United States v. Fraza

• Court: Court of Appeals for the First Circuit
• Decided: February 21, 1997
• Docket: 96-1219
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT

                                 ____________________



        No. 96-1219



                              UNITED STATES OF AMERICA,



                                      Appellee,



                                          v.



                                     SCOTT FRAZA,



                                Defendant, Appellant.



                                _____________________



        No. 96-1220



                              UNITED STATES OF AMERICA,



                                      Appellee,



                                          v.



                                     JAMES FRAZA,



                                Defendant, Appellant.



                                 ____________________


APPEALS FROM THE UNITED STATES DISTRICT COURT



                           FOR THE DISTRICT OF RHODE ISLAND



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



                                 ____________________



                                        Before



                                 Selya, Circuit Judge,
                                        _____________

                            Aldrich, Senior Circuit Judge,
                                     ____________________

                              and Boudin, Circuit Judge.
                                          _____________



                                 ____________________



____________________


W. Kenneth O'Donnell with whom D'Agostino &  O'Donnell and Anthony
            ____________________           _______________________     _______

        M. Traini were on brief for appellant Scott Fraza.
        _________

            Anthony M. Traini with whom W.  Kenneth O'Donnell and D'Agostino &
            _________________           _____________________     ____________

        O'Donnell were on brief for appellant James Fraza.
        _________

            Ira Belkin,  Assistant United States  Attorney, with whom  Sheldon
            __________                                                 _______

        Whitehouse, United States Attorney, was on brief for appellee. 
        __________  ______________________



                                 ____________________



                                  February 18, 1997

                                 ____________________



ALDRICH, Senior Circuit Judge.  James Fraza and his
                               ____________________



            son  Scott ("James"  and "Scott,"  collectively "defendants")



            were indicted  on various  counts of  fraud, 18  U.S.C.    2,



            1041, 1341,  1344, 1346,  and violations of  the Taft-Hartley



            Act,  18 U.S.C.    371, arising  from a  scheme to  defraud a



            credit union.  After  a four day jury trial,  both defendants



            were  found  guilty  on  all  counts  and  now  appeal  their



            convictions  and   sentences.    We  affirm,   with  a  minor



            exception.



                                    I.  Background
                                        __________



                      In 1989, James offered to purchase 80 acres of land



            in  Coventry, Rhode  Island, from  George  Dupont ("Dupont").



            The  agreed upon  price  was $120,000,  financing to  include



            Dupont  holding  a  mortgage  of $60,000.    James  signed  a



            Purchase and Sale agreement and gave Dupont a  $2,000 deposit



            check, but  it required additional financing  to complete the



            sale.



                      In April  of 1990, James  met with officers  of the



            Coventry Credit Union ("CCU").   During this meeting  he told



            the  officers that  the purchase  price  of the  property was



            $205,000 and that he  was seeking to finance $160,000.   They



            informed him that due  to his prior bankruptcy, no  such loan



            could  be granted.  James  then suggested that  his son Scott



            purchase  the property and take  the loan.   The CCU officers



            agreed  to consider  the  request, but  cautioned that  Scott


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would likely require a  co-signer due to his youth  and short



            credit history.



                      In  May  of  1990,  James and  Dupont  attended  an



            informal "closing" in the back seat of the car of  Leo Dailey



            ("Dailey"), an  attorney whose  firm had represented  CCU for



            over  twenty years.  Dupont signed  two closing statements --



            one reflecting the  actual purchase price of $120,000 and the



            other blank.  Dailey  told Dupont he needed the blank form to



            make  a correction to  a tax computation.   At the same time,



            Dupont  endorsed a  deed  conveying the  property to  Scott's



            construction  company.   No  money  or financial  instruments



            changed hands  at this  time.   After two  abortive attempts,



            James found  a co-signer  and  CCU approved  a $160,000  loan



            based  on the  inflated purchase  price of  $205,000.   CCU's



            appraisal of the fair market value of the property came in at



            $225,000.



                      The "formal" closing was held on June  15.  Present



            were James,  Scott, Scott's co-signer, a CCU loan officer and



            Dailey who was  acting as CCU's  attorney.  Dailey  explained



            that  Dupont was  unavailable and  produced the  signed blank



            closing  form.   He  then filled  in  the purchase  price  as



            $205,000.   After  Scott signed,  the loan  officer disbursed



            $160,000  to Dailey  who  then paid  the  closing costs,  the



            existing  $58,740  mortgage  on  the property  and  gave  the



            remaining  approximately $95,000  to Scott  who in  turn paid


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Dailey  $5,000 for  his  work.   A  short time  later  Dupont



            received Scott's  signed promissory note and  mortgage in the



            amount of $60,000 in the mail.   Dupont was not informed that



            CCU held a $160,000 first mortgage on the property.



                      Within  six months  of  the sale,  Scott filed  for



            bankruptcy.     As  part  of  bankruptcy   proceedings,  both



            defendants,  represented by Dailey, gave deposition testimony



            that  they had  given CCU  an inflated  price for  the Dupont



            property.   At approximately the same time, Dailey's law firm



            mailed Dupont a tax form indicating  that Dupont had received



            $205,000 from  Scott  for  the  property.    In  response  to



            Dupont's  complaints, he  was provided  with a  corrected tax



            form but,  along with it, he  received a copy  of the closing



            statement stating the purchase price as $205,000.



                      Also  about this  time,  the loan  to Scott  became



            delinquent and CCU discovered  that the actual purchase price



            of the  property  was $120,000  instead of  $205,000 and  the



            existence of two different  closing statements.  Dailey's law



            firm,  wanting  to keep  CCU as  a  client, arranged  for its



            pension fund to pay CCU $160,000 and take over the mortgage.



                      In  October  1993,  James, Scott  and  Dailey  were



            indicted on  charges of bank fraud, mail  fraud, making false



            statements to a federally insured lending institution, aiding



            and abetting,  and conspiracy  under the Taft-Hartley  Act to



            commit  these offenses.  Dailey  died prior to  trial.  James


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and Scott were found guilty on all counts and sentenced to 37



            months  and 24 months respectively.  Both were also sentenced



            to identical  terms of supervised release,  joint and several



            restitution of $54,000 to Dupont, $200 in special assessments



            and reimbursement  of all attorney's fees  and expert witness



            fees paid pursuant to the Criminal Justice Act ("CJA").



                                   II.  Discussion
                                        __________



                      Defendants   raise   multiple  grounds   on  appeal



            encompassing  issues   relating  to  indictment,   trial  and



            sentencing.  For  clarity's sake we  address these issues  in



            chronological order.



                      A.   Indictment
                           __________



                      Defendants  contend that Count II, knowingly making



            false statements to a  federally insured lending institution,



            18 U.S.C.    1014,  and  Count  III, bank  fraud,  18  U.S.C.



              1344,  are multiplicitous,  thereby  violating  the  Double



            Jeopardy Clause of the Fifth Amendment of the Constitution.



                      Our  analysis begins  with application of  the test



            laid  out  in  Blockburger v.  United  States,  284 U.S.  299
                           ___________     ______________



            (1932), which provides that double jeopardy is not implicated



            if,  when comparing  two  offenses arising  out  of the  same



            transaction, each offense  "requires proof  of an  additional



            fact which the other does  not."  Id. at 304.   This analysis
                                              ___



            is sometimes referred to as the Blockburger "elements test."
                                            ___________


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In United States v.  Norberg, 612 F.2d 1  (1st Cir.
                         _____________     _______



            1979), we set forth the elements to be proven under 18 U.S.C.



              1014.  They are:



                      (1)  that  the  [Institution's]  deposits

                      were [federally insured];



                      (2)   that   the  defendant   made  false

                      statements to the [Institution];



                      (3)   that   the   defendant   knew   the

                      statements were false; and



                      (4) that the  statements were  materially

                      false  and   made  for  the   purpose  of

                      influencing the [Institution]  to make  a

                      loan or advance.



            Id. at  3.  More  recently, in  United States v.  Brandon, 17
            ___                             _____________     _______



            F.3d  409 (1st Cir.), cert. denied,  ___ U.S. ___, 115 S. Ct.
                                  ____________



            80 (1994), we construed  the elements of bank fraud  under 18



            U.S.C.   1344 as:



                      (1) engag[ing] in a scheme or artifice to

                      defraud, or ma[king] false  statements or

                      misrepresentations to obtain money from;



                      (2)   a   federally   insured   financial

                      institution; and



                      (3) d[oing] so knowingly.



            Id. at 424.
            ___



                      Thus, on the plain  language of these statutes, the



            requirements  of  Blockburger are  satisfied.   Section  1014
                              ___________



            contains an element not  contained in   1344, that is,  proof



            that  the  statements  were "materially  false."    Likewise,



              1344 encompasses  a "scheme or artifice  to defraud," which



            is not an  element of   1014.   Defendants, nonetheless, urge


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us to adopt the opinion of a divided Second Circuit in United
                                                                   ______



            States v.  Seda, 978 F.2d 779 (2d Cir. 1992), which held that
            ______     ____



               1014 and  1344, when  arising from  the same  offense, are



            multiplicitous.  978 F.2d at 781.  We do not agree.



                      In   Seda,  the  court   moved  beyond  Blockburger
                           ____                               ___________



            statutory  analysis,  relying  instead on  Whalen  v.  United
                                                       ______      ______



            States, 445 U.S. 684 (1980), where the Court held that counts
            ______



            of rape and felony murder were not  separate offenses because



            in  that case  "proof of  rape [was]  a necessary  element of



            proof  of the  felony murder."   445  U.S. at  694.   We read



            Whalen,  however,  as the  rule only  in  cases of  lesser or
            ______



            greater included  offenses, see  United States v.  Dixon, 509
                                        ___  _____________     _____



            U.S.  688, 698  (1993),  for  which  rape and  felony  murder



            qualify,  but bank  fraud and  making false  statements to  a



            federally  insured lending  institution do  not.   Indeed, in



            Dixon,  the Court overruled the  "same conduct" test of Grady
            _____                                                   _____



            v.  Corbin,  id.  at  711-12, and  reaffirmed  the  mandatory
                ______   ___



            application of  Blockburger statutory analysis.   Id. at 696;
                            ___________                       ___



            cf.  United States v. Wolfswinkel, 44 F.3d 782, 785 (9th Cir.
            ___  _____________    ___________



            1995)  (finding  Seda  non-viable  in  the  wake  of  Dixon).
                             ____                                 _____



            Although  the Blockburger  elements test  is mechanistic  and
                          ___________



            often  criticized, we are already  bound by it.   Rossetti v.
                                                              ________



            Curran, 80 F.3d 1, 6 (1st Cir. 1996); United States v. Black,
            ______                                _____________    _____



            78 F.3d 1,  4 (1st Cir.), cert. denied, ___  U.S. ___, 117 S.
                                      ____________



            Ct. 254 (1996).   Because  it is possible  to violate  either


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statute without violating the other, we believe the best view



            is that these two counts are not multiplicitous.



                      B.   Trial
                           _____



                      First, defendants contend that as regards Count IV,



            Mail Fraud, there was  no evidence that co-conspirator Dailey



            mailed, or caused to be mailed, the  mortgage to Dupont.  The



            evidence,  however,  shows  that  when  Dupont  received  the



            mortgage  in the mail, the return address on the envelope was



            that  of  Dailey's law  firm.   In  addition, the  jury heard



            evidence  that  Dailey  acted  as closing  attorney  in  this



            transaction and recorded the mortgage.  From this testimony a



            reasonable jury  could infer that Dailey  mailed the mortgage



            to Dupont.



                      Defendants next maintain that  deposition testimony



            given by each defendant during  Scott's bankruptcy proceeding



            was non-admissible  as former  testimony under Fed.  R. Evid.



            804(b)(1) because neither defendant had motive or opportunity



            to cross-examine the other.  This is a misconception.  In the



            first place, each  deposition was redacted  to apply only  to



            the  deponent.    Against  him  it  was  clearly  admissible;



            anything affecting  its weight  could be  offered separately.



            If the other defendant  was entitled to have it  limited, and



            not  apply  to  him, it  was  his  obligation  to request  an



            instruction.   United States v.  Barnett, 989  F.2d 546,  558
                           _____________     _______



            n.14 (1st  Cir. 1993);  United States v.  Mateos-Sanchez, 864
                                    _____________     ______________


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F.2d 232,  238 (1st Cir.  1988); Fed. R. Evid.  105.  Neither



            did.



                      Defendants next object to the introduction of their



            deposition  testimony by  claiming violations of  their Fifth



            Amendment  privilege  against  self-incrimination.     It  is



            elementary that the privilege must be asserted at the time of



            the  questioning.  Minnesota v.  Murphy, 465 U.S. 420, 429-30
                               _________     ______



            (1984).   Defendants  seek  to excuse  themselves by  blaming



            their failure  to assert  on their attorney  Dailey, claiming



            that  he failed  to  advise  them  due  to  his  conflict  of



            interest.     We   give  present   counsel  high   marks  for



            imagination, but  nothing else.   The deposition  inquiry was



            not  by a government official  and therefore not  an abuse of



            defendants'  Fifth   Amendment  rights.    See   Colorado  v.
                                                       ___   ________



            Connelly,  479 U.S. 157, 170 (1986) ("The sole concern of the
            ________



            Fifth Amendment . . . is  governmental coercion.").  Once the



            answer was given, we know of no authority suggesting that the



            government could not use it.



                      C.   Sentencing
                           __________



                           1.    Calculation of the Loss
                                 _______________________



                      Defendants next  challenge the court's  seven level



            enhancement  under  U.S.S.G.    2F1.1(b)(1),1  based  on  its



                                
            ____________________



            1.  U.S.S.G.   2F1.1(b)(1) provides a sliding scale requiring

            an increase to  the offense  level calculation  based on  the

            amount  of the loss caused  by or intended  by the defendant.

            Losses  greater than $120,000 but less than $200,000 call for

            a seven level increase.



                                         -10-



calculation of a $124,000 loss to  the victims of defendants'



            fraud.2   They  maintain that  because Dailey's  pension fund



            "purchased" Scott's mortgage from  CCU for the full $160,000,



            this figure should not enter into the loss calculation.  This



            was  not a  purchase  for  value,  however,  but  a  form  of



            laundering.



                      We   previously  examined  the  mechanics  of  loss



            calculation as pertaining to   2F1.1 in some detail in United
                                                                   ______



            States v. Bennett, 37 F.3d 687 (1st Cir.  1994), and again in
            ______    _______



            United States v. Kelley, 76 F.3d 436 (1st Cir. 1996), and see
            _____________    ______



            no need to  engage in lengthy analysis here.   In Bennett, we
                                                              _______



            concluded that Application Note 7(b) controls the methodology



            for calculating loss  under   2F1.1(b)(1).   37 F.3d at  695.



            Note 7(b) provides  that in  the case of  a fraudulent  loan,



            "[t]he 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."  Id. (emphasis supplied).
                                                 ___



            Because CCU  discovered the fraud before  Dailey's law firm's



            pension  fund acquired  the mortgage,  the full  $160,000 was



            correctly included in the loss calculation.


____________________



            2.  The court calculated the loss as of the time of discovery

            of  the fraud as $160,000  for the CCU  mortgage plus $60,000

            for Dupont's  mortgage, less $96,000, the  appraised value of

            the property on that date.



                                         -11-



Defendants  also  contend that  the court  erred in



            including the $60,000 Dupont mortgage in the loss calculation



            because  the amount  of  the loss  attributed  to Dupont  was



            speculative.   We  agree with  the government,  however, that



            with  an appraised  value  of only  $96,000  at the  time  of



            discovery  and  a  first  mortgage  to  the  pension fund  of



            $160,000, Dupont's second mortgage was worthless.


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2.   Obstruction of Justice
                           ______________________



                      Defendants  next   complain   of  the   two   level



            enhancement each  received for obstruction  of justice  under



            U.S.S.G.    3C1.1.    We  review  factual  determinations  of



            whether a defendant obstructed  justice only for clear error.



            United States v.  Thomas, 86  F.3d 263, 263  (1st Cir.  1996)
            _____________     ______



            (citing United States v.  St. Cyr, 977 F.2d 698,  705-06 (1st
                    _____________     _______



            Cir.  1992)).    The  record  contains  evidence  of  several



            independent   acts  by   the   defendants  supporting   these



            enhancements, including submitting a false affidavit by James



            (later admitted to  be untrue), witness  intimidation, albeit



            after  the fact,  and  false objections  to the  Pre-Sentence



            Report.       See   U.S.S.G.     3C1.1,   Application   Notes
                          ___



            3(a),(f),(h).   Faced  with multiple  reasons supporting  the



            enhancement,  we cannot say that the  2 level enhancement for



            obstruction of justice was error, clear or otherwise.



                      3.   Role in the Offense Determinations
                           __________________________________



                      James  contests his two level enhancement for being



            a  manager or  organizer  of the  criminal activity,  seeking



            instead to award that role to Dailey.  We can dispose of this



            contention forthwith.  Reviewing  again only for clear error,



            United States v. Voccola, 99 F.3d  37, 44 (1st Cir. 1996), we
            _____________    _______



            find  that  James' admission  in  his  response to  the  Pre-



            Sentencing  Report that  "to  the extent  that his  son Scott



            Fraza is  involved in this  case, it  is solely due  to James


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Fraza's fault and not Scott Fraza," is enough to  allow us to



            say again that we discern no error here.



                      Scott complains  of the court's refusal  to grant a



            downward adjustment  for his  minor  role in  the offense,  a



            position   which   was   not  opposed   by   the  government.



            Apparently, at  sentencing this  brass ring was  within reach



            when  the Probation  Officer interrupted  the proceeding  and



            engaged in an ex parte communication with the court some time
                          __ _____



            after which the downward adjustment was denied.  According to



            Scott, "the Probation Officer discarded his  role as . . . an



            impartial  'arm of  the Court'  and donned  the mantle  of an



            advocate  for rejection  of the  requested  2-point deduction



            . . . ."



                      Defendant's moral outrage regarding this  issue was



            evident  at oral  argument, but  we are  perplexed as  to his



            expectations of the Probation  Officer's proper behavior.  We



            would expect the officer to exercise his independent judgment



            as to the  application of the guidelines and  we see no error



            in his interruption of  the proceedings to make  his judgment



            known.  See  United States  v. Belgard, 894  F.2d 1092,  1097
                    ___  _____________     _______



            (9th Cir. 1990) (observing that a probation officer's duty is



            to  "provide  the trial  judge  with as  much  information as



            possible in order  to enable  the judge to  make an  informed



            decision").   Anything less would  be a dereliction  of duty.



            Scott's attempt to condemn  the officer for doing his  job is


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misplaced and can not act as a basis for overturning a ruling



            that is not clearly erroneous.



                      4.   Reimbursement
                           _____________



                      Included in defendants' sentences was an obligation



            to repay the cost of their court-appointed attorneys, who had



            been   obtained  on   defendants'  allegation   of  financial



            inability.  See  18 U.S.C.   3006A(a).   To the  government's
                        ___



            repeated  allegation  of  misrepresentations  in   their  CJA



            application  defendants failed  to  respond.   They did  not,



            until  threatened   with  contempt,  even   respond  to   the



            government's  extensive financial report, with exhibits.  The



            court's ultimate sentence apparently rejected their replies.



                      Our  difficulty  is  that the  court  conducted  no



            hearing,  and  made  no  findings as  to  either  defendant's



            financial  viability.   See United  States v.  Santarpio, 560
                                    ___ ______________     _________



            F.2d  448, 455 (1st Cir. 1977); cf. United States v. Chorney,
                                            ___ _____________    _______



            63  F.3d 78, 83 (1st Cir. 1995).  We must remand that that be



            done.



                      5.   Restitution
                           ___________



                      Finally, defendants protest the court's  order that



            they jointly and  severally pay restitution to  Dupont in the



            amount of  $54,000, citing the second mortgage  still held by



            Dupont.    Restitution  orders  are subject  to  clear  error



            review.  United States v. Hensley, 91 F.3d 274, 277 (1st Cir.
                     _____________    _______



            1996).  As  we noted ante,  Dupont's mortgage is  essentially
                                 ____


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worthless.  If circumstances  were to change, i.e,  the first



            mortgage to disappear or land values increase to the point of



            validating  Dupont's mortgage,  defendants  would be  free to



            apply for relief from the restitution order.



                                         III.



                      The convictions  and sentences are affirmed  in all
                                                         ________



            respects, except  that the reimbursement orders  are vacated.



            The cases are remanded for further proceedings  on the matter



            of reimbursement in accordance herewith.


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