United States v. George, Jr. , 841 F.3d 55 ( 2016 )

United States Court of Appeals
For the First Circuit
No. 15-1892
UNITED STATES OF AMERICA,
Appellee,
v.
JOHN GEORGE, JR.,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Denise J. Casper, U.S. District Judge]
Before
Howard, Chief Judge,
Selya and Kayatta, Circuit Judges.
William J. Cintolo, with whom Thomas R. Kiley and Cosgrove
Eisenberg & Kiley, PC were on brief, for appellant.
Ryan M. DiSantis, Assistant United States Attorney, with whom
Carmen M. Ortiz, United States Attorney, was on brief, for
appellee.
November 7, 2016
SELYA, Circuit Judge. It is familiar lore that in Lord
Acton's words, "[p]ower tends to corrupt, and absolute power
corrupts absolutely." John Emerich Edward Dalberg-Acton,
Historical Essays and Studies (1907). The circumstances of this
case remind us of that venerable precept.
Here, the government charges that the defendant — an
entrenched political satrap — used his political clout to divert
federal funds granted to a state agency and, in the bargain,
transgressed federal criminal law. A jury agreed and found the
defendant guilty on charges of conspiracy and embezzlement from a
federally funded organization. See 18 U.S.C. §§ 371,
666(a)(1)(A).1 The district court sentenced the defendant to a
60-month term of immurement on the conspiracy count and a 70-month
term of immurement on the substantive offense count (to run
concurrently). As part of the sentence, the court directed the
defendant to make restitution in the amount of $688,772. Later,
the court ordered the defendant to forfeit an additional $1,382,214
in ill-gotten gains.
In this appeal, the defendant strives to challenge his
conviction, his sentence, and the forfeiture order. After careful
1 We use the term "embezzlement" as a shorthand. The statute
of conviction, 18 U.S.C. § 666(a)(1)(A), criminalizes a range of
nefarious activities, including embezzlement, theft, fraudulent
obtaining, knowing conversion, and intentional misapplication of
covered funds.
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consideration of his asseverational array, we conclude that his
variegated challenges to his conviction are without merit. We
also reject his four claims of sentencing error, including one —
a challenge to a position-of-trust enhancement — that requires us
to address a question of first impression in this circuit.
Finally, we do not reach his challenge to the substance of the
forfeiture order because we conclude that the district court lacked
jurisdiction to enter that order. Accordingly, we affirm his
conviction and sentence, vacate the forfeiture order, and remand
so that, once jurisdiction has reattached, the district court may
address the question of forfeiture anew.
I. BACKGROUND
"We rehearse the facts in the light most hospitable to
the verdict, consistent with record support." United States v.
Maldonado-Garcia, 446 F.3d 227, 229 (1st Cir. 2006). In the
process, we draw all reasonable inferences from the evidence in
favor of the verdict. See id.Defendant-appellant John George, Jr., operated a bus
system on behalf of a regional transit authority funded by the
Commonwealth of Massachusetts and the federal government. This
authority, known as the Southeast Regional Transit Authority
(SRTA), is the governmental body responsible for providing
transportation to certain cities and towns in southeastern
Massachusetts. SRTA is strictly administrative: although it owns
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the buses, facilities, and equipment used to run the system, it
does not itself operate any buses. Instead, SRTA contracts with
a private entity that uses SRTA's resources to operate and maintain
the bus system. SRTA's advisory board, composed of representatives
of the municipalities that it serves, selects this entity.
From 1980 to 1988, the defendant, a former Dartmouth
selectman, served on SRTA's advisory board. In 1988 — after being
elected to the Massachusetts House of Representatives — he resigned
from that advisory board. Simultaneously, he arranged for his
friend and political ally, Joseph Cosentino, to replace him.
The defendant resigned from the legislature three years
later and purchased Union Street Bus Company (USBC). The defendant
effected this purchase through a corporation known as Trans-Ag
Management, Inc. (Trans-Ag). The defendant was the sole owner and
sole employee of Trans-Ag, and — aside from paying the defendant's
salary and contributing to his pension — Trans-Ag's only function
was to serve as the nominal owner of USBC.
At the time of the purchase, USBC had a contract to
operate the SRTA bus system through 1995. After the defendant
assumed control of USBC, the contract was thrice renewed, the last
renewal (for a five-year term) occurring in 2006 (the Agreement).
The evidence of record supports an inference that the defendant
maneuvered his way into the Agreement through collusion with
Cosentino (by then, the defendant had lost the crucial support of
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the City of Fall River, purportedly over his refusal to hire one
of the mayor's cronies, and felt threatened by competition for the
contract from a national company). Among other things, the
defendant brought in a high bidder to make his own bid appear more
attractive and furnished Cosentino with questions meant to
discredit his main competitor's bid.2
Under the Agreement, USBC's expenses were, in effect,
paid by SRTA with public funds: the Agreement bound SRTA to pay
USBC the difference between USBC's operating expenses and USBC's
operating income. Revenue from bus fares was USBC's exclusive
source of operating income; its operating expenses included
payroll, exclusive of the salaries of its corporate officers. In
practice, this exclusion applied only to the defendant, as USBC
had no other corporate officers. Withal, the Agreement
specifically named the defendant as USBC's general manager, and
SRTA separately paid USBC a management fee that gradually rose
from $199,714 for 2006 to $266,711 for 2010. SRTA required
preapproval of any capital expenditures proposed by USBC and funded
approved expenditures as a distinct line item.
The proof adduced at trial indicated that the defendant
misused USBC's funds (reimbursed by SRTA) in several respects.
2In 2008, Cosentino was rewarded for his efforts: the
defendant used his influence to secure a position for Cosentino as
SRTA's administrator (a "no-show" job paying $95,000 per year plus
substantial fringe benefits).
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Three instances involved paying individuals for full-time USBC
jobs while they worked instead for the defendant's (unrelated)
personal business, a farm. Some details follow.
In 2010, USBC paid Sandra Santos, the defendant's
girlfriend, approximately $100,000 in total compensation
(reimbursed by SRTA). At that time, Santos was employed by USBC
as either an "administrative assistant" or "assistant
administrator" (the record is inconclusive as to which title
obtained). In any event, she was only sporadically at her office
between 2005 and 2011: though USBC's office hours were 8:00 a.m.
to 4:30 p.m., she typically appeared only "once or twice a week,
if at all" in the summertime. A USBC employee testified that he
could not recall Santos ever having worked her allotted forty-hour
week. By like token, workers at the defendant's farm testified to
her daily (though not continuous) presence at the farm stand, where
she worked as a supervisor, frequently during USBC's regular
business hours. The evidence at trial permitted a finding that,
from May to September of 2010, Santos was absent from her job at
USBC for 370.25 hours, costing USBC (and, thus, SRTA) $17,772.
Roy Rocha, a night supervisor at USBC and a long-time
friend of the defendant, would routinely abandon his shift shortly
after arriving and take a company car to work at the defendant's
farm or do personal chores for the defendant. Rocha's sole
compensation for this work was his USBC salary (reimbursed by
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SRTA). In 2010, the cost of that salary (including benefits) was
approximately $90,000.
The record tells a similar tale with respect to Ronald
Pacheco, a USBC mechanic. The defendant would peremptorily summon
Pacheco from his USBC duties to do repairs at the farm.
Additionally, Pacheco sanded and painted tractor parts belonging
to the farm at the SRTA-owned garage using SRTA-owned equipment
during his USBC shift. At USBC, the farm came first: when
Pacheco's immediate superior (Al Fidalgo) asked to postpone
Pacheco's assistance on a farm job to focus on urgent bus repairs,
the defendant called Fidalgo's supervisor and insisted that
Pacheco be sent to the farm forthwith.
There was more. In early 2006, USBC paid $10,000 in
SRTA-reimbursable funds to Sousa Construction, ostensibly for
terminal repairs. However, USBC's maintenance supervisor
testified that he knew of no work done by Sousa Construction for
USBC during that period. In addition, there was evidence that
Santos and the defendant were then discussing remodeling the
kitchen at the defendant's home, and that a Sousa Construction
truck was seen there.
Other examples of the defendant's misuse of SRTA
resources populate the record. For instance, the defendant used
SRTA trucks to plow snow at both his home and his farm. So, too,
SRTA equipment for repairing air conditioning systems on buses was
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used by Pacheco at the defendant's farm. What is more, the
defendant had Pacheco (during his USBC shift) install a SRTA-owned
video surveillance system at the farm.
From the defendant's standpoint, matters began to
unravel when Cosentino, having assumed the SRTA administrator
post, got religion. He began pushing back (albeit gently, at
first) against inappropriate uses of SRTA resources. When
Cosentino went further and advertised the upcoming contract
renewal in a national magazine, the defendant threatened to have
him fired — a threat that materialized in September of 2010.
Despite Cosentino's firing, SRTA awarded a new contract to a rival
firm, thus ending the defendant's reign.
An investigation ensued. As a result, a federal grand
jury indicted the defendant on August 5, 2014. The indictment
charged the defendant with embezzling from an organization that
receives federal funds, see 18 U.S.C. § 666(a)(1)(A), and
conspiracy to commit an offense against the United States, see id.§ 371. After a nine-day trial, the jury convicted the defendant
on both counts.
On July 29, 2015, the district court sentenced the
defendant to a 70-month term of immurement on the embezzlement
count and a 60-month term of immurement on the conspiracy count
(to run concurrently). The court ordered the defendant to pay
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restitution in the amount of $688,772. With the consent of both
parties, the court reserved the question of forfeiture.
The court entered its written judgment on July 30, 2015,
immediately after denying the defendant's post-trial motion for
judgment of acquittal. See Fed. R. Crim. P. 29(c). The defendant
filed his notice of appeal the following day.
On August 13, 2015 — while this appeal was pending — the
district court held a hearing. On September 21, 2015, the court
amended its judgment to direct that the defendant forfeit
$1,382,214. The defendant did not file a second notice of appeal.
II. ANALYSIS
The defendant raises a gallimaufry of issues implicating
his conviction, his sentence, and the forfeiture order. We deal
sequentially with the more substantial of these issues. The
defendant's other arguments are insufficiently developed, patently
meritless, or both. As to those arguments, we simply reject them
out of hand, without further elaboration.
A. Sufficiency of the Evidence.
The defendant's flagship claim challenges the
sufficiency of the evidence. With respect to this challenge, we
review the denial of his motion for judgment of acquittal de novo.
See United States v. Chiaradio, 684 F.3d 265, 281 (1st Cir. 2012).
Our basic inquiry is "whether, after assaying all the evidence in
the light most amiable to the government, and taking all reasonable
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inferences in its favor, a rational factfinder could find, beyond
a reasonable doubt, that the prosecution successfully proved the
essential elements of the crime." Id. (quoting United States v.
O'Brien, 14 F.3d 703, 706 (1st Cir. 1994)).
In this case, the government had to prove beyond a
reasonable doubt that the defendant was acting as an agent on
behalf of a state agency or organization; that he embezzled, stole,
obtained by fraud, knowingly converted, or intentionally
misapplied $5,000 or more of property belonging to or under the
care, custody, or control of that agency or organization; and that
the agency or organization received, in any one-year period, more
than $10,000 in federal assistance. See 18 U.S.C. § 666. The
defendant concedes that he worked on behalf of SRTA; that SRTA was
(and is) a state agency or organization within the purview of the
statute; and that it received more than $10,000 in federal
assistance during each of the years in question. The question
reduces, then, to the sufficiency of the government's proof of the
second element.
With respect to this element, the defendant asserts that
the government did not prove that the salaries of his helpmeets
were embezzled, stolen, obtained by fraud, knowingly converted, or
intentionally misapplied. He makes this assertion in the face of
abundant evidence that these individuals were routinely absent
from USBC's premises during their normal working hours and were
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instead toiling at the defendant's farm. In the defendant's view,
evidence of absence from the workplace is meaningless without
evidence that the individuals were not getting their jobs done.
After all, he surmises, they could have been doing their USBC work
elsewhere or at other times.
We do not agree. Several witnesses testified to the
work patterns of Santos, Rocha, and Pacheco, and the jury was well-
situated to determine whether it was plausible that employees who
worked a pittance of hours at USBC's offices while regularly
laboring at the defendant's farm during ordinary business hours
actually performed the USBC jobs for which they were being paid.
The jury decided that it was not plausible, and we think that the
record supports such an inference. See, e.g., United States v.
Ransom, 642 F.3d 1285, 1291 (10th Cir. 2011); United States v.
Sanderson, 966 F.2d 184, 186-87 (6th Cir. 1992).
In a variation on this theme, the defendant contends
that employee salaries cannot be the res purloined under section
666 because the statute carves out a safe harbor for "bona fide
salary" payments. 18 U.S.C. § 666(c). But this contention sweeps
too broadly and promotes an interpretation of "bona fide salary"
that would swallow the statute in a single gulp. Were this the
law, a fraudster would only have to structure his loot as salary
to evade prosecution. We hold, consistent with the plain language
and evident purpose of the statute, that "bona fide salary" means
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salary actually earned in good faith for work done for the
employer. See United States v. Baldridge, 559 F.3d 1126, 1139
(10th Cir. 2009) (holding that work paid for by a county but done
at a county official's private residence could not be a "bona fide
wage"); United States v. Valentine, 63 F.3d 459, 465 (6th Cir.
1995) (rejecting bona fide salary defense under circumstances
analogous to those present in the case at hand).3 Whether wages
are bona fide is ordinarily a question of fact for the jury, see
United States v. Cornier-Ortiz, 361 F.3d 29, 36 (1st Cir. 2004),
and this case is no exception: the jury reasonably could have found
that the salaries of USBC employees who were not only routinely
absent from their posts during business hours but were also working
at other jobs were not bona fide.
The defendant has one last shot in his sling. Noting
that the government did not offer proof that the misused funds
were spent on an "otherwise legitimate purpose," he argues that he
could not be convicted under an intentional misapplication theory.
This argument depends on a highly technical reading of our decision
in Cornier-Ortiz, 361 F.3d at 36-37 — but it is a reading with
which we need not grapple. The indictment did not charge solely
3 The defendant's reliance on United States v. Harloff, 815
F. Supp. 618, 619 (W.D.N.Y. 1993), is misplaced. Courts have
repeatedly distinguished Harloff in cases like this one, see, e.g.,
Baldridge, 559 F.3d at 1139; United States v. Williams, 507 F.3d
905, 909 (5th Cir. 2007); Valentine, 63 F.3d at 465, and we too
regard it as off-point.
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an intentional misapplication theory, nor was the jury instructed
solely on such a theory. Rather, the indictment charged, and the
court instructed the jury, in terms of all five potential means of
violating section 666(a)(1)(A). Consequently, the jury's finding
of guilt did not depend on a finding that the defendant
intentionally misapplied the salaries in question. See United
States v. Hernandez-Albino, 177 F.3d 33, 40 (1st Cir. 1999) ("When
the government alleges in a single count that the defendant
committed the offense by one or more specified means, the Supreme
Court has 'never suggested that in returning general verdicts in
such cases the jurors should be required to agree on a single means
of commission . . . .'" (quoting Schad v. Arizona, 501 U.S. 624,
631 (1991))).
The defendant next submits that the government never
proved that he embezzled $10,000 to remodel his kitchen. In this
regard, he calumnizes the government for not calling the
construction company owners as witnesses notwithstanding its
suggestion to the court (when the record of the $10,000 expenditure
was admitted into evidence) that it would do so.
The pertinent facts are straightforward. The evidence
shows that $10,000 was paid to Sousa Construction, purporting to
be for repairs at SRTA terminals. USBC's maintenance supervisor,
however, testified that he did not know of any work done by Sousa
Construction at any SRTA terminal during the relevant time frame.
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The evidence further shows that — at about the time the check was
issued — the defendant was discussing his kitchen renovation plans,
and a Sousa Construction truck was spotted at his home. Though
there is no smoking gun, there are matching bullet holes. Cf.
United States v. Piper, 298 F.3d 47, 59 (1st Cir. 2002) ("[T]he
government may satisfy its burden of proof 'by either direct or
circumstantial evidence, or by any combination thereof.'" (quoting
United States v. Gifford, 17 F.3d 462, 467 (1st Cir. 1994))). On
this record, a rational jury could have concluded beyond a
reasonable doubt that the $10,000 payment was for the defendant's
personal kitchen renovations.
The defendant battles on, alleging that the government
failed to prove that the use of equipment, such as SRTA plows or
other resources, violated section 666 because (i) such uses were
allowed by the Agreement, (ii) the government did not prove either
the dates on which these events occurred or the monetary values
assigned to each event, and (iii) the events, even if aggregated,
could not cross the $5,000 statutory threshold. These allegations
lack force.
For one thing, if challenged conduct is in fact illegal,
a contract provision cannot ratify that conduct. See United States
v. Mardirosian, 602 F.3d 1, 7 (1st Cir. 2010). For another thing,
even without specific dates or precise values, evidence of the
misuse of resources was relevant to the charged conspiracy. See,
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e.g., Sanderson, 966 F.2d at 189. And at any rate, the district
court rejected a proposed jury instruction requiring unanimity as
to what property constituted the $5,000 necessary to cross the
statutory threshold. The defendant has not challenged that ruling
on appeal and, therefore, any argument on this point is waived.
See DeCaro v. Hasbro, Inc., 580 F.3d 55, 64 (1st Cir. 2009). Since
the statutory threshold is comfortably exceeded by either the bogus
salaries or the wayward kitchen remodeling payment alone, the cost
of the other items is irrelevant. See United States v. Cruzado-
Laureano, 404 F.3d 470, 484-85 (1st Cir. 2005) (holding that two
transactions totaling over $5,000 were sufficient for conviction
under section 666 even if other potentially illegal transactions
were ignored).
The defendant's final assault on the sufficiency of the
evidence is a dead letter. The government alleged, among other
things, that the defendant illegally sought a pension funded by
SRTA and attempted to boost that pension by giving himself a
generous raise in the final year of the Agreement. Before us, the
defendant complains that the government's proof of these
allegations was too thin.
Here, however, the district court eschewed any mention
of the pension in its charge to the jury, and the government only
obliquely alluded to it in its closing argument. Given the other
evidence that we have discussed, the pension and salary increase
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were immaterial to the jury's verdict. Thus, any error in the
admission of the evidence was manifestly harmless.4 See, e.g.,
United States v. Sasso, 695 F.3d 25, 29 (1st Cir. 2012).
B. Constructive Amendment.
The defendant claims that a constructive amendment of
the indictment took place at trial. "A constructive amendment
occurs '"when the charging terms of the indictment are altered" at
trial so that they are different from those handed up by the grand
jury.'" United States v. Muñoz-Franco, 487 F.3d 25, 64 (1st Cir.
2007) (quoting United States v. Rodríguez, 215 F.3d 110, 118 (1st
Cir. 2000)). Because this claim was not made below, our review is
for plain error. See United States v. Brandao, 539 F.3d 44, 57
(1st Cir. 2008). That review "entails four showings: (1) that an
error occurred (2) which was clear or obvious and which not only
(3) affected the defendant's substantial rights, but also (4)
seriously impaired the fairness, integrity, or public reputation
of judicial proceedings." United States v. Duarte, 246 F.3d 56,
60 (1st Cir. 2001).
There was no error in this respect, plain or otherwise.
The jury convicted the defendant on exactly the same charges as
4 We add that the district court's sentencing calculus
(including its order for restitution) did not include either the
unvalued use of SRTA resources or the increased pension. In
formulating the defendant's sentence, the district court did not
include any proceeds of the fraud apart from Santos's salary,
Rocha's salary, and the kitchen renovation payment.
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were laid out in the indictment, which alleged in essence that the
defendant misused SRTA funds and resources for his private benefit.
In light of this congruence between the crimes charged and the
proof at trial, the claim of constructive amendment necessarily
fails. See United States v. DeCicco, 439 F.3d 36, 47 (1st Cir.
2006).
In an effort to blunt the force of this reasoning, the
defendant insists that the government's emphasis gradually shifted
from one means of violating section 666(a)(1)(A) to other means of
violating that statute. But this insistence rings hollow. Where,
as here, all of the means of violating the criminal statute are
properly charged and that broad charge is not limited by a
subsequent stipulation, the government's mid-trial decision to
shift its emphasis from one means to another does not constitute
a constructive amendment of the indictment. See id. at 45-46.
C. Jury Instructions.
Next, the defendant claims that the district court erred
in instructing the jury on mens rea. When — as in this instance
— a party advances a preserved claim "that the court omitted a
legally required instruction or gave an instruction that
materially misstated the law, our review is de novo." United
States v. De La Cruz, ___ F.3d ___, ___ (1st Cir. 2016) [No. 14-
2132, slip op. at 24].
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As said, there are five means through which section
666(a)(1)(A) may be violated. For two of them, the statute
expressly states the necessary mens rea: to "knowingly convert[]"
or "intentionally misappl[y]." 18 U.S.C. § 666(a)(1)(A). The
statute is silent, however, as to the necessary mens rea for a
conviction premised on one of the other three means (stealing,
embezzling, or obtaining by fraud). Faced with this uneven
statutory terrain, the court below instructed the jury on the
meanings of "knowingly" and "intentionally," and then added that
stealing means "to take someone else's money or property without
the owner's consent with the intent to deprive the owner of the
value of that money or property"; that embezzlement "means to
intentionally take . . . [the] money or property of another after
that money or property lawfully came into the possession of the
person taking it by virtue of some office, employment[,] or
position of trust"; and that obtaining by fraud "means to
intentionally take something by false representations, suppression
of the truth[,] or deliberate disregard for the truth."
The defendant argues that these instructions were
deficient because the three statutorily unmodified acts (stealing,
embezzling, and obtaining by fraud) all require a willful mens
rea, which he defines as a "criminal, evil intent." The defendant
cites no authority for his ipse dixit that these offenses always
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require an explicit willfulness instruction.5 More important, his
position defies common sense: the terms "steal," "embezzle," and
"obtain by fraud" by their very nature imply a nefarious intent.
See, e.g., United States v. Kucik, 909 F.2d 206, 212 (7th Cir.
1990) (recognizing that there is a "presumption evident in ordinary
English usage that when one steals one does so with ill purpose").
Here, the district court's instructions clearly conveyed
the criminal quiddity of these terms. Consider, for example, its
instruction (with respect to stealing) that when one "inten[ds] to
deprive" another of property, he does not do so innocently. So,
too, the court's instruction with respect to obtaining by fraud
made it pellucid that such means included "tak[ing] something by
false representations, suppression of the truth[,] or deliberate
disregard for the truth."
To say more on this point would be supererogatory. We
hold that the district court's instructions sufficiently covered
the mens rea necessary to convict. No magic words were required.6
5 The defendant's citation to Morissette v. United States,
342 U.S. 246 (1952), is far afield. The Morissette Court held
that when Congress uses a term of art with a traditional mens rea
but does not mention intent, it does not follow that Congress
eliminated the element of intent altogether. See id. at 263. That
principle has no application where, as here, the challenged
instructions do not strip away any traditional requirement of
intent.
6As framed, the defendant's asseverations regarding mens rea
also bleed into a conclusory suggestion that the indictment may
have been duplicitous. Because the defendant's briefs offer no
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D. Sentencing.
The defendant musters a panoply of claims of sentencing
error. He submits that the district court incorrectly calculated
the amount of loss attributable to the crimes of conviction and
applied unfounded sentencing enhancements for sophisticated means,
abuse of a position of trust, and role in the offense. Since these
claims were preserved below, we review de novo "the sentencing
court's interpretation and application of the sentencing
guidelines, assay the court's factfinding for clear error, and
evaluate its judgment calls for abuse of discretion." United
States v. Ruiz-Huertas, 792 F.3d 223, 226 (1st Cir.), cert. denied,
136 S. Ct. 258 (2015).
1. Amount of Loss. The defendant's challenge to the
sentencing court's loss calculation is easily dispatched. He
maintains that the loss amount used in determining his guideline
sentencing range wrongly included the salaries of Santos and Rocha
as well as the $10,000 allegedly spent on the defendant's personal
kitchen renovations. Each of these items, the defendant says, was
insufficiently proved at trial.
This is old hat. We already have explained that the
evidence was more than adequate to prove the challenged salaries
developed argumentation in support of this suggestion, we deem any
claim of duplicitousness waived. See United States v. Zannino,
895 F.2d 1, 17 (1st Cir. 1990).
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and kitchen renovation payments. See supra Part II(A). It follows
that this claim of sentencing error is hopeless.
2. Sophisticated Means. The district court enhanced
the defendant's offense level by two levels for his employment of
sophisticated means in the commission of the crimes, see USSG
§2B1.1(b)(10)(C), citing the defendant's use of a shell company
(Trans-Ag).7 In terms, a sophisticated means enhancement is
warranted when a defendant has devised "especially complex or
. . . intricate" methods of executing or concealing an offense.
See USSG §2B1.1, cmt. n.9(B). The commentary to the sentencing
guidelines identifies the use of "corporate shells" as a
prototypical example of the type of sophisticated means that may
give rise to the enhancement. See id. The district court found
that Trans-Ag was just such a corporate shell.
The defendant demurs. He argues here, as he did below,
that Trans-Ag is not a shell company but, rather, is merely a
holding company, necessitated by the structure of the Agreement.
The district court heard the parties' conflicting
arguments on this point and considered evidence as to both the
nature of Trans-Ag and the requirements of the Agreement. The
7 In support of this enhancement, the government also points
to the defendant's use of his political connections to control the
bid process. Because the defendant's use of Trans-Ag is itself
sufficient to justify the enhancement, we need not delve into the
government's other arguments.
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court did not clearly err in finding that Trans-Ag was a shell
company, not merely a holding company. As we have said, "where
there is more than one plausible view of the circumstances, the
sentencing court's choice among supportable alternatives cannot be
clearly erroneous." United States v. Ruiz, 905 F.2d 499, 508 (1st
Cir. 1990).
The short of it is that the defendant's scheme to defraud
SRTA was both complex and intricate, and his insertion of Trans-
Ag into the mix was just one manifestation of this complexity. It
is, moreover, clear that he used Trans-Ag both to facilitate and
to help to conceal his perfidy. We conclude, without serious
question, that the defendant's challenge to the sophisticated
means enhancement fails.
3. Position of Trust. The defendant's next plaint
relates to the two-level enhancement imposed by the district court
for abuse of a position of trust. See USSG §3B1.3. To justify
this enhancement, a sentencing court must find that the defendant
held a position of public or private trust and that he used the
position to facilitate or conceal his offense. See United States
v. Pacheco-Martinez, 791 F.3d 171, 178 (1st Cir. 2015). Here, the
district court found that the defendant, as the person in charge
of the affairs of a closely held corporation (USBC), occupied a
position of trust with respect to SRTA and used that position to
facilitate his embezzlement of SRTA's funds and resources.
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Abuse is manifest, so the issue is whether the district
court supportably found that the defendant occupied a position of
trust at all. The defendant assails the district court's
reasoning, declaring that his "status as an outside contractor" is
not "a per se position of public or private trust." That is true
as far as it goes — but it does not take the defendant very far.
The court did not rely on a per se rule. Instead, it found that,
on this record, the defendant, as the president of a contractor,
occupied a position of trust vis-à-vis SRTA. In reviewing that
finding, our analysis must proceed from the perspective of the
victim. See id. at 178-79; United States v. Chanthaseng, 274 F.3d
586, 589 (1st Cir. 2001).
This court has not yet considered whether — or under
what circumstances — a high-ranking employee of a government
contractor can be said to occupy a position of trust vis-à-vis a
defrauded government entity.8 Still, we do not write on a pristine
page. Other courts have recognized that a defendant can be found
to have occupied (and abused) a position of trust vis-à-vis the
8
In United States v. Sotomayor-Vázquez, 249 F.3d 1 (1st Cir.
2001), we affirmed a finding that the defendant (an outside
consultant to a government contractor) occupied a position of trust
when embezzling from the contractor. See id. at 19-20. But there,
the contractor was the victim of the crime, and we addressed only
whether the defendant's status as a consultant created a position
of trust. That is at a considerable remove from this case, in
which the district court found SRTA to be the victim and treated
the contractor as the instrumentality through which the fraud was
perpetrated.
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government when he misuses public funds through a combination of
control over a government contractor and a lack of government
oversight. See, e.g., United States v. Robinson, 198 F.3d 973,
978 (D.C. Cir. 2000); United States v. Wright, 160 F.3d 905, 911
(2d Cir. 1998); United States v. Glymph, 96 F.3d 722, 728 (4th
Cir. 1996). This construct recognizes a real world problem:
individuals controlling government contractors sometimes grow so
cozy with the contracting agency that they are allowed to exercise
substantial discretionary authority over government funds without
any semblance of meaningful oversight. In other words, a
government agency sometimes may rely too heavily on a high-ranking
employee of a contractor and thereby place that individual in a
position of special trust.
To warrant the application of the position-of-trust
enhancement in such circumstances, a defendant first must have
both substantial control and significant discretion over the
affairs of the government contractor. See Robinson, 198 F.3d at
978; Wright, 160 F.3d at 911. This is consistent with our case
law, which teaches that "the requirement of managerial or
professional discretion is 'paramount'" in regard to the position-
of-trust enhancement. United States v. Sicher, 576 F.3d 64, 76
(1st Cir. 2009) (quoting Chanthaseng, 274 F.3d at 589)
Of course, application of this enhancement may be
supported by a showing that the government agency placed special
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trust and confidence in the defendant. Courts have treated a lack
of supervision over the use of government funds as a proxy for a
showing that the government agency placed special trust and
confidence in the defendant. To conduct this aspect of the
inquiry, a court must ask "whether the victim reposed additional
trust in the defendant by ceding its ability to confirm compliance
with the contract, thus relying more heavily on the honesty of the
defendant than an ordinary party to a contract would." United
States v. Nathan, 188 F.3d 190, 206 (3d Cir. 1999).
Applying this reasoning, courts have found positions of
trust when, for example, the government allowed a defense
contractor to self-certify that its shipments met the government's
specifications, see Glymph, 96 F.3d at 728; when the defendant ran
a school on behalf of a public school system with no corresponding
oversight of the school's financial records and little oversight
of its operations, see Robinson, 198 F.3d at 978; and when a
government agency entrusted a coin supplier with carte blanche
authority over substantial amounts of coins belonging to the
agency, see United States v. Boyle, 10 F.3d 485, 489 (7th Cir.
1993). In each of these cases, the agency imbued the defendant
with broad power over the use of public funds through reduced
oversight; and the use of that power to facilitate or control
criminal activity, by a person who had control over the government
contractor, was found to be an abuse of a position of trust. See
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Robinson, 198 F.3d at 978; Glymph, 96 F.3d at 728; Boyle, 10 F.3d
at 489.
United States v. Nathan is a representative case. See
188 F.3d at 207. There, the Third Circuit affirmed a finding that
the president of a defense contractor held a position of trust
vis-à-vis a government agency, noting that he "held the highest
position in the company," owned a controlling interest in the
company, determined how his company "would fill the government
contracts," and yet was allowed to operate without any effective
governmental check on whether his company's work met government
specifications because the government agency never appointed a
quality assurance representative to monitor the contractor's
performance. See id. at 206-07.
The record in this case shows beyond hope of
contradiction that the defendant dominated USBC. Indeed, his iron-
fisted control is open-and-shut. He was the sole owner of Trans-
Ag (the shell company that, in turn, owned USBC); he served as
USBC's president (indeed, he was its sole corporate officer); and
he exercised virtually unfettered control over USBC's operations,
including personnel and finances.
So, too, the record is replete with evidence from which
a factfinder reasonably could infer that SRTA reposed special trust
in the defendant. Thanks to his political connections, USBC's
performance was subjected to almost no oversight by SRTA.
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According to testimony at trial, the defendant "had exclusive and
sole responsibility for" USBC's employees. He also had exclusive
and sole responsibility for USBC's performance of a cost-plus
contract in circumstances in which the contracting government
agency had no idea which employee was doing what work. What is
more, SRTA's lax financial monitoring allowed him to pay USBC
employees with public funds to work on his private business and to
use public funds to pay for his kitchen renovations. That the
defendant held sway over SRTA is evident from the fact that — in
violation of the Agreement — he was able to rebuff without
consequence an auditor sent by SRTA to inspect USBC's records.
Similarly, Cosentino admitted that when the defendant gave
unsatisfactory explanations for questionable expenses, SRTA "would
do nothing because of [Cosentino's] association and relationship
with" the defendant.
In sum, the defendant's control over USBC was coupled
with a lack of meaningful government oversight over USBC. This
scenario ensured that SRTA ceded to the defendant its
responsibility to oversee the use of public funds. See id. at
206. The upshot was that — as the district court supportably found
— SRTA effectively placed the defendant in a position of trust.
Viewed against this backdrop, the district court did not clearly
err in finding that the defendant held and abused a position of
trust with respect to SRTA.
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4. Role in the Offense. The district court enhanced
the defendant's offense level by four additional levels, finding
that he was the organizer and leader of a criminal enterprise that
included five or more participants. See USSG §3B1.1(a). The
defendant challenges this enhancement, quarreling with the court's
assessment of the size of the enterprise.
The sentencing guidelines call for a four-level
enhancement when "the defendant was an organizer or leader of a
criminal activity that involved five or more participants or was
otherwise extensive." Id. To qualify as a participant, a person
must be criminally responsible for the commission of the offense,
but need not be either prosecuted for or convicted of the offense.
See id., cmt. n.1; United States v. Bey, 188 F.3d 1, 10 (1st Cir.
1999). Since the defendant himself counts as one of the five
participants, the court must identify at least four other
participants to satisfy the numerosity requirement. See United
States v. Tejada-Beltran, 50 F.3d 105, 113 n.9 (1st Cir. 1995).
The court below based the enhancement on a finding that
the defendant (at a minimum) directed the actions of Santos, Rocha,
Cosentino, Louis Pettine (Cosentino's predecessor as SRTA
administrator), David Peixoto (USBC's comptroller), and Steven
Robinson (USBC's outside accountant). Inasmuch as we conclude
that the numerosity requirement is satisfied by the district
court's findings with respect to the defendant, Santos, Rocha,
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Peixoto, and Cosentino, we limit our discussion to those
individuals.
That the defendant himself was a participant requires no
elaboration. In addition, there was no clear error in finding
Santos and Rocha to be participants. As explained above, see supra
Part II(A), those two individuals accepted salaries funded by SRTA
for work they did not do and, thus, knowingly furthered the
criminal enterprise.9 See United States v. McCormick, 773 F.3d
357, 360 (1st Cir. 2014).
Nor was there clear error in naming Peixoto as a
participant. After all, there was ample evidence that he abetted
the defendant's corrupt activities (for example, he sent a USBC
technologist to the defendant's farm to investigate how SRTA-
funded surveillance cameras could be installed at the farm stand).
Moreover, Peixoto admitted to the grand jury that he willfully
"failed to disclose to federal auditors that USBC employees
. . . were absent from USBC during work hours and instead were
working at [the defendant's f]arm." To cinch matters, he tried to
cover up what had happened by "shredd[ing] USBC records and other
documents around the time that [the defendant] lost the SRTA
contract." No more was needed to ground the finding that Peixoto
9 Although the district court did not identify Pacheco as a
participant, his involvement was of the same nature as that of
Santos and Rocha (albeit not to the same extent). Consequently,
he too qualified as a participant.
- 29 -
was a participant. See United States v. Starks, 815 F.3d 438, 441
(8th Cir. 2016) (holding that an "individual only needs to give
'knowing aid in some part of the criminal enterprise'" to be
considered a participant (quoting United States v. Hall, 101 F.3d
1174, 1178 (7th Cir. 1996))).
Finally, we discern no clear error in the district
court's conclusion that Cosentino participated in the criminal
activities. When the defendant was competing for the Agreement,
Cosentino assisted him in undermining other bidders and said
nothing to his fellow advisory board members about the defendant's
machinations. In return, the defendant arranged for him to succeed
Pettine as SRTA administrator. In that capacity, Cosentino turned
a blind eye to the defendant's use of SRTA resources for improper
purposes. These actions give rise to an inference of complicity
sufficient to ground a finding that Cosentino was a participant in
the criminal activities.10 See McCormick, 773 F.3d at 360; see
also United States v. Al-Rikabi, 606 F.3d 11, 14 (1st Cir. 2010)
(describing participants as "complicit individuals").
10To be sure, Cosentino eventually got religion and began to
resist the defendant's looting of SRTA resources. Nevertheless,
he willingly participated in the scheme during several prior years
and, thus, could be found to be a participant for purposes of the
role-in-the-offense enhancement. See United States v. Guevara,
706 F.3d 38, 45-46 (1st Cir. 2013).
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That ends this aspect of the matter. We discern no clear
error in the district court's imposition of the four-level role-
in-the-offense enhancement.
E. Forfeiture.
The last leg of our journey takes us to the forfeiture
order. The defendant assigns error; the government counters that
we lack appellate jurisdiction over this assignment of error.
The background facts are undisputed. Following its
pronouncement of sentence, the district court entered judgment on
July 30, 2015. That judgment did not contain any dispositive
provision with respect to forfeiture, but it did note that the
court was deferring any decision on forfeiture "with the consent
of the parties." The next day, the defendant filed his notice of
appeal.
While the appeal was pending, the district court (on
September 21, 2015) purposed to enter an amended judgment, which
for the first time included an order of forfeiture. The defendant
neither amended his notice of appeal nor served a new notice of
appeal. Over three months later, the defendant submitted his
opening brief on appeal. In it, he attempted for the first time
to challenge the forfeiture order.
The government argues that the forfeiture order is not
properly before us: in its view, the defendant's failure to file
a new notice of appeal after the entry of the forfeiture order
- 31 -
deprives us of jurisdiction to review that order. See, e.g.,
United States v. Casas, 999 F.2d 1225, 1232 (8th Cir. 1993). There
is, however, an antecedent question that must be answered.
Although neither party challenges the district court's
jurisdiction to enter its forfeiture order, we have an independent
obligation to explore that issue. See One & Ken Valley Hous. Grp.
v. Me. State Hous. Auth., 716 F.3d 218, 224 (1st Cir. 2013). Our
review of the district court's implicit conclusion that it
possessed subject-matter jurisdiction to enter the forfeiture
order is de novo. See United Seniors Ass'n, Inc. v. Philip Morris
USA, 500 F.3d 19, 23 (1st Cir. 2007).
The question that concerns us is whether the pendency of
the defendant's notice of appeal divested the district court of
jurisdiction to enter the forfeiture order. In answering that
question, we start with the abecedarian principle that once a
notice of appeal is filed, the district court is divested of
"authority to proceed with respect to any matter touching upon, or
involved in, the appeal." United States v. Brooks, 145 F.3d 446,
455 (1st Cir. 1998) (quoting United States v. Mala, 7 F.3d 1058,
1061 (1st Cir. 1993)). This principle "derives from the notion
that shared jurisdiction almost always portends a potential for
conflict and confusion." Id. at 456. Accordingly, shared
jurisdiction is limited to a "circumscribed cluster of situations,
- 32 -
the handling of which is not inconsistent with the prosecution of
an appeal." Id.
We need not tarry. The defendant's notice of appeal was
filed on July 31, 2015. At that moment, the district court was
divested of jurisdiction regarding "any matter touching upon, or
involved in, the appeal." Brooks, 145 F.3d at 455 (quoting Mala,
7 F.3d at 1061); see Griggs v. Provident Consumer Discount Co.,
459 U.S. 56, 58 (1982) (per curiam) (explaining that "a notice of
appeal . . . divests the district court of its control over those
aspects of the case involved in the appeal"). This proscription
extended to the court's attempt to introduce into the judgment,
for the first time, a forfeiture order. See United States v.
Pease, 331 F.3d 809, 816 (11th Cir. 2003).
A close analogy is found in our recent decision in United
States v. Maldonado-Rios, 790 F.3d 62 (1st Cir. 2015) (per curiam).
There, we held that the district court lacked jurisdiction, during
the pendency of an appeal, to grant a sentence modification motion
brought under 18 U.S.C. § 3582(c)(2). See id. at 64. In reaching
that conclusion, we cited, inter alia, United States v. Distasio,
820 F.2d 20, 23 (1st Cir. 1987), for the proposition that "a
docketed notice of appeal suspends the sentencing court's power to
modify a defendant's sentence." We added that the limited
exceptions to the general rule that an appeal terminates a district
court's jurisdiction all pertain "to district court orders that
- 33 -
concern matters unrelated to the 'substance of the decision' being
appealed." Maldonado-Rios, 790 F.3d at 64 (quoting 16A Charles A.
Wright et al., Federal Practice and Procedure § 3949.1, at 59 (4th
ed. 2008)); accord United States v. Cardoza, 790 F.3d 247, 248
(1st Cir. 2015) (per curiam). The forfeiture order in this case
does not concern a matter unrelated to the substance of the
defendant's appeal. Thus, it falls within the general rule, not
within the long-odds exception to it. See Pease, 331 F.3d at 816.
Our decision in United States v. Ferrario-Pozzi, 368
F.3d 5 (1st Cir. 2004), is not to the contrary. That decision
addressed whether a district court retains jurisdiction, under
Federal Rule of Criminal Procedure 32.2(e), to enter a forfeiture
order despite the pendency of a notice of appeal.11 See id. at 11.
There — unlike in this case — the district court's original
judgment included a statement that "forfeiture shall be no less
than $2,000,000 to be determined at a hearing." Id. at 7. While
the defendant's appeal was pending, the district court made a
specific forfeiture award of $3,700,000. See id. at 8. We ruled
that the pending appeal did not deprive the district court of
jurisdiction to issue the award because the award could be
considered "an amendment of an existing order under Rule 32.2(e),
11 Rule 32.2(e) allows a court "at any time" to "amend an
existing order of forfeiture to include" substitute property or
subsequently located property. Fed. R. Crim. P. 32.2(e)(1)
(emphasis supplied).
- 34 -
and thus within the jurisdiction retained by the court." Id. at
11. Put simply, our holding rested on the fact that forfeiture
"was properly a part of the [initial] judgment." Id.Here, there was no forfeiture order included in the
original judgment, merely an allusion to the possibility that
forfeiture might be ordered at some unspecified future date. The
district court made clear both at the disposition hearing and in
its written judgment that forfeiture remained an open, unresolved
issue, and took no position as to whether forfeiture would be
ordered at all. Under these circumstances, the pendency of the
appeal deprived the court of jurisdiction to issue its amended
judgment.
The fact that the parties consented to deferral of the
district court's consideration of the forfeiture issue does not
alter the jurisdictional calculus. A federal court's lack of
subject-matter jurisdiction cannot be repaired by consent of the
parties. See United States v. Horn, 29 F.3d 754, 768 (1st Cir.
1994) ("Parties cannot confer subject matter jurisdiction on
either a trial or an appellate court by indolence, oversight,
acquiescence, or consent.").
We add a coda. The district court was not powerless to
address the issue of forfeiture despite the pendency of the appeal.
It could have asked us to stay the pending appeal and remand in
order to allow it to make that additional ruling. See Puerto Rico
- 35 -
v. SS Zoe Colocotroni, 601 F.2d 39, 42 (1st Cir. 1979); cf.
Maldonado-Rios, 790 F.3d at 64-65 (discussing procedure to be used
when district court wishes to act upon a motion that it lacks
jurisdiction to address because of the pendency of an appeal
(citing Fed. R. App. P. 12.1(a))). We commend this salutary
procedure to district courts that wish to add forfeiture orders to
sentences previously imposed.
III. CONCLUSION
We need go no further. For the reasons elucidated above,
we affirm the defendant's conviction and sentence, but vacate the
order of forfeiture as improvidently granted (that is, as granted
without jurisdiction). We remand so that the district court, once
its jurisdiction has reattached, may consider the issue of
forfeiture anew. We take no view, however, as to either the
propriety or amount of a future order of forfeiture.
Affirmed in part, vacated in part, and remanded.
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