or negative reply to such an inquiry.

26. U.S.C. § 6103(h)(5).

On July 27, 1992, about a month before jury selection,

Copple moved pursuant to § 6103(h)(5) for disclosure of tax

background information of prospective jurors. In its response to

Copple's motion, the government agreed to provide the

information, but stated that it would be virtually impossible to

obtain tax audit information from prior to 1986. The district

court granted Copple's motion for the § 6103(h)(5) investigation,

0 Our review of this issue is plenary since it requires the interpretation of a federal statute. See Air Courier Conference/Int'l Comm. v. U.S. Postal Serv., 959 F.2d 1213, 1217 (3d Cir. 1992). but did not mention whether the IRS was to investigate the tax

records of the prospective jurors for the years preceding 1986.

The government provided Copple with the IRS review

indicating that none of the prospective jurors had been audited

or investigated from 1986 to 1991, the years for which the IRS'

records were computerized. At a hearing the day before

commencement of trial, Copple claimed that he was entitled to the

tax information without any limitation as to time period. The

government responded that checking records of possible audits

occurring before 1986 would require a manual search, which would

take weeks, even a month, to complete.

Copple then claimed that he was entitled to ask on voir

dire whether any of the prospective jurors had ever been audited

by the IRS or whether any of the prospective jurors had ever been

the subject of a civil or criminal tax investigation; he also

argued that he was entitled to have the IRS verify the answers

the jurors gave. The district court granted Copple's request for

voir dire but declined to order the IRS to verify the jurors'

answers.

On voir dire, the district court asked the prospective

jurors: "Have you or any member of your immediate family ever

been audited by the Internal Revenue Service?" In response to

this question, Juror Number 7, Art Borczon stated that he had

been audited during 1988 and 1989 (the audit for 1989 had not yet

been resolved), that he had paid a deficiency, and that he had

"never [been] satisfied with that." He also represented,

however, that he could be a fair and impartial juror. Juror Number 45, James Henderson, also stated that he had been audited

about 35 years earlier, but he too testified that he could be

fair and impartial. A few other jurors responded that they had

not been audited personally, but that members of their families

had been.0

Copple did not ask that Borczon, Henderson or the other

jurors be dismissed; instead he moved to have the entire panel

rejected because the government had failed to comply with

§6103(h)(5). He provided two bases for his motion. First,

Copple argued that the investigation was inadequate because it

only went back five years. Second, Copple argued that the

investigation of all of the jurors was demonstrably unreliable

because it had failed to disclose Borczon's audits occurring

within the five year period.

The district court, however, denied the motion. Copple

submits that this was error and that his conviction therefore

should be reversed and the case remanded for a new trial. The

government responds that such a ruling was not error because the

district court properly found that ordering the IRS to supply

such information would have unduly delayed the trial and that,

even if it was error, such error was harmless and any prejudice

0 Juror Number 44, Lisa Hayes stated that her father-in-law had been audited. Juror Number 75, John Moore responded that his father had been audited. Juror Number 43, Jim Harry, stated that a company for which he had worked had gotten into trouble with the IRS and had gone out of business. As a result, Harry had lost his job. He said that he could not be impartial and he was dismissed. was cured by asking the prospective jurors about their tax

histories.

The question whether Copple is entitled to a new trial

because the tax investigation was limited to the jurors' records

since 1986 requires us to determine the requirements of

§6103(h)(5), something we have not had occasion to do until now.

Although the statute explicitly provides a defendant with a right

to require that the Treasury provide an affirmative or negative

response as to whether a prospective juror has been audited,0 it

is silent on the appropriate time period covered by the

investigation. In addition, the statute does not specify the

procedures that a district court must follow to carry out the

purposes of the provision, and it is silent on the consequences,

if any, for noncompliance.

1. The Requirements of § 6103(h)(5). Copple argues that the statute's lack of any limitation

on the appropriate time period covered by the investigation

implies that the investigation can have no time limitation and

that the government violated the statute when it limited the

investigation to the preceding five years. In addition to

relying on the statutory language, Copple relies on a Ninth

Circuit opinion, United States v. Sinigaglio, 925 F.2d 339, amended, 942 F.2d 581 (9th Cir. 1991), which held that where the

defendant makes a timely motion for a § 6103(h)(5) investigation,

0 The explanation for this provision apparently is that a juror who has been audited might either be 1) antagonistic to the government or 2) fear retaliation from the government and convict the defendant to curry favor. the investigation must cover all of the years the prospective

jurors paid taxes. Id. at 341. Copple urges this Court to adopt

the Sinigaglio view of § 6103(h)(5).

The government counters with United States v. Spine,

945 F.2d 143 (6th Cir. 1991), in which the Sixth Circuit stated

that § 6103(h)(5) does not require an investigation extending to

all of the years the prospective jurors paid taxes. Spine held

that the requirements of § 6103(h)(5) are met as long as the

court orders an investigation and, if the IRS cannot locate all

of jurors' histories from the time they began paying taxes by the

time of trial, the district court obtains such information on

voir dire. Id. at 148. Spine reached this result by reading a

reasonableness limitation into § 6103(h)(5). According to Spine,

§ 6103(h)(5) merely required the district court to order an

investigation which would be appropriate under the circumstances,

one which would take into account both the cost and inconvenience

of the investigation and the ability to get the same information

on voir dire.

The Sixth Circuit's interpretation of the statutory

language is informed by practical considerations. Allowing a

defendant to request an investigation of all of the potential

jurors' tax information from the time they began paying taxes

could take months, indeed, even as much as a year. See United States v. Johnson, 762 F. Supp. 275, 277 & n.1 (C.D. Cal. 1991),

rev'd on other grounds, 991 F.2d 569 (9th Cir. 1993). Scheduling

criminal cases, which is already difficult enough, would be made

even more difficult since a trial with a current jury pool would have to be postponed for months while the IRS completed an

investigation. See Spine, 945 F.2d at 148.0 This might also

cause serious inconvenience to prospective jurors.0 In addition,

strict compliance with § 6103(h)(5) would also impose substantial

costs on the IRS since defendants would routinely request

information requiring the IRS to conduct manual searches of

noncomputerized records.

Interpreting § 6103(h)(5) to require tax investigations

stretching back twenty or thirty years would transform

§6103(h)(5) into a significant practical bar to tax prosecutions.

It potentially would permit a defendant in a tax case to postpone

a trial indefinitely by continually requesting potential jurors'

tax information. Spine, 945 F.2d at 148. Indeed, interpreting

§6103(h)(5) to require such an extensive search might make tax

prosecutions so expensive that the government would be reluctant

to bring them. See United States v. Nielsen, 1 F.3d 855, 858

(9th Cir. 1993), cert. denied, 1994 U.S. LEXIS 2762 (1994).

0 In United States v. Huguenin, 950 F.2d 23, 30 (1st Cir. 1991), for example, the IRS took nineteen days to complete a manual search of the jurors' tax histories. All of the jurors in that case had filed their tax returns at a single IRS Regional Service Center for all of the years they paid taxes. Had any of the jurors lived outside the region at any other time they were paying taxes, the search time would have been considerably longer. 0 Moreover, it is not clear that all the checks can be completed within a fixed window between identification of the panel and the time for its appearance in court. Further complicating the administration of the jury panel is that when the period between identification and appearance is increased, continuances become more likely. We should not interpret the language of § 6103(h)(5) to

create such an absurd result absent a clear direction from

Congress, see Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 575, 102 S. Ct. 3245, 3252, 73 L. Ed. 2d 973 (1982), United

States v. Schneider, 14 F.3d 876, 880 (3d Cir. 1994), and there

is no such clear direction in either the language or the

legislative history of the provision. As has been mentioned, the

language of § 6103(h)(5) is silent on whether the IRS must search

the tax records for all of the time the jurors began paying

taxes. And the legislative history of § 6103(h)(5) demonstrates

that Congress' principal concern in enacting the provision was

merely to ensure that the government and the defendant would have

access to the same information -- not that the information had

such intrinsic worth that Congress meant to bring prosecutions to

a standstill while the IRS conducted an investigation.0 Spine,

945 F.2d at 147. There is simply no suggestion that § 6103(h)(5)

was meant to create the significant practical barrier to tax

prosecutions that would result if we were to accept Copple's

interpretation. See, United States v. Lussier, 929 F.2d 25, 30

0 Before Congress enacted § 6103(h)(5), the procedure for inquiring into tax records of potential jurors was governed by Treasury Regulation § 301.6103(a)-1(h). This regulation authorized the government to inquire of the IRS whether a prospective juror had been investigated by the IRS. Criminal defendants, however, had no similar right to inquire. When deciding whether to incorporate this regulation into the Tax Reform Act of 1976, Congress decided to allow such disclosures as long as the taxpayer had the same access to the information. Spine, 945 F.2d at 147 (quoting Senate Committee on Finance, 94th Cong., 2d Sess., June 4, 1976, Press Release (1976) reprinted in Tax Magmt. (BNA), Primary Sources, Series II, § 6103 (1976), at 40 (Nov. 1, 1977)). (1st Cir. 1991) (per curiam) ("The statute itself makes no

provision for such an extreme alteration of normal trial

arrangements.").

We therefore adopt the Sixth Circuit's approach and

conclude that § 6103(h)(5) requires only that the investigation

into the tax records of potential jurors meet the standard of

reasonableness.0 Specifically, upon timely request by the

0 Nearly every case considering § 6103(h)(5) has cited Spine favorably and has held that a limitation on the time period covered by the IRS investigation is not reversible error. Nearly all of those cases, however, have analyzed limitations on the time period covered by a § 6103(h)(5) investigation under the rubric of harmless error. See, e.g., United States v. Axmear, 964 F.2d 792, 793 (8th Cir. 1992), cert. denied, 113 S. Ct. 963, 122 L. Ed. 2d 120 (1993); United States v. Droge, 961 F.2d 1030, 1034 (2d Cir.), cert. denied, 113 S. Ct. 609, 121 L. Ed. 2d 544 (1992); Huguenin, 950 F.2d at 29-30; United States v. Schandl, 947 F.2d 462, 469 (11th Cir. 1991), cert. denied, 112 S. Ct. 2946, 119 L. Ed. 2d 569 (1992); United States v. Hardy, 941 F.2d 893, 896 (9th Cir. 1991); United States v. Masat, 896 F.2d 88, 95 (5th Cir. 1990), cert. denied, 113 S. Ct. 108, 121 L. Ed. 2d 66 (1992). But see, Nielsen, 1 F.3d at 858 (where there is substantial disclosure of the information about the persons audited or investigated, voir dire supplements the information, and there is no palpable suggestion of prejudice, § 6103(h)(5) was not violated). While the harmless error approach has a certain appeal, we believe that its use to cure the perceived deficiency in the statutory language is highly questionable and ultimately flawed. Harmless error analysis is typically a retrospective analysis, one that requires the reviewing court to make a considered judgment about the impact an error had on a particular conviction. See Kotteakos v. United States, 328 U.S. 750, 66 S. Ct. 1239, 90 L. Ed. 1557 (1946) (discussing the theory behind harmless error). Courts that have used harmless error analysis to cure the purported "error" of limiting a tax record investigation to six years have used the doctrine in quite a different sense. Rather than using harmless error to consider the particular circumstances of a given case, these courts have used it to prescribe a course of action a district court may take to insulate its "noncompliance" with the statute from challenge on appeal. E.g., Droge, 961 F.2d at 1032-35. When used this way, harmless error analysis becomes a surrogate for defendant, the district court must grant a reasonable period of

time for the IRS to complete a search of the potential jurors'

tax records for the time period requested by the defendant. If

the district court only allows the defendant enough time for the

IRS to conduct a search of the computerized records and not a

search of the noncomputerized records,0 the grant of time will be

reasonable as long as the computer search is made, and the court

elicits on voir dire information about the jurors' tax histories

for the period of time not covered by the investigation.0 We add

only that Congress might be well advised to revisit the provision

interpretation of the statutory requirements in the first instance, but this is not the function of the harmless error doctrine. 0 As has been mentioned, the records are computerized for the years following 1986 and the IRS can retrieve the information without too much difficulty. The likelihood that a juror who had been audited before 1986 would be biased and would refuse to mention that bias on voir dire seems quite small, so that the costs of a manual investigation prior to 1986 might not be justifiable. At all events, as 1986 recedes, the number of jurors who potentially will have had an audit or other investigation which is not recorded on computer will diminish and, eventually, the problem will disappear. 0 Although some cases might be read to require that the responses of the jurors on voir dire should be verified, see, e.g., Huguenin, 950 F.2d at 29, and Lussier, 929 F.2d at 30, we believe there is no need to verify the answers given by the jurors on voir dire because jurors are presumed to respond truthfully to such questions, see Masat, 896 F.2d at 95. Although some prospective jurors might be reluctant to answer such questions truthfully, "veniremen are often asked sensitive and potentially embarrassing questions, including inquiries into their involvement in criminal activity or the involvement of family or friends in criminal activity, their religious or philosophical beliefs, and other matters of a personal nature." Id. We see no reason to depart from the presumption that the potential jurors will respond truthfully. and specify more clearly the intent behind it and its

requirements.

2. Did the district court comply with § 6103(h)(5)? Under our reading of § 6103(h)(5), the district court's

failure to order a complete search of the jurors' past history

was not error. First, after Copple requested the § 6103(h)(5)

inquiry, the district court ordered the clerk to provide a list

of jurors in the case along with other relevant information to

the United States Attorney so that the IRS could conduct the

investigation. This occurred about twelve days before the trial

and it gave the IRS enough time to search the computerized

records and get information about the potential jurors' tax

histories for the period from 1986 to 1991.

Second, the district court conducted an extensive voir

dire about the potential jurors' tax histories and experience

with the IRS including whether they or any member of their family

had been audited. The questioning covered all of the period for

which the jurors had paid taxes. Moreover, the voir dire worked.

It identified a juror who was outside the scope of the IRS audit

(Henderson) and a juror who the IRS for some reason simply missed

(Borczon).0 Borczon, for example, indicated that he had been

unhappy with the audit results but also stated that he could

still be fair and impartial. Apparently, his answers were

satisfactory since Copple did not even move to strike him. In a

sense, then, Copple had access to more accurate information than

0 We do not believe that the fact that the IRS missed Borczon necessarily means that the computerized search was inadequate. he would otherwise have received had the inquiry been limited to

a full IRS investigation.

For all the foregoing reasons, we hold that the

district court complied with § 6103(h)(5).

B. The Victim Impact Evidence 1. Relevance and Prejudice.

During its case in chief, the government called to the

stand a number of the funeral directors who had put their money

in Copple's hands. They testified about their losses, and about

the impact of those losses on their lives. Copple argues that

evidence about the victims' losses was irrelevant under Federal

Rule of Evidence 401, and that the testimony about the impact of

the losses was both irrelevant (or at least of negligible

probative worth) and also unfairly prejudicial, and hence

excludable under Federal Rules of Evidence 401 and 403. Our

review of these challenges to the conviction is for abuse of

discretion. See United States v. Versaint, 849 F.2d 827, 831 (3d

Cir. 1988).

With respect to the testimony about the financial

losses, Copple properly argues that the government does not have

to show that the victims actually suffered a loss to satisfy the

elements of the mail fraud statute. The essential elements of

the crime of mail fraud are 1) a scheme or artifice to defraud;

2) participation by the defendant with specific intent to

defraud; and 3) use of the mail in furtherance of the scheme. 18

U.S.C. § 1341; see United States v. Burks, 867 F.2d 795 (3d Cir. 1989). Proof of actual loss by the intended victim is not

necessary. See United States v. Kelley, 929 F.2d 582, 585 (10th Cir.), cert. denied, 112 S. Ct. 341, 116 L. Ed. 2d 280 (1991);

United States v. King, 860 F.2d 54, 55 (2d Cir. 1988), cert.

denied, 490 U.S. 1065, 109 S. Ct. 2062, 104 L. Ed. 2d 628 (1989).

But that does not mean that evidence of loss was

irrelevant. Proving specific intent in mail fraud cases is

difficult, and, as a result, a liberal policy has developed to

allow the government to introduce evidence that even peripherally

bears on the question of intent. See United States v. Foshee,

606 F.2d 111, 113 (5th Cir. 1979), cert. denied, 444 U.S. 1082,

100 S. Ct. 1036, 62 L. Ed. 2d 766 (1980).0 Proof that someone

was victimized by the fraud is thus treated as some evidence of

the schemer's intent. See, United States v. Heimann, 705 F.2d

662, 669 (2d Cir. 1983) ("While technically the success or

failure of a scheme to defraud is irrelevant in a mail fraud

case, realistically, when the contested issue is intent, whether

or not victims lost money can be a substantial factor in a jury's

determination of guilt or innocence." (citation omitted)). Also

relevant is the defendant's failure to take any steps to

ameliorate the loss. See Anderson v. United States, 369 F.2d 11, 15 (8th Cir. 1966), cert. denied, 386 U.S. 976, 87 S. Ct. 1171,

18 L. Ed. 2d 136 (1967). The government submits that the

evidence about the victims' losses and Copple's refusal to make

0 This policy extends in the other direction as well, and allows the defendant to introduce testimony of collateral transactions that tend to negate the requisite intent. See Id. good those losses was relevant to show Copple's specific intent

to defraud. We agree, with the qualification that district

judges should exercise their wise discretion in imposing limits

on such testimony. The following discussion is a case in point.

Copple's defense was that he had simply made a bad

business decision when he, as trustee, had relied on the advice

of experts to invest in rare coins. Yet the funeral directors

had to pay for their losses out of their own pockets, while he

refused to part with any of the luxuries he had purchased with

the Mechem "pre-need" funds. The evidence of Copple's refusal to

part with the property under such circumstances was, we believe,

evidence of Copple's fraudulent intent. It tended to show that

Copple intended to convert the Mechem "pre-need" money to his own

personal use, something he had no right to do.

In addition, the testimony about the funeral directors'

losses also corroborated the testimony of insurance agent James

Domino, who said that he had never issued a surety bond to Mechem

despite Copple's requests. Yet a few of the funeral directors

testified that they had received a letter on Domino's stationary

stating that the surety bond had been issued, and that letter was

offered into evidence. Thus the fact that the funeral directors

had to pay the losses out of their own pockets corroborated

Domino's testimony that no such bond was issued and showed

Copple's intent to mislead the funeral directors with the letter.

Since the evidence about the extensive losses suffered by the

funeral directors was relevant to show Copple's failure to repay and his intent to defraud, the evidence was admissible under the

low threshold of Rule 401.

When the district court ruled on the admissibility of

the testimony about the funeral directors' losses, however, its

ruling encouraged the government to introduce a wide range of

victim impact testimony in addition to the testimony about the

size of the losses. Some of the victim impact testimony went

beyond anything that was reasonable to prove Copple's specific

intent to defraud.

A number of the funeral directors testified that the

money they had used to pay back the losses came from money they

had saved for their children's college educations. Others

testified that paying back the money had affected their health,

or had been taken from savings dedicated to other special

purposes. For example, in response to the question of what

effect the loss of money had on his business, Frank Mihalcik

answered: "[w]ell, the situation . . . . has affected my health.

I have lost over 60 pounds, and I am currently under a doctor's

care." Terry Starr testified that he had to use every bit of

personal savings he had in order to retrust the lost money. He

then stated that, in order to obtain the money, he and his wife

were forced to break a contract to purchase a home and to use the

down payment money to retrust the money they had lost.

Testimony such as this had either no, or very little,

probative value and was unfairly prejudicial. We believe that it

was irrelevant either for the purposes of proving that Copple had

failed to make up the loss to the funeral directors or for any other reason. Even if there had been some marginal relevance to

the testimony about the particular personal or professional

impact the losses had on the funeral directors, its principal

effect, by far, was to highlight the personal tragedy they had

suffered as victims of the scheme. The testimony was designed to

generate feelings of sympathy for the victims and outrage toward

Copple for reasons not relevant to the charges Copple faced. It

arguably created a significant risk that the jury would be swayed

to convict Copple as a way of compensating these victims wholly

without regard to evidence of Copple's guilt.

In short, we believe that the probative value of the

victim impact testimony was outweighed by unfair prejudice, and

that such testimony should have been excluded under Federal Rule

of Evidence 403.

2. Harmless Error. Although the district court abused its discretion by

allowing all of the victim impact testimony into evidence, we

need not reverse if that error was harmless. Trial error is

harmless if it is highly probable that the error did not affect

the judgment. United States v. Simon, 995 F.2d 1236, 1244 (3d Cir. 1993). High probability exists if the court has a "sure

conviction that the error did not prejudice the defendant." Id.

at 1244 (internal quotations omitted). There is no need to

disprove "every reasonable possibility of prejudice." Id. at

1244 (internal quotations omitted). We believe that the error of

admitting the victim impact statements was harmless because of the overwhelming evidence of both the scheme to defraud and

Copple's specific intent.

First, Copple's claim that he had bought the rare coins

in order to get a higher return for Mechem was refuted by the

bankruptcy trustee's testimony that Copple had sold $877,000

worth of the coins just before declaring bankruptcy and had made

the checks from the coin companies payable to himself -- not

Mechem. Although $450,000 of that money was eventually

transferred to Mechem, Copple could not remember where the other

$427,000 of the proceeds from the sale went.

Second, Copple spent immense amounts of money for

personal use while he was drawing money from the Mechem account.

Copple's personal spending during the three-year life of Mechem

included the following purchases: $228,000 Home improvement, Sesler Builders 196,334 Furniture, Russell's Country Manor 67,694 Home improvement, Kitchens by Meade 70,000 Home improvement, architects and contractors. 62,081 Jewelry, Les Crago 70,279 Jewelry, Fortunoff's 398,000 Jewelry, Neiman-Marcus 48,712 Sable coat 11,000 Other fur coats 480,000 Gifts for family members 230,000 Payments to other Copple-owned businesses 61,000 Automobiles 6,000 Country club fees 3,000 Gambling, Caesar's Palace

At the time of the bankruptcy, Copple had also just put a

$110,000 deposit down on a $450,000 diamond from Neiman-Marcus

that weighed 38.33 carats. Nearly all of the money for these expenditures came from money in the "pre-need" accounts that

Copple had transferred to himself.

Third, the evidence was overwhelming that Copple had

prepared wholly fictitious reports about how Mechem was investing

the money, about the interest earned on the investments, and

about fidelity or surety bonding. Particularly incriminating is

the false letter Copple caused to be sent from Mechem to its

investors six months after it was incorporated stating that

Mechem's "investments have been made in insurance companies,

annuities, T-bills, long-term municipal bond funds, short-term

CD's and money markets," and that Mechem's "performance has

reflected our excellent investment posture for the last fifteen

years." Also highly probative of both the scheme to defraud and

Copple's fraudulent intent was the evidence that funeral

directors were sent fabricated quarterly reports showing the

interest that had accrued on the trust investments, and the

evidence that Copple had ordered a salesman to alter a general

liability policy to make it look like a fidelity or surety bond.

We believe that all of this evidence overwhelmingly

indicates that Copple knowingly devised or participated in a

scheme to defraud and did so with the specific intent to defraud

the funeral directors and others who had invested in Mechem. We

are satisfied that it was highly probable Copple would have been

convicted for violating the mail fraud statute even if the victim impact testimony had been excluded. For these reasons, we hold

that the error was harmless.0

III. SENTENCING ISSUES

A. The Upward Departure At the sentencing hearing the district court stated

that "an upward departure of two levels is appropriate based on

the large number of victims and the amount of monetary loss

involved as provided in section 2F1.1(b)(2)(B) of the

Guidelines." Copple contends that this departure was improper

because the Guidelines adequately take into consideration both

the amount of money involved in the offense (in § 2F1.1(b)(1))

and the number of victims of the fraud (in § 2F1.1(b)(2)(B)).0 We 0 Copple has also argued that the cumulative effect of six trial errors in addition to the admission of the victim impact testimony denied him a fair trial. A new trial is required on this basis only when "'the[] errors, when combined, so infected the jury's deliberations that they had a substantial influence on the outcome of the trial.'" United States v. Thornton, 1 F.3d 149, 156 (3d Cir.), cert. denied, 114 S. Ct. 483, 126 L. Ed. 2d 433 (1993) (quoting United States v. Hill, 976 F.2d 132, 145 (3d Cir. 1992)). The six asserted errors include a prosecutor's allegedly improper remark during the opening statement, three allegedly improper statements by witnesses, the admission of testimony summarizing the testimony of other witnesses, and the showing of a video tape of Copple's home. We have examined the six asserted grounds for error and believe that they were at most nothing more than minor aberrations in a long trial, and did not consist of cumulative evidence indicating a proceeding dominated by passion and prejudice. To the extent any of the incidents constituted error, we believe that in light of the overwhelming evidence of guilt, the errors were harmless and did not deprive Copple of a fundamentally fair trial. 0 Copple argues alternatively that the district court did not really depart upwards but instead gave a four level increase pursuant to § 2F1.1(b)(2) because the offense involved both more than minimal planning and more than one victim. Copple points out that although at sentencing the district court stated that it must therefore consider whether Copple's crime fell outside the

"heartland" of cases which are described in the Guidelines

because either the amount of monetary loss or the number of

victims swindled was so high that the guidelines which

"linguistically apply" significantly understate Copple's

culpability. See U.S.S.G. Ch.1 Pt.A(4)(b) (policy statement).0 We believe that neither ground articulated by the district court

is a valid basis for departure in this case.

To begin with, the amount of monetary loss falls well

within the range of monetary loss explicitly considered in the

Guidelines. Section 2F1.1(b)(1) gives the district court

authority to increase the offense level incrementally according

to the amount of loss. See U.S.S.G. § 2F1.1(b)(1)(A)-(S). The

$4.9 million loss in this case fits squarely within the loss

table's range of $2000 to $80 million. See U.S.S.G.

§2F1.1(b)(1)(N). This is not a case in which the amount of loss

was departing upward, the court checked the box in the judgment that stated "[t]he sentence is within the guidelines range." Copple correctly argues that § 2F1.1(b)(2) allows for a two level increase if the offense involves either more than minimal planning or more than one victim, and that a district court may not impose a four level increase under § 2F1.1(b)(2) if the offense involved both more than minimal planning and a scheme to defraud more than one victim. United States v. Astorri, 923 F.2d 1052, 1057 (3d Cir. 1991). Thus to the extent that the district court did not depart upwards, but rather gave a four level enhancement because the crime involved both more than minimal planning and more than one victim, we hold alternatively that the increase was improper on such a basis. 0 Our review of this issue is plenary. See United States v. Kikumura, 918 F.2d 1084, 1098, 1110 (3d Cir. 1990) (review of upward departure is plenary on whether the increase was permissible and for abuse of discretion on whether the degree of the increase was reasonable). exceeds the highest amount accounted for in the loss table. Since

the Guidelines appear to take into account adequately the amount

of monetary loss in this case, this factor was an invalid basis

for departure. See United States v. Davidson, 984 F.2d 651, 654 (5th Cir. 1993) (upward departure on the basis of amount of money

in a fraud impermissible where $800,000 fraud fell within range

of former Guidelines which had a ceiling of $5 million).

We also believe that the Guidelines adequately

calibrate the offense level to take account of the number of

victims in this case. The loss fell directly on thirty-one

funeral directors, who had to make good for their "pre-need"

customers by agreeing to retrust the money out of their own

pockets and to perform "pre-need" funerals without compensation.

Although thirty-one victims is far more than necessary to trigger

the two level enhancement pursuant to § 2F1.1(b)(2)(B) for

conducting a scheme to defraud more than one victim, thirty one

is not so extraordinarily large a number in a case of this type

that it falls outside the heartland of the fraud provisions. See,

e.g., United States v. Boula, 932 F.2d 651, 656-57 (7th Cir.

1991) (upward departure due to the number of victims in case

involving 3000 victims was not permissible because such a scheme

was not outside the heartland of the number of victims

contemplated by the Guidelines). Cf. United States v. Benskin, 926 F.2d 562, 564-65 (6th Cir. 1991) (relying on the pre-November

1989 Guidelines, the court upheld an upward departure involving

600 victims); Davidson, 984 F.2d at 654 (extraordinarily large number of victims required for upward departure). In our view, the Guidelines, through both the loss table in § 2F1.1(b)(1) and

§ 2F1.1(b)(2)(B), adequately account for frauds involving the

number of victims in this case.

Schemes involving large numbers of victims raise two

principal considerations. First, schemes involving large numbers

of victims tend to impose much greater losses. Second, schemes

involving numerous victims tend to be more systematic, and losses

actually caused by such schemes may underrepresent the amount of

losses the defendant intended. See U.S.S.G. § 2F1.1, background (justifying the enhancement for schemes involving more than one

victim in 2F1.1(b)(2)(B)). In this case, the first consideration

seems to be adequately taken into account by the loss table in

§2F1.1(b)(1), for Copple's offense level was increased to reflect

the total loss in increments that the Sentencing Commission

deemed appropriate. Similarly, the second consideration

generally is adequately taken into account by giving Copple a

one-time enhancement pursuant to § 2F1.1(b)(2)(B) for involving

more than one victim. Although there may be cases in which the

loss table in § 2F1.1(b)(1) disproportionately underrepresents

the amount of intended loss that does not appear to be the case

here.

Moreover, Ponzi schemes, major securities frauds and

other similar frauds involving thousands of victims have been

around since the early twentieth century, and the Commission was

certainly aware of them when drafting the Guidelines. Indeed

such awareness seems implicit in the $80 million ceiling in the

loss table. Frauds of $80 million will almost certainly involve numbers of victims far in excess of the thirty-one involved

here.0 Given the structure of the Guidelines and the interplay

between the loss table and the "more than one victim"

enhancement, the fraud in this case does not appear to involve a

number of victims that is outside the "heartland," and hence a

departure was impermissible. Accordingly the sentence must be

vacated and reconsidered.

Nevertheless, our holding does not preclude the

district court from making an upward departure. At the time it

granted the departure in this case, the district court did not

take cognizance of two bases for increasing the offense level

suggested in the presentence report.0 Although the district 0 Indeed two circuits, the Second and the Eleventh, seem to have imposed a categorical bar on departures based on the number of people involved. See United States v. Mandel, 991 F.2d 55, 58 (2d Cir. 1993); Alpert, 989 F.2d at 459. 0 The presentence report stated:

92. . . . Approximately thirty additional directors and their clients were excluded because the losses were less than $30,000 per funeral director. Also, the mail fraud perpetrated by the defendant involved not only Mechem Financial, Inc., but also Mechem Financial of Ohio as evidenced by the results of the civil investigation conducted by the Ohio Attorney General's Office. If the losses suffered by that affiliate were added to the fraud that occurred in this district, the total loss to the funeral directors would exceed $11 million, and under the provisions of § 2F1.1(b)(1), the offense level would increase by an additional 2 levels.

93. Section 4A1.3 provides that the court may consider imposing a sentence departing from the otherwise applicable guideline range if reliable information indicates that the criminal history does not adequately reflect the seriousness of the defendant's past criminal conduct. A factor that may be considered is prior similar adult criminal conduct not resulting in a criminal conviction. (Section 4A1.3(e)). Paragraph 59 court implicitly rejected these grounds for departure by imposing

the departure in the way it did, nothing prevents the district

court from reconsidering them on remand.0

B. The Restitution Order We must also vacate the portion of the judgment of

sentence ordering Copple to pay $4,257,940.45 in restitution.0

The Victim and Witness Protection Act ("VWPA") allows the

district court to order restitution as part of a sentence. 18

U.S.C. § 3663(a)(1). Section 3664(a) of the VWPA provides the

procedures the district court must employ in ordering the

restitution:

of this report deals with fraudulent transactions involving over $100,000 for which the defendant was not criminally prosecuted. This conduct began in December 1984 but was not discovered for several years. The victim was reimbursed by the defendant's former employer, and criminal charges were not pursued. This conduct is similar to what occurred in the cases of Patrick Mastrian, Audrey Garfield Woo, and Virginia Sczepanski.

Of course we express no opinion on the appropriateness of these bases for increasing the offense level, preferring to leave that determination in the first instance to the district court. 0 On remand, a district court can consider matters not explicitly or implicitly part of the decision in the appellate court. See United States v. Uccio, 940 F.2d 753, 758-59 (2d Cir. 1991); cf., United States v. Kikumura, 947 F.2d 72, 76 (3d Cir. 1991) (law of the case prevented the district court from reconsidering issue explicitly decided by the appellate court). As long as the district court gives Copple adequate notice that it might reconsider these bases for departure and affords an adequate hearing to allow the parties an opportunity to elaborate on their position, see Burns v. United States, 501 U.S. 129, 111 S. Ct. 2182, 2187, 115 L. Ed. 2d 123 (1991), the court may reconsider them. 0 Our review of the restitution issue is plenary. See Air Courier Conference, 959 F.2d at 1217. The court, in determining whether to order restitution under section 3663 of this title and the amount of such restitution, shall consider the amount of the loss sustained by any victim as a result of the offense, the financial resources of the defendant, the financial needs and earning ability of the defendant and the defendant's dependents, and such other factors as the court deems appropriate.

18 U.S.C. § 3664(a) (emphasis supplied). This Court has required

the district courts "'to make specific findings as to the factual

issues that are relevant to the application of the restitution

provisions of the VWPA.'" United States v. Logar, 975 F.2d 958,

961 (3d Cir. 1992) (quoting United States v. Palma, 760 F.2d 475,

480 (3d Cir. 1985)).

In Logar, we identified the factual findings the

district court must make before ordering restitution: 1) the

amount of loss, 2) the defendant's ability to pay and the

financial need of the defendant and the defendant's dependents,

and 3) the relationship between the restitution imposed and the

loss caused by the defendant's conduct. 975 F.2d at 961. We

also held that, notwithstanding estimates of loss in a presentence report, the district judge must point to the evidence

in the record supporting the calculation of loss to the victims.

Id. at 961-62. The district court in this case failed to follow

these procedures.

At the sentencing hearing, the district court ordered

restitution on the following basis: We accept as factual the report in the presentence report concerning money due victims, and this amount of money, of course, is difficult to ascertain without having a hearing that might go on for days, but we do accept as fact those findings in the presentence report and order that the defendant shall make restitution in the amount of $4,257,940.45 through the Trustee of the United States Bankruptcy Court for the Western District of Pennsylvania who will make the distribution to the victims listed in the indictment. It is further ordered that the defendant shall pay to the United States a fine of $100,000 and the costs of prosecution. This fine shall be subject to the rights of creditors.

(emphasis in the original). The district court also stated that

the bankruptcy court should monitor the restitution ("we feel

that the bankruptcy court is better able than this Court to

determine who owes what to whom").

The district court made no findings about Copple's

ability to pay the restitution. The court also made no findings

about Copple's financial needs, or his ability to support himself

and his wife and two children (after his release from jail). We

will therefore remand for the district court to make the factual

findings necessary to support such order of restitution as it may

make. We note in this regard that the district court is not at

liberty to delegate its role with respect to restitution to the

bankruptcy court or the bankruptcy trustee.

IV. CONCLUSION

The judgment of the district court with respect to the

conviction will be affirmed. However, the judgment with respect

to the sentence will be reversed and the case remanded for

further proceedings consistent with this opinion.