United States v. Cornier-Ortiz

United States Court of Appeals
For the First Circuit

No. 03-1022

UNITED STATES OF AMERICA,

Appellee,

v.

EDWIN RAFAEL CORNIER-ORTIZ,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

[Hon. José A. Fusté, U.S. District Judge]

Before

Lynch, Circuit Judge,
Campbell, Senior Circuit Judge,
and Lipez, Circuit Judge.

Maritza Gonzalez de Miranda, Assistant United States Attorney,
with whom H.S. Garcia, United States Attorney, Sonia I. Torres,
Assistant United States Attorney, and Thomas F. Klumper, Assistant
United States Attorney, were on brief, for appellee.

David W. Roman, with whom Brown & Ubarri was on brief, for
appellant.

March 17, 2004
 LYNCH, Circuit Judge. This public corruption case from

Puerto Rico resulted in the conviction, for misuse of federal

housing monies from 1996 to 2001, of the sole defendant, Edwin

Rafael Cornier-Ortiz. Cornier was the general manager,

sequentially, of two private for-profit management corporations,

CORA and ERCO. Cornier worked with others -- including a HUD

division director, a contract employee of the Puerto Rico Public

Housing Authority, and their relatives -- to divert United States

Department of Housing and Urban Development ("HUD") funds that were

meant for the administration of low-income housing projects in

Puerto Rico. The schemes alleged involved fraud, kickbacks, sham

contracts, ghost employees, and conflicts of interest. Others

involved were convicted under separate indictments.

Cornier claimed to be an innocent victim caught in the

corrupt schemes of others. He was sentenced to fifty-two months in

prison and three years of supervised release, and sentenced to pay

restitution of $136,056.00 to HUD. Cornier appeals both his

conviction, on insufficiency of evidence grounds, and his sentence

requiring restitution. We affirm the conviction, but vacate part

of the restitution order.

I.

Cornier was indicted on eight counts, all related to

misuse of federal housing funding. Cornier pled not guilty. After

an eight-day jury trial on the first seven counts, he was convicted

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on six of those seven counts: aiding and abetting the theft or

misapplication of federal funds in violation of 18 U.S.C. §§

666(a)(1)(A) and (2) (Count One); conspiring to defraud the United

States by violating 18 U.S.C. § 666, in violation of 18 U.S.C. §

371 (Count Three); aiding and abetting the theft or misapplication

of federal funds in violation of 18 U.S.C. §§ 666(a)(1)(A) and (2)

(via a different scheme than the scheme implicated by Count One)

(Count Four); aiding and abetting extortion in violation of 18

U.S.C. §§ 1951(a) and (b) (Count Five); money laundering in

violation of 18 U.S.C. §§ 1956(a)(1)(B)(i) and (2) (Count Six); and

conspiracy to commit money laundering in violation of 18 U.S.C. §

1956(h) (Count Seven). He was acquitted on Count Two, which

charged him with aiding and abetting the solicitation and

acceptance of a kickback in violation of 41 U.S.C. §§ 51, 53, and

54.

Essentially, Count One involved a scheme in which

Cornier, as general manager of CORA, hired the brother of a housing

authority employee to prepare and submit vouchers for federal CGP

funds and then lied about the nature of the brother's employment to

the CORA board. The work -- both preparing vouchers for submission

to the housing authority and the underlying modernization work

evidenced by the vouchers -- appears to have been done. The

preparation of the vouchers, however, was done by the housing

authority employee, who also approved the payment of the vouchers

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when they were submitted to the housing authority, and not by the

brother. As to this scheme, Cornier says that no real harm was

done.

Counts Three through Seven involved a later scheme with

Cornier's next company, ERCO. ERCO employed at an excessive salary

the half-brother of a HUD official. The brother did little work,

but he received a handsome salary of $15,000 a month, kept $4,000

of it, and passed along the remaining $11,000 to the HUD official.

As to this scheme, Cornier claims that he was forced into feeding

the greed of the HUD official, was himself a victim of the

official's extortion, and was entitled to judgment in his favor.

There is no claim of trial error, only that the evidence was

insufficient.

At sentencing, the district court addressed Count Eight,

which charged Cornier with forfeiture of assets related to the

offenses in the other counts, and ordered Cornier to pay

restitution in the amount of $136,056.00 to HUD. Of that amount,

$61,804.80 was connected with the Count One conviction. Cornier

now appeals his convictions and the order to pay restitution as to

Count One.

II.

A. Sufficiency of the Evidence

Cornier argues that the district court erred in denying

his Rule 29 motions for judgment of acquittal as to all six

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offenses. We review the denial of Rule 29 motions de novo. United

States v. Zenon-Rodriguez, 289 F.3d 28, 32 (1st Cir. 2002); United

States v. Ayala-Ayala, 289 F.3d 16, 21 (1st Cir. 2002). Our review

of the sufficiency of the evidence requires us to ask "whether,

after viewing the evidence in the light most favorable to the

prosecution, any rational trier of fact could have found the

essential elements of the crime beyond a reasonable doubt."

Jackson v. Virginia, 443 U.S. 307, 319 (1979) (emphasis omitted);

United States v. Casas, 356 F.3d 104, 126 (1st Cir. 2004) ("We draw

all reasonable evidentiary inferences in harmony with the verdict

and resolve all issues of credibility in the light most favorable

to the government."); United States v. Henderson, 320 F.3d 92, 102

(1st Cir. 2003).

Some background facts about the funding of public housing

projects in Puerto Rico are necessary to understand the schemes

involved in this case. HUD allocates federal monies to Puerto Rico

for the administration of low-income public housing projects. Most

of that federal funding is allocated to cover the costs of managing

and operating the housing projects. A different portion of the

federal funding is allocated to pay for periodic modernization of

the housing projects. HUD disburses this modernization funding

based in part on a Comprehensive Grant Program ("CGP"), so the

funds are called CGP funds. The Puerto Rico Public Housing

Administration ("PRPHA") receives the federal funds from HUD and is

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charged with administering the Commonwealth's public housing

projects. Pursuant to a 1992 agreement between the government of

Puerto Rico and HUD, management of the low-income housing projects

in Puerto Rico is done by private management agencies. Such

agencies submit bid proposals to PRPHA, and the proposals are then

evaluated by a PRPHA bid board. A private management agency that

has been awarded a management contract by PRPHA is paid a

management fee under the contract using federal funds from HUD. In

addition, the private management agency may submit requests to

PRPHA for CGP funding in connection with the documented expenses of

modernizing and improving its assigned housing projects.

1. Count One

Under Count One,1 violation of 18 U.S.C. § 666, the

government had to prove beyond a reasonable doubt: (1) that Cornier

was "an agent of an organization, or of a State, local, or Indian

tribal government, or any agency thereof"; (2) that Cornier

embezzled, stole, obtained by fraud, knowingly converted, or

intentionally misapplied property that is "valued at $5,000 or

more" from "such organization, government, or agency"; and (3) that

such "organization, government, or agency receives, in any one year

1
Count One charged that, from 1995 to 1997, Cornier, an
agent of an organization as defined in 18 U.S.C. § 666, along with
other such agents, aided and abetted the violation of 18 U.S.C. §
666 by willingly and intentionally embezzling, stealing, obtaining
by fraud, converting, or misapplying $61,804.80 that was the
property of the PRPHA, an organization that received in excess of
$10,000 in a one-year period under a federal program.

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period, [federal assistance] in excess of $10,000." 18 U.S.C. §

666.

Cornier raises no issue about the first or third prongs.

He argues only that the second prong was not satisfied because his

actions fit within a statutory exception. Under § 666(c), "bona

fide salary, wages, fees, or other compensation paid, or expenses

paid or reimbursed, in the usual course of business" are exempted

from the statute's coverage. § 666(c); see United States v. Mills,

140 F.3d 630, 633 (6th Cir. 1998) ("[B]ona fide salaries, wages,

fees, and other compensation either received by or promised by §

666 defendants fall within the scope of the subsection (c)

exception"). Subsection (c) was added to the statute in 1986, and

the only reference to it in the legislative history states that it

"amends 18 U.S.C. § 666 to avoid its possible application to

acceptable business practices." H.R. Rep. No. 99-797, at 30

(1986), reprinted in 1986 U.S.C.C.A.N. 6138, 6153.

The facts pertaining to Count One, recounted in the light

most favorable to the prosecution, are as follows. CORA Management

Group, Inc. was a for-profit private management agency. Cornier,

a former PRPHA employee, was the general manager and a shareholder

of CORA. Among other things, he was in charge of administering

bids for contracting services and obtaining CGP funding for CORA.

In July 1995, CORA was awarded a contract with the PRPHA to manage

and maintain certain low-income housing projects. Under the

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contract, CORA received federal funds from PRPHA; PRPHA received

those funds from HUD. CORA received federal assistance in excess

of $10,000 during each of the years 1996-1998 in connection with

its management of the housing projects.

Rubin Monroig, a contract employee at PRPHA, approached

Cornier in 1995 and informed him that CORA was not requesting from

PRPHA any CGP funds. CORA was, of course, receiving a management

fee from PRPHA to operate the housing projects. That management

fee was paid by PRPHA using federal funds from HUD. But CORA was

also entitled to request CGP funds in order to make physical

improvements to the public housing projects it operated and in

order to improve its management of those projects.2 Unlike the

management fee, which was established under the contract, the

disbursement of CGP funds was left to the discretion of PRPHA.

Like the management fee, the original source of the CGP money

disbursed by PRPHA was HUD. Rubin Monroig told Cornier that his

brother, Francisco Monroig, could assist CORA in obtaining CGP

funds. Cornier then hired Francisco for that very purpose.

Hiring an expert to assist in handling the paperwork

associated with obtaining CGP funds was itself a legitimate use of

CGP funds because employing such an expert could improve the

2
Rubin Monroig explained that CGP funds could be used for
"permanent improvements . . . such as . . . painting the entire
housing project, widening sidewalks, access control, gates and
material, basically the most costly items."

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management of the public housing projects. Francisco Monroig,

however, had absolutely no expertise in or knowledge of CGP funds.

Whenever Cornier needed assistance as to CGP funds, he contacted

Francisco's brother, Rubin, who did have such knowledge, and Rubin

provided the requested assistance. Rubin prepared CORA's requests

for CGP funding, which involved creating invoices and associated

documentation, and gave them to Francisco. Francisco then

delivered the documents to Cornier, who, in turn, submitted them to

PRPHA. This was an end-run by Rubin, who could not directly do any

of these things because he worked for PRPHA. Francisco did not

perform any work at all related to CGP funds.

This case is unusual in that the government made no

effort to prove that the underlying work paid for by the HUD monies

was not done. Cf. United States v. Moeller, 80 F.3d 1053, 1057-58

(5th Cir. 1996) (sufficient evidence to convict under §

666(a)(1)(A) where, among other things, no written product was ever

produced in exchange for state funds). Rubin testified (1) that he

did in fact provide the expertise necessary to fill out the

paperwork associated with requesting CGP funding for maintenance

work, and (2) that the underlying maintenance work -- the work for

which he claimed CGP funding was needed in the invoices he prepared

for Cornier -- was in fact performed by CORA. However, there was

also testimony from Carmen Ortiz, a CORA board member, indicating

that Cornier could have done the paperwork himself. Cornier's job,

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after all, was to administer the CORA budget and to prepare bids

for contracting services. When Francisco's contract "expired,"

Cornier did in fact prepare the CGP invoices himself. See Mills,

140 F.3d at 633-34 (suggesting that the § 666(c) exception would

not apply if the government proved that salaries were paid for jobs

that were unnecessary or unjustified).

The government's strategy, it seems, was not to prove

that the work was not done, but rather, to prove that the work was

done by someone who could not lawfully do it. Rubin worked for

PRPHA, and his job was to review the requests for CGP funding from

private management agencies such as CORA and to authorize payments

of CGP funding to those agencies on PRPHA's behalf. Rubin gave

preferential treatment to CORA's requests for federal funding, but

it was not proven that those requests would not have been funded

anyway. CORA paid Francisco $61,804.80 between September 1995 and

February 1997 for the assistance with the paperwork involved in

obtaining CGP funds, and Francisco passed the money along to Rubin.

The government's evidence about what Cornier got out of

this arrangement was not entirely clear. As best we can tell, this

scheme may have somewhat increased CORA's profits in at least two

ways. First, CORA's CGP invoices were never rejected. This was

important because there was some evidence that the underlying

maintenance work needed to be done and that CORA risked losing its

management contract if the work was not done. If the CGP invoices

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had been rejected, then CORA might have had to pay for the costs of

the maintenance work out of its own funds, if the work was done at

all. Rubin suggested that the work would not have been done by

CORA if CGP funds were not available. According to Rubin, the

benefit of the arrangement to Cornier was that CORA "had the

benefit of having some work that they needed to be done, having it

actually done at a cost which was not going to be charged against

their profit, and the company would appear well for having done

that work." Second, there was some marginal benefit in that CORA's

CGP invoices were processed more quickly.

Whatever the gains to Cornier from the arrangement may

have been, they were not trivial because Cornier both lied about

and tried to cover up the arrangement. The CORA board was not

aware of Francisco's employment. When the board eventually

discovered his employment, it confronted Cornier. Cornier falsely

told the board that he had hired Francisco because PRPHA had

demanded that CORA hire a CGP lobbyist. Francisco only worked

about a month after the board's discovery, and Cornier told the

board that Francisco's employment had ended because his contract

had expired, even though the contract actually had no expiration

date.

Cornier argues that his conviction on Count One should be

reversed because the payments that he authorized to Francisco

Monroig constituted legitimate compensation paid in the usual

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course of business and thus fell within the § 666(c) exception.

Cornier points out that CGP funds could lawfully be used to hire

experts to assist CORA in requesting funds from PRPHA. Further, he

maintains that there was no evidence either that he had any

knowledge that Rubin Monroig was receiving any part of the payments

made to Francisco Monroig, or that he had any knowledge that Rubin,

not Francisco, was the one actually doing the work. Without such

knowledge, Cornier argues, the payments to Francisco were made in

good faith. In other words, Francisco and Rubin may have had a

scheme, but he was not part of it.

There was sufficient evidence for the jury to convict.

First, the intentionality element of the "intentional

misapplication" of federal funds was met by evidence that Cornier

in fact knew that Rubin did the work, not Francisco. There was

testimony that Francisco was entirely ignorant about CGP funds and

that Cornier never even bothered to ask Francisco about them.

Francisco testified that he "really didn't know what CGP was" and

that the work required by his employment contract with CORA was not

performed by him, but rather by Rubin. Francisco explained that he

never talked to Cornier about CGP funds and that Cornier never

asked him about them. His "limited conversation with [Cornier]

pertaining to [the documents he delivered] was, if [Cornier] had

any questions regarding the information, [Cornier] should contact

my brother Rubin because he was the one who could answer."

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 Rubin's testimony was consistent with Francisco's. Rubin

acknowledged that Francisco had no knowledge of federal funds and

could not have assisted Cornier with them. Rubin testified that "I

suppose that [Cornier] knew that Francisco didn't know anything

[about CGP funds], because [Cornier] never asked him [about them]."

Rubin explained that he himself prepared the invoices for Cornier

and that Cornier would contact him, not Francisco, to discuss work

related to CGP funds.3

Furthermore, Cornier's own behavior belies his contention

that he had no knowledge that he was involving CORA in sham

contracts with Francisco; it supports the conclusion that he took

active steps to conceal the fraud. Cornier met with Francisco

behind closed doors, and he never informed the CORA board that

Francisco was being employed. When eventually confronted by the

board, Cornier first lied about the reason that Francisco was hired

and then lied about the termination date of Francisco's contract.

This brings us to the bona fide salary exception in §

666(c), and to Cornier's argument that the payments were not a

"misapplication" at all. The jury could easily have concluded that

the payments to Rubin through Francisco were not bona fide because

the PRPHA conflict of interest rules prohibited Rubin from

3
Rubin explained that the advantage of using him, someone
who worked for PRPHA, was that "because . . . I was the one who was
receiving these invoices directly, I would move them with greater
speed and they would not be rejected."

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participating in such a scheme. A scheme designed to evade

conflict of interest rules is hardly legitimate or acceptable.

That the payments were made for a legitimate purpose -- to hire a

CGP expert to obtain funding for maintenance work that was indeed

done -- does not render them bona fide under the statute if they

were intentionally misapplied, as they were here via sham contracts

that skirted conflict of interest rules and allowed CORA to receive

preferential treatment and other benefits.

This interplay between the bona fide exception and the

prohibition against "intentional misapplication" is sensible. As

the Second Circuit has explained, the first four prohibitions of §

666(a)(1)(A), embezzlement, stealing, obtaining by fraud, and

knowing conversion, "cover any possible taking of money for one's

own use or benefit. Intentional misapplication, in order to avoid

redundancy, must mean intentional misapplication for otherwise

legitimate purposes; if it were for illegitimate purposes, it would

be covered by [the first four] prohibitions . . . ." United States

v. Urlacher, 979 F.2d 935, 938 (2nd Cir. 1992). The prohibition

against intentional misapplication covers the situation presented

here: payments made for what was an underlying legitimate purpose

but intentionally misapplied to undermine a conflict of interest

prohibition. To hold that such payments were bona fide under §

666(c) would be inconsistent with § 666(a)(1)(A).

We affirm the conviction on Count One.

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 2. Counts Three, Four, Five, Six, and Seven

To convict Cornier under Count Three,4 conspiracy to

violate 18 U.S.C. § 666, the government had to prove that there was

(1) an agreement, (2) an unlawful objective of the agreement (here,

violation of § 666), and (3) an overt act in furtherance of the

agreement. United States v. Barker Steel Co., Inc., 985 F.2d 1123,

1127-28 (1st Cir. 1993).

To convict Cornier under Count Four,5 the government had

to prove that Cornier aided and abetted in a violation of 18 U.S.C.

§ 666, the elements of which were set forth earlier.

To convict Cornier under Count Five,6 aiding and abetting

extortion, 18 U.S.C. § 1951, the government had to prove (1) that

Cornier aided the inducement of a victim to part with property; (2)

that he did so knowingly and willingly with extortionate means; and

(3) that interstate commerce was affected. See United States v.

Stephens, 964 F.2d 424, 429 (5th Cir. 1992).

4
Count Three charged that, from April 1999 to January
2001, Cornier knowingly and willfully conspired with Juan Irizarry
Valentin and Samuel Valentin Toro to violate § 666.
5
Count Four charged that, from April 1999 to January 2001,
Cornier, an agent of an organization as defined in 18 U.S.C. § 666,
along with other such agents, aided and abetted the violation of 18
U.S.C. § 666 by willingly and intentionally embezzling, stealing,
obtaining by fraud, converting, or misapplying $266,252.48 that was
the property of the PRPHA, an organization that received in excess
of $10,000 in a one-year period under a federal program.
6
Count Five charged that, from April 1999 to January 2001,
Cornier aided and abetted extortion by consenting to a person's
receipt of approximately $266,252.48 that was not due to him.

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 To convict Cornier under Count Six,7 money laundering

under 18 U.S.C. § 1956(a)(1)(B)(i), the government had to show (1)

that Cornier knowingly conducted a "financial transaction," (2)

that he knew the transaction involved funds that were the proceeds

of some form of unlawful activity, (3) that the funds involved were

in fact the proceeds of a "specified unlawful activity," and (4)

that Cornier engaged in the financial transaction knowing that it

was designed in whole or in part to conceal or disguise the nature,

location, source, ownership, or control of the proceeds of such

unlawful activity. See 18 U.S.C. § 1956(a)(1)(B)(i); United States

v. Martinez-Medina, 279 F.3d 105, 115 (1st Cir. 2002).

Count Seven8 charged conspiracy to launder money.

Cornier's appeal of Counts Three through Seven boils down

to a single contention -- that he was an innocent victim of

extortion by Juan Irizarry Valentin ("Irizarry").

The facts relevant to the remaining counts, described in

the light most favorable to the prosecution, are as follows. In

1997, Cornier befriended Irizarry, who was the Director, Operations

7
Count Six charged that, from April 1999 to January 2001,
Cornier aided and abetted the knowing and willful execution or
attempted execution of forty-one financial transactions with
proceeds from extortion, knowing that the transactions involved
unlawful proceeds and knowing that the transactions were designed
to conceal those proceeds.
8
Count Seven charged that Cornier conspired to commit
money laundering related to the offense alleged in Count Six, in
violation of 18 U.S.C. § 1956(h).

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Division, Office of Public Housing at HUD in Puerto Rico.

Irizarry's job at HUD involved visiting and evaluating the public

housing projects that were managed by private management agencies.

In 1998, CORA received a fee for its management and

maintenance of certain shelters that were set up by FEMA in the

aftermath of the devastation wrought by Hurricane George.

Normally, all the CORA partners shared in management fees. When

the management fee from FEMA arrived in this instance, however,

Cornier took Carmen Ortiz, one of the CORA board members, to see

Irizarry at Irizarry's HUD office. Irizarry falsely told Ortiz

that the fee could only be divided among the three CORA partners

who had actively worked on the shelters. As a result, the

management fee was split among Cornier and only two other CORA

board members, so Cornier received a larger share than he should

have. Irizarry thus lined Cornier's pocket by making a false

statement.

Cornier formed his own management agency company, ERCO

Enterprises, Inc. ("ERCO") in 1998.9 Irizarry helped Cornier

behind the scenes to incorporate ERCO and then to prepare a bid

proposal to PRPHA. Irizarry, a HUD official, did not sit on the

PRPHA board that would act on the proposal. The proposal budget

set forth the allocation of the money that ERCO planned to spend in

managing the requested housing projects. Under the public housing

9
Cornier resigned from CORA in April 1999.

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project system, federal funds paid the salaries of management

agency employees assigned to the particular housing projects. In

its proposal, ERCO budgeted a generous salary of about $305,000.00

annually for an assistant general manager; the person named was

Roberto Colon.

Based on that proposal, PRPHA awarded ERCO a multi-

million dollar, five-year contract (April 1999 to March 2004) to

manage and maintain certain housing projects. The overall contract

was worth $28,676,304.00. There is no evidence that Irizarry

influenced the PRPHA to approve the proposal, including its

generous salary figure. After the contract was awarded to ERCO,

Irizarry arranged for a meeting among Cornier, Samuel Valentin Toro

(Irizarry's half-brother, "Valentin") and himself. At that

meeting, Irizarry introduced Cornier to Valentin as "your next

boss." Cornier offered Valentin an assistant general manager

position for $15,000.00 per month ($180,000.00 annually), plus

additional incentives. Valentin accepted the offer and was hired

to work as an assistant general manager. Cornier's wife, Raquel

Rios, was also hired to work as an assistant general manager; she

was paid the same salary as Valentin. So, $360,000 a year was

being spent on the position of assistant general manager. Roberto

Colon, who had been designated as the assistant general manager in

the bid proposal, never held the position.

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 Irizarry then instructed Valentin to open a bank account

and to deposit the money from Cornier there each month. Irizarry

told Valentin to keep $4,000 each month for himself; it was

understood that Irizarry would keep the remaining $11,000.

Irizarry received approximately $195,386.36 in payments from

Cornier in this way.

Even before Valentin started working for ERCO, Cornier

made payments to Irizzary by issuing two checks to Valentin and

then endorsing the checks to himself by forging Valentin's

signature. Cornier deposited these checks in his own bank account

and then wrote out checks to Irizarry from that account for

comparable amounts. Cornier also created and signed false

employment records for Valentin in connection with the two checks.

Irizarry later asked Valentin to imitate the forged signature on

future checks.

Cornier argues that he was an innocent victim of

extortion by Irizarry and thus entitled to judgment in his favor on

each of the remaining counts. As to Counts Three and Four, the

government asserts that there is no "innocent victim" defense to a

violation of § 666. While some case law suggests that mere

acquiescence to an extortioner's demands for payments may not be

criminal under 18 U.S.C. § 1951 (extortion), see United States v.

Spitler, 800 F.2d 1267, 1275-78 (4th Cir. 1986), Cornier has

pointed to no authority, and we have not discovered any, to support

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a similar defense to § 666. Cf. Evans v. United States, 504 U.S.

255, 267 n.18 (1992) (extortion and bribery are not necessarily

mutually exclusive).

We have already discussed the bona fide exception defense

to § 666 liability, and it has no conceivable application to the

Irizarry affair. As to Counts Three and Four, then, we take the

defendant's "innocent victim" argument as a claim that there was

insufficient evidence that he entered into an agreement with

Irizarry and Valentin to intentionally misapply funds in violation

of § 666.

The government's evidence supporting the existence of an

agreement included the following: that Irizarry had helped Cornier

to get money while at CORA and then helped him to incorporate ERCO

and to prepare a bid proposal for a PRPHA management contract; that

the bid proposal included an annual salary of $305,000.00

designated for an assistant general manager named Roberto Colon;

that once ERCO was awarded the contract, Valentin, Irizarry's half-

brother, was substituted for Colon and paid a salary that even

Valentin conceded was grossly inflated; that Valentin gave $11,000

of his monthly salary to Irizarry, who had arranged the meeting

among the three men at which Cornier offered Valentin the position;

and that Cornier was clearly aware that Valentin was being used to

funnel money to Irizarry because even before Valentin began working

for ERCO, Cornier "paid" Valentin, falsely endorsed the payments to

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himself, and then used the money to pay Irizarry. Based on that

evidence, the jury was amply justified in concluding that Irizarry

and Cornier had an agreement to submit a bid proposal that included

an inflated salary figure for the assistant general manager

position, to substitute Valentin for Colon, and to use the inflated

salary to channel federal funds to Irizarry. The inflated salary

in the bid proposal provided Cornier with the extra federal funds

necessary to pay Irizarry, so the jury could logically infer that

the men had agreed to include the inflated salary in the bid for

that very purpose. That Cornier engaged in the misapplication of

funds intentionally is supported by the evidence of his efforts to

conceal the scheme -- by channeling the payments to Irizarry

through Valentin, by using Roberto Colon's name on the bid

proposal, and by signing false employment records in connection

with the checks he issued before Valentin started working. We

affirm the convictions on Counts Three and Four.

Cornier's "innocent victim" defense is more properly

asserted as to Counts Five through Seven because they involve

extortion and associated offenses. See Spitler, 800 F.2d at 1276

("Congress may not have intended to criminalize the acquiescence of

extortion victims"); cf. Gebardi v. United States, 287 U.S. 112,

120-23 (1932) (interpreting the Mann Act as not intended to punish

the "victim" of the crime).

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 The defense makes much of the fact that Irizarry pled

guilty in another case to conspiring to extort $195,386.36 from

Cornier, a fact of which the district court took judicial notice.

A victim of extortion can cross the line into illegal behavior if

he engages in more active conduct than simply agreeing to pay the

extortioner. See Spitler, 800 F.2d at 1276. But here, Cornier

argues, Irizarry forced him to hire Valentin for $15,000 per month

by using his official position at HUD to threaten Cornier with

economic harm, and the evidence shows that he merely acquiesced to

the monthly $15,000 payments that Irizarry demanded. He argues

that there was no symbiotic relationship between himself and

Irizarry and that there is no evidence that he benefitted from or

willingly joined in the payments made to Irizarry through Valentin.

He emphasizes that Irizarry had nothing at all to do with the

approval of ERCO's management contract with PRPHA. Irizarry was a

HUD official, and HUD had no input in the awarding of contracts by

PRPHA. As a result, he claims, Irizarry's assistance in starting

ERCO and in preparing the bid proposal to PRPHA are irrelevant.

Put simply, Cornier claims that he got nothing in exchange for the

payments he made to Irizarry, thus making unreasonable any

conclusion other than that he was an unwilling victim.

To resolve this case, we need not delineate the precise

location of the "line at which a payor's conduct constitutes

sufficient activity beyond the mere acquiescence of a victim." Id.

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at 1278. Wherever that line is drawn, there was sufficient

evidence here to conclude that Cornier was on the wrong side of it.

The fact of Irizarry's guilty plea does not make the

evidence of Cornier's own guilt insufficient. Irizarry's plea was

evidence for the jury to consider, and the jury was entitled to

conclude, based on the other evidence presented, that Cornier was

not an innocent victim at all.

The evidence supported the conclusion that some sort of

quid pro quo arrangement was in place and that Cornier did more

than merely acquiesce to it. Irizarry had used his official

position at HUD to help Cornier to receive a larger-than-deserved

fee from a FEMA program in 1998. Cornier had taken one of the CORA

board members to Irizarry's office to accomplish the fraud. Later,

Cornier would again be the beneficiary of Irizarry's help.

Irizarry provided his experience and expertise in helping Cornier

to incorporate his own management company and to prepare a bid

proposal to PRPHA. There is thus no question that Irizarry's help

yielded monetary benefits to Cornier, and it would only take a

small inference for the jury to conclude that Cornier agreed to the

ERCO payment arrangement with Valentin and Irizarry in gratitude

for this help. Valentin explained the scheme in just this way,

testifying that he got the assistant general manager job "through

my brother, in gratitude for him having helped Mr. Cornier" prepare

the bid proposal for the PRPHA contract. He said, "I had to

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believe, and I know for a fact, that he [Irizarry] had a deal with

Mr. Cornier."

Moreover, there was testimony that Irizarry and Cornier

were great friends. Carmen Santiago, who is Irizarry's ex-wife,

testified that Cornier and Irizarry "had a very close relationship"

and had been friends since 1997. She said that the two men called

each other constantly and that Cornier frequently visited Irizarry

at his farm. Valentin's testimony was consistent with Santiago's.

He explained that Cornier and Irizarry "had an enormous

friendship." Similarly, Carmen Ortiz, a member of the CORA board,

testified that "there was a very close friendship between them."

The jury could easily have credited the reinforcing

testimony of Santiago, Valentin, and Ortiz and concluded that

Irizarry and Cornier were working together, not against one

another. The two men looked out for each other and for each

other's future. For example, Cornier told Irizarry that if

Irizarry ever retired from HUD, Cornier would give him some ERCO

shares and have him work for ERCO as a consultant. Cornier and

Irizarry often discussed various projects that could be undertaken

on Irizarry's farmland. Irizarry constantly advised and counseled

Cornier on business matters, and Cornier gave cellular phones to

Irizarry. Even if Cornier acted out of friendship for Irizarry,

the jury could conclude that there was nothing innocent about it.

We affirm the convictions on Counts Five, Six, and Seven.

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B. Restitution Order

Cornier appeals the order that he pay $61,804.80 to HUD

as restitution in connection with his conviction on Count One. The

amount of restitution ordered for Count One is equal to the amount

of money paid to Francisco Monroig by Cornier, on behalf of CORA,

via the illegal employment scheme. We review restitution orders

under an abuse of discretion standard, crediting the lower court's

subsidiary factual findings unless clearly erroneous and reviewing

associated legal questions de novo. United States v. Vaknin, 112

F.3d 579, 586 (1st Cir. 1997). No facts are in dispute; what is at

issue is the viability of the government's theory.

Cornier's argument on appeal appears to be that HUD was

not a "victim" for purposes of 18 U.S.C. § 3663 because it suffered

no loss attributable to the CGP funds disbursed to CORA and then

paid to Francisco Monroig and so HUD was not "directly and

proximately harmed." Cornier does not argue that the crime of

conviction in Count One is outside the coverage of § 3663, or that

the government cannot qualify as a victim under § 3663, United

States v. Quarrell, 310 F.3d 664, 677 (10th Cir. 2002). Rather,

Cornier asserts that the $61,804.80 in CGP funding was spent by

CORA for legitimate purposes and in the ordinary course of business

because CGP funds from PRPHA could legitimately be used to pay for

expert assistance. He claims that he hired Francisco Monroig in

good faith as a funding expert.

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 As defined by 18 U.S.C. § 3663(a)(2), a "victim" is

a person directly and proximately harmed as a result of
the commission of an offense for which restitution may be
ordered including, in the case of an offense that
involves as an element a scheme, conspiracy, or pattern
of criminal activity, any person directly harmed by the
defendant's criminal conduct in the course of the scheme,
conspiracy, or pattern.

The district court found that there was a loss, and that HUD was

the victim of Cornier's misapplication of federal funds. The

court's restitution order was for $136,056.00. On appeal, Cornier

challenges only the $61,804.80 that was involved in Count One.

Cornier argues that:

as a matter of law there was no loss because the money at
issue was, indeed, actually spent by CORA Management for
a legitimate purpose, for its own benefit, and in the
normal course of business. Indeed, after making the
expenditures, CORA['s] performance under the PHA
management contract was actually better than if it had
not made the expenditures. . . . The inescapable
conclusion is that there was no loss to the government
because the money was actually spent for what it was
suppose[d] to be spent on and the intended beneficiaries
(CORA Management and the Project dwellers) received the
benefits of the expenditures. In short, there was no
victim.

(emphasis omitted). In arguing this, Cornier relies on testimony

from the government's own witness, Rubin Monroig, who said that the

CGP funds disbursed to CORA represented payment for work that was

actually done, including the expert advice that he, Rubin, had

provided.

The government's brief is largely non-responsive, arguing

instead that the misapplication resulted from the use of

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Francisco's name, that Francisco was no expert, and that Francisco

did no work, so there must have been a loss. The government did

not try this case on a theory that the work paid for by the CGP

funds was never done; there is no testimony to that effect. The

government's own witness, Rubin Monroig, said that the underlying

work, for which the $61,804.80 was disbursed, was done.

The purpose of restitution is to secure to an

identifiable victim who has been directly and proximately harmed

the pecuniary loss he or she has suffered. 18 U.S.C. § 3663A(a)

and (c). The government's argument confuses the issue whether

there has been a crime with the issue whether the conditions for

restitution have been met, particularly whether HUD suffered a

pecuniary loss. Because the work for which the CGP funds were

disbursed was done, it would be an unfair windfall to HUD to

conclude that HUD had directly and proximately suffered a loss of

$61,804.80. The government offered no evidence of an actual loss

to HUD in a lesser amount. Accordingly, we vacate the restitution

order to the extent it requires restitution of $61,804.80. See

United States v. Paradis, 219 F.3d 22, 24-25 (1st Cir. 2000). We

leave the matter of any further proceedings on the restitution

count to the district court.

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 III.

The convictions are affirmed; the order of restitution is

vacated to the extent of the $61,804.80 awarded in connection with

defendant's conviction on Count One of the indictment. So ordered.

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