PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 97-4342
MIJA S. ROMER,
Defendant-Appellant.
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 97-4343
KHEM C. BATRA,
Defendant-Appellant.
Appeals from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Leonie M. Brinkema, District Judge.
(CR-96-350-A)
Argued: January 29, 1998
Decided: June 24, 1998
Before MURNAGHAN, NIEMEYER, and MOTZ, Circuit Judges.
_________________________________________________________________
Affirmed by published opinion. Judge Murnaghan wrote the opinion,
in which Judge Niemeyer and Judge Motz joined.
_________________________________________________________________
COUNSEL
ARGUED: John Hale Shenefield, MORGAN, LEWIS & BOCKIUS,
L.L.P., Washington, D.C.; Cary Steven Greenberg, GREENBERG,
BRACKEN & TRAN, P.C., Alexandria, Virginia, for Appellants.
John J. Powers, III, Antitrust Division, UNITED STATES DEPART-
MENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF:
Donald C. Klawiter, MORGAN, LEWIS & BOCKIUS, L.L.P., Wash-
ington, D.C.; John M. Tran, GREENBERG, BRACKEN & TRAN,
P.C., Alexandria, Virginia, for Appellants. Joel I. Klein, Assistant
Attorney General, A. Douglas Melamed, Deputy Assistant Attorney
General, Marion L. Jetton, Anthony V. Nanni, James T. Clancy,
Kathleen M. Mahoney, Antitrust Division, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.
_________________________________________________________________
OPINION
MURNAGHAN, Circuit Judge:
Mija Romer and Khem Batra (Appellants), were tried by a jury for
various offenses stemming from their involvement in a conspiracy to
rig bids at real estate foreclosure auctions. Both Appellants were con-
victed of violating the Sherman Act, 15 U.S.C. § 1. In addition,
Romer was convicted of bank fraud, in violation of 18 U.S.C. § 1344,
and tax fraud in violation of 18 U.S.C. § 371. On appeal, Appellants
make various assignments of error with respect to their convictions,
and Romer challenges her sentence. Finding no error, we affirm.
I.
Appellants are real estate speculators who, together with others,
participated in a conspiracy to limit bidding competition at certain
public foreclosure auctions in Fairfax County, Virginia. The purpose
of the conspiracy was to hold down the price of auctioned properties
by agreeing not to bid against one another at auctions -- an activity
commonly known as "bid-rigging." During an auction, most members
of the conspiracy would refrain from bidding, while one designated
member would bid on and receive the property at a much-reduced
2
price. Following the auction, members of the conspiracy would hold
a private auction amongst themselves, at which point they would dis-
cuss the price they each would have bid for the property. The person
with the highest bid would be given the deed, and the conspirators
would divide amongst themselves the money saved by artificially
holding down the price of the property.
Under Virginia law, all sales of foreclosed properties must be con-
ducted at public auctions. See Va. Code Ann.§ 55-59(7). If the lender
who initiates the foreclosure is an out-of-state entity, a Virginia resi-
dent must be appointed to serve as "trustee." See Va. Code Ann. § 55-
58.1(2). The trustee has a fiduciary duty to obtain the highest possible
purchase price for the property. Following the auction, the trustee
remits all proceeds to the appropriate parties -- the lender receives
sufficient funds to pay off the mortgage and the remainder is returned
to the homeowner or used to satisfy remaining liens.
As a result of their bid-rigging activities, Appellants were indicted
by a federal grand jury on September 12, 1996. The indictment
charged both Appellants, inter alia, with violating the Sherman Act,
15 U.S.C. § 1, by conspiring to rig bids on nine properties sold at pub-
lic auction. Appellants were also indicted for conspiracy to evade the
payment of federal taxes, in violation of 18 U.S.C.§ 371. Romer was
individually indicted for bank fraud, in violation of 18 U.S.C. § 1344,
for obtaining a loan by submission of false earnings information.
The case proceeded to a jury trial on January 21, 1997, in the
United States District Court for the Eastern District of Virginia. At
trial, Romer testified that she had attended and bid at private auctions
on ten properties, and Batra admitted his involvement with six. The
Government introduced evidence suggesting that members of the con-
spiracy had been concerned about having their illegal earnings
detected and that they had agreed to make auction payments in cash
in order to evade the Internal Revenue Service (IRS). Co-conspirator
Leo Gulley testified that, following one private auction in March of
1994, members of the conspiracy, including both Appellants, had dis-
cussed the danger of creating a "paper trail" by making payments to
each other with checks. Those present agreed that all payments would
be made in cash. Gulley's testimony was confirmed by that of co-
conspirator Alexander Giap, who had become a government infor-
3
mant and surreptitiously tape-recorded a number of the conspiracy's
meetings. During one taped conversation, Romer cautioned the others
that "you can't report it on your taxes." She later emphasized that "we
don't want any check writing between us. If we get caught by IRS,
we'll be dead."
The Government also produced evidence regarding Romer's fraud-
ulent effort to obtain a loan from Herbert Bank and Trust Co. in Octo-
ber 1993. The evidence showed that in order to obtain approval for
the loan, Romer, who is a CPA, informed bank officials that her gross
income for 1992 was approximately $90,000. The bank approved
Romer's loan based on her oral statement, but requested that Romer
submit a tax return to substantiate her income. In response to that
request, Romer submitted a bogus IRS Form 1040, which she claimed
to be her 1992 tax return and which overstated her gross income by
approximately $85,000.
Appellants were convicted of violating the Sherman Act, and
Romer was convicted of bank fraud and conspiracy to defraud the
IRS. In determining Romer's sentence, the district court began with
a base-offense level of 10, pursuant to U.S.S.G.§ 2R1.1(a). The court
then granted a 1-level enhancement, as authorized by U.S.S.G.
§ 2R1.1(b)(1), for submitting non-competitive bids in an antitrust
conspiracy. The court also granted a 2-level enhancement for obstruc-
tion of justice, under U.S.S.G. § 3C1.1, based on the court's finding
that Romer had intentionally withheld material information during
sentencing. After grouping Romer's antitrust and tax conspiracy
offenses, pursuant to U.S.S.G. § 3D1.2(c), and combining the result,
as required by U.S.S.G. § 3D1.4, with Romer's bank fraud convic-
tion, the court arrived at an offense level of 14. The court then sen-
tenced Romer, within the applicable range, to a term of 18 months
imprisonment on each count, followed by a total of 3 years supervised
release, and ordered Romer to pay $27,269 in fines and restitution.
This appeal followed.
II.
Appellants contend that the district court erred in denying their
motion for judgment of acquittal, pursuant to Fed. R. Crim. P. 29(c),
since the Government failed to demonstrate that the conspiracy's bid-
4
rigging activities involved "commerce among the several states," as
required by § 1 of the Sherman Act. We review de novo the district
court's decision to deny judgment of acquittal. See United States v.
United Med. & Surgical Supply Corp., 989 F.2d 1390, 1401-02 (4th
Cir. 1993) (citing United States v. Garcia, 868 F.2d 114, 115 (4th Cir.
1989)). Where, as here, a motion for judgment of acquittal is based
on insufficiency of the evidence, the conviction must be sustained if
the evidence, when viewed in the light most favorable to the Govern-
ment, is sufficient for any rational trier of fact to find the essential ele-
ments of the crime beyond a reasonable doubt. See Jackson v.
Virginia, 443 U.S. 307, 319 (1979) (citation omitted). In reviewing
the sufficiency of the evidence, we are not entitled to weigh the evi-
dence or to assess the credibility of witnesses,"but must assume that
the jury resolved all contradictions . . . in favor of the Government."
United Medical, 989 F.2d at 1402 (citation omitted). With these stan-
dards in mind, we now consider the merits of Romer's argument.
Section 1 of the Sherman Act provides in pertinent part that
"[e]very contract, combination in the form of trust or otherwise, or
conspiracy, in restraint of trade or commerce among the several
States, . . . is hereby declared to be illegal." 15 U.S.C. § 1. The lan-
guage of the Sherman Act is conspicuous for its breadth. See United
States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 553 (1944)
("Language more comprehensive [than that used in § 1 of the Sher-
man Act] is difficult to conceive."). Indeed, the Supreme Court has
noted that by using the phrase "commerce among the several States,"
Congress intended the Sherman Act to reach the constitutional limits
of the commerce power. See Summit Health, Ltd. v. Pinhas, 500 U.S.
322, 329 n.10 (1991) ("Congress `meant to deal comprehensively and
effectively with the evils resulting from contracts, combinations and
conspiracies in restraint of trade, and to that end to exercise all the
power it possessed.'") (quoting Atlantic Cleaners & Dyers, Inc. v.
United States, 286 U.S. 427, 435 (1932)).
In a Sherman Act prosecution, the government bears the burden of
proving beyond a reasonable doubt a connection between the defen-
dant's activities and interstate commerce.1 See McLain v. Real Estate
_________________________________________________________________
1 The government's success in demonstrating the required nexus with
interstate commerce "is both a critical jurisdictional fact and an element
of the substantive offense charged under 15 U.S.C.§ 1. Facts sufficient
for the one are sufficient for the other, and vice versa." United States v.
Foley, 598 F.2d 1323, 1328 n.2 (4th Cir. 1979).
5
Bd. of New Orleans, Inc., 444 U.S. 232, 242 (1980). In McLain, the
Supreme Court explained that in order to meet its burden the govern-
ment must "demonstrate by submission of evidence beyond the plead-
ings either [1] that the defendants' activity is itself in interstate
commerce or, [2] if it is local in nature, that it has an effect on some
other appreciable activity demonstrably in interstate commerce." 444
U.S. at 242 (citation omitted). The first of these standards allows for
application of the Sherman Act where the defendant's allegedly anti-
competitive activities "lie directly in the flow of interstate com-
merce." United States v. Foley, 598 F.2d 1323, 1328 (4th Cir. 1979).
Under the second standard, a defendant's conduct, although "wholly
local in nature," McLain, 444 U.S. at 241, falls within the ambit of
the Sherman Act when, "as a matter of practical economics," the
activities "have a not insubstantial effect on the interstate commerce
involved," id. at 246 (quoting Hospital Bldg. Co. v. Rex Hospital
Trustees, 425 U.S. 738, 745 (1976)).
Although the McLain standards are often described as "tests," we
explained in Foley that "[o]bviously these are not bright line, mutu-
ally exclusive tests," and that it may be "quite possible to analyze a
particular pattern of activities without express reliance upon either."
598 F.2d at 1328; see, e.g., Goldfarb v. Virginia State Bar, 421 U.S.
773 (1975). Therefore, although our analysis may be guided by the
McLain standards, we are mindful that our goal is to answer the
"more general question, whether the activities under alleged restraint
have a sufficient nexus with interstate commerce." Foley, 598 F.2d at
1329.
In the present case, Appellants argue that the Government has
failed to carry its burden of establishing that their seemingly local
bid-rigging activities had the required nexus with interstate com-
merce. In support of that contention, Appellants point out that the
auctions involved Virginia real property; took place entirely within
the Commonwealth of Virginia; and that the participants, including
the trustee and all non-institutional bidders, were Virginia residents.
In light of those facts, Appellants contend that the thrust of the con-
spiracy's activities was purely local.
We disagree. As an initial matter, we note that the narrow concep-
tion of interstate commerce reflected in the Appellants' argument is
6
without support in the law. Determining whether anti-competitive
activities are within the reach of the Sherman Act is a practical
inquiry, one which requires us to consider the substance of the trans-
action at issue. In conducting that inquiry, we look beneath the sur-
face of the transaction, with an eye toward assessing its interstate
features. We consider not only the location of the transaction and the
immediate parties, but all other conceivable links with interstate com-
merce, including the interests of secondary parties and the passage
across state lines of goods and services related to the transaction.
In light of the broad nature of our inquiry, we disagree with the
Appellants' characterization of their auction-rigging activities as
purely local. The driving force behind each auction was the financial
interest of an out-of-state lender, who initiated the auction to recover
the balance of an outstanding debt. Although each sale of property
was conducted through the conduit of a Virginia trustee, that relation-
ship was one of form rather than substance. In reality, the trustee was
a mere resident agent, appointed by the lender to conduct the auction
on the lender's terms. Despite superficial appearances, it was the
lender who initiated the foreclosure, who directed the terms of the
auction, and who, at the close of each sale, received across state lines
some portion of the proceeds in satisfaction of its interest in the prop-
erty. Therefore, we find it inescapable that, far from being purely
local events, the auctions were interstate transactions of the most fun-
damental sort.
Appellants' next contention is that, even assuming the auctions
were interstate in nature, the Government has failed to demonstrate,
under Goldfarb, 421 U.S. at 784, that the Appellants' participation
was "integral" to or "inseparable" from the auctions. Appellants argue
that the presence of non-institutional bidders, like themselves, was not
necessary to the conduct of the auctions because, even in the absence
of non-institutional bidders, the lender's own representative could bid
on and receive the property at a price sufficient to cover the outstand-
ing debt.
We find that argument unpersuasive. While it is no doubt true that
the auctions could have proceeded in the absence of non-institutional
bidders, Appellants were not convicted of rigging bids at hypothetical
auctions they did not attend. Their convictions were for collusive
7
behavior at nine auctions which they not only attended, but at which
they were the successful bidders. By purchasing property at foreclo-
sure auctions initiated by out-of-state lenders, Appellants assumed a
role that was not only integral to but inseparable from the interstate
sale of property. We therefore have no difficulty concluding that their
activities were in the flow of interstate commerce.
In a final attempt to escape liability under the Sherman Act, Appel-
lants argue, in reliance on United States v. Lopez, 514 U.S. 549
(1995), that the Sherman Act exceeds Congress's power to regulate
pursuant to the Commerce Clause, because it grants federal jurisdic-
tion over local activities with only a de minimis or attenuated connec-
tion to interstate commerce. However, under the express language of
Lopez, an act of Congress is a valid exercise of the commerce power
where, as here, the act contains a "jurisdictional element which . . .
ensure[s], through case-by-case inquiry, that the [activity] in question
affects interstate commerce." Id. at 561. Because we have conducted
such an inquiry in the case at bar, we are confident that we have satis-
fied our obligations under Lopez.
In summary, we hold that when viewed in the light most favorable
to the Government the evidence is sufficient to convince a jury
beyond a reasonable doubt that the Appellants' bid-rigging activities
had the requisite nexus with interstate commerce. We therefore affirm
the district court's denial of judgment of acquittal.
III.
Appellants maintain that the district court erroneously stated appli-
cable law when it gave a supplemental jury instruction regarding the
meaning of interstate commerce. The instruction included a hypothet-
ical example in which three Virginia Volvo dealers conspired to fix
the prices they charged for automobiles received from Volvo of
America. The court explained that this type of agreement, "although
formed in state, is going to have an impact on interstate commerce . . .
[b]ecause part of the goods that are involved here are shipped from
out of state . . . ." Hence, the court explained,"one of the things you
have to look at in this case is the extent to which you find that there
are out-of-state aspects of the real estate foreclosure process."
According to Appellants, the court's instruction was erroneous
8
because the use of the automobile analogy improperly compared real
property to movable goods, and the instruction focused the jury's
attention on the out-of-state aspects of the real estate foreclosure pro-
cess.
We review the district court's jury instructions"in their entirety
and in context." United States v. Muse, 83 F.3d 672, 677 (4th Cir.
1996) (citing Cupp v. Naughten, 414 U.S. 141, 146-47 (1973)).
Therefore, we consider the language of the supplemental instruction
together with all other instructions given by the district court on the
interstate commerce issue. In the present case, Appellants failed to
object to the district court's supplemental instruction during trial. Pur-
suant to Fed. R. Crim. P. 52(b), we are entitled to notice an error not
preserved by timely objection only if the defendant can demonstrate
that (1) an error occurred, (2) which was plain, and (3) which affected
his or her substantial rights. See also United States v. Olano, 507 U.S.
725, 731-32 (1993). Even where such an error is identified, the deci-
sion to correct the error remains within the sound discretion of the
court of appeals, to be exercised only when the error "seriously af-
fect[s] the fairness, integrity or public reputation of judicial proceed-
ings." Id. at 732 (quoting United States v. Young, 470 U.S. 1, 15
(1985)).
Upon a thorough review of the record, we cannot say that the dis-
trict court's instructions were erroneous, let alone plainly erroneous.
Contrary to Appellants' contentions, we find the court's choice of an
automobile analogy to be appropriate. Although a piece of real estate
being sold in interstate commerce does not itself pass across state
lines, title certificates, advertising, financing, and other goods and ser-
vices generated by the transaction pass from state to state as readily
as automobiles. And the district court was careful to inform the jury
that the focus of their inquiry was not the out-of-state activities them-
selves, but the relationship or impact of the Appellants' conduct to
those activities. We therefore find no error in the district court's
instructions.
IV.
Appellants challenge the district court's refusal to grant two jury
instructions pertaining to the defense's theory of the case. The first
9
was a Black's Law Dictionary definition of the term"joint venture."
According to Appellants, that instruction was necessary "because it
defined a joint venture differently from a partnership insofar as it is
a `one time group of two or more persons in a business undertaking.'"
The second requested instruction was to inform the jury that bid-
rigging is only illegal if it is "an agreement between competitors not
to bid."
It is well-settled that a district court should grant a jury instruction
requested by the defense so long as the instruction has evidentiary
foundation and accurately states applicable law. See United States v.
Stotts, 113 F.3d 493, 496 (4th Cir. 1997) (citations omitted). Ordinar-
ily, we review the district court's refusal to grant a proposed instruc-
tion for an abuse of discretion, see United States v. Russell, 971 F.2d
1098, 1107 (4th Cir. 1992), but in the present case, although Appel-
lants requested that the proposed instructions be given, they failed to
object to the district court's denial of those requests. Therefore, under
Olano, 507 U.S. at 731-32, our review of the district court's rulings
is limited to plain error. See United States v. Arthurs, 73 F.3d 444,
448 (1st Cir. 1996) (applying plain error analysis where defendant
requested instruction but failed to object when denied); United States
v. Tringali, 71 F.3d 1375, 1380 (7th Cir. 1995) (same), cert. denied
sub nom. Hernandez v. United States, 117 S. Ct. 87 (1996).
In the instant case, we are not convinced that the district court's
rejection of the proposed instructions was plain error. As the court
obviously recognized, the first instruction threatened to confuse the
jury's understanding of applicable law. Given that danger, the court's
own instruction -- that "forming a partnership or an agreement to bid
on a contract [is not] necessarily a violation of the [Sherman A]ct" --
was adequate to inform the jury of the point the defendants sought to
make.
As to the second instruction, it is true that bid-rigging is typically
defined as an agreement "between competitors" to submit or withhold
contract offers from a third party. See United States v. Portsmouth
Paving Corp., 694 F.2d 312, 325 n.18 (4th Cir. 1982) ("[C]ollusive
bidding is `an agreement between competitors in a bidding contest to
submit identical bids or, by preselecting the lowest bidder, to abstain
from all bona fide effort to obtain the contract.'") (quoting 1 R. Call-
10
mann, The Law of Unfair Competition, Trademarks and Monopolies
203 (4th ed. 1981)); United States v. Sargent Elec. Co., 785 F.2d
1123, 1127 (3rd Cir. 1986) ("An agreement among persons who are
not actual or potential competitors in a relevant market is for Sherman
Act purposes [an act without consequence]."). Here, the district
court's instructions, standing alone, informed the jury only that the
"critical factor" in a bid-rigging conspiracy is "an agreement between
two or more persons to either eliminate, reduce or interfere with com-
petition." While we believe that instruction may have been erroneous,
we have no occasion to decide the issue in the case at bar, since even
assuming, arguendo, that plain error occurred, it cannot be said that
the error affected the Appellants' substantial rights.
We have recently held that to establish the third prong of the Olano
plain error analysis in cases of jury misinstruction, the defendant
bears the burden of proving that "the error actually affected the out-
come of the proceedings," United States v. Hastings, 134 F.3d 235,
240 (4th Cir. 1998) (citations omitted), in other words, "that the jury
actually convicted him based upon an erroneous understanding of the
[law]," id. at 243 (citation omitted).
In the instant case, Appellants cannot meet their burden of demon-
strating actual prejudice, since there was no evidence on which a
properly instructed jury could have concluded that Appellants and
their cohorts were anything but competitors. According to Appellants'
own testimony, members of the conspiracy agreed to hold down the
price of auctioned property by not bidding against one another. There
was no evidence whatsoever that the purpose of that collusion was,
as Appellants have suggested, merely a "partnership" to pool
resources, share research, or spread risks. Quite the contrary, all the
evidence suggested that the purpose of the conspiracy was to obtain
property at artificially depressed prices and to divide the savings
among those competitors who refrained from bidding. In light of all
this, we find no reason to believe that a properly instructed jury could
have acquitted the Appellants, and we affirm their convictions accord-
ingly.
V.
Appellants maintain that the district court erred in admitting two
pieces of evidence during trial. We review the district court's rulings
11
for an abuse of discretion. See United States v. Ellis, 951 F.2d 580,
582 (4th Cir. 1991); United States v. Masters , 622 F.2d 83, 87-88 (4th
Cir. 1980) (citations omitted). For the reasons stated below, we
affirm.
A. Newspaper Article
The first piece of contested evidence is a Washington Post newspa-
per article that described a recent bid-rigging conviction in the Dis-
trict of Columbia. The Government introduced the article to provide
background to a taped conversation that occurred on October 1, 1994,
in which the conspirators referred to the article and its discussion of
convictions. According to Appellants, the article was inadmissible
hearsay under Rules 801 and 802 of the Federal Rules of Evidence,
and, in any event, was more prejudicial than probative and should
have been excluded under Rule 403.
With respect to the first contention -- that the article was inadmis-
sible hearsay -- the district court held that the article was admissible
because it was not offered to prove the truth of its contents, see Fed.
R. Evid. 801(c), but rather to place in its proper context the conspira-
tors' taped discussion about the article. The district court cautioned
the jury that the article was not offered "to prove the guilt or inno-
cence of any of the defendants in this court or to establish that there
was, in fact, a conspiracy in th[e] District[of Columbia]. It simply
was introduced in the area of the reactions to the article and certain
comments that may have been made about it." In light of the indepen-
dent relevance of the article and the district court's careful instruction
to the jury regarding the limits of its use, we are confident that the
article was admissible.
We also reject Appellants' contention that the article was imper-
missibly inflammatory under Rule 403, which provides that otherwise
relevant evidence "may be excluded if its probative value is substan-
tially outweighed by the danger of unfair prejudice, confusion of the
issues, or misleading the jury . . . ." In the present case, although the
article may have had some prejudicial impact, we cannot say that such
impact substantially outweighed the article's probative value. More-
over, any danger of prejudice was substantially minimized by the dis-
trict court's careful instructions to the jury that the article was being
12
offered for context only and that the conduct described therein
occurred in a different jurisdiction and "may or may not be similar to
the conduct involved here." Therefore, we cannot say that the district
court abused its discretion by admitting the article into evidence.
B. Plea Agreement
The next piece of challenged evidence is the testimony of co-
conspirator Alexander Giap regarding a plea agreement he reached
with the Government. When called by the Government to testify at
trial, Giap explained that, as a result of his involvement with the con-
spiracy, he had pled guilty to three felonies, including bid-rigging,
which he described as participating in an "agreement not to compete
at . . . public auctions." Such was the full extent of evidence heard by
the jury regarding Giap's plea agreement. The agreement itself was
neither read to the jury nor submitted into evidence.
Although it is generally recognized that the prosecution can intro-
duce evidence of a plea agreement during direct examination of a
government witness, that freedom is not unlimited. See United States
v. Henderson, 717 F.2d 135, 137 (4th Cir. 1983). Whenever the gov-
ernment offers evidence of a plea agreement, there is a danger that
"the agreement may aid the government by indicating the witness's
knowledge of the crime or by [conveying] . . . the unspoken message
. . . `that the prosecutor knows what the truth is and is assuring its rev-
elation.'" Id. (quoting United States v. Roberts, 618 F.2d 530, 536
(9th Cir. 1980)). To guard against such danger, we have held that the
government may elicit testimony regarding a plea agreement only if:
(1) the prosecutor's questions do not imply that the government has
special knowledge of the witness's veracity; (2) the trial judge
instructs the jury on the caution required in evaluating the witness's
testimony; and (3) the prosecutor's closing argument contains no
improper use of the witness's promise of truthful cooperation. See id.
at 138.
In the present case, the district court fully complied with the safe-
guards laid out in Henderson. At no point during questioning or clos-
ing argument did the Government imply special knowledge or
guarantee of Giap's veracity, and the district court gave a cautionary
instruction that, due to Giap's status as an informant, his testimony
13
must be viewed more critically than that of other witnesses. There-
fore, we cannot say that the district court abused its discretion by
admitting the challenged testimony.
VI.
Romer contends that the Government's evidence and arguments at
trial constituted a variance from her indictment. According to Romer,
although her indictment alleged bank fraud by way of submission of
false documents, the Government's evidence at trial suggested that
she also facilitated fraud by way of oral statements to bank officials.
We have previously explained that a variance occurs when "the
evidence at trial establishes facts materially different from those
alleged in the indictment." United States v. Kennedy, 32 F.3d 876,
883 (4th Cir. 1994) (citations omitted). Where a variance is found to
have occurred, reversal is required only if the defendant demonstrates
that the error infringed his or her "substantial rights" and thereby
resulted in "actual prejudice." Id. at 883 (citations omitted). In United
States v. Fletcher, 74 F.3d 49 (4th Cir.), cert. denied, 117 S. Ct. 157
(1996), we explained that prejudice may result if the variance sur-
prises the defendant at trial and thereby hinders his or her ability to
prepare a defense, or if the variance exposes the defendant to the risk
of a second prosecution for the same offense, see id. at 53 (citations
omitted).
In the case at bar, we are not persuaded that a variance was com-
mitted. Although Romer's indictment does not mention oral state-
ments, the language of the indictment is broad and non-exclusive. It
alleges that Romer "executed a scheme . . . to defraud a financial
institution . . . by means of false and fraudulent pretenses, representa-
tions and promises," and that, "[a]s part of the loan application pro-
cess," Romer submitted a false IRS Form 1040. Although the
indictment mentions Romer's false IRS form, it does not exclude
other statements or submissions that were part and parcel of the same
fraudulent endeavor.
In any event, even assuming, arguendo, that a variance occurred,
Romer has failed to demonstrate actual prejudice. Under 18 U.S.C.
§ 1344, bank fraud consists of "knowingly execut[ing], or attempt[-
14
ing] to execute, a scheme or artifice . . . (2) to obtain [funds] . . . by
means of false or fraudulent pretenses, representations, or promises
. . . ." Here, even disregarding all evidence of false statements,
Romer's conviction could be sustained on the basis of her fraudulent
tax form alone. In any event, we are confident that any variance, if
indeed one occurred, did not subject Romer to the threat of a second
prosecution or hinder her ability to prepare a defense. Therefore, even
assuming that the Government's evidence varied from the indictment,
no prejudice resulted and we affirm Romer's conviction accordingly.
VII.
Romer claims that the district court erred in denying her motion for
judgment of acquittal, pursuant to Fed. R. Crim. P. 29(c), since the
evidence was insufficient to support her conviction for defrauding the
IRS. As discussed previously, we review the district court's ruling on
a motion for judgment of acquittal de novo, see United Medical, 989
F.2d at 1401-02, asking whether the evidence, when viewed in the
light most favorable to the Government, is sufficient to sustain a find-
ing of guilt beyond a reasonable doubt as to each essential element
of the offense, see Jackson, 443 U.S. at 319.
Romer was convicted of conspiracy to evade the payment of fed-
eral taxes, in violation of 18 U.S.C. § 371. To prove a violation of
§ 371 -- often referred to as a Klein conspiracy, see United States v.
Klein, 139 F. Supp. 135 (S.D.N.Y. 1955) -- the government must
establish: (1) that an agreement existed; (2) that the conspirators com-
mitted an overt act in furtherance of the conspiracy; and (3) that the
defendant intended to agree to the conspiracy and to defraud the
United States. See United States v. Tedder, 801 F.2d 1437, 1446 (4th
Cir. 1986) (citation omitted). In the present case, Romer contends that
the Government failed to meet its burden as to the first and third ele-
ments of its case.
We disagree. With respect to the first element, the Government
presented sufficient evidence, by way of tape-recorded conversations,
to establish that members of the conspiracy reached an agreement to
make private auction payments in cash. At one meeting, Rosen asked
Romer, Batra, Giap, and Gulley, "If I'm the successful bidder . . . [d]o
I put [it] on my income tax? . . . [I]s this money being reported or
15
not?" Gulley responded by stating, "[S]o what we're saying [is] we
go cash . . . ." Romer answered, "Right," and Rosen, Giap, and Gulley
agreed. Rosen then emphasized that the parties "can't report [the ille-
gal earnings] on [their] taxes." During a later conversation, Romer
reaffirmed to the others the importance of using cash, stating: "Every-
thing that we do from now on has gotta be cash. . . . Because we don't
want any check writing between us. If we get caught by the IRS, we'll
be dead." In light of this evidence, we have no difficulty concluding
that Romer entered into an agreement to refrain from reporting her
illegal earnings to the IRS.
As to the third element, Romer contends that the Government's
evidence was insufficient to prove a specific intent to defraud the IRS
of tax revenues, as opposed to an intent merely to avoid detection for
bid-rigging. We find that argument to be unpersuasive. Although it is
well-settled that a Klein conspiracy exists only when an objective of
the agreement is "to thwart the IRS's efforts to determine and collect
income taxes," United States v. Vogt, 910 F.2d 1184, 1202 (4th Cir.
1990) (citations omitted), the evidence here is sufficient to support a
determination that such a purpose existed. We are confident that a
jury, when faced with the tape-recorded conversations -- including,
most notably, Romer's statement that "if the IRS catches us, we'll be
dead" -- could reasonably have concluded that Romer was at least in
part motivated by the desire to evade the payment of federal taxes.
We therefore affirm Romer's conviction for tax fraud.
VIII.
Romer's appeal alleges five assignments of error with respect to
her sentence. We have carefully considered each of those contentions,
and we find that only two necessitate extended discussion. In review-
ing the remaining contentions, we are required by statute to give "due
regard to the opportunity of the district court to judge the credibility
of the witnesses," and must "accept the findings of fact of the district
court unless they are clearly erroneous." 18 U.S.C. § 3742(e) (1988).
Questions regarding the legal interpretation of the guidelines are
reviewed de novo. See United States v. Daughtrey , 874 F.2d 213, 217
(4th Cir. 1989). With these standards in mind, we address each of
Romer's arguments in turn.
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A. "Non-Competitive Bids"
Romer contends that the district court erred in granting an upward
enhancement in her sentence, pursuant to U.S.S.G.§ 2R1.1(b)(1).
That provision authorizes a one-level upward enhancement "[i]f the
conduct involved participation in an agreement to submit non-
competitive bids . . . ." According to Romer, that enhancement was
intended to apply only to "bid-rotation" cases and was, therefore,
improperly applied in the case at bar.
In support of her argument, Romer relies exclusively on the Sev-
enth Circuit's decision in United States v. Heffernan, 43 F.3d 1144
(7th Cir. 1994). In that case, the defendant was a steel drum manufac-
turer who had conspired with other manufacturers to sell drums to
customers at identical prices. See id. at 1145. The district court
granted a one-level enhancement in the defendant's sentence, pursu-
ant to § 2R1.1(b)(1), on the grounds that the conspiracy's activities
constituted bid-rigging. On appeal to the Seventh Circuit, the court
reversed, holding that price-fixing by way of submission of identical
bids was not the sort of behavior to which § 2R1.1(b)(1) was intended
to apply. See generally id. at 1146-50. In reaching that conclusion, the
court determined, among other things, that § 2R1.1(b)(1) applied only
to bid-rotation cases, and that the price-fixing engaged in by the con-
spiracy did not qualify as bid-rotation. Romer asks us to reach the
same conclusions in the case at bar.
We decline to do so. For starters, we are not persuaded that
§ 2R1.1(b)(1) is limited to bid-rotation cases.2 The language of the
guideline is broad and non-exclusive. It authorizes a one-level
enhancement for all cases involving the submission of "non-
competitive bids." If the Sentencing Commission intended the
enhancement to apply only to bid-rotation cases, it is reasonable to
believe that the general term "non-competitive bids" would have been
replaced by a more particular term, like "bid-rotation" or "comple-
_________________________________________________________________
2 In Heffernan, the court explained that bid-rotation, which is also
sometimes referred to as the submission of "complementary bids," occurs
when a group of bidders agree "for each job . . . which of them shall be
the low bidder, and the others submit higher bids to make sure the desig-
nated bidder wins." 43 F.3d at 1146.
17
mentary bids." That conclusion is strengthened by the fact that
§ 2R1.1(d)(3) actually uses the term "complementary bids," and dis-
cusses such conduct as though it were a sub-category, rather than a
synonym, of bid-rigging in general. The lack of similar specificity in
§ 2R1.1(b)(1) would appear to indicate that the Commission intended
the enhancement to apply generally to all forms of bid-rigging.
In any event, even if we assume, arguendo, that § 2R1.1(b)(1)
applies only to bid-rotation cases, we are not convinced that auction-
rigging is excluded from that category. It was undisputed that, prior
to each auction, members of the conspiracy discussed which of them
would submit the lowest bid, and the others agreed to abstain from
bidding or, at the very least, not to outbid the chosen bidder. Bidding
of that nature is complementary in the sense that the bids submitted
and withheld are designed to assist the chosen bidder in obtaining the
property at the lowest possible price, with the understanding that, over
time, each conspirator will receive an appropriate pay-off. That is
very different from the conduct faced in Heffernan, where the manu-
facturers merely agreed to sell their drums for an identical price and
no complementary bids were exchanged. Therefore, even assuming
that § 2R1.1(b)(1) applies only to bid-rotation, we are confident that
auction-rigging falls within that category. We therefore conclude that
the district court was justified in granting an upward enhancement.
B. Obstruction of Justice
Romer's final argument is that the district court erred in granting
an enhancement in her sentence for obstruction of justice, pursuant to
U.S.S.G. § 3C1.1. The court granted the enhancement on the grounds
that Romer had failed to provide the probation office with a complete
accounting of her assets, which included various lines of credit
amounting to over $36,000; the proceeds of seven properties Romer
sold during 1996, which totaled more than $400,000; and the pro-
ceeds from the sale of a time-share property in Florida, which totaled
more than $4,500.
Section 3C1.1 authorizes a two-level upward enhancement "[i]f the
defendant willfully obstructed or attempted to obstruct or impede, the
administration of justice during the investigation, prosecution, or sen-
tencing of the instant offense . . . ." The commentary to § 3C1.1 pro-
18
vides a non-exhaustive list of conduct which constitutes obstruction
of justice, including "providing materially false information to a pro-
bation officer in respect to a presentence . . . investigation for the
court." U.S.S.G. § 3C1.1, comment. n.3(h). Under the Guidelines,
material evidence is that which, "if believed, would tend to influence
or affect the issue under determination." U.S.S.G. § 3C1.1, comment.
n.5.
In the case at bar, Romer maintains that the district court erred in
failing to make an explicit finding of materiality with respect to the
information withheld from the probation officer. We are unpersuaded.
Although it is true that the district court did not make an express find-
ing of materiality, our cases have never held that such a finding is
required. Instead, it is sufficient if a finding of materiality may be
implied from the court's statements during sentencing. See United
States v. Saintil, 910 F.2d 1231, 1233 (4th Cir. 1990). Here, the dis-
trict court imposed an upward enhancement after providing Romer
with the opportunity to explain her failure to be forthcoming with
regards to her assets. In response to Romer's explanation that this fail-
ure was a mere oversight, the district judge stated,"I have problems
with somebody who's a CPA being that lax in remembering the
details, especially in a context that's as important as a presentence
investigation . . . . [I am unable] to accept your statement that you
merely forgot to fully disclose all of your assets." We believe a find-
ing of materiality is implicit in the court's remarks. The court's state-
ments and the context in which they were given reveal that the matter
was given careful consideration and that the court believed that
Romer had intentionally withheld information material to the presen-
tence investigation.3 The upward enhancement is therefore affirmed.
_________________________________________________________________
3 Furthermore, because an accurate estimate of a defendant's assets is
a prerequisite to the imposition of fines, see U.S.S.G. § 2R1.1, comment.
n.2, we cannot say that the district court's finding of materiality was
clearly erroneous. See United States v. Hicks , 948 F.2d 877, 886 (4th Cir.
1991) ("The question of materiality [under§ 3C1.1] is a factual determi-
nation . . . subject to the clearly erroneous standard of review.") (citation
omitted).
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IX.
In summary, we affirm the district court on all matters.
AFFIRMED
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