United States v. Cruz-Arroyo

United States Court of Appeals
For the First Circuit

No. 05-1681

UNITED STATES OF AMERICA,

Appellee,

v.

JOSE GERARDO CRUZ-ARROYO,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. Carmen Consuelo Cerezo, U.S. District Judge]

Before

Selya, Lipez and Howard, Circuit Judges.

Rafael F. Castro Lang for appellant.
Jacqueline D. Novas, Assistant United States Attorney, with
whom H. S. García, United States Attorney, and Nelson Pérez-Sosa,
Assistant United States Attorney (Senior Appellate Attorney), were
on brief, for appellee.

August 24, 2006
 SELYA, Circuit Judge. Following a lengthy trial, a petit

jury convicted defendant-appellant Jose Gerardo Cruz-Arroyo on four

counts involving Hobbs Act extortion and related money laundering.

In this venue, the appellant challenges the sufficiency of the

evidence and the constitutionality of convictions based mainly on

evidence neither identified in the indictment nor previewed before

the grand jury. We affirm.

I. BACKGROUND

Because the appellant mounts a challenge to the

sufficiency of the evidence, we rehearse the relevant facts in the

light most hospitable to the verdict, consistent with record

support. See United States v. Sánchez-Berríos, 424 F.3d 65, 71

(1st Cir. 2005).

In the 1990s, Puerto Rico began the substantive process

of privatizing government-owned hospitals. See P.R. Laws Ann. tit.

24 §§ 3301-3325 (repealed 2003). The enabling legislation, among

other things, authorized the Department of Health (the DOH) to

contract out certain health-care services and to sell off public

hospitals. That aspect of the legislation required the DOH, acting

in concert with the Government Development Bank (the GDB), to

approve each such transaction. See id. § 3303.

Sales of public hospitals typically had to be

accomplished through competitive bidding. See id. If, however, a

financially sound investor already was administering the affairs of

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a particular public hospital, the DOH could short-circuit the

bidding process and negotiate directly with that investor for a

sale of the hospital. See id. § 3306. In an effort to take

advantage of the direct-sale option, Caribbean Anesthesia Services,

Inc. (CAS) sought to assume an existing contract for the

administration of the Dr. Alejandro Otero López Hospital (the

Hospital) in Manatí, Puerto Rico. The contract was, at the time,

held by Caribbean Hospital Corporation (CHC).

As part of a push to gain the DOH's approval for the

contract assumption, a CAS consultant arranged a luncheon between

CAS shareholders and the appellant, who was the chief legal adviser

to the Secretary of Health (the Secretary) and the director of the

DOH's law department. At this luncheon — attended on CAS's behalf

by, among others, José De Jesús-Toro, José Ivan Ramos Cubano, and

Alvin Ramirez Ortiz — the appellant learned of CAS's interest in

taking over the Hospital's management contract and, ultimately, in

purchasing the facility outright. When the meeting ended, the

appellant said that he would help CAS in whatever way he could.

The CAS shareholders thereafter agreed that De Jesús-Toro would

shepherd the relationship with the DOH generally and with the

appellant specifically.

From that point forward, the appellant served as CAS's

ears and eyes in the government, keeping De Jesús-Toro abreast of

all developments. CAS soon learned of two potential snags. First,

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there were other groups interested in acquiring the Hospital.

Second, the GDB's counsel had issued an opinion that highlighted a

dispute over whether CAS would be responsible for monies owed to

the DOH by its assignor (CHC). This dispute was significant both

because of the size of the debt and because, under Puerto Rico law,

an entity in debt to the DOH could not take advantage of the

direct-sale option. See id. § 3306. Since the management contract

had only a short time left to run, the GDB's counsel argued that

the Hospital should be auctioned off through an open bidding

process.

In October of 1997, the DOH overrode the GDB's

objections, approved CAS's proposed acquisition of the management

contract, and gave CAS until June 30, 1998 to negotiate terms for

a direct sale of the Hospital. CAS took over management of the

facility the next month.

On November 25, 1997, while the direct-sale negotiations

were in full flower, De Jesús-Toro wired $15,000 from a CAS account

to the appellant's bank account. On January 10, 1998 — more than

a month later — the appellant instructed his bank to return the

money because it did not belong to him. However, a mere four days

thereafter, De Jesús-Toro withdrew $35,000 from a CAS account and

used the funds to procure fourteen money orders, each in the amount

of $2,500. Without exception, the proceeds of these money orders

found their way into the appellant's possession before the direct-

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sale deadline. The appellant used the funds for a variety of

personal purposes (e.g., to make a down payment on a new

automobile, to pay for his children's private schooling, and to

augment individual retirement accounts held by him and his wife).

In June of 1998, CAS sent a letter of intent for the

Hospital purchase to the GDB and the DOH. Although the

privatization committee found CAS to be a suitable purchaser, an

auditor's report indicated that the debt dispute had not been

resolved. A meeting was arranged between the GDB, the DOH, the

Governor's chief of staff, and CAS. José Quirós, who held a twenty

percent equity interest in CAS, met with the appellant beforehand

in order to present his views on the matter. When the four-way

meeting occurred, the Governor's chief of staff requested that the

appellant draft a legal opinion to resolve the uncertainty.

In an initial opinion, dated September 4, 1998, the

appellant found that CAS was responsible for the debts amassed by

its predecessor-in-interest (CHC). Shortly thereafter, the

appellant did an about-face and prepared a revised opinion, dated

September 14, 1998, in which he concluded that CAS was not

responsible for the debts amassed by CHC. The revised opinion was

accepted by the agencies involved and made CAS eligible to purchase

the Hospital without the hindrance of competitive bidding. The

parties closed on the direct sale three days later (although CAS

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and the DOH continued to debate financial issues that arose out of

CAS's earlier management of the Hospital).

At the same time that the DOH was dickering with CAS over

the debt issue, the appellant was negotiating sub rosa to become

in-house counsel for Pinnacle (a company controlled by Quirós). In

those negotiations, the appellant presented Pinnacle with a wish

list that included a $144,000 annual salary, a luxury car, a

retirement plan, health benefits, sick leave, paid vacation, and

summer camp for his children. In Quirós's words, he and De Jesús-

Toro "felt obliged" to hire the appellant, notwithstanding the fact

that his demands far exceeded what Pinnacle had budgeted for the

position.

In August of 2000, while both the appellant's employment

negotiations and CAS's debt negotiations were ongoing, De Jesús-

Toro leased an Audi for the appellant's use. CAS not only footed

the bill but also gave the appellant the use of a gasoline credit

card, free of charge.

On October 6, 2000, Pinnacle, through Quirós, formally

offered the appellant the in-house counsel position. CAS and the

DOH resolved their remaining financial issues the next month. The

appellant started work at Pinnacle in January of 2001. The jury

supportably could have found that these events were not merely

coincidental but, rather, inextricably intertwined; Pinnacle

managed two medical centers, including CAS's newly acquired

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Hospital, and these two institutions jointly paid the salaries of

all Pinnacle's employees (including Pinnacle's neophyte in-house

counsel).

In due course, a federal grand jury indicted the

appellant and four codefendants (including De Jesús-Toro, Ramos

Cubano, and Ramirez Ortiz). The indictment charged the appellant

with two counts of extortion (viz., one count of conspiracy to

interfere with commerce by extortion and one count of interference

with commerce by extortion) and two counts of conspiracy to commit

money laundering. See 18 U.S.C. §§ 1951, 1956. After a forty-one

day trial, a petit jury found the appellant guilty across the

board. This timely appeal ensued.

II. ANALYSIS

Before us, the appellant advances three assignments of

error. First, he argues that the evidence was insufficient to

support the verdict on the Hobbs Act extortion charges (counts 1

and 2). Second, and relatedly, he maintains that this same dearth

of evidence undermines his convictions for money laundering (counts

3 and 4) because the alleged extortion served as the underlying

predicate offense on which those charges were based. Third, he

posits that his convictions on all four counts must be set aside

due to a fatal variance: those convictions were premised on

evidence neither submitted to the grand jury nor referenced in the

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indictment. We address the three components of this asseverational

array sequentially.

A. Counts 1 and 2.

We review challenges to the sufficiency of the evidence

de novo, assessing the proof in the light most hospitable to the

verdict. See United States v. Vega Molina, 407 F.3d 511, 526 (1st

Cir. 2005); United States v. Valle, 72 F.3d 210, 216 (1st Cir.

1995). The test is whether the evidence, including all reasonable

inferences therefrom, would permit a rational juror to conclude

beyond a reasonable doubt that the defendant was guilty of the

crime charged. See United States v. Maldonado-García, 446 F.3d

227, 231 (1st Cir. 2006). We administer the test without any

independent evaluation of the credibility of the witnesses. See

United States v. Franky-Ortiz, 230 F.3d 405, 407 (1st Cir. 2000).

Finally, we caution that to achieve a passing grade on this test,

the prosecution need not have succeeded in negating every possible

theory consistent with the defendant's innocence. See Maldonado-

García, 446 F.3d at 231.

The Hobbs Act criminalizes conduct that "in any way or

degree obstructs, delays, or affects commerce or the movement of

any article or commodity in commerce, by robbery or extortion or

attempts or conspires so to do." 18 U.S.C. § 1951(a). To support

the Hobbs Act charges in this case then, the government needed to

establish that the appellant committed extortion and that his

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actions affected interstate or international commerce. See id. We

consider the sufficiency of the evidence as to each such element.

1. Extortion. The Hobbs Act defines extortion as "the

obtaining of property from another, with his consent, induced by

wrongful use of actual or threatened force, violence, or fear, or

under color of official right." Id. § 1951(b)(2). The indictment

charged the appellant with extortion both under color of official

right and through inducement by economic fear. The "color of

official right" and "fear" prongs provide alternative,

independently sufficient grounds for finding extortion; thus,

adequate proof of one obviates any need for proof of the other.

See United States v. Bucci, 839 F.2d 825, 827 (1st Cir. 1988)

(explaining that "the prosecution can establish a violation by

showing that a defendant induced payment either through the use of

. . . fear, or under color of official right"); United States v.

Hathaway, 534 F.2d 386, 393 (1st Cir. 1976) (similar).

The appellant contends that in a Hobbs Act "color of

official right" case, the government must show that the official

somehow "induced" the payment. This emphasis exaggerates the

government's burden. To establish guilt for extortion under color

of official right, the prosecution must show only that the

defendant, a public official, has received an emolument that he was

not entitled to receive, with knowledge that the emolument was

tendered in exchange for some official act. See Evans v. United

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States, 504 U.S. 255, 268 (1992); United States v. Cruzado-

Laureano, 404 F.3d 470, 481 (1st Cir. 2005). The government is not

required to prove any affirmative act of inducement on the part of

the corrupt official. See Evans, 504 U.S. at 268.

Here, the evidence reveals that the appellant accepted

$35,000 in serial money orders derived from a CAS account. He

received and spent these funds while the DOH's approval of CAS's

proposal to acquire the Hospital hung in the balance. Given the

appellant's pivotal role in the DOH's triage of hospital purchase

proposals, the importance attached to his opinion by the Governor's

chief of staff, and his resultant power to impact CAS's financial

interests, the jury reasonably could have inferred that the money

orders were intended as reciprocity for official acts, past or

future — and that the appellant knew as much.

In an effort to blunt the force of this reasoning, the

appellant suggests that these payments were simply the fruits of

his "special relationship" with De Jesús-Toro. That relationship,

the appellant muses, inspired De Jesús-Toro to make a generous, no-

strings-attached gift. We need not dwell on the inherent

implausibility of such an explanation; it suffices to say that the

government need not refute every alternative theory consistent with

the defendant's innocence in order to defeat a sufficiency of the

evidence challenge. See United States v. Woodward, 149 F.3d 46, 56

(1st Cir. 1998). In this instance, the jury acted well within its

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proper province in rejecting the somewhat fanciful claim that the

appellant received a considerable sum of money due to friendship

with a man who just happened to be a beneficiary of his official

acts. Cf. United States v. Ortiz, 966 F.2d 707, 712 (1st Cir.

1992) (explaining that "jurors are neither required to divorce

themselves from their common sense nor to abandon the dictates of

mature experience").

We have said enough on this score. Since a plausible

view of the evidence supports a finding that the appellant accepted

the money orders in exchange for official acts, the proposition

that the government failed to establish extortion under color of

official right necessarily fails.

Although this finding, without more, establishes the

extortion element, we note for the sake of completeness that the

evidence also suffices to ground a finding of extortion induced

through fear. We explain briefly.

Under the Hobbs Act, "fear" encompasses fear of economic

loss, including the loss of business opportunities. See Bucci, 839

F.2d at 827. To establish that kind of fear, the government must

show that the victim reasonably feared that noncompliance with the

putative extortionist's terms would result in economic loss. See

United States v. Rivera Rangel, 396 F.3d 476, 483 (1st Cir. 2005).

The evidence in this case satisfies that criterion.

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 CAS made a substantial investment when it assumed the

management contract for the Hospital — and it risked forfeiting

both that investment and the prospect of future profits if the DOH

did not endorse its purchase proposal. The appellant played a key

role in the negotiating pavane and, thus, had the potential to

influence (perhaps to dictate) the success or failure of CAS's

business plan. A rational jury surely could have inferred that,

given the circumstances, De Jesús-Toro and Quirós would have been

apprehensive that noncompliance with the appellant's demands (such

as his esurient terms for future employment at Pinnacle) would

result in the foreclosure of a lucrative business opportunity. The

plausibility of this inference was strengthened by Quirós's

testimony that he had been considering a more experienced candidate

for the Pinnacle in-house counsel position; that he had budgeted a

lower wage for that post; but that he nonetheless "felt obliged" to

hire the appellant at the more munificent salary that the appellant

stipulated. In this regard, the jury reasonably could have thought

that "fe[eling] obliged" was a euphemism for fearing the

consequences of rejecting the appellant's demands.

To cinch matters, the events that transpired demonstrate

beyond hope of contradiction that CAS's economic fear was

reasonable. The appellant's initial opinion letter, which was

unfavorable to CAS, attained the Secretary's endorsement. It was

only when the appellant reversed field and revised his legal

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opinion (which otherwise would have barred any direct sale) that a

pathway opened for CAS's acquisition of the Hospital. The timing

amply illustrates the salience of this about-face: the parties

closed on the sale of the Hospital a scant three days after the

appellant issued his revised opinion.

We hold, therefore, that the government provided

sufficient evidence for the jury to conclude that the appellant was

guilty of extortion induced by fear of economic loss. Cf. United

States v. Doyle, 981 F.2d 591, 595 (1st Cir. 1992) (warning that

"[o]ne would have to believe in the Tooth Fairy to think [a

particular sequence of events] merely coincidental").

2. Commerce. In addition to establishing extortion, the

government also must show that the extortionate conduct obstructed,

delayed, or affected interstate or international commerce. See 18

U.S.C. § 1951(a). As to this prong, the case law erects a low

threshold: a de minimis interference with commerce is enough to

sustain a Hobbs Act conviction. See Vega Molina, 407 F.3d at 527.

The appellant advances two contentions in hopes of

showing that the government failed to cross even this modest

threshold. Neither contention is persuasive.

The appellant's principal argument is that there was no

effect on interstate commerce because the money orders that he

received were purchased by De Jesús-Toro personally. Since De

Jesús-Toro earned his livelihood as a physician and only practiced

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his profession in local hospitals, this thesis runs, an extortion

of his funds could not have interfered with interstate commerce.

This exercise in legal legerdemain does not withstand scrutiny.

While De Jesús-Toro bought the money orders, the record

confirms that he first withdrew a sum equal to their cost — $35,000

— from a CAS account. He then used the appropriated funds to buy

the money orders. Hence, the distinction between business and

personal funds that the appellant relies on here is purely one of

form, not of substance.

The jurisprudence of the Hobbs Act does not recognize

that kind of artificial distinction. See, e.g., United States v.

Devin, 918 F.2d 280, 293-94 (1st Cir. 1990) (finding an effect on

interstate commerce when defendant had received money from the

president of a corporation who, in turn, had derived the money from

the coffers of the corporation — which was engaged in interstate

commerce). A temporary interval of personal possession may serve

to weaken the causal connection between funds and interstate

commerce, but that connection remains strong enough to forge the

necessary link — a de minimis effect on interstate commerce. See

id. at 293.

The appellant's fallback argument is that the government

failed to prove that any of CAS's funds entered into the stream of

interstate commerce. This argument comprises little more than

whistling past the graveyard. The government establishes a

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cognizable effect on interstate commerce if it shows that the

extortionate conduct depleted the assets of a business engaged in

interstate commerce. See United States v. Rodríguez-Casiano, 425

F.3d 12, 15 (1st Cir. 2005) (upholding a finding of an effect on

interstate commerce where money stolen in housebreaks belonged to

businesses — a hardware store and a gas station, respectively —

that purchased products out of state).

That principle is determinative in the instant case. The

government adduced evidence showing that the money orders the

appellant accepted could be traced to a CAS account; that CAS

managed, and later owned, the Hospital; and that the Hospital

bought much of its equipment from the United States mainland. This

evidence formed a sufficient predicate for an inference that any

payments that depleted CAS's assets affected interstate commerce.

To sum up, we conclude, without serious question, that

the government provided adequate proof to establish both of the

elements needed to ground convictions on the Hobbs Act counts: the

commission of extortion and a concomitant interference with

interstate commerce.

B. Counts 3 and 4.

The appellant's second claim of error stands or falls on

the merits of the appellant's first claim of error. The applicable

money laundering statute, 18 U.S.C. § 1956, imposes criminal

liability on any person who, "knowing that the property involved in

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a financial transaction represents the proceeds of some form of

unlawful activity," engages in a financial transaction that

constitutes money laundering. Id. § 1956(a)(1). In fine, the

statute requires proof of the commission of some antecedent offense

(the specified "unlawful activity"), the avails of which are then

"laundered" by the defendant. Here, the relevant counts in the

indictment (counts 3 and 4) charged the extortion as the antecedent

offense.

Seizing on this tiered statutory structure, the appellant

claims, in effect, that the evidence was insufficient to support a

finding of extortion and that, therefore, the absence of the

linchpin predicate offense rendered the evidence insufficient to

support his money laundering convictions. This claim is hopeless.

After all, we already have rebuffed the appellant's challenge to

the sufficiency of the evidence in connection with the extortion

charges. See supra Part II(A). Consequently, his challenge to his

money laundering convictions collapses of its own weight.

C. Variance.

The appellant next complains that the verdict cannot

stand on any of the four counts of conviction because it rests

predominantly on facts that the government failed either to present

to the grand jury or to plead in the indictment. We first sketch

the background for this plaint and then address its merits.

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 In responding to a question on the verdict form, the

petit jury found that the offenses of conviction involved $35,000.

In the appellant's view, that calculation means that the jury found

him liable only for the money orders that De Jesús-Toro passed

along to him. But the government did not adduce any evidence about

this alleged bribe before the grand jury; and the grand jury, in

turn, did not mention the money orders in the indictment. Building

on this foundation, the appellant argues that his convictions rest

upon a prejudicial variance, thereby violating his rights under the

Fifth, Sixth, and Fourteenth Amendments.

Though vigorously advanced, this argument lacks force.

First and foremost, the fact that the jury found the appellant

liable for $35,000 is by no means a conclusive indication that the

money orders constituted the only evidence upon which the jury

found him guilty. See, e.g., United States v. Casas, 425 F.3d 23,

64 n.56 (1st Cir. 2005) (stating that there is no foolproof way of

telling what parts of the evidence the jury credited when it did

not make specific findings on the overt acts alleged in the

indictment). And even were we to assume, favorably to the

appellant, the validity of his premise anent the money orders, the

conclusion that he reaches would not follow.

A variance occurs "when the facts proved at trial differ

from those alleged in the indictment." United States v. Fisher, 3

F.3d 456, 462 (1st Cir. 1993). Even if a variance occurs, however,

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that fact alone does not suffice to displace a conviction. Rather,

a variance requires that a conviction be set aside only when it is

prejudicial, that is, when it affects the defendant's substantial

rights. See United States v. Tormos-Vega, 959 F.2d 1103, 1115 (1st

Cir. 1992); United States v. Fermin Castillo, 829 F.2d 1194, 1196

(1st Cir. 1987). There is no prejudicial variance so long as an

indictment provides the defendant with sufficient detail to allow

him to prepare a defense, avoid unfair surprise at trial, and plead

double jeopardy when appropriate. See Tormos-Vega, 959 F.2d at

1115. The law recognizes that the government need not lay out the

whole of its proof in the indictment. See United States v.

Marrero-Ortiz, 160 F.3d 768, 773 (1st Cir. 1998).

That brings us to the case at bar. Here, the indictment

limned the nucleus of operative facts giving rise to the charges

against the appellant. It not only listed some overt acts

referable to the charged conspiracies (e.g., it described the

$15,000 payment that the appellant received and returned,1 the Audi

that De Jesús-Toro leased for him, and his cushy employment

arrangement with Pinnacle) but also referred to the general

agreement among CAS's shareholders that "De Jesús-Toro would take

1
The appellant insists that his return of this payment
conclusively demonstrates his innocence. In view of his subsequent
receipt and retention of a larger sum, however, the jury was free
to conclude that his return of the $15,000 payment may have had
some other, less attractive explanation (say, a belief either that
the amount was too paltry or that the source of the funds was too
easily traced).

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care of the payments to [the appellant]." Taken in the ensemble,

these allegations served to put the appellant on notice that any

pecuniary benefit he had received from or through De Jesús-Toro

might be relevant to the government's case. See, e.g., United

States v. Innamorati, 996 F.2d 456, 478 (1st Cir. 1993) (finding no

prejudicial variance when an indictment charged a defendant with

conspiring to distribute drugs and the government introduced proof

of two deals not listed as overt acts because the evidence fell

"squarely within the scope of th[e] alleged conspiracy").

In short, the indictment gave the appellant fair warning

as to the nature of the charges that he faced and allowed him to

defend intelligently against those charges. No more was exigible.

Consequently, no variance (or, at the least, no prejudicial

variance) occurred. See Marrero-Ortiz, 160 F.3d at 773.

III. CONCLUSION

We need go no further. For aught that appears, the

appellant was fairly tried and justly convicted. His appeal,

therefore, cannot prosper.

Affirmed.

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