United States v. Camuti

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 94-1222

UNITED STATES OF AMERICA,

Appellee,

v.

WILLIAM J. CAMUTI,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. William G. Young, U.S. District Judge]

Before

Selya, Circuit Judge,

Bownes, Senior Circuit Judge,

and Boudin, Circuit Judge.

Thomas V. Laprade, by Appointment of the Court, with whom Black,

Lambert, Coffin & Rudman was on briefs for appellant.

William P. Stimson, Assistant United States Attorney, with whom

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

States.

March 12, 1996

BOUDIN, Circuit Judge. In a jury trial beginning in

September 1993, William Camuti was tried on 13 counts of mail

fraud in connection with a scheme to defraud investors by

obtaining their funds through false representations. 18

U.S.C. 1341, 2. On October 18, 1993, the jury acquitted

Camuti on two counts and convicted him on the remaining 11

counts. Camuti was sentenced on February 28, 1994 to 116

months' imprisonment and ordered to pay $2,528,000 in

restitution. He now appeals, challenging both his conviction

and his penalties. Taken in the light most favorable to

the government, United States v. Brien, 59 F.3d 274, 275 (1st

Cir.), cert. denied, 116 S. Ct. 401 (1995), the evidence

submitted at trial permitted the jury to find the following.

Starting in the early 1980s Camuti ran a mortgage brokerage

business called "The Loan Depot" from a building in Randolph,

Massachusetts. Camuti attracted a large number of homeowners

seeking second mortgages and placed their applications with

various lenders.

Beginning in December 1988 and continuing for some

period, Camuti began to solicit investments from several

Waltham businessmen, known at trial as "the Waltham Five."

He represented to them that their funds would be invested in

high-quality residential mortgages that he would select and

service. The Waltham Five invested more than $2.5 million

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with Camuti, but in fact Camuti never invested their money in

residential mortgages.

In February 1989, Camuti hired Joseph Carroll, a young

stockbroker, to market pools of mortgages to potential

investors. Carroll and several part-time salesmen telephoned

potential investors to persuade them to invest money in

mortgage pools. The first such pool was to be backed by a

mortgage on the Loan Depot office building in Randolph, but

Carroll testified at trial that this initial effort fell

short and that he managed to raise only $125,000 compared

with a goal of $900,000.

Carroll further testified that Camuti responded to this

setback by instructing Carroll to tell investors that each

mortgage pool consisted of a group of residential mortgages

on homes in well-to-do Boston suburbs. Camuti was

represented to be a co-manager of the pools, and he signed a

mortgage pool "participation certificate" that was sent to

each investor. Over the next year, the program attracted

over $1.7 million. In fact no residential mortgages secured

these investments.

In October 1989, about nine months after Carroll began

his efforts, the Securities Division of the Massachusetts

Secretary of State's office began to receive reports that

Camuti might be illegally marketing unregistered securities

and sent him a letter of inquiry. Camuti told his attorney

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to respond that the Loan Depot's solicitations had produced

no response; by letter of October 27, 1989, his lawyer told

the Securities Division, inaccurately, that no funds had been

collected and no mortgage pool participations had been

issued. In a subsequent letter, the lawyer told the

Securities Division, again inaccurately, that all such

solicitations had ceased.

In spring 1990, Camuti began falling behind in interest

payments and, in May 1990, a Boston newspaper reported

allegations that there were no residential mortgages backing

Camuti's pools. In December 1990, members of the Waltham

Five met with Camuti and he admitted that their funds were

not secured by residential mortgages. In later negotiations,

the Waltham Five sought other collateral; one proposal was to

have one of their members take control of the assets in the

Loan Depot as a trustee for the other investors, but no

settlement was ever reached.

At trial the government presented the evidence just

described through approximately twenty-five witnesses. These

included Carroll, various investors who had been solicited by

Carroll, other persons familiar with Camuti's role in the

Loan Depot, and four members of the Waltham Five. Three of

the four testified that Carroll himself had told them that

their investments would be backed by residential mortgages;

the fourth was not specific on this point.

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Camuti's own position at trial was that Carroll had

deceived Camuti and that Camuti had discovered Carroll's

misrepresentations only in the spring of 1990, and then

discharged Carroll. As to the Waltham Five, Camuti suggested

that they, or at least some of them, were engaged in an

effort to secure control of the Loan Depot which, in its

mortgage broker activities, had been a successful business.

Camuti also denied representing to the Waltham Five that

their investments would be used to purchase residential

mortgages.

On this appeal, Camuti does not claim that the evidence

was insufficient to hold him liable for mail fraud. Rather,

he argues on several fronts that the trial court effectively

deprived him of a fair trial by restricting his opportunity

to present his defense and, further, that the court

misinstructed the jury. He also contests his sentence and

restitution order. The Cross-Examination of the Waltham

Five. The government had little trouble in this case proving

that Carroll had defrauded the mortgage pool investors; its

problem was to implicate Camuti in these actions. The main

witness for the government, unfortunately, was Carroll who

directly implicated Camuti but, as a self-confessed

defrauder, was hardly a perfect witness. The government did

have other evidence linking Camuti to Carroll's frauds, but

it was obviously quite helpful to the government to show that

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Camuti himself had been making comparable misrepresentations

to his own friends, namely, the members of the Waltham Five.

In response, Camuti asserted that the Waltham Five were

using their transactions with Camuti to take over Camuti's

business. To make this showing, Camuti sought to cross-

examine a Waltham Five member about the proposed trust

document that the Waltham Five had tendered to Camuti, and

posed questions designed to show that another member had

acquired an interest in certain of the Loan Depot's assets.

The district judge sustained a number of objections by the

government to these inquiries. Camuti now claims that these

rulings were error.

Few of the tasks of a trial judge are more difficult

than coping with this kind of problem. A fragment of

evidence is offered seemingly remote from the main issues.

At this point, the trial judge has to rule on relevance, at

least provisionally, without knowing how this fragment will

look as part of a larger pattern. And (assuming a proper

objection), the judge may also have to consider other

limitations, such as those based on prejudice or confusion,

in deciding how far to let issues of marginal relevance be

pursued.

In this instance, the district court sought side bar

explanations for the disputed evidence and made clear its

willingness to give the defense wide latitude to explore the

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alleged scheme of the Waltham Five if it could be shown to

bear on the question whether Camuti had acquired money from

the Waltham Five based on false representations. But as we

read the colloquies, ultimately the district court concluded

that the necessary foundation was lacking and that questions

about the trust document or the present ownership of Loan

Depot assets were at best minimally relevant, confusing and a

waste of time.

We think that this judgment was clearly within the broad

discretion allowed to district courts in these matters,

United States v. Jarabek, 726 F.2d 889, 902-03 (1st Cir.

1984), and Camuti's claim of error fails without regard to

the government's procedural objections (several of which have

some bite). The crime with which Camuti was charged--mail

fraud--did not require that the victims be pure of heart or

even that they have been effectively deceived by the charged

misrepresentations. Materiality issues aside, all that

matters is that the representations were deliberately made by

the defendant. United States v. Allard, 926 F.2d 1237, 1242

(1st Cir. 1991).

Camuti's position, as we understand it, is that the

alleged motives and later actions of the Waltham Five bore on

the question of whether Camuti had ever made the

misrepresentations to them at all; Camuti argues that the

Waltham Five loaned money to Camuti rather than invested it

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in supposed residential mortgages; and--or so Camuti further

reasons--the malign motive and later actions that the defense

has attributed to the Waltham Five are inconsistent with

their story that Camuti made misrepresentations.

But the inferences are so thin that they can barely, if

at all, meet the generous test of relevance under Fed. R.

Evid. 401. That the Waltham Five sought security after they

discovered Camuti's fraud hardly suggests that any of them

were previously plotting to take over the Loan Depot

business; and even a prior plot to obtain such control would

tell little about whether Camuti had made false statements

when he obtained their funds. The difference between proof

and speculation is a matter of degree, but the proof here is

close to the latter end of the spectrum.

At the same time, quite apart from irrelevance, the

evidence sought to be adduced did have the capacity to

mislead and confuse the jury. See Fed. R. Evid. 403.

Although irrelevant to any proper defense, it lent itself to

the suggestion that whatever Camuti may have done, the

Waltham Five took advantage of him when he found himself

hard-pressed and that one member had enriched himself at

Camuti's expense. In other words, the scenario that Camuti

sought to suggest could easily have been useful to Camuti but

not for any legitimate purpose.

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Camuti cites to us precedent that the right of cross-

examination is secured by the Confrontation Clause of the

Constitution, but those cases involve unjustifiable

restrictions on cross-examination. E.g., Chambers v.

Mississippi, 410 U.S. 284 (1973). The ordinary application

of Fed. R. Evid. 401-03 does not even remotely impair any

constitutional right under the Sixth Amendment. See Delaware

v. Van Arsdall, 475 U.S. 673, 679 (1986); United States v.

Kepreos, 759 F.2d 961, 964 (1st Cir. 1985). It is worth

adding that the district court went out of its way to offer

Camuti an opportunity to create a foundation for the evidence

he sought to adduce.

The Telephone Tape. As part of the defense's case,

Camuti sought to play for the jury an audio tape recording.

The tape had been found in Carroll's desk and, taken at face

value, included several telephone sales pitches by Carroll to

prospective investors. In the course of one of the pitches,

apparently relating to commercial property mortgages, the

speaker--purporting to be Carroll--said that, with respect to

an investment vehicle, "I have one of my clients that's gonna

take the whole deal, and that's a half a million dollars,

himself."

Camuti's position, at trial and on appeal, is that this

comment showed that Carroll's sales efforts to raise money on

commercial mortgages were a success. This fact, Camuti

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reasons, undermined Carroll's own testimony that his

commercial-mortgage sales efforts had largely failed and that

this failure caused Camuti to instruct Carroll to begin

pitching non-existent residential mortgages instead.

Camuti's brief assumes that, if the tape were played,

Carroll's comment about his half-a-million-dollar client

would have been admissible for its truth.

The tape recording, like most other "real" evidence,

could be admitted only upon an offer or promise of evidence

sufficient to permit the jury to find that the tape was what

its proponent (Camuti) claimed it to be: here, recordings of

actual telephone sales calls by Carroll. See Fed. R. Evid.

901. Camuti offered to testify that he himself recognized

the voice as that of Carroll. The government said that this

was insufficient, pointing out that no chain of custody had

been proved and that Camuti himself had recorded over

portions of the tape by using it to record calls to or from

his own telephone.

The district judge listened to the tape and chose to

exclude it. His first comment was that the tape had not been

adequately authenticated. He continued by saying that, in

light of Camuti's constitutional right to confront witnesses

against him, see Chambers, 410 U.S. at 294, the court would

admit the tape if "truly exculpatory." But the judge ruled

that the call in question appeared to deal with "interests in

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commercial property" and was therefore "not central to this

case . . . ."

Chain of custody is one means of authenticating evidence

but not the only means; and voice identification by Camuti

would have served as evidence that Carroll was the speaker.

The government's better argument is that there is some

internal evidence that raises doubts about the tape's

authenticity, which Carroll could have removed if Camuti had

called him to authenticate the tape. The district judge has

considerable discretion in resolving authentication issues

under Rule 901, United States v. Carbone, 798 F.2d 21, 24

(1st Cir. 1986), but the district court did not choose to

exclude the tape on this ground--saying, instead, that the

evidence was not exculpatory.

We conclude that if the tape had any relevance at all,

it was so slight that the exclusion of the tape was at the

most harmless error. Under ordinary hearsay rules the tape

was never admissible as evidence that Carroll had in fact

sold a commercial mortgage to one of his clients for

$500,000. The taped conversation, even if authentic, was an

out-of-court statement by Carroll; and Camuti makes no effort

to show that the statement falls within any hearsay

exception. Accordingly, if offered for the truth of the

matter asserted--as Camuti assumes it to be--the taped

comment is excluded by Fed. R. Evid. 802.

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In Chambers, the Supreme Court held that it can violate

due process to exclude reliable hearsay evidence crucial to

the defense; there, the state court in a murder trial had

excluded out-of-court statements of another that he had

committed the crime with which the defendant was charged.

410 U.S. at 292-93. But the Chambers statements were

arguably reliable, cf. Fed. R. Evid 804(b)(3), and vitally

important to the defense; the hearsay comment of Carroll is

neither. Chambers is not a general abrogation of the hearsay

rule. Lee v. McCaughtry, 933 F.2d 536, 538 (7th Cir.), cert.

denied, 502 U.S. 895 (1991).

Of course, Carroll's statement might still have been

admissible not for its truth but for impeachment, if

sufficiently inconsistent with his trial testimony.

Ordinarily, extrinsic evidence is not admissible to impeach

by contradiction; but an exception exists where the

contradiction is on a material issue. United States v.

Perez-Perez, 72 F.3d 224, 227 (1st Cir. 1995). It is not

easy to tell whether the vague reference on the tape to a

prospective $500,000 investment is at odds with any point in

Carroll's trial testimony.

But even if we assume that the tape was authentic and

extrinsic evidence of Carroll's statement admissible to

impeach, it could not have altered the outcome of this case.

At most the contradiction, if contradiction there was, would

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have cast a small measure of additional doubt upon Carroll's

veracity. But Carroll was already a proven liar, having

engaged for months in selling investors phony mortgage

certificates. The jury nevertheless believed him when he

said that Camuti was responsible for the scheme.

The jury had a basis for believing Carroll's trial

testimony because there was also a fair amount of other

evidence supporting the view that Camuti had collaborated in

the fraud: for example, evidence that Camuti was familiar

with Carroll's operation, had signed the investment

certificates, had told similar lies about residential

property to the Waltham Five, and had instructed his own

lawyer to mislead the state authorities when they began to

investigate. The idea that one additional lie from Carroll

would have undermined this structure is fanciful. United

States v. Legarda, 17 F.3d 496, 499 (1st Cir.), cert. denied,

115 S. Ct. 81 (1994).

Jury Instructions. Camuti says that the district court

erred in two rulings on jury instructions: one was the

court's refusal to give Camuti's requested instruction that

good faith was a defense to the fraud charge; the other was

granting the government's request to instruct that a

defendant's knowledge of fraud may be inferred from willful

blindness. Camuti's counsel did not object after the jury

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was instructed and before it retired, as required by Fed. R.

Crim. P. 30, so our review is limited to plain error.

On the good faith instruction, there was no error at

all, let alone plain error. A separate instruction on good

faith is not required in this circuit where the court

adequately instructs on intent to defraud. United States v.

Dockray, 943 F.2d 152, 155 (1st Cir. 1991). Here, the

court's instruction on fraud is not seriously challenged.

Camuti says that the instruction was needed here because the

court limited Camuti's evidence offered to show good faith.

But missing evidence is not supplied by instructions; and if

evidence of good faith was excluded in error, Camuti was free

to raise the point.

As for the willful blindness instruction, it was amply

justified in this case. United States v. Gabriele, 63 F.3d

61, 66-67 (1st Cir. 1995). A jury could reasonably find that

even if Camuti had not actually directed the fraud, the

warning signs were ample to have alerted Camuti to the fraud

unless he deliberately chose to close his eyes to them; two

good examples are the newspaper reports of the fraud

(articles Camuti discussed with his investors) and the

contacts by the state investigators (which Camuti sought to

thwart with false information).

Camuti suggests that this blindness instruction was

faulty because it could have led the jury to apply a

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negligence standard in determining his guilt. On the

contrary, the judge not only properly instructed the jury as

to the elements of fraud and used the usual formula for

willful blindness, see E. Devitt, et al., Federal Jury

Practice and Instructions 17.09 (4th ed. 1992); Gabriele,

63 F.3d at 66 n.6, but the judge also told the jury that it

could not find that Camuti acted knowingly if he "was simply

careless."

Sentence Calculations. In calculating the offense level

for Camuti's offense, the district judge increased the figure

by two levels for obstruction of justice under U.S.S.G.

3C1.1. From the prosecutor's request and the subsequent

colloquy, it is evident that the district court based this

ruling on a finding that Camuti had committed perjury during

the trial. United States v. Dunnigan, 113 S. Ct. 1111

(1993), ordains an enhancement in those circumstances.

On appeal, Camuti argued that the district judge's bare

statement at sentencing--that an obstruction of justice had

occurred--was too bare to show that the district judge had

found each of the elements of the perjury enhancement as

required under Dunnigan: falsity, willfulness and

materiality. See 113 S.Ct. at 1116-17. The government said

that the findings could be inferred from context or that the

error, if any, was harmless. Instead of speculating, we

retained jurisdiction and, by order, asked the district court

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to identify the obstructive conduct and the basis for any

Dunnigan findings.

By a supplemental order entered on November 9, 1995, the

district court supplied the specifics. Its order found that

the perjury lay in Camuti's testimony that he was unaware of

the misrepresentations made by Carroll to investors. The

district court's order also specifically found this testimony

to be false, willful and material. The findings are not

clearly erroneous and, in fact, Camuti has offered us no

reason to doubt that they were correct. Accordingly, nothing

more need be said about the perjury enhancement.

The district court imposed a further four-level upward

adjustment based on a finding that Camuti was the organizer

of a criminal organization that was "extensive." U.S.S.G.

3B1.1(a). This adjustment was imposed after a recitation by

the government of evidence showing that Camuti's Loan Depot

organization had employed the services of over a dozen

people, that the fraud was sophisticated and directed at many

investors, and that it was orchestrated by Camuti.

The district judge said that he was persuaded by this

argument. On appeal, Camuti argues (apparently for the first

time) that the enhancement required not only that the fraud

be extensive but also that Camuti have played an extensive

role as an organizer or leader. The guidelines do so

require, U.S.S.G. 3B1.1(a); United States v. Tejada-

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Beltran, 50 F.3d 105, 111 (1st Cir. 1995); but in adopting

the prosecutor's scenario, the district judge so found and

the evidence supports him. Thus, if not forfeited, the

argument fails.

Camuti also contends that the same enhancement amounts

to double counting because the size of the fraud was already

reflected in an adjustment based on the loss inflicted by the

fraud. U.S.S.G. 2F1.1(b)(1). One could argue about

whether double counting is involved: the organizer

adjustment focuses not on the amount of loss but on the role

of the defendant and the size of the organization; still, the

latter element often correlates with the size of the loss.

But the short answer is that this is at worst permissible

double counting, United States v. Lilly, 13 F.3d 15, 19 (1st

Cir. 1994).

A final two-level upward adjustment was based upon

Camuti's abuse of a position of "private trust" to

"significantly facilitate[]" the offense. U.S.S.G. 3B1.3.

The government's theory was that, at least as to the Waltham

Five, Camuti was effectively a fiduciary trusted by them to

invest their money in residential mortgages that he (Camuti)

would select. Cf. United States v. Newman, 49 F.3d 1, 9 (1st

Cir. 1995). The district court accepted the theory despite

Camuti's rather general objections that his relationship with

the investors had not facilitated any fraud.

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On appeal, Camuti has revised his objection. He now

says that his activities vis-a-vis the Waltham Five were

"incidental" to the offenses on which he was sentenced, and

he points out that all but one of the mail fraud counts

related to other investors solicited by Carroll. This

argument rests on the peculiar logic of the mail fraud

statute which makes criminal not the scheme to defraud

standing alone but each use of the mails in connection with a

scheme to defraud. 18 U.S.C. 1341.

The short answer is that for purposes of determining

responsibility at sentencing, the guidelines include not only

the offense of conviction but also any other conduct that is

"part of the same course of conduct or common scheme or plan

as the offense of conviction." U.S.S.G. 1B1.3(a)(2). The

government's main excuse for offering evidence as to the

Waltham Five was that the frauds directed against the Waltham

Five were part of the same overall scheme. On this theory,

those frauds were also "relevant conduct" at sentencing,

regardless of specific mailings.

There was certainly evidence that the Waltham Five were

defrauded. Whether there was only a single overarching

scheme might be debated, cf. U.S.S.G. 1B1.3, comment.

(n.9); United States v. Sklar, 920 F.2d 107, 111 (1st Cir.

1990); and there is no explicit finding on the point by the

district court. But neither did Camuti make his present

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argument at sentencing. It is enough here that the evidence

permitted the finding of a single scheme and there was

certainly no plain error where, without objection, the

district court proceeded on that premise.

Restitution. At sentencing, the district judge ordered

Camuti to make restitution payments to members of the Waltham

Five in the amount of $2,528,000. This award was based on

computations in the pre-sentence report reflecting investment

losses in this range claimed by the individual members of the

Waltham Five. Camuti did not object to the pre-sentence

report nor object to the restitution order when the district

court specified the amounts. On appeal, Camuti claims for

the first time that the restitution order--aside from $37,500

owing to Bowse--was plain error.

Camuti's theory is straightforward. Under the statutory

language that applies to his case, restitution may be ordered

only for losses caused by the "offense" or "offenses" of

conviction. 18 U.S.C. 3663(a) (1988); see Hughey v. United

States, 495 U.S. 411 (1990). Later amendments have broadened

the authority to require restitution to include harm due to

"the defendant's criminal conduct in the course of the

scheme," 18 U.S.C. 3663(a)(2) (Supp. V, 1993), but the

changes are not retroactive. Newman, 49 F.3d at 11 & n.14.

Camuti's argument is that none of the investments of the

Waltham Five, apart from $37,500 owing to Bowse, was related

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to an individual mailing specified as a count in the Camuti

indictment.

As already noted, the mail fraud offense is committed by

a mailing in aid of a scheme to defraud. One can therefore

argue that a loss is caused by the "offense" only if it stems

from a transaction linked to a specific mailing for which the

defendant was indicted. Although several circuits have taken

a broader view, this circuit has twice construed the old

restitution statute to incorporate such a gloss, Newman, 49

F.3d at 11; United States v. Cronin, 990 F.2d 663, 666 (1st

Cir. 1993), and this precedent is binding on this panel.

The government's first answer is that Camuti did not

raise the Hughey issue in the district court and therefore

waived it. Its other answer is to point to counts 11 and 12

of the indictment, charging Camuti with the mailings by his

lawyer to the state authorities. These mailings, says the

government, delayed the discovery and termination of the

scheme and thereby can be deemed to have caused the losses

from investments made after the date of the first letter.

According to the government, almost all of the Waltham Five

investments occurred after this date. Camuti, in turn, calls

this causal connection a threadbare speculation.

The government's waiver argument does not meet riposte

of plain error, see United States v. Olano, 113 S. Ct. 1770

(1983); and our precedents limiting the reach of the old

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restitution statute are plain enough. It could be argued

that Olano's further requirement--that the plain error be "a

miscarriage of justice" or the like, id. at 1779--is not

satisfied where, as here, the losses in question were due to

Camuti's fraudulent scheme, even if not directly linked to

the charged mailings. But such a rough and ready approach

would arguably be at odds with our recent decision in United

States v. Gilberg, No. 95-1586, slip op. at 15-17 (Jan. 31,

1996).

But in this case, unlike Gilberg, the government does

have an argument that the restitution ordered by the district

court can be sustained on the merits based on counts 11 and

12. The government's causation argument, and Camuti's

response, are largely fact-bound; to resolve the dispute

would require a remand to the district court to develop

further facts and a decision by the district court that might

show that the restitution judgment should be smaller. Since

Camuti failed to raise this issue in a timely fashion and it

is by no means certain that the restitution judgment is

substantially excessive, we exercise our undoubted discretion

under Olano to disregard the alleged error. 113 S. Ct. at

1778.

Affirmed.

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