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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