United States v. Blastos

United States Court of Appeals
For the First Circuit

No. 00-2116

UNITED STATES OF AMERICA,

Appellee,

v.

ALEXANDER BLASTOS,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW HAMPSHIRE

[Hon. Steven J. McAuliffe, U.S. District Judge]

Before

Torruella, Circuit Judge,
Campbell and Bownes, Senior Circuit Judges.

Bjorn Lange, Assistant Federal Defender, with whom Federal
Defender Office was on brief, for appellant.

Jean B. Weld, Assistant United States Attorney, with whom
Paul M. Gagnon, United States Attorney, and Michael J. Gunnison,
Assistant United States Attorney, were on brief, for appellee.

July 19, 2001
 BOWNES, Senior Circuit Judge. The defendant-appellant,

Alexander Blastos, was convicted by a jury of one count of wire

fraud. He was sentenced to sixty months in prison, three years

of supervised release, and a special assessment of $100.00. On

appeal, the defendant argues that his conviction should be

reversed and he should be awarded a new trial because the jury

instruction was erroneous. He also contends that, if the

conviction is affirmed, the case should be remanded to the

district court for resentencing because the district court erred

in calculating the "loss" under section 2F1.1(b)(M) of the

United States Sentencing Guidelines ("U.S.S.G."). We disagree

on both points and affirm the district court.

I. Background

On January 28, 1999, a grand jury in the District of

New Hampshire returned a one count indictment against the

defendant, charging him with wire fraud in violation of 18

U.S.C. § 1343. The indictment charged the defendant with

devising "a scheme and artifice to defraud, and for obtaining

money and property by means of false and fraudulent pretenses,

representations and promises." The indictment alleged that the

defendant "falsely and fraudulently posed as a man of vast

wealth, and used this and other misrepresentations to attempt to

obtain at auction a yacht known as the 'Argo' or 'Christina'

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from the Government of Greece." The yacht had been owned by

Aristotle Onassis. The indictment also alleged that, as part of

the scheme and artifice, the defendant obtained and attempted to

obtain various other goods and services, including loans, travel

expenses, meals, a Mycenaean dagger blade, and yacht management,

design, and engineering services. The indictment listed ten

interstate and international telefaxes made or caused to be made

by the defendant.

The evidence at trial in fact showed that the defendant

posed as a man of great wealth by falsifying loan agreements,

investment statements and his net worth. When in 1993, the

defendant bid $2.1 million on the yacht, his bid was accepted by

the Greek government. Over the course of the next year, his

charade continued. He used "his" yacht, which in reality he did

not yet own, as collateral for other business ventures and

engaging yacht decorators and designers. The facts make clear

that Blastos was far from the wealthy man he pretended to be;

for the years 1991 through 1995, the defendant reported income

totaling only $2,600. He was the ultimate con man.

Jury trial commenced on April 4, 2000. At the close

of the government's case, the defendant moved, pursuant to Fed.

R. Crim. P. 29, for a directed verdict of acquittal; this motion

was denied. The defendant rested without calling any witnesses.

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He then renewed his Rule 29 motion for a directed verdict of

acquittal; this motion was also denied.

The district court instructed the jury and the

defendant objected to the jury charge, arguing that "materiality

should have been alleged as a separate element of the offense of

wire fraud." He also argued that the district court should have

instructed the jury pursuant to his proposed jury instruction,

which included, inter alia, what the defendant contended was the

"materiality" element of 18 U.S.C. § 1343. The district court

denied the defendant's objection. The jury returned a guilty

verdict. On August 21, 2000, the district court sentenced the

defendant to sixty months' imprisonment, three years of

supervised release, and a special assessment of $100.00. This

appeal followed.

II. Discussion

A. Jury Instruction

The defendant first argues that the district court

erroneously instructed the jury on the element of materiality.

He contends that the district court's instruction failed to

comply with the Supreme Court's decision in Neder v. United

States, 527 U.S. 1, aff'd after remand, 197 F.3d 1122 (11th Cir.

1999), cert. denied, 530 U.S. 1261 (2000), which held, inter

alia, that materiality is an element of wire fraud. The

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government argues that, although the instruction "may not

strictly comply with the holding of Neder . . ., the issue of

'materiality' was squarely placed before the jury in the court's

instructions . . . [and] the jury verdict would have been the

same even if the court had specifically instructed the jury that

'materiality' was an element of 'scheme and artifice to

defraud.'"

In Neder, the Court held that "the omission of an

element is an error that is subject to harmless-error analysis."

527 U.S. at 15. Assuming arguendo the district court omitted a

sufficient materiality instruction, we apply a harmless-error

analysis and ask whether the conviction can stand because the

error was harmless, 1 that is, whether "it appears beyond a

reasonable doubt that the error complained of did not contribute

to the verdict obtained." Neder, 527 U.S. at 15 (citing Chapman

v. California, 386 U.S. 18, 24 (1967)); see also Sustache-

Rivera v. United States, 221 F.3d 8, 18 (1st Cir.), cert.

denied, U.S. , 121 S. Ct. 1364 (2000); United States v.

1 The government admittedly "splits hairs" when discussing
which standard of review we should apply--either "harmless-
error" or "plain error"--depending on whether a proper objection
was made thereby preserving the argument. We need not discuss
the intricacies of this point because we ultimately determine
that the defendant's argument cannot survive even a harmless
error review.

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Escobar-De Jesus, 187 F.3d 148, 162 (1st Cir. 1999), cert.

denied, 528 U.S. 1176 (2000).

The defendant requested that the district court include

the following instruction in its charge to the jury:

The indictment charges the defendant
with Wire Fraud.

In order to sustain this charge, the
government must prove each of the following
elements beyond a reasonable doubt:

First, that there was scheme and
artifice to defraud or to obtain money or
property by false and fraudulent pretenses,
representations or promises, as alleged in
the indictment;

Second, that such pretenses,
representations, or promises were
material[;]

Third, that the defendant knowingly
and willfully participated in the scheme or
artifice to defraud, with knowledge of its
fraudulent nature and with specific intent
to defraud; and

Fourth, that in execution of that
scheme, the defendant used or caused the use
of wire communication in interstate or
foreign commerce as specified in the
indictment.

* * * *

The second element that the government
must prove beyond a reasonable doubt is that
the false and fraudulent representation
[sic] pretenses, representations, and
promises related to a material fact or
matter. A material fact is one which a
reasonable person would consider important

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 in determining his or her choice of action
in the transaction in question. The
government does not have to prove that a
victim or victims actually relied on that
representation in making a decision.

The district court instructed the jury on the elements

of the crime of wire fraud as follows:

In order to carry its burden of proof
with regard to the crime of wire fraud, as
charged in the indictment, the government
must prove each of the following essential
elements beyond a reasonable doubt:

First, the existence of a scheme to
defraud or to obtain money or property by
means of false or fraudulent pretenses,
substantially as charged in the indictment.

Second, the defendant's knowing and
willful participation in this scheme with
the intent to defraud.

And third, the use of interstate or
foreign wire communications, on or about the
dates alleged, in furtherance of this
scheme.

* * * *

The term false or fraudulent pretenses
means any false statements or assertions
that concern a material aspect of the matter
in question, that were either known to be
untrue when made or that were made with
reckless indifference to their truth and
that were made with the intent to defraud.
They include actual, direct false statements
as well as half-truths and the knowing
concealment of facts.

A material fact or matter is one that
has a natural tendency to influence or be

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 capable of influencing the decision-maker to
whom it was addressed. . . .

The Supreme Court has held that "a false statement is

material if it has a natural tendency to influence, or [is]

capable of influencing, the decision of the decisionmaking body

to which it was addressed." Neder, 527 U.S. at 16 (alteration

in original) (internal quotation marks omitted). After review

of the entire record, we hold that no jury could reasonably find

that the false and fraudulent pretenses, representations or

promises made by the defendant were not material as they had the

natural tendency to influence the decisionmaker.

The record establishes that the defendant was a

convincing liar. The record is replete with deliberate

misrepresentations made by the defendant with the intent to

influence the decisionmaker. Some examples of this are as

follows.

From the time that the defendant's $2.1 million bid for

the yacht was accepted, he constantly assured the Greek

government that he had sufficient funds to take possession of

the yacht, when in fact he did not. To that end, the defendant

directed his assistant, Judith Tonks, to draw up a fictitious

payment bond in the amount of $2,122,449 under the fictitious

name "Trans Global Guarantee Company, Ltd." This fake bond was

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forged with a signature of S. Abraham Goldberg, and was faxed to

the Greek government.

The defendant further directed Tonks to send a letter

to the representative of the Greek government saying: "To

further answer your query in regard to the status of funds, be

assured that the $2,146,000 US dollars for the acquisition of

the boat is currently and has been available." In a letter sent

three months later, the defendant assured the Government of

Greece that five deposits representing payment for the yacht

would be made to the proper account by the end of the week. A

few days later, the defendant directed Tonks to send a telefax

stating that he would forward $500,000 from his personal funds,

but would need to delay payment in full.

The Government of Greece, however, never saw a penny.

The fact that the Greek government did not sell the yacht to the

next highest bidder and allowed the defendant to drag his feet

for nearly seven months, keeping the yacht off the market for

that time, is strong evidence that it relied on the defendant's

statements. Others relied on the defendant's fraudulent

statements and misrepresentations. For example, the yacht

broker testified that she spent six months working on behalf of

the defendant and incurred considerable expense in the process.

She testified that she relied on the defendant's claim that he

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owned the Christina. On this uncontroverted record, no

reasonable jury could find that the defendant was anything but

a liar and a con man, who deliberately made misrepresentations,

with the intent to influence the decisionmaker.

The failure to instruct the jury on "materiality" as

a specific element of wire fraud was therefore harmless error.

Moreover, we note that the district court gave an instruction on

materiality that, although it did not meet the specific

requirements of Neder, accomplished the same purpose. Finding

that the error was harmless, we affirm the defendant's

conviction.

B. Sentencing

Having affirmed the defendant's conviction, we turn now

to his second argument on appeal, which concerns his sentence.

The defendant contends that the district court erred in

calculating the "loss" under U.S.S.G. § 2F1.1(b) (1994) and

urges us to remand the case to the district court for

resentencing. At sentencing, the district court increased the

base offense level by twelve levels after calculating the loss

to be between $1.5 million and $2.5 million. The district court

found a reasonable estimate of the potential or intended loss to

be the face value of the $2.1 million fraudulent bond issued by

the fictitious Trans Global Guarantee Company Ltd. The

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defendant argues that the loss should be measured only by the

actual goods or services rendered to him.

We review the district court's interpretation of the

loss provisions of the Guidelines de novo and review its factual

findings only for clear error. United States v. Carrington, 96

F.3d 1, 6 (1st Cir. 1996). "In fraudulent loan application

cases . . . the loss is the actual loss to the victim . . . .

However, where the intended loss is greater than the actual

loss, the intended loss is to be used." U.S.S.G. § 2F1.1,

application note 7(b). We have held, in United States v.

Haggert, 980 F.2d 8, 12 (1st Cir. 1992), that there are two

types of fraud:

The first type of fraud implicates the "true
con artist," who never intends to perform
the undertaking, such as the terms of the
contract or loan repayments, but who intends
only to pocket the money without rendering
any service in return. The second type of
fraud involves a person who would not have
attained the contract or loan but for the
fraud, but who fully intends to perform. In
the latter case, and only in the latter
case, is the intended loss not to be
considered for sentencing.

Id. at 12-13 (footnote omitted) (citing United States v.

Schneider, 930 F.2d 555, 558 (7th Cir. 1991)). It is clear from

the record that the defendant was the "true con artist," and

therefore that the district court committed no legal error in

sentencing the defendant according to the intended loss.

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 We have held that "[i]ntended loss need not be

determined with precision: [t]he court need only make a

reasonable estimate of the loss, given the available

information." United States v. Stein, 233 F.3d 6, 18 (1st

Cir.), cert. denied, U.S. , 121 S. Ct. 1406 (2000)

(internal quotation marks omitted) (second alteration in

original). Based on the evidence, the district court determined

the reasonable estimate of the intended loss to be the face

value of the $2.1 million fraudulent bond issued by the

fictitious Trans Global Guarantee Company. After careful review

of the record, we hold that this does not constitute clear

error. The district court properly calculated the "loss"

provision of the Guidelines and we affirm the defendant's

sentence.

III. Conclusion

For the reasons stated above, we affirm both the

defendant's conviction and his sentence. Affirmed.

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