United States Court of Appeals
For the First Circuit
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No. 99-2124
UNITED STATES,
Appellee,
v.
ROBERT E. PARADIS,
Defendant, Appellant.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. D. Brock Hornby, U.S. District Judge]
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Before
Selya and Lynch, Circuit Judges,
and Schwarzer,* Senior District Judge.
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Thomas B. Wheatley, by appointment of the Court, for appellant.
Margaret D. McGaughey, Assistant United States Attorney, with whom
Jay P. McCloskey, United States Attorney, was on brief, for appellee.
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July 17, 2000
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* Of the Northern District of California, sitting by designation.
SCHWARZER, Senior District Judge. We must decide whether a
defendant convicted of a single count of laundering the proceeds of
bankruptcy fraud was properly ordered to make restitution to the
bankruptcy trustee.
BACKGROUND
This case arises out of a scheme to conceal assets from the
bankruptcy court, the trustee and creditors in the bankruptcy
proceedings of Catherine Petit, defendant Robert Paradis's employer.
Prior to her bankruptcy, Petit was pursuing a multi-million dollar
claim against various parties. To help finance the litigation, Petit
and several associates (not including Paradis) persuaded investors to
purchase stakes in the outcome of the litigation. From 1989 until
1997, they raised roughly $8.2 million from numerous investors. In
June 1993, an involuntary Chapter 7 (later converted to Chapter 11)
petition was filed against Petit. During the course of the bankruptcy
proceedings, Petit falsely denied receiving any income from the sale of
her interest in the litigation. This fraud on the bankruptcy court
ultimately led to the October 1997 arrests of Petit, Paradis, and
several of Petit's associates.
Paradis's role in the scheme was to conceal Petit's
investment income from her creditors and the bankruptcy court. As
office manager of a company Petit controlled, Paradis received a
portion of the funds Petit raised through the investment scheme and
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deposited them in personal accounts held by him and his wife. From
those accounts, Paradis paid Petit's business and personal expenses.
All told, Paradis passed roughly $3 million through his accounts,
depriving Petit's bankruptcy estate and her creditors of potential
access to those funds.
Shortly after his arrest in October 1997, Paradis pled guilty
to one count of money laundering in violation of 18 U.S.C.
§ 1956(a)(1)(B)(i) and 18 U.S.C. § 2. The district court sentenced
Paradis to fifteen months in prison and three years of supervised
release, and ordered Paradis to pay $3 million in restitution to the
United States Trustee in Petit's bankruptcy case. On this appeal,
Paradis challenges the restitution order and the length of the term of
supervised release. We have jurisdiction under 28 U.S.C. §§ 1291 and
2253.
DISCUSSION
I. RESTITUTION
A. Standard of Review
We customarily review restitution orders for abuse of
discretion. See United States v. Vaknin, 112 F.3d 579, 586 (1st Cir.
1997). "To the extent that a challenge to a restitution order hinges
on a legal question, however, the sentencing court's answer to that
question is reviewed de novo." Id.
B. Application of Restitution to Money Laundering
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At sentencing, both Paradis and the government argued that
because in the usual case--laundering of the proceeds of drug
transactions--the victim is society, restitution is improper in a case
where money laundering is the only offense. The district court,
however, concluded that because Paradis's money laundering deprived the
bankruptcy trustee of the ability to distribute the laundered funds to
Petit's creditors, restitution was appropriate and the trustee was a
victim for purposes of 18 U.S.C. § 3663A. The court ordered Paradis to
pay restitution of roughly $3 million--the aggregate of the laundered
funds--to the trustee in Petit's bankruptcy case. On appeal, Paradis
urges us to reverse the restitution order on the same ground he argued
in the district court, i.e., that there can be no identifiable victim
for purposes of § 3663A because the victim of money laundering is
society. Although the government also took that position in the
district court, on appeal it defends the district court's order to
facilitate our consideration of this issue.
Paradis's argument rests on decisions applying the grouping
provisions of United States Sentencing Guideline § 3D1.2, under which
offenses are grouped for sentence calculation where they are based on
different acts but harm the same victims. He relies principally on
United States v. Lombardi, 5 F.3d 568 (1st Cir. 1993). The issue there
was whether a defendant's sentence for mail fraud and for money
laundering should have been included in a single group. In rejecting
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the defendant's argument that his mail fraud and money laundering
convictions involved the same victims for purposes of grouping under
the guidelines, we said, "[t]he guidelines are clear that, for purposes
of these subsections, the victim of fraud is the insurance company and
the victim of money laundering is society." The decision is not
apposite; it does not implicate the construction of the restitution
statute, 18 U.S.C. § 3663A, nor does it purport to decide that money
laundering could not produce an identifiable victim. For the same
reasons, the other decisions on which Paradis relies are inapposite.
See, e.g., United States v. Kunzman, 54 F.3d 1522, 1531 (10th Cir.
1995) (securities fraud and money laundering); United States v. Gallo,
927 F.2d 815, 824 (5th Cir. 1991) (drug offenses and money laundering).
We turn now to the statute. Under 18 U.S.C. § 3663A,
restitution is mandatory where the defendant is convicted of "any . .
. offense against property under [Title 18], including any offense
committed by fraud or deceit . . . in which an identifiable victim or
victims has suffered a . . . pecuniary loss." 18 U.S.C. § 3663A(c)(1);
id. § 3663A(a)(1). Paradis does not dispute that money laundering is
an offense against property. See 18 U.S.C. § 1956(a)(1) ("Whoever,
knowing that the property involved in a financial transaction
represents the proceeds of some form of unlawful activity, conducts .
. . a financial transaction . . .") (emphasis added). A "victim" under
the statute is "a person directly and proximately harmed as a result of
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the commission of an offense for which restitution may be ordered . .
. ." 18 U.S.C. § 3663A(a)(2).
Here, Paradis diverted funds he knew were the proceeds of
Petit's fraud on the bankruptcy court from the bankruptcy estate. To
conceal the existence of those funds from the bankruptcy court, Paradis
channeled them through his own accounts, out of which he paid Petit's
personal and business expenses. The direct result of Paradis's actions
was to conceal from the bankruptcy court and from the estate $3 million
that could have been available to satisfy claims of creditors. On
these facts, Paradis's argument that society alone was the victim is
untenable and restitution may be appropriate to the extent identifiable
victims exist.
C. Identification of the Victim
The district court determined that the bankruptcy trustee was
the victim for purposes of § 3663A. The victim must be one who was
"harmed as a result of the commission of [the] offense." 18 U.S.C. §
3663A(a)(2). While the trustee may be a victim of bankruptcy fraud,
that was not the charge against Paradis. His offense was laundering
the proceeds of the fraud. There is no evidence that the trustee was
harmed as a result of this offense. Its effect was to conceal the
proceeds of the fraud and to divert those funds from the estate where
they could have been available to pay creditors who had filed claims.
But again there is no evidence of harm to creditors, i.e., no evidence
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of creditors who filed claims that went unpaid. Because there is no
evidence of identifiable victims who suffered harm as a result of
Paradis's money laundering, the restitution order must be vacated.
II. SUPERVISED RELEASE
For the first time on appeal, Paradis challenges the three-
year term of supervised release imposed as part of his sentence.
Because he did not raise this objection in the district court, our
review is for plain error. See United States v. Merric, 166 F.3d 406,
409 (1st Cir. 1999). Paradis must establish "an obvious and clear
error under law that seriously affect[s] the fairness, integrity or
public reputation of judicial proceedings." Id. at 409-10 (internal
quotations omitted). His argument is merely that three years of
supervised release is unnecessary. This falls well short of an
assertion of plain error. We therefore reject Paradis's challenge to
his term of supervised release.
CONCLUSION
The order of restitution is vacated. In all other respects,
the judgment is affirmed.
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