United States v. Agne

United States Court of Appeals
For the First Circuit

No. 98-1974

UNITED STATES OF AMERICA,

Appellee,

v.

WILLIAM G. AGNE, D/B/A PUMP SALES AND SERVICES,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Hector M. Laffitte, U.S. District Judge]

Before

Selya, Circuit Judge,
Coffin, Senior Circuit Judge,
and Lipez, Circuit Judge.

Guillermo J. Ramos-Luina for appellant.
Desiree Laborde-Sanfiorenzo, Assistant U.S. Attorney, with
whom Guillermo Gil, United States Attorney, Jorge E. Vega-
Pacheco, Assistant U.S. Attorney, and Camille Velez-Rive,
Assistant U.S. Attorney, were on brief for appellee.

May 31, 2000
 COFFIN, Senior Circuit Judge. Defendant William G. Agne

seeks reversal of his criminal convictions for wire fraud, bank

fraud, and making a false statement on a loan or credit

application ("false statement"). Defendant's contentions are

that the wire fraud charge was barred by a statute of

limitations, that a letter of credit is not a document

encompassed within the false statement statute, that there was

insufficient evidence that he committed a scheme to defraud, and

that the court made evidentiary and sentencing errors.

Concluding as a matter of law that defendant's actions did not

"affect" a financial institution, we vacate his conviction for

wire fraud. We reject defendant's other contentions and affirm

his convictions for bank fraud and false statement.

I. Facts

The jury would have been warranted in finding the following

facts. In May 1991, R.G. Engineering, Inc. (R.G.), a Puerto

Rico corporation, issued a purchase order for $438,750 to Pump

Sales and Service, Inc., a New Jersey corporation of which

defendant was president and owner, for a series of replacement

parts for an industrial circulating water pump. Pump Sales

supplied various parts to R.G., although the relationship

between the parties deteriorated due to disputes about shipping,

billing, and other matters. Defendant and Roberto Camino,

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president of R.G., ceased speaking to each other in the spring

of 1992. Communication on behalf of Pump Sales was then

conducted almost exclusively by Romie Ausman, an employee of

Intesco, a Florida affiliate of Pump Sales owned by defendant.

In November 1991, R.G. advanced Pump Sales $75,000 to start

the fabrication process for the final parts – two "impellers"

and two "suction bells" – including drawings, patterns, casting,

machining, and balancing. A March 1992 letter from Pump Sales

represented that it had utilized the advance to take steps

toward the manufacture of the parts. Although the drawings were

made, the process apparently never advanced beyond that stage.

R.G. opened an irrevocable letter of credit in the amount

of $109,411 in favor of Pump Sales at Banco Santander Puerto

Rico in May 1992. An officer of Banco Santander testified

that a letter of credit "is an instrument issued by a bank

acting on its customer's instructions whereby the bank engages

with a beneficiary, which usually is the seller in a

transaction, to pay against certain documents which are

stipulated in the letter of credit." The letter of credit was

intended to facilitate payment for the impellers and suction

bells and was to be drawn on by Pump Sales after it had

initiated the delivery of those parts. The letter of credit

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authorized the bank to pay Pump Sales the full amount upon its

presentation of a sight draft (essentially a demand for

payment), a commercial invoice for "pump parts," a packing list,

and the original trucker's bill of lading.

In mid-June 1992, defendant phoned Banco Santander several

times to inform it that Pump Sales was sending documentation via

courier that would allow it to collect the funds authorized by

the letter of credit. On June 18, Pump Sales presented the bank

with a sight draft endorsed by defendant, a commercial invoice

representing that pump parts were shipped on that date, a

packing list, and a bill of lading. The bill of lading

contained a discrepancy, and the bank informed defendant that it

would not issue the funds. In a letter dated June 24, Pump

Sales enclosed a corrected bill of lading.

After reviewing Pump Sales's documentation, the bank on June

26 transferred by wire $109,411 to Pump Sales's account at a New

Jersey bank. On July 3, the bank debited R.G.’s corporate

account $109,411. Camino, R.G.'s president, was surprised that

the impellers and suction bells were ready so soon and as a

result he visited his freight forwarder in New Jersey to

determine what parts had been shipped. He discovered that four

previously paid for shafts had been shipped, but not the suction

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bells or impellers. R.G. never received the impellers and

suction bells.

Defendant was charged with bank fraud in violation of 18

U.S.C. § 1344, making a materially false statement or report for

the purpose of influencing the action of a federally insured

institution in violation of 18 U.S.C. § 1014, and wire fraud in

violation of 18 U.S.C. § 1343. He was convicted by a jury on

all three counts.

II. Whether the Charge of Wire Fraud was Time-Barred

Defendant committed the actions that led to his convictions

between March 1991 and June 1992. The government indicted him

for wire fraud in January 1998. Defendant contends that the

charge was time-barred.

The statute of limitations in 18 U.S.C. § 3282 requires that

wire fraud charges be brought within five years of the offense.

Section 3282 is modified, however, by 18 U.S.C. § 3293(2), which

establishes a ten year statute of limitations when the "offense

affects a financial institution." Defendant argues that the

bank suffered no loss and was not affected by his actions, and

that therefore the five year statute of limitations applied and

the indictment was tardy. The district court summarily presumed

that the bank experienced a risk of loss and that was sufficient

to support the charge. We review this issue of law, one of

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first impression in this circuit, de novo. See United States v.

Rivera, 131 F.3d 222, 224 (lst Cir. 1997) (interpretation of

statute is purely legal question reviewed de novo).

Our first reference point is the statutory language. See

Greebel v. FTP Software, Inc., 194 F.3d 185, 192 (lst Cir.

1999); see also Rivera, 131 F.3d at 224 ("When the 'plain

meaning' is clear on its face, 'the sole function of the courts

is to enforce it according to its terms.'" (citation omitted)).

No definition of "affect" is found in the statute. Its

dictionary definition is "to act on; produce an effect or change

in." The Random House Dictionary of the English Language 33 (2d

ed. 1983). Its synonyms are listed as "influence, sway; modify,

alter," id., lending support to defendant's position that there

must be some negative consequence to the financial institution

to invoke the extended statute of limitations.

The little precedent that exists leans in the same

direction. The two courts that have had occasion to interpret

section 3293(2) considered situations in which the financial

institution was a parent to the defrauded entity and thus was

closely financially linked to it. In United States v. Pelullo,

964 F.2d 193 (3d Cir. 1992), the Third Circuit rejected the

argument that the parent financial institution of a wholly owned

subsidiary could not be affected when the fraud was directed at

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the subsidiary, noting that Congress intended to extend the

statute to wire fraud that did not necessarily target a

financial institution but nonetheless affected it. See id. at

214-16. In United States v. Bouyea, 152 F.3d 192 (2d Cir.

1998), the Second Circuit, confronting a situation where a

wholly owned subsidiary suffered a loss of $150,000 after

borrowing money from its parent financial institution to finance

its transaction with the defendant, held that the evidence was

sufficient to allow the jury to find that the defendant's

actions affected a financial institution. See id. at 195.

In both cases, the financial institution presumably suffered

a loss or at the very least was exposed to a high risk of loss

as a result of defendant's commission of fraud resulting in a

loss to its subordinate entity. The court in Pelullo recognized

that there was, however, a limit to the statute's reach, noting

that the effect on the bank would be too attenuated to invoke

the statute in certain circumstances, for example, "if the fraud

was directed against a customer of the depository institution

which was then prejudiced in its dealings with the institution."

Pelullo, 964 F.2d at 216. We agree that at minimum there needs

to be some impact on the financial institution to support a

conviction.

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 We conclude that this is a case in which the consequence to

the bank, if any, is too remote to sustain the conviction. Even

assuming, without deciding, that being exposed to a risk of loss

is sufficient to "affect" a bank, within the ordinary meaning of

that term, we cannot agree with the district court that this

defendant created such a risk.

In Banco Santander's standard application and agreement for

an irrevocable letter of credit, R.G. promised to pay the bank

on demand for each draft drawn under the credit by Pump Sales.

Camino agreed that pursuant to the bank's typical procedure,

"the letter of credit was set up [such] that R.G. Engineering,

Inc., was going to be debited from R.G. Engineering's account in

Banco Santander immediately upon payment of the letter of

credit." In fact, R.G.'s corporate account at Banco Santander

was debited the full amount of the letter of credit shortly

after the payment was made to Pump Sales. 1 The bank officer

testified that R.G. usually maintained ample funds to cover its

needs and that there were sufficient funds in R.G.'s commercial

1 It could be, but was not, argued that R.G. could
theoretically have withdrawn the entirety of its funds on
deposit with the bank in the brief interim between the bank's
issuance of funds to Pump Sales and its debiting of R.G.'s
account. Given the facts of this case, however, the likelihood
of this occurrence is too minimal to justify criminal liability.

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account at the time that the letter of credit was drawn for the

bank to debit R.G.'s account.

Further, R.G. pledged as security for the letter of credit

all of its assets in the possession of the bank.2 The bank

officer testified that the letter of credit was established such

that, first, the bank would debit R.G.'s account after issuing

the letter of credit, and if sufficient funds were not available

in R.G.'s account, then R.G. would draw a commercial loan for

the amount. Thus, the bank was protected by R.G.'s promise to

compensate it for funds issued to Pump Sales.

The government suggests that the bank was subject to a

potential loss in that R.G. could have instituted a civil suit

against it for wrongfully honoring the letter of credit. The

2The letter of credit stated that R.G. agreed:

To pledge . . . to you as security for any and all of
the obligations and/or liabilities of the undersigned
hereinbefore or hereinafter referred to, now or
hereafter existing, any and all property of the
undersigned now or at any time(s) hereafter in your
possession or control or that of any third party
acting in your behalf, whether for the express purpose
of being used by you as collateral security or for
safekeeping or for any other or different purpose . .
. and the undersigned hereby authorize(s) you, at your
option at any time(s), whether or not the property
then held by you as security hereunder is deemed by
you to be adequate, to appropriate and apply upon any
and all of the said obligations and/or liabilities,
whether or not then due, any and all moneys now or
hereafter with you on deposit or otherwise to [the]
credit of or belonging to the undersigned . . . .

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letter of credit, however, protects the bank from this

possibility as well: "[N]either you [Banco Santander] nor any of

your correspondents shall be responsible for . . . the validity,

sufficiency or genuineness of documents, or of any

endorsement(s) thereon, even if such documents should in fact

prove to be in any or all respects invalid, insufficient,

fraudulent or forged . . . ."

Finally, the government suggested at oral argument, in an

argument likely waived, that the bank was at risk of losing its

client, R.G., as well as tarnishing its reputation. We cannot

construe a criminal statute to sweep so broadly as to make one

guilty of wire fraud for merely arousing these possibilities.

Our conclusion here does not mean that a bank could never

be "affected" by the use of fraudulent documents to draw the

funds of another. In this case, however, we cannot say that

defendant's actions "affected" a financial institution within

the plain meaning of that term because the bank suffered no

actual financial loss and experienced no realistic prospect of

loss because of the continuing adequacy of funds in R.G.'s

corporate account and the protective terms of the letter of

credit.

III. Sufficiency of Evidence of Scheme to Defraud

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 Bank fraud is defined by 18 U.S.C. § 1344 as "knowingly

execut[ing], or attempt[ing] to execute, a scheme or artifice --

(1) to defraud a financial institution; or (2) to obtain any of

the moneys, funds, credits, assets, securities, or other

property owned by, or under the custody or control of, a

financial institution, by means of false or fraudulent

pretenses, representations, or promises." Defendant moved for

a judgment of acquittal on the charge of bank fraud on the basis

that the government failed to establish the element of "scheme

to defraud." Defendant alleges that he did ship shafts, which

qualify as "pump parts," shortly after he drew upon the letter

of credit and that he was unaware that the letter of credit was

established as remuneration specifically for the final impellers

and suction bells. He suggests that the documentation he

submitted to the bank was not fraudulent on its face. We review

the denial of a motion for acquittal by assessing the evidence

as a whole in the light most favorable to the verdict.

See United States v. Morillo, 158 F.3d 18, 22 (lst Cir. 1998).

We have defined "scheme" in the context of bank fraud to

include "any plan, pattern or course of action, including false

and fraudulent pretenses and misrepresentations intended to

deceive others in order to obtain something of value." United

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States v. Blasini-Lluberas, 169 F.3d 57, 65 (lst Cir. 1999)

(internal quotation marks and citations omitted). "'The term

'scheme to defraud,' however, is not capable of precise

definition. Fraud instead is measured in a particular case by

determining whether the scheme demonstrated a departure from

fundamental honesty, moral uprightness, or fair play and candid

dealings in the general life of the community.'" United States

v. Brandon, 17 F.3d 409, 424 (lst Cir. 1994) (quoting United

States v. Goldblatt, 813 F.2d 619, 623-24 (3d Cir. 1987)).

The government marshaled sufficient evidence to show that

defendant engaged in a scheme to defraud. Defendant did not use

the $75,000 advance for the impellers and suction bells for its

specifically stated purposes. He twice forwarded to the bank

documentation to draw on the letter of credit even though he had

not shipped the impellers and suction bells for which he was

aware that the letter of credit was payment. He phoned Banco

Santander on multiple occasions in order to assure that the

letter of credit funds were forwarded to his account. Defendant

acknowledged, in response to one of several requests for

information from R.G., that he had collected on the letter of

credit but that the impellers and suction bells were still being

manufactured. Thus, the government established that defendant

engaged in a deceitful pattern of activity in order to obtain

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money. This was sufficient to prove a scheme to defraud. See,

e.g., Blasini-Lluberas, 169 F.3d at 65 (defendant engaged in

scheme to defraud when he deceitfully characterized a

transaction as a loan and misrepresented the purpose of the

loan); Brandon, 17 F.3d at 424 (defendant entered into scheme to

defraud when he fraudulently represented that down payments had

been paid in order to receive loan financing from a bank).

IV. Whether a Letter of Credit Falls within the Purview
of 18 U.S.C. § 1014

The false statement statute proscribes knowingly making such

a statement in order to influence a financial institution's

action "upon any application, advance, discount, purchase,

purchase agreement, repurchase agreement, commitment, or loan."

18 U.S.C. § 1014. Defendant argues that because a letter of

credit is not specifically listed in section 1014 his use of

fraudulent documentation to draw on the letter of credit is not

conduct encompassed by the statute. We review this issue of

law, also one of first impression in this circuit, de novo. See

Rivera, 131 F.3d at 224.

Although a letter of credit is not specifically listed

within the statute, it is easily defined as a type of

"commitment." "Commitment" itself may be defined as "a pledge

or promise; obligation." The Random House Dictionary of the

English Language 412 (2d ed. 1983). By definition, a letter of

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credit is a commitment made by the bank to honor demands for

payment from the beneficiary.

Our conclusion is in accord with holdings of the Third and

Seventh Circuits that letters of credit fit comfortably within

the statute. See United States v. Yung Soo Yoo, 833 F.2d 488,

491 (3d Cir. 1987) (letter of credit is "commitment" by bank);

United States v. Tucker, 773 F.2d 136, 139 (7th Cir. 1985)

(letter of credit is form of "application," "advance," and

"commitment"). Other courts have also upheld convictions under

section 1014 when the specific transaction was not named in the

statute but was a subcategory of a listed term. See United

States v. Bonnette, 781 F.2d 357, 364-66 (4th Cir. 1986)

(depositing fraudulent drafts); United States v. Price, 763 F.2d

640, 643 (4th Cir. 1985) (depositing false credit card

receipts).

Defendant relies heavily on Williams v. United States, 458

U.S. 279 (1982), in which the Supreme Court explained that

section 1014 "reduced 13 existing statutes, which criminalized

fraudulent practices directed at a variety of financial and

credit institutions, to a single section," but did not alter the

types of actions proscribed by the statute. Id. at 288.

Defendant argues that letters of credit were not issued by the

institutions protected in the precursors to section 1014 and

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therefore the statute should not be construed to include letters

of credit. Were we to abide by this sort of rationale, false

statements involving new financial instruments would not be

covered by the statute. This would be an absurd result,

especially here where the financial instrument, a letter of

credit, fits easily within at least one category specifically

listed in the statute.

V. Admission of Statements under Fed. R. Evid. 801(d)(2)(D)

Defendant argues that the court erred by admitting testimony

of conversations between the president of R.G. and Romie Ausman

bearing on the terms and purpose of the letter of credit as

vicarious admissions of a party-opponent excluded from the

definition of hearsay by Fed. R. Evid. 801(d)(2)(D). The rule

allows for the admission of a party-opponent's statement if it

"is offered against a party and is . . . a statement by the

party's agent or servant concerning a matter within the scope of

the agency or employment, made during the existence of the

relationship." Defendant contends that the government did not

adequately prove that Ausman was his agent rather than merely an

employee of an affiliated company. We review the court's

decision to admit the evidence over defendant's objection for an

abuse of discretion. See Woodman v. Haemonetics Corp., 51 F.3d

1087, 1094 (lst Cir. 1995).

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 Whether the statements of a corporate employee may be

admitted against a corporate officer depends upon the

relationship between the employee and the officer; "if the

factors which normally make up an agency relationship are

present, the evidence should not be excluded simply because the

statement is offered against a corporate officer, rather than

the corporation." United States v. Young, 736 F.2d 565, 568

(10th Cir. 1983) ( per curiam) (admitting statements of corporate

employee when testimony was given that the defendant was his

supervisor), rev'd on other grounds, 470 U.S. 1 (1985). An

agency relationship between an employee declarant and a

defendant employer may be established by a variety of evidence,

such as evidence that the declarant is directly responsible to

the defendant, see Zaken v. Boerer, 964 F.2d 1319, 1322-23 (2d

Cir. 1992); that the declarant reports directly to the defendant

who owns an overwhelming majority of stock in the company, see

United States v. Paxson, 861 F.2d 730, 734 (D.C. Cir. 1988);

that the declarant was hired by the defendant and worked on

matters in which the defendant was actively involved, see United

States v. Draiman, 784 F.2d 248, 256-57 (7th Cir. 1986); or that

the defendant "directed [the declarant's] work on a continuing

basis," Boren v. Sable, 887 F.2d 1032, 1041 (10th Cir. 1989).

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 We find no error in the district court's decision to admit

the testimony because the evidence here is ample to show an

agency relationship between Ausman and Agne. Testimony at trial

established that Ausman was hired by Agne in 1989 to conduct

business for Intesco, owned solely by defendant. Agne was also

the president and owner of Pump Sales, which Intesco served as

an "international arm." 3 In one communication from Agne to

Camino, he reported that while he was away from the office for

the following week, Ausman was to handle relations between Pump

Sales and R.G. Ausman was present at all meetings between

Camino and Agne and he was in conversation with Camino regarding

the purchase order, shipment dates, and payment.

After relations between Camino and Agne deteriorated, Ausman

was the contact for Pump Sales in its relations with R.G.

Ausman represented to Camino that he had been appointed by Agne

to negotiate payment terms. Camino was in contact with Ausman

every ten or fifteen days while the terms of the letter of

credit were being negotiated. When Ausman resigned from

Intesco, Agne requested that Camino deal with him directly in

3Defendant contends that Ausman left the employ of Intesco
sometime in May 1992. Because defendant did not supply any
record references as to the exact date of this occurrence, we
cannot say that the court erred by ruling that Ausman was an
agent of defendant's at the time he made the admitted
statements.

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Ausman's absence. Thus, the record supports an inference that

Ausman was directly responsible to defendant and therefore his

statements regarding the letter of credit were admissible

against defendant.4

VI. Sentencing

Finally, defendant makes two arguments concerning his

fifteen month sentence. First, he contends that the court erred

in considering the loss to R.G. as a basis upon which to

increase his base offense level under U.S.S.G. § 2F1.1(b)(1)(G).

Under section 2F1.1(a), crimes involving fraud and deceit

receive a base offense level of six. The offense level

increases in accordance with the amount of loss; losses caused

by a defendant's fraud of greater than $70,000 but less than

$120,000 result in a six level increase. "Loss" is defined by

4Defendant also challenges the district court's instructions
to the jury regarding the government's burden to prove all the
elements of each charge beyond a reasonable doubt. The court
did not provide a specific definition of "reasonable doubt" as
requested by defendant. The court did not err because "no
definition of reasonable doubt need be included in jury
instructions." United States v. Olmstead, 832 F.2d 642, 646
(lst Cir. 1987); see also United States v. Rodriguez-Cardona,
924 F.2d 1148, 1160 (lst Cir. 1991). It is of no import that
both defendant and the government requested an instruction
defining "reasonable doubt." See United States v. Cassiere, 4
F.3d 1006, 1024 (lst Cir. 1993) (reiterating that trial court is
"in the best position to determine whether, and if so how, to
define reasonable doubt").

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the guidelines commentary as "the value of the money, property,

or services unlawfully taken." U.S.S.G. § 2F1.1 cmt. 7.

Defendant argues that because the government cannot charge

him with wire fraud against R.G. due to the five-year statute of

limitations, the court should not have considered the loss to

R.G. Defendant suggests that the only relevant loss was that of

the bank and thus there was no loss. "We review a district

court's construction of a sentencing guideline de novo, see

United States v. McDonald, 121 F.3d 7, 9 n.1 (lst Cir. 1997),

and its application of a sentencing guideline to the facts in

the same manner, see United States v. Muniz, 49 F.3d 36, 41 (lst

Cir. 1995)." United States v. Nunez, 146 F.3d 36, 40 (lst Cir.

1998).

The guidelines do not specify who must suffer the loss.

The guidelines do direct a sentencing court to consider all acts

of the defendant as well as "all harm that resulted from the

acts" of defendant. See U.S.S.G. § 1B1.3(a)(1)(A) & (3). Here,

the court considered the range of defendant's acts and their

repercussions, choosing to assign a loss of only $109,411, even

though it could have increased this amount by the $75,000 loss

to R.G. resulting from Pump Sales's improper use of R.G.'s

advance. Moreover, the guidelines do not require that the court

specifically identify victims. See United States v.

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Resurreccion, 978 F.2d 759, 762 (lst Cir. 1992) ("That there

likely are such victims, or that the defendant intends them to

exist, is often sufficient to show a likely actual, or intended,

loss."). At trial, Camino testified that R.G. never received

anything for the $109,411 fraudulently obtained by Pump Sales.

Thus, it was not error for the court to conclude that $109,411

was the amount of the loss.

Second, defendant argues that the court erred by giving him

a two level enhancement for "more than minimal planning,"

pursuant to U.S.S.G. § 2F1.1(b)(2)(A). The guidelines

commentary explains that "more than minimal planning" means

"more planning than is typical for commission of the offense in

a simple form." U.S.S.G. § 1B1.1 cmt. 1(f). It also can mean

that "significant affirmative steps were taken to conceal the

offense . . . . [or] repeated acts [were committed] over a

period of time, unless it is clear that each instance was purely

opportune." Id. Defendant argues that the letter of credit

inadequately described the products to be shipped and that his

repeated deceptive acts were merely opportunistic. "We review

the district court's minimal planning assessment only for clear

error," and "[w]e are not inclined to reverse a finding of more

than minimal planning unless the evidence compels the conclusion

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that the defendant's actions were purely opportune or 'spur of

the moment.'" Brandon, 17 F.3d at 459.

In United States v. Fox, 889 F.2d 357 (lst Cir. 1989), we

stated that we could not "conceive of how obtaining even one

fraudulent loan would not require more than minimal planning."

Id. at 361. We have consistently concluded that repeated

actions in furtherance of a crime -- particularly a white-collar

crime -- require more than minimal planning. See United States

v. Royal, 100 F.3d 1019, 1032 (lst Cir. 1996) ("The sentencing

court was entitled to find, under the definition provided by the

guidelines, that [defendant's] repeated acts in the course of

this conspiracy required more than minimal planning."); United

States v. Santiago-Gonzales, 66 F.3d 3, 7 (lst Cir. 1995) (when

defendant made seven separate falsified entries, he engaged in

more than minimal planning).

The evidence confirms that defendant undertook more than

minimal planning. His deceitful actions began with his misuse

of the $75,000 advance, included his involvement of other Pump

Sales employees to create the fraudulent documentation, and

culminated in his repeated efforts to fraudulently induce the

bank to issue the monies authorized by the letter of credit. We

cannot conclude that defendant's actions were merely

opportunistic or "spur of the moment."

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-23-
 VII. Conclusion

We vacate defendant's conviction for wire fraud and remand

to the district court to adjust defendant’s sentence as

appropriate. We affirm defendant's convictions for bank fraud

and making a false statement on a loan or credit application,

concluding that a letter of credit falls under the false

statement statute, that the evidence was sufficient to establish

a scheme to defraud, and that the court did not err in admitting

statements of defendant's agent or in sentencing defendant.

Vacated in part and affirmed in part, remanded for further

proceedings consistent with this opinion.

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