United States v. Rowe

Opinion

USCA1 Opinion

                 United States Court of Appeals

                     For the First Circuit


No. 98-2330



                          UNITED STATES,



                            Appellee,



                                v.



                         ROBERT J. ROWE,



                      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,

                   Cyr, Senior Circuit Judge,

                   and Stahl, Circuit Judge.


Stephen Hrones, with whom Hrones & Garrity, was on brief for

appellant.

     Mark J. Balthazard, Assistant United States Attorney, with

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

appellee.


January 27, 2000


STAHL, Circuit Judge.  Robert Rowe was convicted on two

counts of bankruptcy fraud in violation of 18 U.S.C.  152.  We

overturned his conviction on one of the two counts and remanded for

resentencing.  See United States v. Rowe, 144 F.3d 15 (1st Cir.

1998) ("Rowe I").  Now that resentencing has taken place, Rowe

again appeals.  For the reasons stated  below, we reverse and

remand for resentencing.

                                I.

                            Background

  The facts of this case are not in serious dispute.  Our

opinion in Rowe I sets forth the relevant details:

      In September 1992, Rowe filed a

  personal bankruptcy petition under chapter 7

  of the Bankruptcy Code.  Doing so obligated

  him to file with the bankruptcy court a number

  of bankruptcy schedules that are designed to

  profile a chapter 7 petitioner's financial

  situation.  In Schedule A, which directs the

  petitioner to list all interests in "REAL

  PROPERTY," Rowe typed "NONE" in the column

  where he was asked to provide a "Description

  and Location of Property."  In Schedule J,

  which is labeled "CURRENT EXPENDITURES OF

  INDIVIDUAL DEBTOR(S)," Rowe typed "$395.00" in

  the space [in which] he was to list his "Rent

  or home mortgage payment."  These two

  responses were the subjects of the bankruptcy

  frauds charged in Counts II and III of the

  indictment.



      The government's theory as to Count II

  was straightforward: the answer "NONE" in

  Schedule A was fraudulent because, at the time

  Rowe filed his petition, he and his ex-wife

  each had a 50 percent ownership interest in a

  residence located at 20 Highland Avenue in

  Nahant, Massachusetts.  The government's

  theory as to Count III [was] a bit more

  complicated . . . but can be summarized as

  follows: the answer "$395.00" in Schedule J

  was fraudulent because, at the time Rowe filed

  his petition, EDI [a company that he and his

  brother had created] was paying upwards of

  $1800 per month in rent for Rowe to live in a

  house he personally had leased.  This house

  was located at 47 Castle Road in Nahant,

  Massachusetts.  In the government's view, Rowe

  had a clear obligation to disclose this rent

  payment on his Schedule J, but failed to

  disclose it in order to [conceal his interest

  in EDI from the bankruptcy court -- an act

  which was itself the subject of Count I of the

  indictment].

                                 

Id. at 16-17.  After an eleven-day trial, a jury acquitted Rowe on

Count I, but found him guilty on Counts II and III.  Rowe appealed,

and although we affirmed his conviction on Count II, we reversed

his conviction on Count III, vacated his sentence, and remanded for

further proceedings.  See id. at 24.

  Before resentencing could take place, the U.S. Attorney's

Office filed an ethical complaint against Rowe's attorney with the

Massachusetts Board of Bar Overseers ("BBO") stating that Rowe's

attorney had committed misconduct by making baseless allegations

that the government's case agent had lied to the grand jury and

that the prosecution had suborned the use of this perjured

testimony.  At counsel's request, the district court continued

Rowe's resentencing while his attorney responded to the BBO

complaint.  Shortly thereafter, the BBO dismissed the complaint.

  In the district court, Rowe's attorney renewed his

allegations of perjury and argued that the government's pursuit of

an ethical complaint against him was retaliatory.  He moved for an

evidentiary hearing to explore these issues, arguing that proof of

government misconduct would entitle his client to a downward

departure at sentencing.  The district court denied the motion,

finding that Rowe's unsupported allegations of perjury were too

conclusory to justify further consideration.

  Thereafter, on November 12, 1998, the court sentenced

Rowe to eighteen months of imprisonment,  twenty-four months of

supervised release with a $50 special assessment and a fine of

$10,000.  Under the United States Sentencing Guidelines ("the

Guidelines"), the court's sentence reflected a base offense level

of six, see U.S.S.G.  2F1.1(a) (Nov. 1995), a four level

enhancement for an intended loss of more than $20,000, see id. 

2F1.1(b)(1)(E), a two level enhancement for the violation of a

judicial order or process, see id.  2F1.1(b)(3)(B), and a two

level enhancement for obstruction of justice, see U.S.S.G.  3C1.1

(Nov. 1995). 

                               II.

  We review the district court's refusal to hold an

evidentiary hearing on the misconduct claim on an abuse of

discretion standard.  See United States v. Grant, 114 F.3d 323, 326

(1st Cir. 1997).

  In the past, we have indicated that "a downward departure

could not be employed as a means of reprimanding the government for

the 'false testimony' of a government agent before a grand jury." 

United States v. Connell, 960 F.2d 191, 196 n.8 (1st Cir. 1992)

(quoting United States v. Valencia-Lucena, 925 F.2d 506, 515 (1st

Cir. 1991)).  Even so, we have recognized that other kinds of

governmental misconduct could be the basis for a downward departure

at sentencing.  See United States v. Montoya, 62 F.3d 1, 3-4 (1st

Cir. 1995) ("[W]here government agents have improperly enlarged the

scope or scale of the crime, the sentencing court 'has ample power

to deal with the situation either by excluding the tainted

transaction from the computation of relevant conduct or by

departing from the [guideline sentencing range].'" (quoting

Connell, 960 F.2d at 196)).  Since then, the Supreme Court has

suggested that downward departures are broadly available when

unusual circumstances distinguish a case from the heartland of the

Guidelines.  See Koon v. United States, 518 U.S. 81, 94 (1996).  We

have yet to revisit this issue in Koon's wake.

  But here, we need not decide whether Connell and

Valencia-Lucena remain good law.  Even if a downward departure

could redress the use of perjured grand jury testimony by a

government agent, Rowe's conclusory allegations in this regard did

not require an evidentiary hearing.  FBI agent Richard Egan

provided grand jury testimony that Rowe had transferred his house

to his ex-wife after learning that his activities were the subject

of a government investigation.  Egan admitted at trial that this

testimony was in error and that Rowe had in fact retained an

ownership interest in the house all along.  Egan explained that his

grand jury testimony was simply mistaken, based on erroneous

information that he had received from Rowe's previous attorney. 

Rowe failed to rebut this explanation, and absent any meaningful

evidence that Egan knowingly misled the grand jury, there was no

reason to believe that he had lied or that the prosecution had

suborned the use of perjury.

  Against this background, the U.S. Attorney's decision to

file an ethical complaint against Rowe's attorney cannot be viewed

as improper because although the BBO eventually dismissed that

complaint, the government had at least a threshold basis for

believing that Rowe's allegations of perjury had been made in bad

faith.  With these facts in mind, the district court properly

concluded that Rowe's claim of government misconduct was belied by

the record and simply was too conclusory to warrant further

consideration.  See United States v. Lilly, 983 F.2d 300, 310 (1st

Cir. 1992) (noting that a criminal defendant is not entitled to an

evidentiary hearing on a motion unless he can make an "adequate

threshold showing that material facts are in genuine doubt or

dispute"); see also United States v. McGill, 11 F.3d 223, 225 (1st

Cir. 1993) ("[E]videntiary hearings on motions are the exception,

not the rule. . . . [A] party seeking an evidentiary hearing must

carry a fairly heavy burden of demonstrating a need for special

treatment." (internal citations omitted)).

                               III.

  We now consider Rowe's claim that the district court

erred in arriving at his sentence.  "We first determine the

applicability of [each] guideline to a particular case de novo. 

After determining the guideline's scope and meaning, we review the

district court's factual determinations for clear error, giv[ing]

due deference to the district court's application of the guidelines

to the facts."  United States v. Cali, 87 F.3d 571, 575 (1st Cir.

1996) (internal quotation marks and citations omitted).

                                A.

  The district court increased Rowe's base offense level by

four to reflect the intended loss from his criminal conduct.  See

U.S.S.G.  2F1.1(b)(1)(E) (Nov. 1995).  In so doing, the court

found that Rowe had concealed his interest in the house from the

bankruptcy court, that the intended loss from Rowe's actions

amounted to the value of his interest in the house, and that

although outstanding loans and attachments on the house made the

value of his interest unclear, a willing buyer and seller would

have valued the property at more than $20,000.  Under the

Guidelines, the court's valuation required a four-point increase in

Rowe's base offense level.  See id.

  We would have little difficulty accepting the district

court's methodology if it represented a reasonable means of

ascertaining Rowe's intended loss.  Because criminal conduct can

cause an indeterminate amount of harm, the loss in a particular

case "need not be determined with precision."  U.S.S.G.  2F1.1

app. note 8 (Nov. 1995).  A sentencing court "need only make a

reasonable estimate of the loss" in light of the information at

hand.  Id.  "Courts can, and frequently do, deal with rough

estimates," and as such, "a party dissatisfied with [a] sentencing

court's quantification of the amount of loss . . . must go a long

way to demonstrate" clear error.  United States v. Rostoff, 53 F.3d

398, 407 (1st Cir. 1995).

  But even with this deferential standard in mind, the

district court's determination of the loss in this case must be

reversed.  Rowe was found guilty of committing bankruptcy fraud by

submitting bankruptcy schedules that failed to disclose his

interest in the residence.  The value of his interest, if any, was

unclear because although the house if unencumbered was worth

between $130,000 and $140,000, two mortgages and a number of

attachments appear to have encumbered the property at the time Rowe

submitted his fraudulent bankruptcy schedules.

  If the amount of these encumbrances was completely

unknown, then the district court properly could have resorted to a

hypothetical estimate of how a willing buyer and seller would have

valued Rowe's interest in the house.  Here, however, there was

substantial evidence about the size of the encumbrances.  The first

mortgage on the property apparently had a balance of $10,500, while

the second mortgage allegedly had a balance of $50,000.  Moreover,

Government Exhibits 10A, 10B, 10C, 10D, 11A, and 11B indicated that

there were several attachments on the property, one of which was

for $600,000.  These obligations arguably rendered Rowe's interest

in the property worthless.

  Rather than sorting through this evidence to ascertain

the value of the harm that Rowe either caused or intended, the

district court stated that "[t]he thing that's missing is no

showing in evidence . . . by the Government or by the defendant as

to what [he] did owe on the original or other loans at the date

that is relevant to the loss calculation."  The court could have

conducted an evidentiary hearing to resolve this difficulty, but it

did not.  Instead, it estimated Rowe's interest in the property to

be worth $20,000 -- an amount that was inconsistent with the record

and had no discernible connection to the amounts that both the

government, which estimated the loss to be $60,000, and Rowe, who

estimated the loss to be $0, had proposed.  Against this

background, the district court's intended loss calculation was

clearly erroneous and must be reversed.

                                B.

  The district court also increased Rowe's base offense

level by two on the grounds that by concealing his interest in the

residence, Rowe violated a judicial order or process requiring him

to disclose all of his property to the bankruptcy court.  See

U.S.S.G.  2F1.1(b)(3)(B) (Nov. 1995).

  The Guidelines call for a two level enhancement at

sentencing when a crime of fraud involves the "violation of any

judicial or administrative order, injunction, decree, or process

not addressed elsewhere in the guidelines."  See id.  "[T]he

rationale for the enhancement is to redress the 'aggravated

criminal intent'" that exists when a defendant engages in wrongful

conduct despite a prior order that directs him not to do so. 

United States v. Shadduck, 112 F.3d 523, 529 (1st Cir. 1997)

(quoting U.S.S.G.  2F1.1 background).  The focus upon heightened

criminal intent means that in the case of bankruptcy fraud, the

enhancement will not apply automatically whenever someone fails to

follow a general set of instructions in a bankruptcy rule or form. 

See Shadduck, 112 F.3d at 529-30.  Instead, the enhancement applies

only to those who receive a more specific command from the

bankruptcy court and break it.  See id.

  There was no such command in Shadduck, but there was such

an order here.  Rowe's petition for bankruptcy did not include a

list of his assets.  Recognizing this deficiency, the bankruptcy

court sent Rowe a notice advising him to disclose his assets in

their entirety by filing a Statement of Financial Affairs along

with supporting schedules.  Unlike a notice of hearing or another

informational announcement that a debtor might receive as a matter

of course upon filing for bankruptcy, see Shadduck, 112 F.3d at

530, this notice was specifically directed at Rowe with a tailored

command to cure the defects in his original petition so as to

provide complete disclosure.  Despite a warning that "FAILURE TO

COMPLY WILL RESULT IN APPROPRIATE ACTION," Rowe chose to violate

the notice by continuing to conceal his interest in the residence. 

On these facts, the district court properly concluded that Rowe

violated a judicial order or process within the meaning of 

2F1.1(b)(3)(B) of the Guidelines.

                                C.

  The district court also applied a two level enhancement

to Rowe's base offense level on the grounds that he had perjured

himself at trial.  In the court's view, "Rowe's [testimonial]

denials of an ownership interest in real property located at 20

Highland Avenue, Nahant, Massachusetts, were untruthful and

material" and thereby warranted a sentencing enhancement for

obstruction of justice.  See U.S.S.G.  3C1.1 (Nov. 1995).

  Section 3C1.1 of the Guidelines requires the imposition

of a two level enhancement if a defendant "willfully obstructed or

impeded, or attempted to obstruct or impede, the administration of

justice during the investigation, prosecution, or sentencing of

[an] offense."  In order for perjury to support an obstruction of

justice enhancement, the defendant must have given "'false

testimony concerning a material matter with the willful intent to

provide false testimony, rather than as a result of confusion,

mistake, or faulty memory.'"  United States v. D'Andrea, 107 F.3d

949, 958 (1st Cir. 1997) (quoting United States v. Dunnigan, 507

U.S. 87, 94 (1993)).  We review the court's factual findings in

this regard for clear error.  See D'Andrea, 107 F.3d at 958.

  Despite the deferential standard of review that applies,

the district court's decision to apply an obstruction of justice

enhancement in this case cannot stand.  As the government concedes

in its appellate brief, "Rowe admitted at trial that he was an

owner of record on the property at all times" and that he had

omitted this interest from his schedule of assets.  In other words,

Rowe conceded that he owned the house with his ex-wife and that he

had failed to disclose his interest in the house to the bankruptcy

court.  Contrary to what the trial court opined at sentencing, Rowe

never lied about these aspects of his conduct.

  Instead, Rowe simply tried to justify why he did what he

did by claiming that he did not disclose the house to the

bankruptcy court because he felt that the mortgages and attachments

had rendered the asset worthless and because in any event, he

verbally had agreed to give his share of any proceeds of a sale to

his ex-wife if the property ever could be sold.  The import of his

testimony was that he did not think that he was legally obligated

to list a worthless asset in his bankruptcy filings.  Although the

jury was entitled to disbelieve Rowe's claim that he simply had

made a mistake, the mere fact that he tried to explain himself at

trial cannot alone support an obstruction of justice enhancement. 

See United States v. Akitoye, 923 F.2d 221, 228  (1st Cir. 1991)

("[I]f perjury is less than apparent on the record as a whole, with

due respect for the trial judge's coign of vantage and allowing

reasonable latitude for credibility assessments, the defendant

should be given the benefit of the resultant doubt.")

                               IV.

                            Conclusion

  For the foregoing reasons, we vacate Rowe's sentence and

remand for further proceedings consistent with this opinion.

  Reversed.