United States v. Rosen

• Court: Court of Appeals for the First Circuit
• Decided: November 10, 1997
• Docket: 97-1209
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT

                                 ____________________



          No. 97-1209



                                    UNITED STATES,



                                      Appellee,



                                          v.



                                   JEROME E. ROSEN,



                                Defendant, Appellant.



                                 ____________________



                     APPEAL FROM THE UNITED STATES DISTRICT COURT



                          FOR THE DISTRICT OF MASSACHUSETTS



                     [Hon. Robert E. Keeton, U.S. District Judge]
                                             ___________________



                                 ____________________



                                        Before



                               Torruella, Chief Judge,
                                          ___________



                            Aldrich, Senior Circuit Judge,
                                     ____________________



                              and Lynch, Circuit Judge.
                                         _____________



                                _____________________



               Morris M. Goldings, with whom Richard S. Jacobs and Mahoney,
               __________________            _________________     ________

          Hawkes & Goldings were on brief for appellant.
          _________________

               Mark J. Balthazard,  Assistant United States  Attorney, with
               __________________

          whom Donald  K. Stern, United  States Attorney, was on  brief for
               ________________

          appellee.


____________________



                                  November 12, 1997

                                 ____________________



TORRUELLA, Chief  Judge.  Attorney Jerome Rosen appeals
                    TORRUELLA, Chief  Judge. 
                               ____________



          his conviction on four counts of federal mail fraud stemming from



          certain representations Rosen made to  the trustee of a debtor in



          bankruptcy.  He was sentenced  to two years probation,  including



          eight months home confinement, and fined $30,000.  Rosen argues 



          that the elements  of mail fraud were  not met by his  failure to



          disclose certain  information about  a proposed  asset sale,  and



          that there was insufficient evidence to convict.  We affirm.



                                      BACKGROUND
                                      BACKGROUND



                    On an appeal  from a jury conviction, we  must view the



          evidence in the  light most favorable to the  jury's verdict, see
                                                                        ___



          United States  v. Gonz lez-Maldonado,  115 F.3d  9, 12 (1st  Cir.
          _____________     __________________



          1997), unless  presented  with a  claim  that suggests  that  the



          jury's balanced  assessment of  the evidence  was itself  somehow



          tainted, see United  States v. Roberts, 119 F.3d  1006, 1008 (1st
                   ___ ______________    _______



          Cir. 1997) (no  need to view  record in  light most favorable  to



          government in  context of  prosecutorial misconduct  claim).   On



          this appeal, we  are limited to the evidence  and inferences most



          favorable to the  verdict, and on this basis  the following facts



          could have been found by the jury.



                    Rosen  served  as  legal  counsel  to  the  owners  and



          operators of New England Tri-State Development Corporation ("Tri-



          State").  Tri-State,  which was owned and operated  by George and



          Kevin Kattar, operated a golf course in Massachusetts and held an



          approximately 1,100 acre parcel of undeveloped land in Maine.  In



          April1992, Tri-Statefileda voluntaryChapter11 bankruptcypetition.


-2-



At some  point in the  winter of 1993-94,  Kevin Kattar



          told  Rosen that  a  Maine lumberman  named  Michael Griffen  was



          potentially interested  in purchasing  the Maine  property for  a



          total  of approximately $1  million, to be  paid in installments.



          Griffen  was  in  contact with  another  Maine  lumberman, Orland



          Dwelley, who also had some interest  in purchasing and developing



          the  Maine property.    In  March 1994,  the  Tri-State case  was



          converted to a  Chapter 7 liquidation, and  Joseph Braunstein was



          appointed as  trustee.  During the Chapter  7 conversion hearing,



          Rosen,  appearing as the debtor Tri-State's attorney, stated that



          Tri-State  had  received  an  offer  of  $500,000  for the  Maine



          property, and also stated that Tri-State believed the property to



          be worth $750,000.



                    After the conversion, and no later than May 1994, Rosen



          began negotiating a possible  sale price with Griffen.   Although



          Kevin Kattar sought a $1 million sale price during a meeting with



          Griffen  and  Rosen on  May  25,  1994,  no concrete  terms  were



          assented to.  In a letter of May 16, 1994, Rosen indicated to the



          trustee that Rosen was attempting  to find a buyer for the  Maine



          property at a price of "$500,000  cash."  In a letter to  Griffen



          dated June 6, 1994, Rosen stated that,  based on the May 25, 1994



          meeting with Griffen in Boston, it was Rosen's understanding that



          Griffen wished to "buy the above  property . . . at a total  cost



          to you which will  not exceed $1,000,000.00, including  legal and



          consulting fees, payable  no more than $525,000.00  upon delivery



          of good, clear, and marketable title  . . . and any balance  over


-3-



up to  four years."   The  June 6,  1994 letter  to Griffen  also



          suggested two  approaches to selling  the Maine property,  one of



          which was the following: 



                    2.   Having  you make  an  offer to  purchase

                    directly to the trustee for $500,000 cash and

                    then  hiring Kevin and  George Kattar to help

                    you  develop  the  property at  a  salary  of

                    $60,000.00  per  year  each  on  a  four year

                    employment contract.1



          Griffen did not sign or return Rosen's letter.



                    Soon,  it became  clear that  Orland  Dwelley, and  not



          Griffen, would be the most  likely purchaser and developer of the



          Maine property.  Rosen telephoned Dwelley to  discuss a sale at a



          net price  of $1 million, with $500,000 to  be paid up front.  On



          July 12, 1994, Rosen  sent a letter to  Dwelley stating that  the



          offer price was for $500,000, and adding the following:



                      In  addition, our  understanding is  that

                      you, with  Mr. Griffin,  will engage  the

                      Kattar  boys as  your  consultants for  a

                      total  amount of  $475,000, payable  over

                      four years in  monthly payments totalling

                      $9896.00 (each  of  the  two  Kattars  to

                      receive one-half, or $4948.00 per month).

                      Lastly,  you  will   pay  me  a  fee   of

                      $25,000.00  if  you   are  successful  at

                      acquiring   the    property,   but    not

                      otherwise, payable at closing.



          Dwelley signed  and returned  an attached letter  dated July  14,



          1994, which Rosen had prepared, stating in pertinent part:



                      we  (together  with our  associates)  are

                      prepared to pay the sum of $1,000,000 for

                      the   Property   in   approximately   the

                              
          ____________________



          1  The  other approach discussed  in the letter  was reaching  an

          understanding  with  the holders  of  the mortgage  on  the Maine

          properties to buy  the property from the Trustee and then sell it

          to Griffen.



                                         -4-



following manner: $500,000  upon delivery

                      of  a  Deed  conveying  good  record  and

                      marketable title,  . . . and  the balance

                      (less  our  expenses for  your  services)

                      over  a period  of years  (not to  exceed

                      five)  either by way of a secured note or

                      consulting fees, secured by a lien on the

                      property.



                      For your  services as aforesaid,  we will

                      pay you  the sum of  $25,000, plus actual

                      expenses, at Closing.



                    Rosen also drafted  an offer letter from Dwelley to the



          trustee, which stated a $500,000  offer price but did not mention



          any further payments to be made  to either the Kattars or  Rosen.



          The offer  letter, which was  signed by Dwelley and  forwarded by



          Rosen to  the trustee  on July 18,  1994, stated  that "we  would



          expect to seek  to employ one or  more of the former  officers of



          Tri-State to  assist us in  marketing the property," but  did not



          provide any further details.



                    Rosen never disclosed  to the trustee the  substance of



          the employment relationship discussed in his correspondence  with



          Dwelley.  Rosen  did not provide the  trustee with a copy  of the



          July 14,  1994 letter  that  Dwelley signed.    When the  trustee



          questioned  Rosen  on  July  25,  1994  about  the  reference  in



          Dwelley's offer letter to the possible employment of "one or more



          of the former officers" of Tri-State, Rosen told the trustee that



          there  "was  nothing definite  as  far as  what  the compensation



          [would be] or even if they would be employed."



                    In  a letter  to  Dwelley dated  August 2,  1994, Rosen



          wrote:


-5-



I  forgot  to  mention in  our  telephone

                      conversation that if you get a  call from

                      the   Trustee,  whose   name  is   Joseph

                      Braunstein,  or his  associate  . .  .  I

                      would prefer that you  not give either of

                      them  the   salary  details   about  your

                      agreement to hire the Kattar  boys if the

                      sale goes through.



          Rosen  used another  attorney, John  Rodman, as  the attorney  of



          record for  Dwelley.  When Rodman  asked Rosen if  there had been



          any  specific employment arrangements for the Kattars, Rosen told



          him that there was nothing  in writing and no specific agreement,



          which information Rodman later relayed to the trustee.



                    In  November  1994,  the  trustee  ultimately  accepted



          Dwelley's  second written offer  for the Maine  properties, which



          again offered $500,000, but with  a higher initial deposit.  That



          offer tracked the language of the first offer letter and had been



          mailed to  Rosen, who  then forwarded  it  to the  trustee.   The



          trustee sought  bankruptcy  court  approval  for the  sale.    On



          January  3, 1995, Rosen attended  the bankruptcy court hearing on



          the motion to sell the  property to Dwelley, and said  nothing to



          contradict  the notion  that  Dwelley's  $500,000  was  the  best



          available offer for the  debtor's Maine property, or  to indicate



          that  a larger  offer  of  $1 million  had  been contemplated  by



          Dwelley.



                    Before  the scheduled closing,  an attorney working for



          Dwelley   in  Maine  asked   Rosen  to  explain   the  employment



          arrangement regarding the  Kattars.  That attorney,  Laurie Dart,



          then informed  the trustee  that there  may have been  additional



          arrangements for future payments to the Kattars.  Upon hearing of



                                         -6-



the  previously  undisclosed  arrangements, the  trustee  filed a



          motion to revoke the court-approved sale of the Maine property.  



                    In the fall  of 1995, the trustee ultimately received a



          third offer from  Dwelley, and entered into an  agreement to sell



          the Maine property  to Dwelley for  $730,000 in  cash.  No  terms



          regarding  any subsequent  payments  (or regarding  the  Kattars'



          employment) were part of the final sale transaction.



                    At trial, the  government sought to prove  that Rosen's



          failure  to disclose  information regarding  what the  government



          referred to as the "side agreement" with Dwelley was a fraudulent



          scheme intended to prevent the  trustee from receiving as much as



          possible from  the sale  of the  debtor's estate.   Specifically,



          Rosen was charged with using the  mails in the course of tricking



          the trustee into approving a $500,000 sale which in fact was a $1



          million dollar sale, with the remainder to be paid to the Kattars



          and Rosen.  The four counts of Rosen's indictment under 18 U.S.C.



            1341 comprised of two mailings related to each of Dwelley's two



          offers  to  purchase  the  property  for  $500,000  --  including



          mailings  from  Dwelley to  Rosen  that  Rosen forwarded  to  the



          trustee in July and October 1994.



                    The jury rendered  guilty verdicts on all  four counts.



          Prior  to the  end of  trial, the  district court  denied Rosen's



          motion for judgment of acquittal.   On appeal, Rosen again argues



          that  there  was insufficient  evidence to  support a  mail fraud



          conviction, in essence because there was not a binding employment



          agreement between Dwelley and the Kattars.


-7-



DISCUSSION
                                      DISCUSSION



                    Rosen's chief contention  on appeal is that  to support



          his conviction  under 18 U.S.C.    1341, the government  bore the



          burden  of  proving  beyond a  reasonable  doubt  that  a binding



          employment agreement existed between the purchaser, Dwelley,  and



          Rosen's  clients, the  Kattars, that  Rosen  failed to  disclose.



          Thus,  Rosen  argues  that  either his  motion  for  judgment  of



          acquittal should have been granted  -- because such proof was not



          offered -- or, in the  alternative, his proposed jury instruction



          stating that  proof of an  employment agreement was  necessary to



          support  a guilty verdict should  have been incorporated into the



          district court's instructions.



                    Without doubting  that a  binding employment  agreement



          would have  made Rosen's  incomplete disclosures  to the  trustee



          more egregious, or  more obviously illegal, we find  that proving



          Rosen's  failure  to  disclose  a binding  agreement  was  not  a
                                            _______



          necessary prerequisite to establishing this mail fraud violation.



          When the  evidence  is viewed  as  a  whole, in  the  light  most



          favorable to the verdict, drawing all credibility issues in favor



          of  the verdict,  as is  appropriate in  reviewing  a sufficiency



          claim, see,  e.g., United States  v. Fulmer, 108 F.3d  1486, 1490
                 ___   ____  _____________     ______



          (1st Cir. 1997), we see a  set of facts that would be  sufficient



          to "allow a rational jury" to render  a guilty verdict.  Id.; see
                                                                   ___  ___



          also United States v. Batista-Polanco,  927 F.2d 14, 17 (1st Cir.
          ____ _____________    _______________



          1991) (stating standard of review for sufficiency claims).


-8-



The elements  of a mail  fraud offense under  18 U.S.C.



            13412   are:   (1)   the  defendant's   knowing   and   willing



          participation in  a scheme to  defraud with a specific  intent to



          defraud; and  (2) the  use of  the mails  in  furtherance of  the



          scheme.  See  United States v. Montminy,  936 F.2d 626, 627  (1st
                   ___  _____________    ________



          Cir.  1991)  (listing elements  of mail  fraud); see  also United
                                                           _________ ______



          States v. Ruiz,  105 F.3d 1492, 1501  (1st Cir. 1997) (same).   A
          ______    ____



          defendant need not have been  successful in his scheme to defraud



          in order  to be  convicted under  the  mail fraud  statute.   See
                                                                        ___



          United  States v.  Jordan,  112  F.3d 14,  19  (1st Cir.),  cert.
          ______________     ______                                   _____



          denied,  ___ U.S.  ___, No.  97-5823,  1997 WL  562297 (Oct.  14,
          ______



          1997).   Section  1341's scope  is  broad.   It covers  deceptive



          schemes  to deprive  victims of  a wide  variety of  tangible and



          intangible property  interests; such a scheme must, at a minimum,



          contemplate either  some "articulable  harm" befalling the  fraud



          victim  or "some  gainful use"  of the  object of  the fraudulent



          scheme  by the  perpetrator, regardless  of whether  this use  is

                              
          ____________________



          2  18 U.S.C.   1341 (Supp. 1997) provides in pertinent 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 purposes 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 or delivered by

                      the Postal  Service, .  . .  or takes  or

                      receives therefrom, . . . any such matter

                      or thing, shall be fined under this title

                      or imprisoned  not more than  five years,

                      or both.



                                         -9-



profitable in  the economic sense.   United States  v. Czubinski,
                                               _____________     _________



          106 F.3d  1069, 1074-75 (1st Cir. 1997).



                    Direct proof of fraudulent intent is often difficult to



          find, and thus we have long permitted the inference of fraudulent



          intent from circumstantial evidence.  See, e.g., United States v.
                                                ___  ____  _____________



          Goodchild, 25 F.3d 55, 60 (1st Cir. 1994).  Here, there was ample
          _________



          evidence to support  the jury's conclusion that Rosen  acted with



          the  purpose of defrauding  Tri-State's trustee in  bankruptcy of



          amounts  that a buyer, Orland Dwelley, was willing to pay for the



          debtor  Tri-State's  Maine   property.    It  is   certainly  not



          irrational  to  conclude  that  information  regarding  Dwelley's



          willingness to pay a total of one million dollars over time would



          have been valuable  to the trustee, regardless of  whether it was



          proven that Dwelley would have been willing to pay what  he later



          paid,  namely  $730,000, at  the  time  of  his second  offer  of



          $500,000.



                    The  letters between  Rosen and  Dwelley  in July  1994



          support  the conclusion  that  a  side  agreement to  employ  the



          Kattars  --   and  for  Dwelley   to  thereby  pay  a   total  of



          approximately  $1 million -- existed.   The language of Dwelley's



          reply  letter  to Rosen  dated  July  14,  1994  is  particularly



          telling,  stating that "[w]e  (together with our  associates) are



          willing  to  pay  a  total  of $1,000,000  for  the  Property  in



          approximately the following  manner: $500,000 upon delivery  of a



          Deed  .  . .  and the  balance .  .  . over  a period  of years."



          Comparing these  letters with  the testimony  of the  trustee and


-10-



with the  offer letters to  the trustee indicates that  Rosen was



          not forthcoming in his representations regarding the structure of



          the asset sale.   Furthermore, Rosen asked Dwelley  in writing to



          "not give [the trustee or his associate] the salary details about



          your agreement to hire the Kattar boys if the sale goes through."



          All of this  evidence can  support a  rational jury's  conclusion



          that Rosen, in  structuring the initial offer by  Dwelley, sought



          to induce the  trustee "into believing that a  $500,000 offer had



          been made to buy  the Maine property, when in fact  the offer was



          for $1 million," as Rosen's indictment alleged.



                    Rosen  argues  that  any  side  agreement  between  the



          Kattars and Dwelley was not binding.  The side agreement need not



          have been binding, however, in order to establish that hiding the



          information from the trustee  satisfied the element of a  "scheme



          or artifice  to defraud"  in this  case.  18  U.S.C.    1341.   A



          rational  jury  could  have  found  that  a  legally  non-binding



          agreement between Rosen and Dwelley regarding a $1 million dollar



          purchase  price was intentionally  kept hidden from  the trustee,



          and that  regardless of its  non-binding nature, the  trustee was



          thereby  tricked into  believing  that $500,000  represented  the



          extent of Dwelley's interest in the properties.  Simply put, from



          the point  of view of  the trustee, the value  of the information



          that Rosen concealed derives from  the fact that Dwelley may have



          been willing  to pay more  than $500,000  for the property  -- it



          does not turn  on whether that  interest was fixed  in a  legally



          binding agreement.


-11-



A mail fraud  conviction may be based  on a defendant's



          "deceptive  conduct," a category  that certainly may  include the



          dissemination  of  incomplete  information,  where  the  specific



          intent to defraud exists.  McEvoy Travel Bureau, Inc. v. Heritage
                                     __________________________    ________



          Travel, Inc., 904 F.2d 786, 791 (1st  Cir. 1990); see also United
          ____________                                      ________ ______



          States v.  D'Amato, 39  F.3d 1249, 1257  (2d Cir.  1994) ("'[T]he
          ______     _______



          withholding or  inaccurate reporting  of  information that  could



          impact on  economic decisions  can provide the  basis for  a mail



          fraud prosecution.'") (quoting United States v. Wallach, 935 F.2d
                                         _____________    _______



          445,  462-63 (2d  Cir.  1991)).   The jury  could  choose not  to



          believe  Rosen's  explanation  for his  failure  to  disclose the



          understanding reached with Dwelley, which is that he believed the



          trustee did not want to  entertain offers that involved  payments



          over time.   A rational jury could  also infer an intent  to harm



          the  debtor  estate, which  under the  most basic  bankruptcy law



          principles is  entitled to  the full value  of the  consideration



          paid  for an  estate asset.   11  U.S.C.   541(a)(6);  see, e.g.,
                                                                 ___  ____



          United  States v.  Knight, 336  U.S.  505, 508  (1949) ("All  the
          ______________     ______



          consideration which is paid for  a bankrupt's assets becomes part



          of the  estate.   No device or  arrangement, however  subtle, can



          subtract or divert any of it.").  



                    Rosen  also seems to  argue that the  indictment itself



          alleged  that a  binding  employment agreement  was  part of  the



          fraudulent scheme.  We might concur,  but for the fact that Rosen



          himself  described  the   correspondence  with   Dwelley  as   an



          "agreement."  He  cannot  now  be heard  to  complain  about  the


-12-



government's  and court's  adoption of  his own  definition.   It



          follows  that  the district  court  did  not  err in  failing  to



          instruct  the jury  that it  must find  that a  binding agreement



          between Dwelley  and the  Kattars was formed.   Our review  of an



          alleged legal error in a jury instruction is de novo.  We find no
                                                       _______



          error  in the district  court's instructions, which  informed the



          jury  that the government  "must prove beyond  a reasonable doubt



          that there  was an agreement  to pay additional money,"  and that



          gave an acceptable definition of an "agreement" as requiring that



          the  parties  manifest  an  agreement  to the  same  terms.    As



          discussed above, the mail fraud statute plainly does  not require



          that Rosen's deceptive behavior regarding a buyer's true level of



          interest  be in  relation  to a  binding, as  opposed  to a  non-



          binding,  agreement with  the  buyer to  pay  additional sums  of



          money.



                    Finally, relying  on United  States v.  D'Amato,3 Rosen
                                         ______________     _______



          argues that,  in the absence  of a necessary harm  resulting from



          the fraudulent scheme, the government had to prove Rosen's intent



          to defraud  with independent  evidence. See  D'Amato, 39  F.3d at
                                                  ___  _______



          1257  ("Where the  scheme does  not cause  injury to  the alleged



          victim  as  its  necessary result,  the  government  must produce



          evidence   independent  of  the   alleged  scheme  to   show  the



                              
          ____________________



          3  Rosen  cites United States  v. Sawyer, 85  F.3d 713, 715  (1st
                          _____________     ______

          Cir. 1996), for the same proposition.  Sawyer, however, pertained
                                                 ______

          to proof regarding  the elements, not of    1341, but of    1346,

          the "honest  services fraud"  provision. The  citation to  Sawyer
                                                                     ______

          thus  adds nothing  to  Rosen's argument  under  D'Amato on  this
                                                           _______

          point.



                                         -13-



defendant's fraudulent intent.").   We disagree with  the premise



          that  Rosen's scheme  does not  necessarily  contemplate a  harm.



          Viewing the evidence in the  light most favorable to the verdict,



          we see an attempt to prevent all of the proceeds of an asset sale



          from going to the debtor's estate itself.  To deprive the trustee



          of  a  debtor  in bankruptcy  of  accurate  information regarding



          greater amounts that a  potential buyer is willing to pay is harm



          enough.  Compare with Czubinski, 106 F.3d at 1074 (no deprivation
                   ____________ _________



          of  property interest in confidential information for purposes of



          federal fraud statute  where no gainful use  or other articulable



          harm followed from mere browsing  of taxpayer files).  Here, once



          the side agreement was unearthed, the trustee took quick steps to



          dissolve  the approved  $500,000 sale,  and  eventually sold  the



          property to the same buyer at  $730,000.  The two cases cited  by



          Rosen in  support of  his contention that  no harm  is implicated



          here are readily distinguishable on the facts.  See United States
                                                          ___ _____________



          v. Jain, 93 F.3d 436 (8th Cir. 1996), cert. denied, ___ U.S. ___,
             ____                               _____ ______



          117 S. Ct.  2452 (1997) (reversing conviction where  there was no



          evidence of harm  to patients from scheme in  which hospital paid



          kickbacks to referring  psychologist);  United States  v. Ashman,
                                                  _____________     ______



          979  F.2d 469,  479 (7th  Cir.  1993) (violation  of a  commodity



          brokerage practice not a deprivation of property because customer



          would have received identical price).  Unlike in Jain and Ashman,
                                                           ____     ______



          the scheme  at issue  here threatened  to place  its victim  in a



          tangibly worse position, namely one  in which a trustee could not



          extract the maximum value for the debtor's assets.


-14-



CONCLUSION
                                      CONCLUSION



                    For  the reasons stated in this  opinion, we affirm the
                                                                 ______



          judgment of the district court.


-15-