United States v. Fraza

UNITED STATES COURT OF APPEALS
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT

No. 96-1219

UNITED STATES OF AMERICA,

Appellee,

v.

SCOTT FRAZA,

Defendant, Appellant.

No. 96-1220

UNITED STATES OF AMERICA,

Appellee,

v.

JAMES FRAZA,

Defendant, Appellant.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

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

Before

Selya, Circuit Judge,

Aldrich, Senior Circuit Judge,

and Boudin, Circuit Judge.

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

M. Traini were on brief for appellant Scott Fraza.

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

O'Donnell were on brief for appellant James Fraza.

Ira Belkin, Assistant United States Attorney, with whom Sheldon

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

February 18, 1997

ALDRICH, Senior Circuit Judge. James Fraza and his

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

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

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

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

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

were found guilty on all counts and now appeal their

convictions and sentences. We affirm, with a minor

exception.

I. Background

In 1989, James offered to purchase 80 acres of land

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

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

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

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

check, but it required additional financing to complete the

sale.

In April of 1990, James met with officers of the

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

the officers that the purchase price of the property was

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

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

could be granted. James then suggested that his son Scott

purchase the property and take the loan. The CCU officers

agreed to consider the request, but cautioned that Scott

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

credit history.

In May of 1990, James and Dupont attended an

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

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

over twenty years. Dupont signed two closing statements --

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

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

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

Dupont endorsed a deed conveying the property to Scott's

construction company. No money or financial instruments

changed hands at this time. After two abortive attempts,

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

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

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

$225,000.

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

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

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

that Dupont was unavailable and produced the signed blank

closing form. He then filled in the purchase price as

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

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

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

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

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

received Scott's signed promissory note and mortgage in the

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

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

Within six months of the sale, Scott filed for

bankruptcy. As part of bankruptcy proceedings, both

defendants, represented by Dailey, gave deposition testimony

that they had given CCU an inflated price for the Dupont

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

mailed Dupont a tax form indicating that Dupont had received

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

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

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

statement stating the purchase price as $205,000.

Also about this time, the loan to Scott became

delinquent and CCU discovered that the actual purchase price

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

existence of two different closing statements. Dailey's law

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

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

In October 1993, James, Scott and Dailey were

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

statements to a federally insured lending institution, aiding

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

commit these offenses. Dailey died prior to trial. James

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

months and 24 months respectively. Both were also sentenced

to identical terms of supervised release, joint and several

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

and reimbursement of all attorney's fees and expert witness

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

II. Discussion

Defendants raise multiple grounds on appeal

encompassing issues relating to indictment, trial and

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

chronological order.

A. Indictment

Defendants contend that Count II, knowingly making

false statements to a federally insured lending institution,

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

1344, are multiplicitous, thereby violating the Double

Jeopardy Clause of the Fifth Amendment of the Constitution.

Our analysis begins with application of the test

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

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

if, when comparing two offenses arising out of the same

transaction, each offense "requires proof of an additional

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

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

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

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

1014. They are:

(1) that the [Institution's] deposits
were [federally insured];

(2) that the defendant made false
statements to the [Institution];

(3) that the defendant knew the
statements were false; and

(4) that the statements were materially
false and made for the purpose of
influencing the [Institution] to make a
loan or advance.

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

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

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

U.S.C. 1344 as:

(1) engag[ing] in a scheme or artifice to
defraud, or ma[king] false statements or
misrepresentations to obtain money from;

(2) a federally insured financial
institution; and

(3) d[oing] so knowingly.

Id. at 424.

Thus, on the plain language of these statutes, the

requirements of Blockburger are satisfied. Section 1014

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

that the statements were "materially false." Likewise,

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

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

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

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

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

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

In Seda, the court moved beyond Blockburger

statutory analysis, relying instead on Whalen v. United

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

of rape and felony murder were not separate offenses because

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

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

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

greater included offenses, see United States v. Dixon, 509

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

qualify, but bank fraud and making false statements to a

federally insured lending institution do not. Indeed, in

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

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

application of Blockburger statutory analysis. Id. at 696;

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

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

Although the Blockburger elements test is mechanistic and

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

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

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

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

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statute without violating the other, we believe the best view

is that these two counts are not multiplicitous.

B. Trial

First, defendants contend that as regards Count IV,

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

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

evidence, however, shows that when Dupont received the

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

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

evidence that Dailey acted as closing attorney in this

transaction and recorded the mortgage. From this testimony a

reasonable jury could infer that Dailey mailed the mortgage

to Dupont.

Defendants next maintain that deposition testimony

given by each defendant during Scott's bankruptcy proceeding

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

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

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

first place, each deposition was redacted to apply only to

the deponent. Against him it was clearly admissible;

anything affecting its weight could be offered separately.

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

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

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

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

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

did.

Defendants next object to the introduction of their

deposition testimony by claiming violations of their Fifth

Amendment privilege against self-incrimination. It is

elementary that the privilege must be asserted at the time of

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

(1984). Defendants seek to excuse themselves by blaming

their failure to assert on their attorney Dailey, claiming

that he failed to advise them due to his conflict of

interest. We give present counsel high marks for

imagination, but nothing else. The deposition inquiry was

not by a government official and therefore not an abuse of

defendants' Fifth Amendment rights. See Colorado v.

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

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

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

government could not use it.

C. Sentencing

1. Calculation of the Loss

Defendants next challenge the court's seven level

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

1. U.S.S.G. 2F1.1(b)(1) provides a sliding scale requiring
an increase to the offense level calculation based on the
amount of the loss caused by or intended by the defendant.
Losses greater than $120,000 but less than $200,000 call for
a seven level increase.

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

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

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

this figure should not enter into the loss calculation. This

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

laundering.

We previously examined the mechanics of loss

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

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

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

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

concluded that Application Note 7(b) controls the methodology

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

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

"[t]he loss is the amount of the loan not repaid at the time

the offense is discovered, reduced by the amount the lending

institution has recovered (or can expect to recover) from any

assets pledged to secure the loan." Id. (emphasis supplied).

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

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

correctly included in the loss calculation.

2. The court calculated the loss as of the time of discovery
of the fraud as $160,000 for the CCU mortgage plus $60,000
for Dupont's mortgage, less $96,000, the appraised value of
the property on that date.

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Defendants also contend that the court erred in

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

because the amount of the loss attributed to Dupont was

speculative. We agree with the government, however, that

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

discovery and a first mortgage to the pension fund of

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

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2. Obstruction of Justice

Defendants next complain of the two level

enhancement each received for obstruction of justice under

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

whether a defendant obstructed justice only for clear error.

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

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

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

independent acts by the defendants supporting these

enhancements, including submitting a false affidavit by James

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

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

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

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

enhancement, we cannot say that the 2 level enhancement for

obstruction of justice was error, clear or otherwise.

3. Role in the Offense Determinations

James contests his two level enhancement for being

a manager or organizer of the criminal activity, seeking

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

contention forthwith. Reviewing again only for clear error,

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

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

Sentencing Report that "to the extent that his son Scott

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

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

say again that we discern no error here.

Scott complains of the court's refusal to grant a

downward adjustment for his minor role in the offense, a

position which was not opposed by the government.

Apparently, at sentencing this brass ring was within reach

when the Probation Officer interrupted the proceeding and

engaged in an ex parte communication with the court some time

after which the downward adjustment was denied. According to

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

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

advocate for rejection of the requested 2-point deduction

. . . ."

Defendant's moral outrage regarding this issue was

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

expectations of the Probation Officer's proper behavior. We

would expect the officer to exercise his independent judgment

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

in his interruption of the proceedings to make his judgment

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

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

to "provide the trial judge with as much information as

possible in order to enable the judge to make an informed

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

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

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

that is not clearly erroneous.

4. Reimbursement

Included in defendants' sentences was an obligation

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

been obtained on defendants' allegation of financial

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

repeated allegation of misrepresentations in their CJA

application defendants failed to respond. They did not,

until threatened with contempt, even respond to the

government's extensive financial report, with exhibits. The

court's ultimate sentence apparently rejected their replies.

Our difficulty is that the court conducted no

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

financial viability. See United States v. Santarpio, 560

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

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

done.

5. Restitution

Finally, defendants protest the court's order that

they jointly and severally pay restitution to Dupont in the

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

Dupont. Restitution orders are subject to clear error

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

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

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

mortgage to disappear or land values increase to the point of

validating Dupont's mortgage, defendants would be free to

apply for relief from the restitution order.

III.

The convictions and sentences are affirmed in all

respects, except that the reimbursement orders are vacated.

The cases are remanded for further proceedings on the matter

of reimbursement in accordance herewith.

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