United States v. Jordan

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 96-1396
No. 96-1397

UNITED STATES OF AMERICA,

Appellee,

v.

GEORGE R. JORDAN, JR.,

Defendant, Appellant.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MAINE

[Hon. D. Brock Hornby, U.S. District Judge]

Before

Selya, Circuit Judge,

Aldrich and Cyr, Senior Circuit Judges.

Jane Elizabeth Lee for appellant.

George R. Jordan, Jr. on supplemental brief pro se.

F. Mark Terison, Assistant United States Attorney, with whom John

S. Gleason III, Assistant United States Attorney, and Jay P.

McCloskey, United States Attorney, were on brief for appellee.

April 29, 1997

ALDRICH, Senior Circuit Judge. This case arises

from the conviction of defendant George Jordan, Jr.

("Jordan") after two trials, on various charges of fraud,

money laundering, tax evasion, and filing false tax returns.

He appeals his convictions and sentences. We affirm in part

and reverse in part.

I. Background

Jordan was employed as a risk manager by the

Pioneer Plastics Corporation ("Pioneer") from 1989 to April

1993. His primary responsibility was the investigation and

resolution of claims filed by Pioneer employees under its

self-insured workers compensation program. The investigation

phase included ongoing, surreptitious "activity" checks on

disabled employees to verify that they were, in fact, not

able to work. Toward this end, in 1990, he formed his own

investigation company, PineTree Insurance Services

("PineTree"), and began submitting invoices to Pioneer for

investigations and activity checks. Jordan submitted

invoices on behalf of PineTree, approved them, mailed checks

on behalf of Pioneer to PineTree's P.O. Box, and ultimately

endorsed and deposited these checks into his personal

checking account. The relationship between Jordan and

PineTree violated Pioneer's prohibition against undisclosed

outside business interests with the potential to influence an

employee's judgment in the performance of his duties.

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In early 1993, a manager at Pioneer became

concerned about the high level of PineTree expenses. An

internal investigation ensued. When another manager

attempted to contact PineTree he could find no telephone

number or street address. Jordan's secretary, when

questioned, revealed that Jordan hand-delivered the invoices

which contained only a P.O. box address. Upon further

investigation, the box was discovered to be registered to

Jordan. On the day following this discovery, Jordan resigned

from Pioneer. After his departure, a Pioneer officer

searched Jordan's office and discovered PineTree

investigative reports printed in "one big long document."

Six months later, Jordan was indicted on five

counts of mail fraud, 18 U.S.C. 1341, 1342, 1346, four

counts of wire fraud, 18 U.S.C. 1343, and a single count of

money laundering, 18 U.S.C. 1956(a)(1)(B)(ii). After a

three day jury trial he was acquitted of the wire fraud

charges. A mistrial was declared when the jury was unable to

reach a verdict on the remaining counts.

In August 1995, while awaiting retrial, Jordan was

indicted on four counts of income tax evasion, 26 U.S.C.

7201, and two counts of filing a false income tax return,

26 U.S.C. 7206(1), stemming from the PineTree scheme. Over

his objection, the court allowed the government to join for

trial the tax indictments and the remaining mail fraud and

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money laundering charges. This time Jordan was convicted on

all counts and sentenced to 72 months imprisonment, three

years supervised release, special assessments of $600 and

restitution to Pioneer of $158,603.10.

II. Joinder and Prejudice

Jordan renews here his earlier objection to the

court's decision to allow the government to join the

outstanding charges from the first trial with the tax evasion

counts. We note at the outset that instead of responding to

the government's motion for joinder under Fed. R. Crim. P.

13, defendant used his response to argue prejudice under Fed.

R. Crim. P. 14, most often utilized in a separate motion to

sever. Although these may involve different standards of

review, see United States v. Edgar, 82 F.3d 499, 503 (1st

Cir.), cert. denied, U.S. , 117 S. Ct. 184, 65

U.S.L.W. 3237 (U.S. Oct. 7, 1996) (No. 96-178), and United

States v. Alosa, 14 F.3d 693, 695 (1st Cir. 1994), basically

our issue is abuse of discretion with respect to prejudice.

Jordan, correctly, does not dispute that, substantively, all

offenses could have been joined in a single indictment under

Fed. R. Crim. P. 8(a). See United States v. Clayton, 450

F.2d 16, 18 (1st Cir. 1971). This said, we turn to the

question whether the grant of joinder unduly prejudiced.

In order to prevail on this claim, Jordan must make

"a strong showing of prejudice." United States v. Gray, 958

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F.2d 9, 14 (1st Cir. 1992). In United States v. Scivola, 766

F.2d 37 (1st Cir. 1985), we observed that there are three

types of prejudice that can emerge from this type of

situation:

(1) the defendant may become embarrassed
or confounded in presenting separate
defenses; (2) proof that defendant is
guilty of one offense may be used to
convict him of a second offense, even
though such proof would be inadmissible
in a separate trial for the second
offense; and (3) a defendant may wish to
testify in his own behalf on one of the
offenses but not another, forcing him to
choose the unwanted alternative of
testifying as to both or testifying as to
neither.

Id. at 41-42 (internal citations omitted). Jordan argues

here that joinder subjected him to the latter two types of

prejudice.

Jordan did not testify in either trial, and

contends that by allowing the joinder of the fraud, money

laundering and tax counts, he was deprived of his Fifth

Amendment right to testify as to certain counts but not as to

others. In support, he relies on our opinion in Alosa, ante,

where we remarked that "a defendant may deserve a severance

of counts where [he] makes a convincing showing that he has

both important testimony to give concerning one count and

strong need to refrain from testifying on the other." 14

F.3d at 695 (internal citations omitted). To make this

showing, a defendant must timely offer enough information to

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the court to allow it to weigh the needs of judicial economy

versus "'the defendant's freedom to choose whether to

testify' as to a particular charge." Id. (quoting Scivola,

766 F.2d at 43).

In his objection to the government's motion to join

indictments, Jordan argued his need to testify in order to

produce a "good faith" defense to the tax charges. See Cheek

v. United States, 498 U.S. 192, 203-04 (1991) (holding that a

defendant is entitled to present his subjective belief that

he did not violate the law, even if such belief is

objectively unreasonable). To bolster this assertion, he

included an offer of proof reciting the testimony that would

constitute his defense.1

1. Jordan's offer of proof contained the following
assertions:

3) It is anticipated that in the tax
prosecution the Defendant would testify
that he has in the past handled his own
tax filings. He has read various
instructions provided by the Internal
Revenue Service and has done some
independent research regarding tax laws.
George Jordan was of the opinion that
funds paid to him from the Pioneer
Plastics Workers' Compensation Trust were
not taxable pursuant to Internal Revenue
Code Section 501(c)(9).

4) Jordan would testify that upon
filing for a Chapter 13 bankruptcy,
Jordan, upon advice of bankruptcy counsel
filed certain forms 1040-X.

5) Jordan filed form 1040 for 1992
and receive (sic) a refund check of

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It is difficult to dismiss these grounds. The

unique circumstances of this case distinguish it from Alosa

where the defendant sought to sever a gun count from drug

trafficking and conspiracy charges. There, the defendant

wanted to testify on the gun charge simply to deny that he

had used the guns for drug trafficking and that he owned the

guns "for fun." 14 F.3d at 695. We upheld the denial of

Alosa's severance motion because that testimony was "some

distance from . . . a credible alibi that only the defendant

can supply showing him to have been elsewhere at the time of

the crime." Id. Here, we believe that Jordan's subjective

testimony on the tax charges is analogous to the "credible

alibi" we found lacking in Alosa. Only he can supply

testimony of his subjective belief as permitted by Cheek,

forthrightly subjecting himself to cross-examination. We do

not accept the government's contention that this belief was

adequately before the jury in the form of Jordan's statement

on his amended tax form that the income was not taxable.

Nor do we accept its contention that Jordan could

have proffered the testimony of his bankruptcy attorney, from

whom Jordan received legal advice, as an effective substitute

approximately $1000, and in addition, a
form 1040-X regarding the Pine Tree
income and exemptions under 501(c)(9)
were filed.

6) Forms 1040-X were filed for the
years 1990, 1991, 1992, and 1993.

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for Jordan's own testimony. While it is likely that the

attorney's testimony also would have been helpful in

establishing a Cheek defense, Jordan contends in his proffer

that he previously handled his own tax affairs and also

relied on his own independent legal research. See supra note

1. On balance, therefore, we conclude that joinder likely

had the effect of eviscerating Jordan's planned defense to

the tax charges.2

The surrender of this privilege was capped by the

government's maneuvering that got before the mail fraud jury

the allegedly fraudulent tax returns. The government had

made substantial efforts at the original trial seeking to

introduce the tax returns as proof of intent. The court

twice ruled that possible prejudice from these forms

outweighed their relevance under Fed. R. Evid. 403. We have

here the type of prejudice outlined in Scivola, 766 F.2d at

41-42, that of evidence presented that would not have been

admissible at a separate trial. By the joinder the

government has circumvented the court's ruling. Jury-wise it

could be thought better off with evidence that would point in

2. We emphasize, however, that we do not hold that a
defendant's mere assertion of a Cheek defense invariably

requires severance of an indictment charging tax and non-tax
offenses. Rather, the court must undertake, on a case-by-
case basis, to weigh "'the considerations of judicial
economy' against the defendant's 'freedom to choose whether
to testify.'" Alosa, 14 F.3d at 695 (citations omitted).

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an improper direction tied to an instruction not to so

consider it, than not to have it at all.

We have an unusual situation. With the Fifth

Amendment involved should either, both, or neither of the

mail fraud, etc. convictions, and tax evasion convictions, be

set aside? There are recognized benefits (to all, except,

usually, the defendant) in having joint trials.

Traditionally, defendants may, to an extent, have to stand

the cost, the extent to be determined by the court's

discretion. In the second mail fraud trial, by choosing not

to take the stand defendant felt only one prejudice, the

jury's knowledge of the tax cases. At the original trial the

court, in excluding evidence of those charges, had described

it as of minimum value to the government. While we agree

with Jordan that it would have been happier for him not to

have had that evidence now get in through the back door by

the joinder, we believe it was within the court's discretion,

in the absence of a Fifth Amendment problem (such as infected

the tax counts), to subject him to the ordinary consequences

of joinder of indictments.

This is not to say that Jordan did not endure some

loss. There should be some limit to the harm the government

should impose to meet the court's Rule 403 finding in the

original action. By bringing the tax indictment, and joining

it with the tax charges to get the tax forms before a mail

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fraud jury, it put Jordan in the proverbial bind -- testify,

to your loss in the mail fraud case, or do not testify, to

your loss in the tax case. Jordan had valid Fifth Amendment

reasons for disliking both alternatives, and we do not think

the government should have it both ways. We allow one, but

it should not complain that we hold it to its original

decision of non-joinder. The convictions and sentences on

the tax counts are vacated.

III. Requirements of a Scheme to Defraud

Continuing with the mail fraud case, Jordan next

argues that the government failed to allege and prove that

Pioneer suffered actual harm or that he was unjustly enriched

as a result of the fraud as required under the 42 U.S.C.

1341.3 The government contends that defendant

affirmatively waived this ground by requesting a jury

instruction on the mail fraud count that did not include any

3. 18 U.S.C. 1341 reads in relevant part:

Whoever, having devised or intending to
devise any scheme or artifice to defraud,
or for obtaining money or property by
means of false or fraudulent pretenses,
representations, or promises . . . for
the purpose of executing such scheme or
artifice or attempting to do so, places
in any post office or authorized
depository for mail matter, any matter or
thing whatever to be sent to delivered by
the Postal Service . . . or takes or
receives therefrom . . . shall be fined
under this title or imprisoned not more
than five years or both.

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mention of actual harm or unjust enrichment.4 We agree. See

United States v. Mitchell, 85 F.3d 800, 808 (1st Cir. 1996)

(citing United States v. Marder, 48 F.3d 564, 571 (1st Cir.),

cert. denied, U.S. , 115 S. Ct. 1441, 63 U.S.L.W. 3721

(U.S. Apr. 3, 1995) (No. 94-8296)). For the mail fraud case

we add only the following.

Prior to the enactment of 18 U.S.C. 1346 in 1988,

the Supreme Court had held in McNally v. United States, 483

U.S. 350, 360 (1987), that schemes to defraud under the mail

and wire fraud statutes did not encompass the intangible

right to honest government but were limited to schemes to

defraud a victim of money or property. Congress responded by

enacting section 1346, expanding the definition of fraud to

include "a scheme or artifice to deprive another of the

intangible right of honest services."

In light of the advent of 1346, in order to prove

mail fraud under 1341 the government must show "that the

defendant used the mails for the purpose of executing or

attempting to execute a scheme to defraud," United States v.

4. The jury instruction Jordan requested reads as follows:

Intent to Defraud - Defined:

To act with an "intent to defraud"
means to act knowingly and with the
intention or purpose to deceive or cheat.
An intent to defraud is accompanied,
ordinarily by a desire or purpose to
bring about some gain or benefit to one's
self.

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Allard, 926 F.2d 1237, 1242 (1st Cir. 1991), and such scheme

may include one to deprive another of the intangible right to

honest services, United States v. Sawyer, 85 F.3d 713, 732

(1st Cir. 1996). What is required is that "an articulable

harm befall [the victim] as a result of the defendant's

activities, or some gainful use must be intended by the

[defendant], whether or not this use is profitable in the

economic sense." United States v. Czubinski, 106 F.3d 1069,

1074-75 (1st Cir. 1997). Actual monetary harm or unjust

enrichment is therefore not required. A defendant need not

even successfully carry out the scheme to defraud in order to

be found guilty. Id.; Allard, 926 F.2d at 1242.

Even if we had not found Jordan's argument waived,

we agree that the government presented sufficient evidence

that the jury could have found that Jordan deprived Pioneer

of his services and/or its money through a scheme to defraud.

IV. Double Jeopardy

Finally, Jordan contends that the district court's

decision to sentence him on the tax evasion counts and the

false filing counts violated the double jeopardy clause,

because the latter counts charge lesser included offenses.5

5. Other circuits have endorsed Jordan's contention. See,

e.g., United States v. Kaiser, 893 F.2d 1300, 1305 (11th Cir.

1990). Since the panel is not in agreement as to whether
this contention raises an issue of first impression in this
circuit, or whether it is foreclosed by Gaunt v. United

States, 184 F.2d 284, 288 (1st Cir. 1950), we leave that

matter for another day.

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See Rutledge v. United States, U.S. , 116 S. Ct. 1241,

1247-50 (1996). Since we are vacating the tax convictions,

we need express no view on this contention at the present

time.

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V. Conclusion

Defendant has also filed a pro se brief. We do not

discuss it here as we find his arguments to be without

merit.6 His convictions and sentences on Counts I through X

of the first indictment are affirmed. The convictions and

sentences on all counts of the second indictment are vacated

and this case remanded for further proceedings in accordance

with this opinion.

6. Nor do we address Jordan's claim that the court
improperly excluded his correspondence with the Internal
Revenue Service as hearsay. At his next trial, Jordan will
be free to present the arguments he failed to make below.

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