United States v. Jordan

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT

                                 ____________________



        No. 96-1396

        No. 96-1397



                              UNITED STATES OF AMERICA,



                                      Appellee,



                                          v.



                                GEORGE R. JORDAN, JR.,



                                Defendant, Appellant.



                                 ____________________


APPEALS FROM THE UNITED STATES DISTRICT COURT



                              FOR THE DISTRICT OF MAINE



                     [Hon. D. Brock Hornby, U.S. District Judge]
                                            ___________________



                                 ____________________



                                        Before



                                 Selya, Circuit Judge,
                                        _____________



                       Aldrich and Cyr, Senior Circuit Judges.
                                        _____________________



                                 ____________________


Jane Elizabeth Lee for appellant.
            __________________

            George R. Jordan, Jr. on supplemental brief pro se.
            _____________________                       ___ __

            F. Mark Terison, Assistant United States Attorney,  with whom John
            _______________                                               ____

        S.  Gleason  III,  Assistant  United   States  Attorney,  and  Jay  P.
        ________________                                               _______

        McCloskey, United States Attorney, were on brief for appellee.
        _________



                                 ____________________



                                    April 29, 1997

                                 ____________________



ALDRICH, Senior Circuit  Judge.   This case  arises
                               _____________________



            from   the  conviction  of   defendant  George   Jordan,  Jr.



            ("Jordan")  after two  trials, on  various charges  of fraud,



            money laundering, tax evasion,  and filing false tax returns.



            He  appeals his convictions and sentences.  We affirm in part



            and reverse in part.



                                    I.  Background
                                        __________



                      Jordan  was  employed  as  a risk  manager  by  the



            Pioneer  Plastics Corporation ("Pioneer")  from 1989 to April



            1993.   His primary responsibility was  the investigation and



            resolution  of claims  filed by  Pioneer employees  under its



            self-insured workers compensation program.  The investigation



            phase  included ongoing,  surreptitious "activity"  checks on



            disabled employees  to verify  that they  were, in  fact, not



            able to  work.  Toward this  end, in 1990, he  formed his own



            investigation    company,    PineTree   Insurance    Services



            ("PineTree"), and  began submitting invoices  to Pioneer  for



            investigations  and   activity  checks.     Jordan  submitted



            invoices on behalf of  PineTree, approved them, mailed checks



            on behalf of  Pioneer to PineTree's P.O. Box,  and ultimately



            endorsed  and  deposited  these   checks  into  his  personal



            checking  account.    The  relationship  between  Jordan  and



            PineTree violated Pioneer's  prohibition against  undisclosed



            outside business interests with the potential to influence an



            employee's judgment in the performance of his duties.


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In  early  1993,   a  manager  at  Pioneer   became



            concerned  about the  high level  of  PineTree expenses.   An



            internal   investigation  ensued.     When   another  manager



            attempted  to contact  PineTree  he could  find no  telephone



            number  or   street  address.     Jordan's  secretary,   when



            questioned, revealed that  Jordan hand-delivered the invoices



            which contained  only  a  P.O. box  address.    Upon  further



            investigation,  the box  was discovered  to be  registered to



            Jordan.  On the day following this discovery, Jordan resigned



            from  Pioneer.    After  his  departure,  a  Pioneer  officer



            searched    Jordan's    office   and    discovered   PineTree



            investigative reports printed in "one big long document."



                      Six  months  later,  Jordan was  indicted  on  five



            counts of  mail fraud,  18 U.S.C.     1341, 1342,  1346, four



            counts of wire fraud, 18 U.S.C.   1343, and a single count of



            money laundering,  18  U.S.C.   1956(a)(1)(B)(ii).   After  a



            three  day  jury trial  he was  acquitted  of the  wire fraud



            charges.  A mistrial was declared when the jury was unable to



            reach a verdict on the remaining counts.



                      In August 1995, while  awaiting retrial, Jordan was



            indicted  on four  counts of  income tax  evasion, 26  U.S.C.



              7201, and two counts  of filing a false income  tax return,



            26 U.S.C.   7206(1), stemming from the PineTree scheme.  Over



            his  objection, the court allowed the  government to join for



            trial the tax  indictments and the  remaining mail fraud  and


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money laundering charges.  This time  Jordan was convicted on



            all  counts and  sentenced to  72 months  imprisonment, three



            years  supervised release,  special  assessments of  $600 and



            restitution to Pioneer of $158,603.10.



                              II.  Joinder and Prejudice
                                   _____________________



                      Jordan  renews here  his earlier  objection to  the



            court's  decision  to  allow   the  government  to  join  the



            outstanding charges from the first trial with the tax evasion



            counts.  We note at the outset that  instead of responding to



            the government's motion  for joinder under  Fed. R. Crim.  P.



            13, defendant used his response to argue prejudice under Fed.



            R.  Crim. P. 14, most often  utilized in a separate motion to



            sever.   Although  these may  involve different  standards of



            review, see United  States v.  Edgar, 82 F.3d  499, 503  (1st
                    ___ ______________     _____



            Cir.),  cert.  denied,  ___ U.S.  ___,  117  S.  Ct. 184,  65
                    _____________



            U.S.L.W. 3237 (U.S.  Oct. 7, 1996)  (No. 96-178), and  United
                                                                   ______



            States  v. Alosa, 14 F.3d 693, 695 (1st Cir. 1994), basically
            ______     _____



            our issue is abuse  of discretion with respect to  prejudice.



            Jordan, correctly,  does not dispute that, substantively, all



            offenses  could have been joined in a single indictment under



            Fed. R.  Crim. P. 8(a).   See United  States v. Clayton,  450
                                      ___ ______________    _______



            F.2d  16, 18  (1st Cir.  1971).   This said,  we turn  to the



            question whether the grant of joinder unduly prejudiced.



                      In order to prevail on this claim, Jordan must make



            "a  strong showing of prejudice."  United States v. Gray, 958
                                               _____________    ____


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F.2d 9, 14 (1st Cir. 1992).  In United States v. Scivola, 766
                                            _____________    _______



            F.2d 37 (1st  Cir. 1985),  we observed that  there are  three



            types  of  prejudice  that  can  emerge  from  this  type  of



            situation:



                      (1) the defendant may  become embarrassed

                      or  confounded   in  presenting  separate

                      defenses;  (2)  proof  that defendant  is

                      guilty  of one  offense  may be  used  to

                      convict  him  of a  second  offense, even

                      though such proof  would be  inadmissible

                      in  a  separate  trial  for   the  second

                      offense; and  (3) a defendant may wish to

                      testify in  his own behalf on  one of the

                      offenses but not another, forcing  him to

                      choose   the   unwanted  alternative   of

                      testifying as to both or testifying as to

                      neither.



            Id.  at 41-42  (internal citations  omitted).   Jordan argues
            ___



            here  that joinder subjected him  to the latter  two types of



            prejudice.



                      Jordan  did  not  testify  in   either  trial,  and



            contends that  by allowing  the joinder  of the fraud,  money



            laundering and  tax  counts, he  was  deprived of  his  Fifth



            Amendment right to testify as to certain counts but not as to



            others.  In support, he relies on our opinion in Alosa, ante,
                                                             _____  ____



            where we remarked  that "a defendant may deserve  a severance



            of counts where [he]  makes a convincing showing that  he has



            both  important testimony  to give  concerning one  count and



            strong need to  refrain from  testifying on the  other."   14



            F.3d  at 695  (internal  citations omitted).    To make  this



            showing, a defendant must  timely offer enough information to


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the court to allow it to weigh the needs  of judicial economy



            versus  "'the  defendant's  freedom  to  choose   whether  to



            testify' as to  a particular charge."   Id. (quoting Scivola,
                                                    ___          _______



            766 F.2d at 43).



                      In his objection to the government's motion to join



            indictments, Jordan  argued his need  to testify in  order to



            produce a "good faith" defense to the tax charges.  See Cheek
                                                                ___ _____



            v. United States, 498 U.S. 192, 203-04 (1991) (holding that a
               _____________



            defendant is  entitled to present his  subjective belief that



            he   did  not  violate  the  law,  even  if  such  belief  is



            objectively unreasonable).   To  bolster  this assertion,  he



            included an offer of proof  reciting the testimony that would



            constitute his defense.1



                                
            ____________________



            1.  Jordan's  offer   of   proof  contained   the   following

            assertions:



                           3) It is anticipated that in the tax

                      prosecution  the Defendant  would testify

                      that he  has in the past  handled his own

                      tax   filings.    He   has  read  various

                      instructions  provided  by  the  Internal

                      Revenue   Service   and  has   done  some

                      independent research  regarding tax laws.

                      George  Jordan  was of  the  opinion that

                      funds  paid  to   him  from  the  Pioneer

                      Plastics Workers' Compensation Trust were

                      not taxable pursuant to  Internal Revenue

                      Code Section 501(c)(9).



                           4)  Jordan  would testify  that upon

                      filing  for  a  Chapter   13  bankruptcy,

                      Jordan, upon advice of bankruptcy counsel

                      filed certain forms 1040-X.



                           5)  Jordan filed form  1040 for 1992

                      and  receive  (sic)  a  refund  check  of



                                         -6-



It  is difficult  to  dismiss these  grounds.   The



            unique circumstances  of this case distinguish  it from Alosa
                                                                    _____



            where the defendant  sought to  sever a gun  count from  drug



            trafficking and  conspiracy charges.    There, the  defendant



            wanted to testify  on the gun charge  simply to deny  that he



            had used the guns for drug trafficking  and that he owned the



            guns "for fun."   14 F.3d at  695.  We  upheld the denial  of



            Alosa's  severance  motion because  that testimony  was "some



            distance from  . . . a credible alibi that only the defendant



            can  supply showing him to have been elsewhere at the time of



            the  crime."  Id.  Here, we believe  that Jordan's subjective
                          ___



            testimony on  the tax charges  is analogous to  the "credible



            alibi"  we  found  lacking in  Alosa.    Only  he can  supply
                                           _____



            testimony  of his  subjective belief  as permitted  by Cheek,
                                                                   _____



            forthrightly subjecting himself to cross-examination.   We do



            not accept  the government's contention that  this belief was



            adequately before the jury in the form  of Jordan's statement



            on his amended tax form that the income was not taxable.



                      Nor do  we accept its contention  that Jordan could



            have proffered the testimony of his bankruptcy attorney, from



            whom Jordan received legal advice, as an effective substitute



                                
            ____________________



                      approximately $1000, and  in addition,  a

                      form  1040-X  regarding  the   Pine  Tree

                      income  and  exemptions  under  501(c)(9)

                      were filed.



                           6)  Forms 1040-X were filed for  the

                      years 1990, 1991, 1992, and 1993.



                                         -7-



for  Jordan's own  testimony.   While it  is likely  that the



            attorney's   testimony  also  would   have  been  helpful  in



            establishing a Cheek defense,  Jordan contends in his proffer
                           _____



            that  he  previously handled  his  own tax  affairs  and also



            relied on his own independent legal research.  See supra note
                                                           ___ _____



            1.   On balance, therefore,  we conclude that  joinder likely



            had the  effect of  eviscerating Jordan's planned  defense to



            the tax charges.2



                      The surrender  of this privilege was  capped by the



            government's maneuvering that got  before the mail fraud jury



            the  allegedly fraudulent  tax returns.   The  government had



            made  substantial efforts  at the  original trial  seeking to



            introduce  the tax  returns as  proof of  intent.   The court



            twice  ruled   that  possible  prejudice  from   these  forms



            outweighed  their relevance under Fed. R. Evid. 403.  We have



            here the type of  prejudice outlined in Scivola, 766  F.2d at
                                                    _______



            41-42,  that of evidence  presented that would  not have been



            admissible  at   a  separate  trial.    By  the  joinder  the



            government has circumvented the court's ruling.  Jury-wise it



            could be thought better off with evidence that would point in


____________________



            2.  We  emphasize,  however,  that  we  do  not  hold  that a

            defendant's  mere  assertion of  a  Cheek  defense invariably
                                                _____

            requires severance of an  indictment charging tax and non-tax

            offenses.  Rather,  the court must  undertake, on a  case-by-

            case  basis,  to  weigh   "'the  considerations  of  judicial

            economy' against  the defendant's 'freedom  to choose whether

            to testify.'"  Alosa, 14 F.3d at 695 (citations omitted).
                           _____



                                         -8-



an  improper  direction  tied to  an  instruction  not to  so



            consider it, than not to have it at all.



                      We  have  an unusual  situation.    With the  Fifth



            Amendment  involved should  either, both,  or neither  of the



            mail fraud, etc. convictions, and tax evasion convictions, be



            set aside?   There are  recognized benefits (to  all, except,



            usually,   the   defendant)    in   having   joint    trials.



            Traditionally, defendants  may, to  an extent, have  to stand



            the  cost,  the  extent  to  be  determined  by  the  court's



            discretion.   In the second mail fraud trial, by choosing not



            to  take the  stand defendant  felt  only one  prejudice, the



            jury's knowledge of the tax cases.  At the original trial the



            court, in excluding evidence  of those charges, had described



            it as  of minimum value  to the  government.  While  we agree



            with Jordan that  it would have  been happier for him  not to



            have had that  evidence now get in  through the back  door by



            the joinder, we believe it was within the court's discretion,



            in the absence of a Fifth Amendment problem (such as infected



            the tax counts), to subject him  to the ordinary consequences



            of joinder of indictments.



                      This  is not to say that Jordan did not endure some



            loss.  There should be some  limit to the harm the government



            should impose to  meet the  court's Rule 403  finding in  the



            original action.  By bringing the tax indictment, and joining



            it with  the tax charges to  get the tax forms  before a mail


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fraud  jury, it put Jordan in the proverbial bind -- testify,



            to your  loss in the mail  fraud case, or do  not testify, to



            your loss in the tax case.   Jordan had valid Fifth Amendment



            reasons for disliking both alternatives, and we do not  think



            the government should have it both  ways.  We allow one,  but



            it  should not  complain  that we  hold  it to  its  original



            decision of  non-joinder.   The convictions and  sentences on



            the tax counts are vacated.



                      III.  Requirements of a Scheme to Defraud
                            ___________________________________



                      Continuing with  the mail fraud  case, Jordan  next



            argues  that the government  failed to allege  and prove that



            Pioneer suffered actual harm or that he was unjustly enriched



            as a  result of  the fraud  as required under  the 42  U.S.C.



              1341.3      The   government   contends    that   defendant



            affirmatively  waived  this  ground  by   requesting  a  jury



            instruction  on the mail fraud count that did not include any


____________________



            3.  18 U.S.C.   1341 reads in relevant part:



                      Whoever, having devised  or intending  to

                      devise any scheme or artifice to defraud,

                      or  for obtaining  money  or property  by

                      means of false  or fraudulent  pretenses,

                      representations,  or  promises . . .  for

                      the purpose  of executing such  scheme or

                      artifice  or attempting to  do so, places

                      in   any   post   office  or   authorized

                      depository for mail matter, any matter or

                      thing whatever to be sent to delivered by

                      the  Postal Service  . . .  or  takes  or

                      receives therefrom . . .  shall be  fined

                      under  this title or  imprisoned not more

                      than five years or both.



                                         -10-



mention of actual harm or unjust enrichment.4  We agree.  See
                                                                      ___



            United States v. Mitchell,  85 F.3d 800, 808 (1st  Cir. 1996)
            _____________    ________



            (citing United States v. Marder, 48 F.3d 564, 571 (1st Cir.),
                    _____________    ______



            cert. denied,  ___U.S.___, 115 S. Ct. 1441,  63 U.S.L.W. 3721
            ____________



            (U.S. Apr. 3,  1995) (No. 94-8296)).  For the mail fraud case



            we add only the following.



                      Prior to the enactment of 18 U.S.C.   1346 in 1988,



            the Supreme Court had  held in McNally v. United  States, 483
                                           _______    ______________



            U.S.  350, 360 (1987), that schemes to defraud under the mail



            and  wire fraud  statutes  did not  encompass the  intangible



            right to  honest government  but were limited  to schemes  to



            defraud a victim of money or property.  Congress responded by



            enacting section  1346, expanding the definition  of fraud to



            include  "a scheme  or  artifice to  deprive  another of  the



            intangible right of honest services."



                      In light of the advent of   1346, in order to prove



            mail  fraud under   1341  the government must  show "that the



            defendant used  the mails  for the  purpose  of executing  or



            attempting to execute a scheme to  defraud," United States v.
                                                         _____________



                                
            ____________________



            4.  The jury instruction Jordan requested reads as follows:



                      Intent to Defraud - Defined:



                           To act with  an "intent to  defraud"

                      means  to  act  knowingly  and  with  the

                      intention or purpose to deceive or cheat.

                      An  intent  to  defraud  is  accompanied,

                      ordinarily  by  a  desire or  purpose  to

                      bring about some gain or benefit to one's

                      self.



                                         -11-



Allard,  926 F.2d 1237, 1242 (1st Cir. 1991), and such scheme
            ______



            may include one to deprive another of the intangible right to



            honest services,  United States v.  Sawyer, 85 F.3d  713, 732
                              _____________     ______



            (1st  Cir. 1996).  What  is required is  that "an articulable



            harm  befall [the  victim]  as a  result  of the  defendant's



            activities,  or some  gainful  use must  be  intended by  the



            [defendant], whether  or not  this use  is profitable in  the



            economic sense."  United States v. Czubinski,  106 F.3d 1069,
                              _____________    _________



            1074-75 (1st  Cir. 1997).   Actual  monetary  harm or  unjust



            enrichment is therefore not  required.  A defendant  need not



            even successfully carry out the scheme to defraud in order to



            be found guilty.  Id.; Allard, 926 F.2d at 1242.
                              ___  ______



                      Even if we had  not found Jordan's argument waived,



            we agree  that the  government presented  sufficient evidence



            that  the jury could have found  that Jordan deprived Pioneer



            of his services and/or its money through a scheme to defraud.



                                 IV. Double Jeopardy
                                     _______________



                      Finally, Jordan contends  that the district court's



            decision  to sentence him on  the tax evasion  counts and the



            false  filing counts  violated  the  double jeopardy  clause,



            because the  latter counts charge lesser  included offenses.5



                                
            ____________________



            5.  Other circuits have  endorsed Jordan's contention.   See,
                                                                     ___

            e.g., United States v. Kaiser, 893 F.2d 1300, 1305 (11th Cir.
            ____  _____________    ______

            1990).   Since the panel  is not  in agreement as  to whether

            this contention raises an  issue of first impression  in this

            circuit,  or whether  it  is foreclosed  by  Gaunt v.  United
                                                         _____     ______

            States,  184 F.2d  284, 288  (1st Cir.  1950), we  leave that
            ______

            matter for another day.



                                         -12-



See Rutledge v. United States, ___ U.S. ___, 116 S. Ct. 1241,
            ___ ________    _____________



            1247-50 (1996).   Since we are vacating the  tax convictions,



            we need express  no view  on this contention  at the  present



            time.


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V.  Conclusion
                                        __________



                      Defendant  has also filed a pro se brief. We do not



            discuss  it here  as  we find  his  arguments to  be  without



            merit.6   His convictions and sentences on Counts I through X



            of the first indictment  are affirmed.  The   convictions and



            sentences on all counts of the second indictment  are vacated



            and this case remanded  for further proceedings in accordance



            with this opinion.


____________________



            6.  Nor  do   we  address  Jordan's  claim   that  the  court

            improperly  excluded  his  correspondence with  the  Internal

            Revenue Service as hearsay.   At his next trial,  Jordan will

            be free to present the arguments he failed to make below.



                                         -14-