United States v. Shadduck

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 95-1395
UNITED STATES OF AMERICA,

Appellee,

v.

MICHAEL D. SHADDUCK,

Defendant, Appellant.

No. 95-1396
UNITED STATES OF AMERICA,

Appellee,

v.

ANDREA D. SHADDUCK,

Defendant, Appellant.

No. 96-1342
UNITED STATES OF AMERICA,

Appellee,

v.

MICHAEL D. SHADDUCK,

Defendant, Appellant.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Morris E. Lasker,* Senior U.S. District Judge]

*Of the Southern District of New York, sitting by designation.

Before

Cyr, Circuit Judge,

Campbell, Senior Circuit Judge,

and Stahl, Circuit Judge.

James B. Krasnoo with whom Law Offices of James B. Krasnoo was on

brief for appellants.
Mark J. Balthazard, Assistant United States Attorney, with whom

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

April 24, 1997

2

CYR, Circuit Judge. Appellants Michael and Andrea
CYR, Circuit Judge

Shadduck challenge the judgments of conviction and sentence

entered against them for bankruptcy fraud, see 18 U.S.C. 152,

following their four-day jury trial. We affirm the convictions,

but vacate, in part, the sentence imposed upon Michael Shadduck

and remand for resentencing.

I
I

BACKGROUND1
BACKGROUND

Appellant Michael Shadduck ("Shadduck"), a self-em-

ployed insurance salesman, invested in several insurance policies

and a pension fund with Guardian Investor Services Corporation

("Guardian"). Three days before the Shadducks filed their joint

chapter 11 petition on June 4, 1993, Shadduck had requested the

maximum loan advances available on four Guardian life insurance

policies. The chapter 11 petition, unaccompanied by schedules,

listed liabilities totaling $2,269,381.13 to the twenty largest

unsecured creditors.

On the day the joint chapter 11 petition was filed,

Mrs. Shadduck drew an $8,000 check on their personal checking

account and endorsed it over to her husband. Three days later,

1Viewing the evidence in the light most favorable to the
verdicts, we recite the facts as the jury reasonably could have
found them. United States v. Josleyn, 99 F.3d 1182, 1185 n.1

(1st Cir. 1996), cert. denied, 117 S. Ct. 959 (1997). We note,

however, that the record on appeal is woefully incomplete,
particularly as it includes no district court trial transcript.
Of course, the proponent of a claim must "bear the brunt of an
insufficient record on appeal." Real v. Hogan, 828 F.2d 58, 60

(1st. Cir. 1987). See also LaRou v. Ridlon, 98 F.3d 659, 664 n.8

(1st Cir. 1996).

3

four checks totaling $124,383.66 were deposited in a bank account

in the name of John Shepard, a friend of Shadduck. Three checks

had been issued to Shadduck by Guardian and represented portions

of the aforementioned loan proceeds, as well as policy dividends.

The fourth was the $8,000 check withdrawn by Mrs. Shadduck from

the joint account three days earlier.

At the creditors meeting on June 14, Shadduck denied

having made any payment in excess of $600 to any creditor within

the 90-day period preceding June 4, denied having a bank account,

and disavowed any beneficial interest either in insurance poli-

cies or a pension plan. Mrs. Shadduck, who was continuing to

write checks on their joint checking account during this time,

remained silent as her husband made these misrepresentations

under oath.

Following the creditors meeting, two other Guardian

checks, totaling $13,346.01, payable to Shadduck and endorsed

over to Shepard, were deposited in the Shepard account. Two days

later Shadduck gave Shepard a $73,900 check, drawn on Shadduck's

Guardian pension plan and endorsed over to Shepard. At the time,

the Shadduck pension plan account contained $118,339.05. On July

19, 1993, a $33,517.36 check was drawn on the Shadduck pension

plan account, representing the balance in the pension plan after

the required $10,921.69 withholding for federal income tax.

On July 1, the Shadducks filed their bankruptcy sched-

ules, signed the same day under penalty of perjury, asserting

that they had no interest in pension plans or insurance policies

4

and, further, that they had no bank account. Throughout this

entire period, however, Shadduck had funds in his pension plan

and Mrs. Shadduck continued to write checks on their joint

checking account. Shepard subsequently drew checks totaling

$171,211.12 to Shadduck on September 29 and November 2, 1993, in

amounts mirroring the checks Shadduck had issued to Shepard the

previous June. Three of these checks, totaling $17,134.70,

explicitly noted that the proceeds represented pension plan

funds.

The Shadducks were indicted on January 19, 1994: he on

four counts, for concealing assets and falsely stating that he

had no bank account, insurance policies, or pension plan, in

violation of 18 U.S.C. 152; she on one count, for falsely

stating she had no bank account. At trial, Shadduck admitted

making false statements but nevertheless insisted that he had not

listed the pension plan funds on the schedules because they were

exempt, even though he concededly had failed also to list any

pension plan funds as property claimed exempt. Shadduck further

testified that the monies invested in the insurance policies

belonged to clients who had requested that he invest approxi-

mately $85,000 in their behalf. Shadduck admitted making false

statements at the creditors meeting and on the bankruptcy sched-

ules, but vouchsafed that his wife had not known what was going

on.

After the jury returned guilty verdicts against both

defendants, the district court sentenced Shadduck to twenty-seven

5

months' imprisonment, including enhancements based on the total

intended loss, see U.S.S.G. 2F1.1(b)(1) (Nov. 1994), violation

of a judicial order, id. 2F1.1(b)(3)(B), and defrauding multi-

ple victims, id. 2F1.1(b)(2)(B). Shadduck appeals his convic-

tions and sentence. Mrs. Shadduck, who was sentenced to two

years' probation, principally challenges her conviction.2

II
II

DISCUSSION
DISCUSSION

1. Andrea Shadduck
1. Andrea Shadduck

Andrea Shadduck concedes that she purchased the $8,000

bank check with funds drawn from the joint checking account and

endorsed it to her husband, that she signed the bankruptcy

schedules listing no bank account, and that she remained silent

at the creditors meeting while her husband falsely represented

that they had no bank account. She nonetheless contends that

there was insufficient evidence that she intentionally made a

false statement, since her husband testified to her lack of

knowledge.

There was ample evidence to support the conviction.

The jury reasonably could infer from all the circumstances,

especially the timing of the various transactions, that she

possessed the requisite fraudulent intent. She drew an $8,000

2Although both appellants challenge the 2F1.1(b)(3)(B)
enhancement, the district court imposed a downward departure
before sentencing Mrs. Shadduck to probation. United States v.

Shadduck, 889 F. Supp. 8, 11-12 (D.Mass. 1995). Thus, no purpose

would be served by remanding for resentencing in these circum-
stances.

6

bank check on the unscheduled joint checking account the very day

she and her husband signed and filed their joint chapter 11

petition. She signed the bankruptcy schedule stating she had no

bank account, yet continued to draw checks on the joint account

for more than three months, even after her husband, in her

presence, falsely denied the existence of any such account at the

creditors meeting. This circumstantial evidence alone supported

a reasonable inference that her motive in making the $8,000

withdrawal from the joint checking account on the eve of bank-

ruptcy was to prevent its disclosure to creditors. Finally,

fraudulent intent was readily inferable from the fact that the

Shadducks omitted from their joint list of claimed exemptions

only the property not elsewhere disclosed as assets on their

schedules.3 Moreover, the jury was free to discredit the excul-

patory testimony offered by her husband, United States v.

Restrepo-Contreras, 942 F.2d 96, 99 (1st Cir. 1991), and we are

not at liberty to presume otherwise, see United States v. Laboy-

Delgado, 84 F.3d 22, 26 (1st Cir. 1996) (noting that appellate

court must "resolve all disagreement regarding the credibility of

witnesses to the government's behoof").

2. Michael Shadduck
2. Michael Shadduck

3Mrs. Shadduck also urges us to consider testimony presented
by her counsel at a postjudgment hearing to correct Shadduck's
sentence pursuant to 28 U.S.C. 2255. Counsel testified that
the joint checking account had been inadvertently omitted from
the schedules. In evaluating a challenge to the sufficiency of
the evidence on direct appeal, however, we may consider only the
evidence presented at trial. See United States v. Laboy-Delgado,

84 F.3d 22, 26 (1st Cir. 1996).

7

a. Supplemental Jury Instruction4
a. Supplemental Jury Instruction

Shadduck claims the jury verdict was tainted by the

response to a question submitted by the jury.5 Although Shadduck

would have us isolate the trial court's supplemental instruction,

the law is clear that it "'must be viewed in the context of the

overall charge.'" United States v. Femia, 57 F.3d 43, 47 (1st

Cir.) (quoting Cupp v. Naughten, 414 U.S. 141, 146-47 (1973)),

cert. denied, 116 S. Ct. 349 (1995). The general charge had

explained, with respect to each count, that the jury would need

to determine whether the alleged false statements and concealment

had been "knowing" and "fraudulent." There was no objection to

4We "review the propriety of jury instructions for abuse of
discretion." United States v. Mitchell, 85 F.3d 800, 809 (1st

Cir. 1996).

5Shadduck further complains, for the first time, that the
following comment about the weather caused the jury to hurry its
deliberations:

Now it's 3 o'clock in the afternoon. It's a
pretty nasty afternoon in case you haven't
been able to see the weather in the jury
room. Counsel and I are willing to stay as
long as you wish. What I normally do - and
what I will do - is about 4 o'clock, I'll
come down and I would normally excuse you at
that time unless the jury or a majority, at
least, of the jury believes that they are so
close to completing the case that they'd like
to stay a little bit longer. But if that's
not the case, then I will excuse you to re-
sume on Monday morning.

There is nothing in this comment to suggest that the jury was
pressured to rush its verdicts. Rather, the trial judge made
abundantly clear that he was willing to remain as long as neces-
sary that afternoon or to reconvene the following Monday.

Moreover, the defense failed to object to this reasonable proce-
dure.

8

the general charge.

Several hours after retiring to deliberate, the jury

inquired in writing whether there would be a change in the

ownership of certain funds invested in an annuity contract under

the name of one Leonard Roy were the jury to find Shadduck

guilty. The trial judge replied that there was no evidence on

which to base a response to their inquiry and that they were not

to consider this collateral matter in arriving at their verdicts.

The court added:

You should decide whether you believe that
[Shadduck] intentionally made a false state-
ment or he did not make a false statement in
regard to this material. That is the issue
before you.

Shadduck objected that a further instruction was required to the

effect that the jury would need to determine whether Shadduck had

made the statements "fraudulently." After explaining that its

response was consistent with its earlier and more detailed

charge, the court denied the request. Later, Shadduck unsuccess-

fully moved for a mistrial on the ground that the response to the

jury inquiry effectively had eliminated an element of the of-

fense.

Viewed in the context of the entire charge, and given

the clear signal from the trial judge that the jury inquiry

related to a collateral matter not appropriate for their consid-

eration, the response was entirely proper. It did nothing to

disturb, let alone gainsay, the very clear instruction in the

general charge; viz., that the jury must determine whether the

9

alleged conduct had been undertaken "knowingly" and "fraudulent-

ly."

Now, . . . the offenses . . . are al-
leged to have been done "knowingly and fraud-
ulently."
An act or failure to act is "knowingly"
done if it's done voluntarily and intention-

ally and not because of mistake or accident

or any other innocent reason.
The purpose of requiring that the gov-
ernment . . . prove that a defendant acted
"knowingly" is to insure that no one is con-

victed because of an act, or failure to act,

due to a mistake or an accident or some - any
innocent reason.
An act or failure to act is "fraudulent-
ly" done if it is done willfully and with the

intent to deceive or cheat any creditor,

trustee or bankruptcy judge.

An act or failure to act is "willfully"
done if it is done voluntarily and intention-

ally and with a specific intent to do some-

thing which the law forbids; that is to say,

for bad purpose either to disobey or disre-

gard the law.
....
The intent with which an act is done may
also be inferred from the nature of the act
itself. Accordingly, intent, willfulness and
knowledge are usually established by sur-
rounding facts and circumstances as of the
time the acts in question occurred or the
events took place and the reasonable infer-
ences to be drawn from them.

(Emphasis added.) Thus, the court defined both "knowingly" and

"fraudulently" through direct reference to the voluntariness, as

well as the general and specific intent, animating Shadduck's

conduct.

Against the backdrop of this earlier detailed instruc-

tion, we are not persuaded that any significant risk of confusion

arose from the subsequent umbrella response to the jury that it

was to decide whether Shadduck "intentionally" made false state-

10

ments. See United States v. Yefsky, 994 F.2d 885, 899 (1st Cir.

1993) (instruction on "intent," rather than "specific intent,"

held adequate given court's earlier definition of "willfully" as

encompassing specific intent); United States v. Nichols, 820 F.2d

508, 511 (1st Cir. 1987) (unnecessary to instruct on specific

intent "[g]iven the extensive instruction on 'knowingly and

willfully' [delivered] moments earlier").

b. Calculation of Intended Loss (U.S.S.G. 2F1.1)
b. Calculation of Intended Loss (U.S.S.G. 2F1.1)

The district court imposed an eight-level sentence

enhancement based on its finding that Shadduck had intended to

cause loss totaling $246,280. See U.S.S.G. 2F1.1, comment.

(n.7). ("[I]f [the] loss that the defendant was intending to

inflict can be determined, this figure will be used if it is

greater than the actual loss."). On appeal, Shadduck claims for

the first time that the loss calculation, which included the

loans obtained against the Guardian insurance policies and the

funds withdrawn from the pension plan, must be set aside because

those monies were in all events exempt under Bankruptcy Code

522, hence not subject to administration in bankruptcy.6 As

6Shadduck further claims, and the government concedes, that
the presentence report ("PSR") initially "double counted" the
$8,000 removed from the joint checking account the day the
Shadducks filed for bankruptcy. Although the government claims
that the error was corrected in an amended PSR, the record
contains no PSR. In all events, any such double counting would
have been harmless, since the total-loss category was unaffected.
See U.S.S.G. 2F1.1(b)(1)(I) (eight-level increase for loss

exceeding $200,000 but less than $350,000). Thus, addressing the
error, if any, could have no effect on the sentence. See United

States v. Sepulveda, 15 F.3d 1161, 1199 (1st Cir. 1993) (noting,

in context of drug-quantity calculation, that "[i]t is unneces-
sary to address an allegedly erroneous sentencing computation if,

11

Shadduck failed to object below, we review only for "plain

error." United States v. Carrington, 96 F.3d 1, 6 (1st Cir.

1996), cert. denied, 65 U.S.L.W. 3648 (U.S. March 24, 1997) (No.

96-8027); see also Koon v. United States, 116 S. Ct. 2035 (1996);

United States v. Olano, 507 U.S. 725, 734 (1993) ("plain error"

means "obvious" error); see also Fed. R. Crim. P. 52(b).

The present contention assumes, contrary to our

caselaw, that property of the debtor neither claimed nor set

apart as exempt would not have been subject to administration.

See Petit v. Fessenden, 80 F.3d 29, 33 (1st Cir. 1996); Mercer v.

Monzack, 53 F.3d 1, 3 (1st Cir. 1995), cert. denied, 116 S. Ct.

1317 (1996); see also 11 U.S.C. 522(l) (requiring debtor to

list property claimed exempt); Fed. R. Bankr. P. 4003(b). As the

Supreme Court recently held, Bankruptcy Code 522(l) and Bank-

ruptcy Rule 4003(b) are to be interpreted in accordance with

their literal intendment. See Taylor v. Freeland & Kronz, 503

U.S. 638, 643-45 (1992); see also Mercer, 53 F.3d at 3.

Virtually all property of the debtor, except as provid-

ed in Bankruptcy Code 541(b),(c)(2)&(d), becomes "property of

the estate" by operation of law without regard to whether it is

listed on the schedules. Id. 541(a). Shadduck has never

argued that these pension plan monies were not "property of the

and to the extent that, correcting it will not change the appli-
cable offense level").

12

estate,"7 but only that they were not subject to process under

applicable state law.8

7Bankruptcy Code 541(c)(2) excludes from "property of the
estate" an interest in a trust subject to transfer restrictions
enforceable under applicable nonbankruptcy law. See Patterson v.

Shumate, 504 U.S. 753, 757-58 (1992). Patterson held that the

antialienation provisions in ERISA-qualified plans constitute
transfer restrictions for 541(c)(2) purposes, hence such plans
are not "property of the estate." Id. at 760. See also In re

Yuhas, 104 F.3d 612, 614-16 (3d Cir. 1997) (IRA funds not "prop-

erty of estate"); In re Meehan, 102 F.3d 1209, 1214 (11th Cir.

1997) (same). Not only was this argument not raised below, but
there is no record evidence, see supra n.1, that Shadduck's

pension plan even contained transfer restrictions.

8Nor does the record on appeal indicate that this claim was
preserved below. Shadduck contends that Mass. Gen. Laws ch. 235,
34A, exempts pension plan funds which do not exceed seven
percent of the debtor's total income within the five-year period
preceding bankruptcy, and that Mass. Gen. Laws ch. 175, 119A,
exempts insurance policies under certain conditions. In any
event, this argument proves too much.

13

Were we to adopt the regime advocated by Shadduck,

property fraudulently concealed throughout the course of a

bankruptcy proceeding nonetheless would become exempt by opera-

tion of law.9 By contrast, property duly claimed exempt by an

honest debtor does not become exempt by operation of law unless

no "party in interest" objects to the exemption claim within the

allotted thirty-day period. See In re Edmonston, 107 F.3d 74, 76

(1st Cir. 1997); 11 U.S.C. 522(l); Fed. R. Bankr. P. 4003(b).

Thus, the argument advanced by Shadduck would short-circuit the

exemption-claim screening process explicitly envisioned in Fed.

R. Bankr. P. 4003(b), which provides that the thirty-day limita-

tion on objections to exemption claims "does not begin to run

until the debtor lists the 'property claimed as exempt.'"

Mercer, 53 F.3d at 3 (quoting Fed. R. Bankr. P. 4003(b)). See

also Petit, 80 F.3d at 33 ("Unless and until a debtor files a

timely claim of exemptions, however, as required by the Bankrupt-

cy Code and the Federal Rules of Bankruptcy Procedure, there is

no 'list of property claimed exempt' for the trustee or creditors

to oppose."). We therefore reject it and affirm the district

court's "intended loss" calculation.

9Shadduck seeks to supplement the record with "newly discov-
ered evidence" which allegedly establishes that these monies were
considered exempt by the bankruptcy court even though never
claimed exempt. The supplemental submissions a hearing
transcript in which the bankruptcy judge took a matter under
advisement, and a letter from counsel for the trustee suggesting
that the bankruptcy court might find that the pension plan funds
were not reachable by creditors establish nothing of the sort.
We simply note, therefore, that the so-called "evidence" would
not have affected the outcome.

14

c. Enhancement for Violating a Judicial
c. Enhancement for Violating a Judicial

Order (U.S.S.G. 2F1.1(b)(3)(B))10
Order (U.S.S.G. 2F1.1(b)(3)(B))

(i) Judicial Order
(i) Judicial Order

The district court imposed a two-level enhancement on

the ground that Shadduck had violated a judicial "order," within

the meaning of U.S.S.G. 2F1.1(b)(3)(B) (1994) (prescribing two-

level enhancement for violating "any judicial or administrative

order, injunction, decree, or process"), by repeatedly flouting

the obvious intendment behind the Bankruptcy Rules and Official

Forms that all property of the debtor be disclosed. See United

States v. Shadduck, 889 F. Supp. 8, 10 (D. Mass. 1995). See also

United States v. Bellew, 35 F.3d 518, 520-21 (11th Cir. 1994)

(affirming enhancement because Bankruptcy Rules and Official

Forms are "judicial orders").

Shadduck contends that the term "order," as used in

section 2F1.1(b)(3)(B), contemplates only a specific order, such

as a consent decree or an adjudicative order or mandate entered

pursuant to judicial direction. He argues that to uphold the

enhancement absent a specific order would permit its automatic

application in any bankruptcy fraud case, simply by virtue of the

forum in which the false statements were made and without regard

to the aggravated criminal intent which the enhancement was

designed to redress. As hereinafter discussed, we are unable to

agree that a bankruptcy rule or official form is a "judicial

10The guideline interpretation underlying the district court
ruling is reviewed de novo. United States v. Garcia, 34 F.3d 6,

10 (1st Cir. 1994).

15

order," as the term is used in section 2F1.1(b)(3)(B).

First, it is clear that the bankruptcy judge never

entered an order specifically directing Shadduck to disclose

property of the debtor. See Bankruptcy Code 541(a), 11 U.S.C.

541(a). The district court implicitly acknowledged as much

through its reliance on the several verification requirements in

the Official Forms, see Official Bankr. Forms 1, 6, 11 U.S.C.

(requiring debtor's signature verifying assertions in petition

and schedules); Fed. R. Bankr. P. 1008 (mandating verification of

forms); 9011 (signature constitutes representation by signatory

that information provided is true). See Shadduck, 889 F. Supp.

at 10; see also Bellew, 35 F.3d at 520. Thus, as the bankruptcy

court entered no "order, injunction or decree" directing Shadduck

to disclose property of the debtor, the enhancement cannot stand

unless the district court correctly determined that the universal

admonitions in the various Official Forms and/or Bankruptcy Rules

applicable to all debtors in bankruptcy proceedings constitute

"judicial or administrative order[s]" within the meaning of

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

We turn to the guideline commentary for further assis-

tance. See Stinson v. United States, 508 U.S. 36, 42-43 (1993)

("Commentary which functions to interpret [a] guideline or

explain how it is to be applied controls.") (internal quotation

marks omitted); see also United States v. Weston, 960 F.2d 212,

219 (1st Cir. 1992). The application note accompanying U.S.S.G.

2F1.1(b)(3)(B) focuses upon violations of prior orders, injunc-

16

tions, and decrees. See U.S.S.G. 2F1.1, comment. (n.5) (ad-

verting to defendant's "knowledge of the prior decree or or-

der").11 The accompanying exemplar describes a defendant who had

been enjoined in a prior proceeding from engaging in certain

conduct, but who violated the injunction anyway by committing the

fraud for which he was awaiting sentence. Id., see supra n.11.

Thus, the commentary makes clear that the rationale for the

enhancement is to redress the "aggravated criminal intent"

inherent in violating a prior order specifically enjoining the

defendant, or an entity the defendant controlled, from engaging

in the fraudulent conduct which formed the basis for the offense

of conviction. U.S.S.G. 2F1.1, comment. (backg'd).

In the instant case, no pertinent order, decree or

11The application note provides in full:

Subsection (b)(3)(B) provides an adjustment
for violation of any judicial or administra-
tive order, injunction, decree, or process.
If it is established that an entity the de-

fendant controlled was a party to the prior

proceeding, and the defendant had knowledge

of the prior decree or order, this provision

applies even if the defendant was not a spe-

cifically named party in that prior case.

For example, a defendant whose business was
previously enjoined from selling a dangerous
product, but who nonetheless engaged in
fraudulent conduct to sell the product, would
be subject to this provision. This subsec-
tion does not apply to conduct addressed
elsewhere in the guidelines; e.g., a viola-

tion of a condition of release (addressed in
J.7 (Offense Committed While on Release)) or
a violation of probation (addressed in 4A1.1
(Criminal History Category)).

(Emphasis added.)

17

injunction ever entered prior to the bankruptcy fraud perpetrated

by Shadduck, either in the bankruptcy proceeding itself or in any

prior judicial or administrative proceeding. To be sure,

Shadduck attempted to cover up the bankruptcy fraud with false

statements in the petition and schedules submitted to the bank-

ruptcy court, see Official Bankr. Forms 1, 6, 11 U.S.C, as well

as under oath at the creditors meeting. Thus, by concealing

property of the debtor notwithstanding the copious admonitions,

instructions, and verifications in the Bankruptcy Rules and

Official Forms, Shadduck unquestionably committed bankruptcy

fraud. See 18 U.S.C. 152.

Nevertheless, if the government cannot demonstrate that

a prior order, decree or injunction prohibited the defendant (or

an entity controlled by the debtor) from engaging in the type of

fraudulent conduct which formed the basis for his conviction,

there has been no showing that the defendant acted with the

aggravated criminal intent envisioned by the Sentencing Commis-

sion in section 2F1.1(b)(3)(B), as illustrated by the applicable

guideline text and commentary. See United States v. Carrozzella,

105 F.3d 796, 800 (2d Cir. 1997) (the defendant "violated a

command not to file false accounts, but the command was a rule

applicable to all [debtors] and not specifically directed to

him.").12

The nearest likeness to a section 2F1.1(b)(3)(B)

12We express no view regarding whether a departure might be
based upon conduct that does not come squarely within U.S.S.G.
2F1.1(b)(3)(B).

18

"order" contained in the Official Forms is the "Notice of Com-

mencement of Case Under Chapter 11 of the Bankruptcy Code,

Meeting of Creditors, and Fixing of Dates," Official Bankr. Form

9, 11 U.S.C., which is mailed by the bankruptcy court clerk's

office to the debtor and all creditors. Virtually identical

variations on Form 9 are entered routinely in most bankruptcy

proceedings. Form 9 bears the preprinted name of the Bankruptcy

Court Clerk, acting "for the court," see id., and directs the

debtor to appear at the meeting of creditors to provide sworn

testimony. Id. In the latter respect, Form 9 is no more akin to

a judicial order than is the administration of the oath itself.

Official Form 9 resembles in considerable measure the

official letter of warning discussed in United States v.

Linville, 10 F.3d 630 (9th Cir. 1993), with respect to which the

Ninth Circuit explained:

It is pellucid that there is a vast differ-
ence between ignoring prior decrees, orders
and injunctions after being subject to formal
proceedings, and ignoring letters and the

like, no matter how official they might look.

To hold otherwise would compel enhancements

in every criminal case where a defendant was

told by someone in authority that what she

was doing was illegal, rather than limiting

them to more relatively unusual cases where

someone violated a specific court or agency

order or adjudication.

Id. at 632-33 (emphasis added). Similarly, the notice of meeting

of creditors mailed by the bankruptcy clerk is an advisory which

rises neither to the level of a judicial nor an administrative

order under any conventional meaning of the term.

Thus, neither section 2F1.1(b)(3)(B) itself, nor the

19

relevant commentary, supports the enhancement rationale relied

upon below, since their language plainly indicates that the

enhancement was meant to apply to defendants who have demon-

strated a heightened mens rea by violating a prior "judicial or

administrative order, decree, injunction or process." See

U.S.S.G. 2F1.1(b)(3)(B), comment. (n.5), (backg'd). Were an

enhancement to be predicated on the ground that Official Form 9

constitutes a "judicial order," it would become applicable in all

bankruptcy fraud cases, simply by virtue of the forum in which

the false statements were made and without regard to the aggra-

vated criminal intent it was designed to redress. Any such

automatic application in bankruptcy fraud cases, especially

absent the required mens rea, would work an amendment of the

guideline, see id. 2F1.1(b)(3)(B) (prescribing minimum offense

level of ten after enhancement); see id. 2F1.1(a) (setting BOL

at six). As we can discern no hint that the Commission meant to

distinguish bankruptcy fraud from other frauds in this regard,

see U.S.S.G. 2F1.1, comment. (backg'd) (explaining that fraud

guideline "is designed to apply to a wide variety of fraud

cases"), we conclude that the two-level enhancement imposed on

Shadduck for violating a judicial order (U.S.S.G.

2F1.1(b)(3)(B)) was erroneous and cannot stand.

(ii) Judicial Process
(ii) Judicial Process

The government contends, in the alternative, that

Shadduck violated a "judicial . . . process," see U.S.S.G.

2F1.1(b)(3)(B), by committing a bankruptcy fraud which abused the

20

bankruptcy process itself. See United States v. Messner,

F.3d , 1997 WL 67847, *8 (10th Cir. 1997) (holding that

bankruptcy fraud constitutes violation of "judicial process");

United States v. Welch, 103 F.3d 906, 908 (9th Cir. 1996) (per

curiam) (same); United States v. Michalek, 54 F.3d 325, 330-33

(7th Cir. 1995) (same); United States v. Lloyd, 947 F.2d 339, 340

(8th Cir. 1991) (same). We decline to address the claim for

several reasons.

First, the district court explicitly declined to reach

the question after holding that Shadduck had violated a judicial

order. Shadduck, 889 F. Supp. at 10. Second, no exceptional

circumstance warrants our consideration of the claim before the

district court (as it is free to do) has occasion to consider it

on remand. See United States v. Morales-Diaz, 925 F.2d 535, 540

(1st Cir. 1991). Third, the issue is not free from doubt. See

Carrozzella, 105 F.3d at 799-802 (questioning rationale employed

in cases which hold that "abuse" of bankruptcy proceeding itself

constitutes "violation" of judicial "process"); see also United

States v. Krynicki, 689 F.2d 289, 292 (1st Cir. 1982) (before

addressing issue first raised on appeal, appellate court should

consider whether correct resolution is clear).

d. Multiple-Victims Enhancement (U.S.S.G.
d. Multiple-Victims Enhancement (U.S.S.G.

2F1.1(b)(2)(B))
2F1.1(b)(2)(B))

The district court imposed a two-level enhancement

pursuant to U.S.S.G. 2F1.1(b)(2)(B), based on its finding that

Shadduck had engaged in a scheme to defraud more than one victim.

21

Shadduck, 889 F. Supp. at 11. Shadduck complained below that his

crime was victimless, in that the monies he concealed were exempt

and, therefore, that neither the trustee nor the creditors can be

considered victims. On appeal, however, Shadduck presses only

two arguments: (i) the trustee alone qualifies as a victim, and

(ii) the multiple-victims enhancement, in tandem with the en-

hancement under U.S.S.G. 2F1.1(b)(3)(B), see supra pps. 14-19,

amounted to impermissible "double counting." As neither argument

was raised below, we review only for "plain error." See United

States v. Lilly, 13 F.3d 15, 17-18 (1st Cir. 1994).

There is no merit in the contention that the trustee

alone was victimized by the concealment. As used in subsection

2F1.1(b)(2)(B), the phrase "'[s]cheme to defraud more than one

victim,' . . . refers to a design or plan to obtain something of

value from more than one person. In this context, 'victim'

refers to the person or entity from which the funds are to come

directly." U.S.S.G. 2F1.1, comment. (n.3). Thus, the relevant

commentary makes clear that the primary victims of a bankruptcy

fraud, for the most part, are the individual creditors.

Nevertheless, as the representative of the debtor

estate, see Bankruptcy Code 323(a), 11 U.S.C. 323 (a), it is

incumbent upon the trustee to collect and reduce to money all

nonexempt assets of the estate, id. 704 (1). Accordingly,

although the trustee has no prepetition claim to property of the

debtor and therefore does not qualify as a "creditor," a pre-

scribed portion of the net recoveries from any "property of the

22

estate" administered by the trustee comprises a priority cost of

administration as provided in Bankruptcy Code 326(a),

330(a)(1), 503(b)(1)(A) & 507(a)(1). Consequently, not only

creditors but the chapter 7 trustee as well may be victimized

directly by a bankruptcy fraud to the extent it deprives the

estate of assets otherwise subject to administration.

Moreover, it is likewise clear that Shadduck schemed to

obtain something of value. By concealing pension plan funds and

insurance policies which were neither claimed nor set apart as

exempt, Shadduck attempted to retain property of the estate

otherwise subject to administration for the benefit of credi-

tors.13 See Taylor, 503 U.S. at 643-44; Mercer, 53 F.3d at 3

(property claimed exempt is initially "property of the estate"

and becomes exempt only if there is no timely objection to

exemption claim).

The second challenge Shadduck makes to the multiple-

victims enhancement that it amounts to impermissible "double

13As the Ninth Circuit has noted:

Clearly the false statement [the debtor] made
in relation to his bankruptcy estate was
intended to result in an undervaluation of
the estate in bankruptcy and the availability
of less money to satisfy the demands of the
creditors. Thus, [the debtor] would have
"obtained something of value from more than
one person," that being whatever portion of
the estate to which the creditors were enti-
tled but which was hidden by the false state-
ment.

United States v. Nazifpour, 944 F.2d 472, 474 (9th Cir. 1991)

(per curiam). See also Michalek, 54 F.3d 325, 330 (7th Cir.

1995) (concealing assets harms trustee and creditors).

23

counting" when imposed with the enhancement for violating a

judicial order need not be discussed at this time given our

decision to set aside the latter ruling. See supra pps. 14-19.

Consequently, we affirm the two-level enhancement imposed pursu-

ant to U.S.S.G. 2F1.1(b)(2)(B).

24

III
III

CONCLUSION
CONCLUSION

For the foregoing reasons, appellants' convictions are

affirmed. Andrea Shadduck's sentence is affirmed. Michael

Shadduck's sentence is affirmed in part and vacated in part, and

the case is remanded to the district court for resentencing.

So Ordered.
So Ordered.

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