United States v. Delano Lopez

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 94-2277

UNITED STATES OF AMERICA,

Appellee,

v.

FRANKLIN DELANO LOPEZ,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Jose Antonio Fuste, U.S. District Judge]

Before

Selya and Boudin, Circuit Judges,

and Lisi,* District Judge.

Nathan Z. Dershowitz with whom Amy Adelson, Alan M. Dershowitz

and Dershowitz & Eiger, P.C. were on briefs for defendant.

William C. Brown, Appellate Section, Criminal Division,

Department of Justice, with whom Guillermo Gil, United States

Attorney, was on brief for the United States.

December 14, 1995

*Of the District of Rhode Island, sitting by designation.

BOUDIN, Circuit Judge. Franklin Delano Lopez was

convicted on seven counts charging him with white collar

criminal offenses under federal law. In this appeal, able

counsel on both sides have briefed a host of issues, several

of which pose difficult and important questions. We conclude

by affirming on two counts and vacating on five others. The

case is remanded for resentencing on the two affirmed counts

and for retrial on the five vacated counts, if sought by the

government.

I. BACKGROUND

Lopez was tried under a superseding indictment returned

on February 18, 1994. Counts 1 through 5 charged him with

making false representations to federally insured banks, 18

U.S.C. 1014, to influence loans to Lopez and his

businesses, Four Winds Rental, Inc., and Multi-Media

Television, Inc. Counts 6 and 7 charged Lopez with wire

fraud, 18 U.S.C. 1343, based on Lopez' withdrawal of over

$300,000 from the reserve accounts of certain limited

partnerships managed by Lopez through Four Winds Rental, Inc.

The jury trial began on June 6, 1994.

The government's evidence on the first five counts aimed

to show that Lopez made false statements or submitted false

documents to obtain loans, or extensions of loans, on five

occasions. Three involved substantial sums borrowed from

First Federal Savings Bank; another, a loan extension from

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Chase Manhattan; and the last, a loan from Banco Central. In

each instance the alleged misinformation concerned the value

or existence of collateral to secure the loan, and the facts

differed in each instance. No description of the events is

necessary to our disposition of these false statement counts.

The two wire fraud charges, reflected in counts 6 and 7,

related to a different matter, namely, Lopez' withdrawal of

over $300,000 from reserve accounts of certain limited

partnerships that owned multi-unit, federally subsidized

housing projects in Puerto Rico. Four Winds managed and had

a very small ownership interest in each partnership, the

balance being held by other limited partners represented by

Capital Management Strategies, Inc., a Rockville, Maryland,

real estate syndicator. The properties were financed by the

Farmers' Home Administration, which restricted the use of the

funds in the accounts to specific purposes, primarily repairs

and improvements.

The gist of the government's charge was that in 1988

Lopez had withdrawn the sums in question from these accounts

without the required permission and had created false

invoices on the letterhead of a construction company to

account for the withdrawals. The government offered evidence

that Lopez had created the invoices in amounts matching the

withdrawals, that no such construction work had ever been

performed, and that the invoices were nevertheless supplied

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to auditors to explain the withdrawals. The wire element

related to two faxes, allegedly sent by Lopez to Capital

Management Strategies in late 1990 and early 1991, responding

to its inquiry as to the purpose of the withdrawals and the

existence of the required approvals by Farmers' Home

Administration.

About two weeks into the trial, on the evening of June

22, 1994, Lopez was rushed to a hospital emergency room with

serious symptoms. Within a day, the trial judge took

testimony from the emergency room internist and, shortly

thereafter, heard from a court-appointed cardiologist. Later

tests revealed that Lopez was suffering a small brain lesion

or tumor which was serious but, if properly treated, was not

likely to be life threatening. The doctors agreed that the

tumor had to be removed but not on an emergency basis, and

surgery was scheduled for August.

These events caused a recess of the trial from June 22

until July 6, at which time a hearing was held to consider

motions by Lopez' counsel for a mistrial based on the lack of

competency or for a continuance for purposes of treatment.

The thrust of Lopez' objections was that medications

prescribed for him caused side effects that interfered with

his ability to proceed. Relying partly on the advice of the

court-designated neurologist, Dr. Charles Payne, the court

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denied the motions, and Dr. Payne was ultimately placed in

charge of prescribing medications.

The same objections were thereafter renewed several

times but denied. There were further examinations by Dr.

Payne and testimony by him that Lopez was alert, could

understand the charges and assist his lawyers, and was not

being compromised by the prescribed medications. From July

11 through July 13, Lopez testified in his own defense. On

July 18, the jury convicted Lopez on all seven counts.

Thereafter, the district court rejected a post-trial motion

directed to competency. It had earlier refused to order an

investigation into alleged prosecutorial misconduct in the

initiating of the prosection.

Following the trial, Lopez remained on bail and

underwent surgery for the removal of the tumor. On November

17, 1994, Lopez was sentenced to a prison term of 63 months,

based primarily on loss calculations that are challenged by

Lopez on appeal. Motions for continuation of bail pending

appeal were denied by the district court and by this court.

See 18 U.S.C. 3143(b)(1)(B). Lopez is currently serving

his sentence.

II. MEDICAL ISSUES

On this appeal, Lopez' first and most dramatic claim is

that he was forced to continue his trial while afflicted with

a life-threatening brain tumor and while requiring a whole

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battery of medications to cope with various symptoms. These

medications, Lopez suggests, interfered with his ability to

remember, concentrate and present himself credibly, and

undermined his trial testimony. He further asserts that the

trial judge effectively compelled him to accept such

medications and, without basis, charged him with malingering

or attempting to over-medicate in order to frustrate the

trial.

Although these are the core factual allegations, the

legal claim presented has an unusual twist. Lopez does not

claim that he was "incompetent" to stand trial under the

ordinary rubric, see Godinez v. Moran, 113 S. Ct. 2680, 2685

(1993), or that his health would be so damaged by the trial

that it would be inhumane to continue. Instead, relying

primarily on Riggins v. Nevada, 504 U.S. 127 (1992), Lopez

says that the trial court "instead of choosing a less

intrusive alternative--a halt in the proceedings so that

Lopez could have surgery--violated Lopez' constitutional

rights by imposing a `regime' of medication that so impaired

Lopez' abilities that he was unable to testify coherently on

his own behalf."

Riggins, which the government says was not relied upon

in the district court, contains language colorably pertinent

to this case, but involved a fundamentally different issue.

Riggins was tried for murder and, as eight Justices viewed

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the facts, the trial court required Riggins to continue

taking a powerful antipsychotic drug generically known as

thioridazine. Riggins' claim to the Supreme Court, after his

conviction and death sentence, was that he had been compelled

unconstitutionally to take this medication and that the drug

concealed his true mental state from the jury and impaired

his ability to present his insanity defense.

The Supreme Court held that Riggins had a substantial

interest under the Due Process Clause of the Fourteenth

Amendment in "avoiding involuntary administration of

antipsychotic drugs . . . ." Id. at 134. Although the Court

said that forced medication could sometimes be justified

(e.g., to protect the defendant's health or protect others

from danger), the trial judge in Riggins had made no such

findings. For this reason, and given the "strong

possibility" or "substantial probability" that Riggins'

defense had been impaired, id. at 137-38, the Court declined

to require a showing of actual prejudice and overturned the

conviction.

The concern in Riggins with forced medication is not

present in this case. Although Lopez points to the trial

court's threat to revoke bail and imprison him so that a

doctor could supervise his medication, the incident had

nothing to do with forcing on Lopez any medication that he

did not want. The trial court thought that some of the

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symptoms of which Lopez was complaining (e.g., grogginess)

had been induced by over-medication; at the outset a number

of doctors were prescribing different drugs, and testimony

showed that over-medication might be the cause of such

problems. The record shows that Lopez himself wanted proper

medicationandwascontent tohaveDr.Payneprescribe andsupervise.

This does not mean that Lopez is without a potential

claim. That claim, made below and adequately presented here

in the course of the Riggins argument, is that the

medications, necessary even if voluntarily taken, impaired

Lopez' ability to present his defense. Even assuming Lopez'

"competency," that being a fairly easy test to satisfy,

Godinez, 113 S. Ct. at 2685, the threat of impairment

permitted a request for a continuance. Here, Lopez argues,

the district court had a reasonable alternative that should

have been adopted, namely, to postpone the trial until the

operation had occurred and removed or diminished the need for

drugs.

A defendant, especially one proposing to testify at

trial about complex financial transactions, is entitled to be

concerned about his fitness. For good medical reasons, Lopez

was taking a number of medications, some capable of

producing side effects that could impair clarity of mind.

The drugs were designed to prevent seizures, control blood

pressure, relieve pain, induce sleep, reduce agitation and

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prevent depression; and they included Darvocet, ProSom,

Dilantin, Vasotec, Valium, Esgic Plus and Sinequan. At

various times Lopez reported that he had severe headaches,

was unable to sleep, and was suffering from memory lapses.

His lawyers protested that Lopez had problems communicating

with them.

Lopez' health obviously warranted an inquiry by the

trial judge. Far from ignoring the issue, the trial court

deferred trial for a substantial period, summoned medical

experts one after another, took an active role in securing

diagnoses for Lopez, had him re-examined repeatedly, and took

testimony and made findings in abundance, including a

detailed post-trial order summarizing the court's findings

and reasons for proceeding with trial. There is no need to

describe the procedural steps in detail because Lopez himself

does not seriously suggest that the investigation was flawed

or inadequate.

The substantive issue is more difficult. The testimony

of the various doctors confirms that a number of the drugs

Lopez took have the potential to cause side effects such as

grogginess that could interfere with defendant's ability to

present his case. Yet the main thrust of the doctors'

testimony, fairly read, was that the doctors thought that

proper prescription and careful monitoring would meet these

threats. Such a monitoring regime was in place when Lopez

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testified. The doctors who gave testimony raising the most

doubts did so at the outset (while several doctors were

prescribing drugs for Lopez, apparently without much

coordination).

Lopez' main trial counsel did protest at times that his

client was not able to cooperate fully; but these complaints

of Lopez' conduct during trial are balanced, if not

outweighed, by the district court's findings that Lopez

appeared to be well oriented and was cooperating with

counsel. In all events, a reputable expert unaffiliated with

the prosecution or defense--Dr. Payne--gave firm testimony

that Lopez was fit to testify. His testimony was based on

examinations of Lopez close in time and on the monitoring of

his medicine. Even on a cold record, Dr. Payne's testimony

carries conviction.

As for Lopez' own testimony, which he claims suffered

because of his medical condition, the evidence is

inconclusive. It is not the most organized and responsive

testimony we have ever read; but Lopez was confined by

evidentiary rulings that limited him in presenting

information that he and his counsel thought helpful but the

trial judge thought irrelevant (e.g., such as whether the

banks had sustained actual losses). Much of the disarray in

his testimony appears to be caused by such struggles between

Lopez and the court.

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We have no doubt that Lopez in addition was under great

stress. This is true for many criminal defendants, but

surely it was augmented here by the tumor. In a few

instances Lopez' initial medication caused some adverse side

effects while it was being adjusted. On the other hand, the

trial had already progressed for several weeks before Lopez'

emergency room visit, and much of the medication was directed

to medical symptoms--difficulty in sleeping, high blood

pressure, anxiety--that could easily have continued even if

the trial had been delayed and the tumor removed. The

medical advice itself largely supported the course followed

by the district court.

This is a classic instance in which the district court

had to exercise its informed judgment. In such cases, so

long as sound procedures are followed, the court's ultimate

judgment is reviewed under an abuse of discretion standard.

United States v. Zannino, 895 F.2d 1, 13 (1st Cir.), cert.

denied, 494 U.S. 1082 (1990). Whether to proceed with the

trial or await the operation may well have been a hard

question. But on appeal, we think it easy to conclude that

the trial judge acted within his discretion in deciding, with

expert medical support and after careful investigation, to

proceed.

We reject the suggestion that the district court was

hostile to the defendant. Most judges are suspicious of a

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mid-trial request for a continuance or mistrial, and the

record confirms that Lopez' initial symptoms may have been

caused in part by over-medication, even if inadvertent or the

product of too many doctors. Paragons may exist among trial

judges who can maintain perfect discipline with perfect tact;

but for most, a certain sternness in manner and an abiding

skepticism about delay are a necessary part of the arsenal.

III. THE MERITS

Counts 1-5. The first five counts of the indictment

charged Lopez under a statute that punishes anyone who

"knowingly makes any false statement" to influence federally

insured financial institutions. 18 U.S.C. 1014. The

indictment charged, and the district court assumed, that

materiality was an element of the offense. But, as was

commonly done in most circuits at the time, the trial judge

resolved the materiality issue himself and did not submit it

to the jury. The defense objected to this procedure.

Following Lopez' conviction, the Supreme Court decided

United States v. Gaudin, 115 S. Ct. 2310 (1995). There, the

Court held that where materiality is an element of an

offense, it must under the Sixth Amendment be submitted to

the jury. The government's main response to Gaudin is that

materiality is not an element under section 1014.

Alternatively, the government says that any error was

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harmless because the evidence overwhelmingly proved

materiality and no rational jury could have found otherwise.

This court has already held that section 1014 requires

"that the false statement concern[] a material fact. United

States v. Concemi, 957 F.2d 942, 951 (1st Cir. 1992). This

view is consistent with that of several other circuits. E.g.

United States v. Wells, 63 F.3d 745, 750 (8th Cir. 1995);

United States v. Staniforth, 971 F.2d 1355, 1358 (7th Cir.

1992). Although the statute does not contain an explicit

materiality requirement and the Second Circuit has held that

no such requirement is to be inferred, United States v.

Cleary, 565 F.2d 43, 46 (2d Cir. 1977), cert. denied, 435

U.S. 915 (1978), we are not disposed to regard the issue as

an open one in this circuit.

The government's alternative position is that any error

that occurred in failing to submit the issue to the jury was

harmless. Most errors, including constitutional ones, are

subject to harmless error analysis, Sullivan v. Louisiana,

113 S. Ct. 2078, 2081 (1993), simply because it makes no

sense to retry a case if the result will assuredly be the

same. But for various reasons, some errors are deemed fatal

without proof of prejudice. No one, for example, would think

it was harmless error--no matter how conclusive the evidence

of guilt--if the defendant were tried by a jury of five year

olds or in a courtroom dominated by a lynch-mob.

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The Supreme Court has gone somewhat beyond such extreme

cases, holding (for example) that a defective reasonable

doubt instruction objected to at trial cannot be harmless

error. Id. at 2082-83. The precedents make clear that it

could not be harmless error for the trial judge to direct a

verdict on the case as a whole, United States v. Martin Linen

Supply, Co., 430 U.S. 564, 572-73 (1977); and we think that

the Court would apply the same analysis to a directed verdict

on a single element of the offense. Rose v. Clark, 478 U.S.

570, 581 n. 8 (1986); Hoover v. Garfield Heights Municipal

Court, 802 F.2d 168, 177-78 (6th Cir. 1986), cert. denied,

480 U.S. 949 (1987).

We stress that it is of crucial importance to us that

Lopez made a timely objection at trial to the judge's refusal

to submit this issue to the jury. This court has already

indicated that where there is no timely objection, the "plain

error" doctrine (see United States v. Olano, 13 S. Ct. 1770,

1777-78 (1993)), governs in deciding whether failure to

submit an element to the jury calls for reversal. United

States v. Romero, 32 F.3d 641, 652 (1st Cir. 1994). See also

Gaudin, 115 S. Ct. at 2322 (Rehnquist, C.J., concurring).

The mix of considerations is very different where the trial

judge has not been alerted by an objection. Indeed, the

element may be one that the defendant has chosen not to

contest.

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Even where a timely objection has been made, as in our

own case, one might ask why the failure to submit an element

to the jury should automatically be fatal, given that the

harmless error doctrine can be invoked (not always

successfully) in kindred cases, say, to remedy a

misinstruction as to an element, Pope v. Illinois, 481 U.S.

497, 502 (1987), or a faulty presumption, Rose, 478 U.S. at

579-80. But labels like "fundamental," id. at 577, and

"structural," Sullivan, 113 S. Ct. at 2083, tend to be

surrogates for matters of degree and for multiple concerns.

In all events, our best guess is that the Supreme Court would

regard an omitted element reversible error per se if there

were a timely objection--although not automatically "plain

error" if no objection occurred--and this conclusion almost

disposes of the government's fallback position.

We say "almost" because the government could argue that

the jury, although instructed not to, actually did decide the

materiality issue when it found that Lopez did intend to

influence the bank loans by false statements. In theory, the

question of purpose (the defendant's specific intent) differs

from the question of materiality (whether an objective lender

would be likely to be influenced by the statement). Purpose

could exist without materiality, and vice versa. But in most

cases no independent proof exists of a defendant's specific

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intent; rather, the jury infers such purpose from the fact

that the statement would so influence an ordinary lender.

The government hints at this argument in its brief but

makes no effort to show that in this case the jury must have

so reasoned, a conclusion that might require a showing both

that the evidence of materiality was overwhelming and that

other evidence of purpose was thin or absent. If an adequate

showing were made, we would have to decide whether it would

satisfy the Supreme Court. There is some reason to think

that it might, see Sullivan, 113 S. Ct. at 2082, but it will

be time enough to consider this question in a case where the

factual predicate is adequately developed.

Counts 6 and 7. Lopez' attacks on the wire fraud

convictions remain to be considered. In his opening brief,

Lopez challenged the wire fraud convictions on three grounds:

that the evidence did not show a scheme to defraud; that the

use of the wires was not in furtherance of such a scheme;

that in any event there was no proof that Lopez was

responsible for any such use of the wires. We address the

points in the same order.

First, Lopez says that the evidence does not show that

there was a scheme to defraud. He argues that the government

did not show that the withdrawals from the reserve accounts

were diverted to his personal use or that they were directly

linked to the false invoices; and he says that the

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partnerships owed him money in excess of anything withdrawn

and that as a general partner he had authority to withdraw

funds. These arguments peel apart into distinct factual and

legal issues.

Starting with the facts, the government apparently did

not prove at trial where the withdrawn money went. But it

did show that Lopez' withdrawals matched false construction-

company invoices in the same amounts and that Lopez had

prepared the invoices, together with false checks on the

accounts purporting to pay the invoices. Absent other

evidence, the jury was entitled to infer that Lopez had

employed the false documents to disguise the withdrawals and

divert them to his own use. This is enough for a scheme to

defraud without proof as to where he concealed the proceeds

or how he spent the money. Cf. United States v. Yefsky, 994

F.2d 885, 892 (1st Cir. 1993).

As for the legal defenses, Lopez as manager apparently

could withdraw funds for proper purposes, but the jury

reasonably concluded that the purpose here was illicit. Nor

is it pertinent that the partnerships may have owed Lopez

money. The accounts in question here were restricted to

repairs and other narrow uses; and, more important, the

records Lopez created gave the impression that the money had

been used for repairs. The scheme, if successful, would have

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enriched Lopez without reducing the ventures' apparent

obligations to Lopez.

Second, Lopez says that the evidence did not show that

the wires--the basis for federal jurisdiction--were used in

furtherance of the scheme. The money, he notes, was

withdrawn in 1988; and the faxes, responding to inquiries

about the withdrawals, occurred in late 1990 and early 1991.

Lopez concludes that if any fraud occurred, it was completed

long before the faxes were ever sent. No other use of wires

was alleged.

The case law requires that the use of the wires must be

"incident to an essential part of the scheme," Pereira v.

United States 347 U.S. 1, 8 (1954), but the cases have

stretched that concept to include use of the wires in

attempts "`to lull the victims into a sense of false

security, postpone their ultimate complaint to the

authorities, and therefore make the apprehension of the

defendants less likely.'" United States v. Lane, 474 U.S.

438, 451-52 (1986) (quoting an earlier decision). It is hard

to see why the jury could not find that the faxes in this

case do not fit that description.

Lopez says that the faxes do not explicitly refer to the

withdrawals and that they refer to events after 1988 and so

could not justify the withdrawals. But the faxes were sent

in response to inquiries that did refer to the withdrawals

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and it is not a complete answer to say that the faxes were

not directly responsive to the inquiries. Rather, the

responses could be read as attempts to talk around the issue,

to confuse matters, and ultimately to delay or avoid

detection. This permissible inference satisfies the Lane

criterion.

Third, Lopez says that the government failed to prove

that he sent the December 1990 fax (count 6) or that the

January 1991 document (count 7) was transmitted by wire. The

former was sent from the accounting firm used by Four Winds

Rental and an accountant testified that he faxed the letter

as a "courtesy for . . . Mr. Lopez" because "either he or

someone from his office was in--in our office that day." The

letter is not signed but the accompanying cover sheet,

prepared by the accounting firm, says that the letter is from

Lopez.

Quite apart from the cover sheet, the content of the

letter reveals that it is a response to the earlier letter of

inquiry to Lopez. The wording of the letter is substantially

the same as the subsequent letter of January 14, 1991, which

was signed by Lopez. It was a fair inference that Lopez had

also composed the earlier letter and either directed the

accountant to fax it or sent someone in his employ to do so.

All that is required is that Lopez caused the letter to be

faxed and the jury could find that he did.

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As for the January 1991 letter, Lopez does not deny

authorship but questions the proof that it had been faxed.

The letter was found in the files of Capital Management

Strategies together with a page bearing the phrases "Telefax

Communication" and "Fax Cover Sheet" as well as the Four

Winds logo; and the page describes Lopez as the sender and

bears the same date as the letter. This is adequate

circumstantial evidence that the document was faxed and

serves to distinguish United States v. Srulowitz, 785 F.2d

382 (2d Cir. 1986), where no circumstantial evidence showed

that a letter found in a file had been mailed to a third

party.

Lopez contends in his reply brief that the Gaudin

decision also requires reversal of his convictions for wire

fraud. The government charged that Lopez had used interstate

wires in furtherance of a scheme to obtain money by means of

false representations, thereby violating 18 U.S.C. 1343.

Lopez says that such false representations must be material

and that it was error not to so instruct the jury and require

it to find materiality. The government says that this issue

was not preserved, but Gaudin is a recent and not entirely

predictable decision.

On the merits, Lopez' argument confronts an initial

difficulty. In United States v. Faulhaber, 929 F.2d 16, 18

(1st Cir. 1991), this court found no materiality requirement

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in the substantially identical federal mail fraud statute, 18

U.S.C. 1341, stating that the jury was not required to find

that the scheme would have defrauded a person of "ordinary

prudence and comprehension." Faulhaber's position is at odds

with some circuits and with both of the standard instruction

treatises. E.g., United States v. Dunn, 961 F.2d 648, 651

(7th Cir. 1992); 1A L. Sand, J. Siffert, W. Loughlin & S.

Reiss, Modern Federal Jury Instructions 44.01 (1995). But

whether Faulhaber warrants re-examination is a subject for

another occasion.

In our case, the district court did instruct the jury

that a "scheme to defraud" required that the "plan [be one]

reasonably calculated to deceive persons of ordinary prudence

and comprehension by means of false or fraudulent pretenses,

representations, or promises." This language embodies the

materiality standard. The only deceptive conduct charged

under counts 6 and 7 involved false or fraudulent documents,

so it hardly matters that the "reasonably calculated" and

"ordinary prudence" language referred to the word "plan"

rather than the false statements. In short, assuming that

materiality is an element in wire fraud, the issue was

effectively submitted to the jury in this case.

IV. GOVERNMENT MISCONDUCT

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Before trial, Lopez filed a motion alleging government

misconduct and seeking to have the indictment dismissed, or

at least to obtain additional discovery and an evidentiary

hearing. He claimed that he was a victim of vindictive and

selective prosecution and that the indictment had been

tainted by a conflict of interest on the part of a former

Assistant United States Attorney who had played a minor role

in the investigation of Lopez and later served for a period

as Lopez' defense counsel prior to indictment. The district

court denied this motion. United States v. Lopez, 854 F.

Supp. 41 (D.P.R. 1994).

We start with the claim of improper prosecution. Lopez

told the district court that he had been prosecuted because

he refused to use his political influence in favor of the

reappointment of a former U.S. Attorney for Puerto Rico.

Further, he claimed that defendants in his position are

normally pursued civilly on false statement claims, so the

prosecution was selective as well as vindictive. His

evidence on the first point was thin; on the second, the

government offered the district court evidence that Lopez'

case did fall within its guidelines for criminal prosecutions

because of the amounts involved.

On appeal, Lopez has condensed his argument on the claim

of improper prosecution to a couple of sentences and a pair

of footnotes. The arguments are used primarily to add color

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to his other claim of government misconduct, relating to the

dual role of the lawyer who allegedly represented first the

government and then Lopez in the same matter. Arguments not

seriously developed on appeal are waived, Zannino, 895 F.2d

at 17, and in this instance we also think that a deliberate,

and reasonable, strategy choice was made.

Nevertheless, those charges of selective and vindictive

prosecution indirectly concern the integrity of the judicial

process. We have therefore reviewed with care the pertinent

filings in the district court, the district court's lengthy

discussion of the subject, what little Lopez has to say about

the matter on appeal, and the government's more extensive

rebuttal. Although the waiver relieves us of the need to set

out the facts in detail, we comment briefly on each branch of

Lopez' claim.

The district court did not ignore the serious charges of

blackmail made against certain members of the U.S. Attorney's

office, but analyzed the proffered evidence with care. This

evidence consisted primarily of hearsay and conjecture, and

the district court after scrutiny found it insufficient to

require an evidentiary hearing. Lopez, 854 F. Supp. at 45-

46. The district court's judgment call was not unreasonable

on its face, especially where as here the vindictive

prosecution claim falls outside the narrow area where such a

claim traditionally has been recognized, e.g. United States

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v. Garza-Juarez, 992 F.2d 896, 905 (9th Cir. 1992), cert.

denied, 114 S. Ct. 724 (1994), and where the prosecution

itself was conducted by a new U.S. Attorney not implicated by

Lopez' allegations.

As for selective prosecution, the district court asked

the government for information about its prosecution policy.

The government supplied the data and the court ruled that

Lopez had not made out a colorable claim of discriminatory

treatment. Id. at 44. Nor is it surprising to us that the

government would prosecute criminally a charge of multiple

false loan applications totalling a considerable sum.

The government-misconduct claim that Lopez does argue at

length on appeal concerns Luis Plaza Lopez. According to the

allegations, Plaza, while serving as an Assistant United

States Attorney, began the grand jury investigation of Lopez

in February 1992, and took a small number of steps in the

inquiry before leaving the government in November 1992.

Plaza then began representing Lopez in dealing with the

government's investigation. Lopez asserts that he did not

know of Plaza's prior role in his case. Plaza ceased

representing Lopez a year later, before Lopez was indicted,

after a new United States Attorney raised questions about

Plaza's dual role.

If after leaving the government Plaza worked on the

other side of the same matter, this would normally constitute

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a violation of federal law. See 18 U.S.C. 207. But

ordinarily the injured party would be the original client,

here the government, which would be entitled to fear that

confidential information might now be used against it by its

own former lawyer. The district court made this point in

declining to convene an evidentiary hearing on this matter.

Lopez, 854 F. Supp. at 49.

Lopez responds by saying that he was himself prejudiced

because Plaza must have carried into his new employment his

prosecutor's judgment that Lopez was guilty. Lopez cites us

to case law holding that, for just this reason, a judge

cannot sit on a matter on which he worked as a prosecutor.

United States v. Arnpriester, 37 F.3d 466, 467 (9th Cir.

1994). The analogy is not very persuasive. The judge, who

is supposed to be impartial, is disqualified because his

prior connection with one side renders his present

impartiality suspect. An attorney is expected to be loyal,

not impartial, and after switching sides has ample inducement

to act in the interest of the attorney's new client.

But--Lopez counters--in this case Plaza, while serving

as Lopez' attorney, told Lopez that the government

prosecutors might drop charges if Lopez supported one of them

for the then open post of U.S. Attorney. The implication is

that Plaza was working as an agent for prosecutors, thus

depriving Lopez of his constitutional right to independent

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counsel. Assuming that Plaza ever conveyed such a message to

Lopez, Plaza's role was that of a go-between and was apparent

to Lopez. The suggestion that Plaza therefore had divided

loyalties or was a government agent is rhetoric.

Lopez' most straightforward complaint is that the

prosecutors, when they discovered that Plaza was now

appearing on Lopez' side, should have immediately disclosed

to Lopez Plaza's prior involvement as prosecutor in the same

case. Lopez cites us to cases where the government has by

its silence improperly reaped an advantage from disloyal acts

of private defense counsel in cooperation with the

government. E.g., United States v. Marshank, 777 F. Supp.

1507 (N.D. Cal. 1991). But there is no indication that the

government gained any advantage from delay in disclosing

Plaza's former affiliation, if undue delay there was.

The main job of the trial judge in a criminal case is to

try the defendant, and there is always a tension when the

defense seeks to shift the focus to charges of improprieties

or wrongdoing by the government. Where there are plausible

claims of government misconduct prejudicing the rights of the

defendant, the district court cannot ignore them; but how far

to pursue them, and in what manner, depends upon

circumstances, and the judge on the scene has considerable

latitude. United States v. Ortiz-Arrigiotia, 996 F.2d 436,

442-43 (1st Cir. 1993), cert. denied, 114 S. Ct. 1368 (1994).

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Here, the trial judge looked about for big fish, saw none,

and let the red herrings go.

V. SENTENCING

Lopez was sentenced pursuant to the November 1, 1990,

edition of the Sentencing Guidelines (all subsequent

references are to that edition). The seven counts of

conviction were grouped, U.S.S.G. 3D1.2, and Lopez'

sentence was calculated under section 2F1.1, which prescribes

a base offense level of 6 for offenses involving fraud or

deceit.

The main variable under section 2F1.1 is the amount of

"loss" inflicted or intended, and the district court

calculated the total loss for the seven counts as $6,689,051,

requiring an increase of 14 levels. U.S.S.G.

2F1.1(b)(1)(O). The district court added six additional

levels, representing two levels each for more than minimal

planning, id. 2F1.1(b)(2), abuse of a position of trust,

id. 3B1.3, and obstruction of justice for committing

perjury during trial, id. 3C1.1.

The resulting total base offense level was 26 (6 plus 14

plus 6). Lopez had no prior convictions and, given a

criminal history category of I, his offense level of 26

corresponds to a guideline range of 63 to 78 months'

imprisonment. The court chose to construct the 63-month

sentence by imposing concurrent sentences of 24 months on

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count 1 (the conduct underlying this count occurred when an

earlier version of section 1014 was in effect that provided

for a two-year maximum sentence), 63 months each on counts 2

through 5, and 60 months each on counts 6 and 7 (there being

a 60-month statutory maximum on those last two counts).

Lopez has not challenged the base offense level or the

six-level adjustment for planning, abuse of trust or

obstruction. He does challenge the loss calculations on

counts 1 through 5, and on certain of his claims the

government suggests a remand. Having reversed convictions on

those false statement counts, we have no reason to consider

the claims of error as to sentences on those counts. Our

concern is limited to Lopez' separate attacks on the

calculations as to counts 6 and 7.

The broader of the two challenges made by Lopez to his

sentence on counts 6 and 7 is that the government failed to

show either an actual or an intended loss to the partnerships

because Lopez was charged with having improperly withdrawn

$308,481 from the partnerships' reserve accounts in 1988 and

the same year the partnerships allegedly owed Lopez $741,000.

Lopez' brief reasons that the "withdrawal of monies that were

owed to him . . . did not cause the partnerships any `actual'

economic loss," nor can there have been any intended loss

because "here, the alleged crime was complete yet there still

was no loss." The argument is clever but unpersuasive.

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If a defendant had picked the pocket of a victim in a

crowded elevator, gaining $10 in the process, it would not be

a defense when the $10 loss figure was attributed to the

defendant at sentencing to say that the victim happened to

owe the defendant an even larger sum. As long as a theft or

diversion is concealed or disguised, the victim has no reason

to think that its debt has been reduced. In this sense the

loss caused by Lopez was both actual and intended.

Lopez' second argument is less ambiguous but may have

more substance. It is common ground that the amount

withdrawn by Lopez from the partnerships' reserve accounts

was $308,481. This was the amount charged in the indictment

and, interestingly, it is the figure specified by the

district court in its order requiring restitution, an order

that Lopez has not challenged. Yet in reliance on the

probation report, the district court found a loss of $436,176

attributable to the wire fraud counts; and as we shall see

the difference between the two figures may matter.

The probation officer originally calculated the loss on

counts 6 and 7 as $308,481 but thereafter a letter containing

a victim impact statement was received from Capital

Management Strategies claiming a loss of $632,917. The

probation officer deducted various amounts from this larger

figure concluding that they did not reflect losses imposed by

Lopez. The amount left was $436,276, which the probation

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officer and the district court adopted as the loss

attributable to counts 6 and 7. The victim impact statement

was not attached to the pre-sentencing report so the basis

for the claimed total loss of $632,917 is difficult to

discern.

At sentencing, the discrepancy between the original and

adjusted figures for the loss on counts 6 and 7 did not loom

large, since both figures were dwarfed by the losses on

counts 1 through 5; whether the loss of counts 6 and 7 was

$308,481 or $436,176, the total loss on all counts appeared

to be within the $5 to $10 million range for which a 14-level

increase was required. Nevertheless, at sentencing defense

counsel took a swipe at the victim impact statement, calling

it "a letter that has been alluded to in the pre-sentence

report. No live body, no documentation. . . . and to

indicate that there are $436,376 in the losses as a result of

that, I believe, is -- is improper."

On appeal, Lopez says that the letter in question was

not disclosed to him, despite a request, and argues that the

trial judge "failed to exercise independent judgment but

relied mechanically on a non-disclosed hearsay document

referred to very generally in the pre-sentence report . . .

." The government responds that in this circuit reliable

hearsay can be used at sentencing, including hearsay adopted

by a pre-sentence report. See United States v. Tardiff, 969

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F.2d 1283, 1287 (1st Cir. 1992). Lopez then says that the

victim impact statement had no indicia of reliability, a

point difficult to resolve since it is not before us.

It is not necessary to decide these issues in the

abstract because the case must in all events be remanded for

resentencing. The bulk of the losses, and thus a significant

part of Lopez' sentence on counts 6 and 7, rests on amounts

attributed to the counts that we have reversed. The

government has not given us any reason to think that the

losses for counts 1 through 5 can be attributed to Lopez in a

resentencing on counts 6 and 7. The possibility that it may

retry Lopez on counts 1 through 5 is irrelevant at present.

The base offense level for counts 6 and 7 and the six-

level increase have not been challenged on appeal, so the

only question is the amount of loss. The difference between

the two alternative figures here is significant; the $308,481

figure would seemingly produce a total offense level of 20

and a sentencing range of 33-41 months, while the larger

$436,276 figure would produce a total offense level of 21 and

a range of 37-46 months. Although one might construct a

technical argument to defend the use of the larger figure

(e.g., because Lopez did not counter the report with

evidence), we think that simple justice suggests that this is

the wrong course to follow, especially since resentencing is

required in any event.

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If on remand the government wants to rely on the larger

of the two figures, the victim impact statement should be

made available to Lopez' counsel prior to resentencing.

Whether the government wants to support the larger figure

with any other kind of evidence, and whether Lopez wants to

seek an evidentiary hearing at which the maker of the victim

impact statement can be cross-examined, are matters for the

future. What we will not do is uphold on this record the use

of the larger figure where a procedural flaw arguably exists

and we ourselves cannot discern the basis for the figure.

The convictions and sentences on counts 1 through 5 are

vacated; the government may retry the defendant on those

counts or not, as it chooses. The convictions on counts 6

and 7 are affirmed but the sentences imposed on those counts

are vacated and the case remanded for resentencing on those

counts of conviction.

It is so ordered.

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