United States v. Chin ( 2020 )

United States Court of Appeals
For the First Circuit
Nos. 18-1263, 18-1310, 18-1500
UNITED STATES OF AMERICA,
Appellee, Cross-Appellant,
v.
GLENN A. CHIN,
Defendant, Appellant, Cross-Appellee.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Barron, Stahl, and Lipez,
Circuit Judges.
James L. Sultan, with whom Kerry A. Haberlin and Rankin &
Sultan were on brief, for appellant/cross-appellee.
David M. Lieberman, Attorney, Criminal Division, Appellate
Section, United States Department of Justice, with whom Andrew E.
Lelling, United States Attorney, Amanda P. Strachan, Assistant
United States Attorney, George P. Varghese, Assistant United
States Attorney, Brian A. Benczkowski, Assistant Attorney General,
and Matthew S. Miner, Deputy Assistant Attorney General, were on
brief, for appellee/cross-appellant.
July 9, 2020
BARRON, Circuit Judge. These consolidated appeals, like
those we also decide today in United States v. Cadden, ___ F.3d
___ (1st Cir. 2020) [Nos. 17-1694, 17-1712, 17-2062], concern
convictions that stem from a 2012 scandal involving the
Massachusetts-based New England Compounding Center ("NECC"). The
scandal broke after federal investigators traced the cause of a
deadly nationwide outbreak of fungal meningitis and other
illnesses to medications that NECC had produced at its facilities.
Federal criminal charges were then brought against a number of
NECC employees, including the defendant in this case, Glenn Chin,
who was NECC's supervising pharmacist at the time. For his role
in the scandal, he was convicted in 2017 of numerous federal
crimes, and, in consequence, sentenced to a lengthy term of
imprisonment, subjected to an order of forfeiture, and ordered to
pay restitution.
Chin now challenges two of those convictions, for
racketeering and racketeering conspiracy, respectively. He
contends that they must be reversed because the evidence did not
suffice to support them. He also contends that, in consequence,
his prison sentence must be vacated. If he is right about the
lack of evidence to support his convictions, then the order of
forfeiture also must be reversed.
The government, for its part, brings its own appeal. It
challenges the prison sentence that Chin received as well as both
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the $175,000 order of forfeiture that the District Court imposed
on him and its award of restitution of an as-yet-unspecified
amount.
We affirm both of Chin's federal racketeering-related
convictions. However, we vacate and remand the prison sentence,
the forfeiture order, and the restitution order.
I.
Our opinion in Cadden addresses the consolidated appeals
in the criminal case against Chin's boss and alleged co-conspirator
at NECC, Barry Cadden. He was charged in the same indictment as
Chin but his trial on those charges was severed from Chin's. See
Cadden, ___ F.3d at ___ [slip op. at 7-8]. The issues that we
confront here overlap in many respects with those that we address
in our opinion in Cadden's case. We thus refer to our reasoning
there throughout the analysis that follows. We also refer the
reader to that opinion for additional details about NECC's
practices and the federal criminal investigation into them.
Briefly stated, however, the facts relevant to the appeals in
Chin's case are the following.
The practice of compounding involves combining drugs
with other substances to produce medications. As a compounding
pharmacy, NECC -- which was based in Framingham, Massachusetts --
prepared specialized medications, otherwise unavailable in the
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wider market, to hospitals and other medical providers upon their
request.
Chin was a trained pharmacist who served as a supervisor
at both of NECC's clean rooms. The company's compounding
operations that produced the medications tied to the outbreak took
place in one of these clean rooms.
On December 16, 2014, following an extensive federal
criminal investigation into NECC's role in the outbreak, Chin was
charged, along with Cadden and twelve other individuals affiliated
with NECC, in a 131-count indictment in the United States District
Court for the District of Massachusetts. The indictment charged
Chin with racketeering in violation of 18 U.S.C. § 1962(c);
racketeering conspiracy in violation of 18 U.S.C. § 1962(d);
forty-three counts of federal mail fraud in violation of 18 U.S.C.
§ 1341; and thirty-two counts of violating the Federal Food, Drug,
and Cosmetic Act ("FDCA"), see 21 U.S.C. §§ 331(a), 333(a).
The racketeering charge alleged sixty-eight predicate
acts of racketeering to support the allegation that Chin
participated in the conduct of NECC through a "pattern of
racketeering activity." See 18 U.S.C. § 1962(c). These alleged
predicate acts of racketeering included forty-three that were
premised on mail fraud allegations, as mail fraud is a racketeering
activity. See id. § 1961(1)(B). These allegations corresponded
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to the mail fraud allegations set forth in forty-three of the
stand-alone mail fraud counts.
The alleged mail fraud entailed NECC misrepresenting its
various safety protocols to customers who purchased its
medications. Those medications included the contaminated "high-
risk" sterile medication, methylprednisolone acetate ("MPA"),
that NECC had compounded during Chin's tenure as the supervising
pharmacist there and that had given rise to the outbreak. In
particular, NECC was alleged to have misrepresented that it had
complied with the safety standards set forth in Chapter 797 of the
United States Pharmacopeia ("USP-797"), which applies to high-risk
sterile compounded medications, including MPA.
The sixty-eight alleged predicate acts of racketeering
also included twenty-five that were premised on allegations of
second-degree murder, which is itself a racketeering activity.
See id. § 1961(1)(A). The allegations of second-degree murder
were tied to twenty-five patients who had died from having been
injected with the contaminated MPA that NECC had compounded.
The racketeering conspiracy charge did not identify
specific predicate acts of racketeering that it alleged that Chin
conspired to commit. See id. § 1962(d). Rather, the indictment
alleged that Chin conspired to commit a racketeering violation
through a pattern of racketeering activity that involved only
unspecified instances of mail fraud.
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The District Court severed Chin's case from Cadden's and
the other defendants'. Chin's case proceeded to trial, and the
jury found him guilty on all counts. A special verdict form
indicated that, for the purposes of the racketeering offense, the
jury found that the government had proved twelve of the sixty-
eight alleged predicate acts of racketeering, each of which
concerned only mail fraud. The special verdict form expressly
made clear that the jury did not find any of the twenty-five
alleged predicate acts of second-degree murder, which, again, were
relevant only to the racketeering count, not the racketeering
conspiracy count. As to the FDCA counts, the special verdict form
showed that the jury found that Chin acted with an "intent to
defraud or mislead," an aggravating factor, on two of the counts.
See 21 U.S.C. § 333(a)(2). It did not so find for the other thirty
FDCA counts.
The District Court calculated Chin's sentencing range
under the United States Sentencing Guidelines ("Guidelines") to be
seventy-eight to ninety-seven months' imprisonment. The District
Court then sentenced Chin to ninety-six months' imprisonment. The
District Court also issued a forfeiture order against Chin in the
amount of $175,000. Finally, the District Court ruled on the
government's motion for restitution. It ordered that it would
"calculate the total restitution award as the loss suffered by the
hospitals and clinics that purchased lots of degraded or defective
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drugs during the life of the racketeering enterprise," but stated
that it would await the trial of Chin's co-defendants before
apportioning the restitution amount among those found guilty and
so did not identify a dollar amount for the award of restitution.
The government issued a notice of appeal, and Chin
followed suit.
II.
We begin with Chin's appeal, in which he challenges his
convictions for racketeering and racketeering conspiracy. See 18
U.S.C. § 1962(c), (d).1 He contends that each must be reversed
due to insufficient evidence. His sufficiency challenges focus
solely on what the record shows -- or, more precisely, fails to
show -- about whether a juror reasonably could find satisfied the
"pattern of racketeering activity," id. § 1961(5), element that is
common to each of the underlying offenses, see id. § 1962(c), (d).
1 The racketeering conviction at issue was based on 18 U.S.C.
§ 1962(c), which states that
[i]t shall be unlawful for any person employed by or
associated with any enterprise engaged in, or the
activities of which affect, interstate or foreign
commerce, to conduct or participate, directly or
indirectly, in the conduct of such enterprise’s affairs
through a pattern of racketeering activity or collection
of unlawful debt.
The racketeering conspiracy conviction was based on 18 U.S.C.
§ 1962(d), which states that "[i]t shall be unlawful for any person
to conspire to violate any of the provisions of subsection (a),
(b), or (c) of this section." The government alleged that Chin
conspired to violate § 1962(c).
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As we will explain, the challenges to these convictions
turn on whether the evidence sufficed to show that NECC was -- as
of 2012 -- engaged in a regular business practice of fraudulently
representing to its customers that the medications that it was
shipping to them had been produced in accord with certain safety
standards when in fact they had not been. For, if the evidence
did support that conclusion, then a reasonable juror supportably
could have found not merely isolated acts of racketeering activity
but a "pattern" of it.
We begin with Chin's challenge to the racketeering
conviction. We then briefly consider his racketeering conspiracy
conviction.
A.
Congress has provided little guidance as to the meaning
of the "pattern of racketeering activity" element for the offense
of racketeering. See id. § 1961(5). It has made clear that there
must be at least two predicate acts of racketeering within ten
years of one another for there to be a "pattern of racketeering
activity." See id. But, the relevant statutory text is otherwise
silent as to what makes a pair -- or more -- of individual predicate
acts of racketeering a "pattern of racketeering activity."
The United States Supreme Court has fleshed out this
"pattern" element in the following ways. First, the Court has
made clear that the individual predicate acts of racketeering that
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occur within ten years of one another must have been "related" to
one another. H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 239
(1989). Second, the Court has made clear that the predicate acts
must "amount to or pose a threat of continued criminal activity"
to constitute such a "pattern." Id. (emphasis added).
As we have noted, the special verdict form revealed that
the jury based its finding of guilt on the racketeering charge on
twelve of sixty-eight alleged predicate acts of racketeering and
that each of the twelve involved mail fraud.2 Chin does not dispute
that the evidence sufficed to prove those twelve alleged predicate
acts of racketeering or that they were "related" to one another.
2 The mail fraud provision under which Chin was convicted and
on which his predicate acts were based reads, in relevant part, as
follows:
Whoever, having devised or intending to devise any
scheme or artifice to defraud, or for obtaining money or
property by means of false or fraudulent pretenses,
representations, or promises . . . for the purpose of
executing such scheme or artifice or attempting so to
do, places in any post office or authorized depository
for mail matter, any matter or thing whatever to be sent
or delivered by the Postal Service, or deposits or causes
to be deposited any matter or thing whatever to be sent
or delivered by any private or commercial interstate
carrier, or takes or receives therefrom, any such matter
or thing, or knowingly causes to be delivered by mail or
such carrier according to the direction thereon, or at
the place at which it is directed to be delivered by the
person to whom it is addressed, any such matter or thing,
shall be fined under this title or imprisoned not more
than 20 years, or both.
18 U.S.C. § 1341.
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But, Chin does contend that the evidence did not suffice to permit
a juror reasonably to find that they could satisfy the requirement
of continuity. For that reason alone, he contends, his
racketeering conviction must be reversed for insufficient evidence
of a "pattern of racketeering activity." We thus turn our
attention to the continuity requirement and what the evidence shows
regarding it in Chin's case.
B.
There are two distinct means by which the continuity
requirement may be satisfied. The first requires a showing of
"closed-ended" continuity, which depends on a showing that the
related predicated acts occurred during "a closed period of
repeated conduct." H.J., 492 U.S. at 241. Such closed-ended
continuity may be demonstrated "by proving a series of related
predicates extending over a substantial period of time" that is
nonetheless finite. Id. at 242.
The second type of continuity requires a showing of
"open-ended" continuity. Id. at 241. That type of continuity
depends on a showing that the related predicate acts constituted
"past conduct that by its nature projects into the future with a
threat of repetition." Id.
The Supreme Court has provided two examples of what
constitutes evidence of open-ended continuity. In the first
example, related predicate acts may reflect the kind of open-ended
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continuity that suffices to show a "pattern of racketeering
activity" because they "involve a distinct threat of long-term
racketeering activity," as when a criminal's extortionary demand
is accompanied by a promise, implicit or explicit, to regularly
make similar illegal requests in the future. Id. at 242. In the
second example, related predicate acts may be found to reflect
open-ended continuity when they "are part of an ongoing entity's
regular way of doing business." Id. The Court has made clear
that the entity referenced in the second example may have been, at
least in part, a "legitimate business." Id. at 243.
C.
Chin contends that the evidence did not suffice to
support a finding of either closed-ended or open-ended continuity.
But, even assuming that Chin adequately preserved this challenge,
despite the government's contention to the contrary, and thus that
our review is de novo, see United States v. Tanco-Baez, 942 F.3d
7, 15 (1st Cir. 2019), we disagree. As we will explain, a juror
could reasonably find on this record that, by the fall of 2012, it
had become a regular business practice of NECC to ship medications
that had not been prepared in line with the requirements of USP-
797 despite representing to customers that they had been.
Significantly, the twelve predicate acts of racketeering
that the jury found involved NECC having shipped customers
medications that it had falsely told them the company had produced
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in compliance with USP-797, and Chin does not dispute that the
evidence sufficed to support the finding that such a fraud had
been perpetrated in each instance via that particular false
representation. Moreover, those twelve predicate acts concerned
distinct shipments of medications that had been sent to distinct
customers. And while they were all sent within a discrete time
period, a juror reasonably could find on this record that the
company's practice of fraudulently shipping medications as if they
had been produced in compliance with USP-797 had no natural
endpoint.
In accord with this conclusion, we note that a former
lab technician at NECC, Joseph Connolly, testified that the company
"routinely sent medications out prior to getting results back from
testing" for sterility, notwithstanding that USP-797 called for
NECC to wait for the results of such testing before shipment. In
addition, another company employee, Nicholas Booth, testified that
it was not necessarily "a common practice" when he started for the
company to ship medications without testing them in the manner
that USP-797 required, but that, as production ramped up, "corners
were cut" and "it started happening more and more." Booth further
testified that, by the fall of 2012, the company was sending
shipments of untested medications to customers under old labels,
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for medications that had been tested, "quite a bit" and that Cadden
endorsed the practice.3
Chin argues in response that NECC operated safely for
more than a decade before cutting corners in response to a brief
surge in demand in 2012. Based on the much longer period of safe
conduct, he appears to argue, a juror could not reasonably find
that mail fraud via false representations of USP-797 compliance
was part and parcel of a regular NECC business practice, such that
the practice would be an ongoing one.
The jury was tasked, however, with deciding whether the
period of fraudulent activity at NECC was of a nature that there
was "a realistic prospect of continuity over an open-ended period
yet to come." Home Orthopedics Corp. v. Rodríguez, 781 F.3d 521,
531 (1st Cir. 2015) (quoting Feinstein v. Resolution Tr. Corp.,
942 F.2d 34, 45 (1st Cir. 1991)). At the very least, the evidence
sufficed to permit a juror to find that NECC's regular practice
3 Because our analysis is based only on evidence that relates
to the twelve predicate acts found by the jury, Chin's argument,
to the extent he makes it, that we may not rely on evidence that
relates to other predicate acts not found by the jury is beside
the point. In any event, our precedent does not support the
proposition on which he relies. See United States v. Connolly,
341 F.3d 16, 26 (1st Cir. 2003) (finding continuity of a
racketeering enterprise based in part on "evidence of the existence
of the enterprise apart from the specified racketeering acts");
cf. United States v. Cianci, 378 F.3d 71, 93 (1st Cir. 2004) ("The
evidence relating to those acts that were found 'unproven' by the
jury was still available to the jury in its evaluation of the
overall [racketeering] charge.").
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was to engage in similar acts in the face of high demand and that
demand pressure would have continued to be high going forward.
Chin points to evidence that shows that NECC tried to
address the problems in its clean rooms in arguing that NECC's
fraudulent scheme was likely to come to an end after the production
surge in 2012. But, as Chin himself concedes, some of these
efforts were "inadequate," some were "short-lived," and they all
"ultimately failed."
Chin also argues that it would have been illogical for
NECC to continue to produce medications in a substandard manner
indefinitely, given that its business model depended on customers'
trust in the safety of its products. But, Chin does not dispute
that the twelve predicate acts of mail fraud occurred despite the
obvious business risk that they -- like any fraudulent activity,
if discovered -- posed to NECC. Thus, a juror reasonably could
find that, to whatever extent NECC was incentivized to comply with
safety protocols, those incentives were insufficient to cause the
company to refrain from fraudulent conduct in the face of high
demand from customers.4
4 We note that the jury necessarily concluded in finding that
Chin committed twelve predicate acts of racketeering involving
mail fraud that he was a "knowing and willing participa[nt] in
[NECC's mail fraud] scheme with the intent to defraud," United
States v. Soto, 799 F.3d 68, 92 (1st Cir. 2015), and Chin does not
dispute that a juror could infer he would have continued to be a
knowing and willing participant in that fraudulent scheme if there
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Finally, Chin invokes various precedents that have
vacated findings of liability for racketeering based on
insufficient evidence of open-ended continuity. But, those cases
either involve a defendant's attempt to maintain a single contract,
see Sys. Mgmt., Inc. v. Loiselle, 303 F.3d 100, 106 (1st Cir.
2002), or a circumstance in which the defendant's alleged
fraudulent scheme was limited to a "handful of victims" and was
"inherently terminable," Cofacredit, S.A., Inc. v. Windsor
Plumbing Supply Co., 187 F.3d 229, 244 (2d Cir. 1999). They are
thus readily distinguishable from Chin's case.
In sum, the record fails to support Chin's sufficiency
challenge to his conviction for racketeering. Rather, the evidence
sufficed to show that NECC's fraudulent scheme of shipping
medications as if they had been produced in compliance with USP-
797 was an ongoing business practice as of 2012 that showed no
signs of abating.
D.
There remains Chin's sufficiency challenge to his
conviction for racketeering conspiracy. But, the only arguments
that he makes in support of that challenge are identical to the
ones that we have just rejected. We thus must reject this
challenge as well.
were a supportable basis for finding that NECC would continue to
perpetrate it.
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III.
We now turn to the government's challenges in its appeal.
They concern, respectively, the prison sentence that the District
Court imposed and the orders of forfeiture and restitution that it
issued. We begin with the government's arguments that the District
Court erred in calculating the appropriate range for Chin's
sentence under the Guidelines. We then take up the government's
challenge to the District Court's forfeiture order. We conclude
by considering the government's challenge to the District Court's
ruling on restitution.
A.
The government argues that the District Court
miscalculated the amount of loss attributable to Chin's illegal
conduct under the Guidelines and that the District Court
erroneously failed to apply several enhancements under the
Guidelines. In assessing these challenges, we review the District
Court's "factfinding for clear error and afford de novo
consideration to its interpretation and application of the
sentencing guidelines." United States v. Benítez-Beltrán, 892
F.3d 462, 469 (1st Cir. 2018) (quoting United States v. Flores-
Machicote, 706 F.3d 16, 20 (1st Cir. 2013)).
1.
Chin's total offense level was based, in part, on the
amount of "loss" attributable to the underlying fraudulent scheme
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in which he was found to have been engaged. See U.S.S.G.
§ 2B1.1(b)(1); see also id. § 2B1.1 cmt. n.3(A)(i) (explaining
that "loss is the greater of actual loss or intended loss," where
"'[a]ctual loss' means the reasonably foreseeable pecuniary harm
that resulted from the offense"). The District Court fixed that
loss amount at $1.4 million -- a figure that required the District
Court to increase Chin's offense level under the Guidelines by
fourteen levels. See id. § 2B1.1(b)(1)(H). The government
contends, however, that the District Court erred because it
substantially understated the loss amount.
The District Court arrived at the $1.4 million amount by
adding up the revenue that NECC had generated in the relevant
period from what the District Court described as "every potentially
contaminated or degraded drug shipped by NECC from the period
beginning in March 2011 to the demise of the company in 2012."
The District Court's method for calculating the loss amount was
apparently the same one that it used at Cadden's sentencing, and
the parties make no argument to the contrary. We thus understand
the District Court to have arrived at the loss amount of $1.4
million by, as it had done in Cadden's case, adding up the total
NECC revenue generated from sales of medications that were
identified as expired, contaminated, nonsterile, sub-potent,
super-potent, or compounded by an unqualified technician.
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The government takes issue with that approach, as it did
in Cadden's case, and contends that the District Court erred by
not calculating the loss amount in Chin's case based on the total
amount of NECC's sales during the relevant time period. But, the
government has failed to show that all of NECC's sales over that
period were based on fraudulent representations, just as the
government failed to make that showing in Cadden. See ___ F.3d at
___ [slip op. at 66-67]. Nor, as we explained in Cadden, is the
government right that revenue that NECC generated from non-
fraudulent sales during the relevant time period may be included
in the loss amount because customers would not have made the
purchases from NECC had they known about NECC's fraudulent sales
even if they had not been directly defrauded themselves. See id.
at ___ [slip op. at 67-68].
To be sure, shipments in addition to those that the
District Court relied on to calculate the loss amount in Chin's
case could, perhaps, have been supportably found to have been made
fraudulently in their own right. Thus, such shipments could
perhaps have been included in the loss amount calculation, thereby
generating a figure greater than $1.4 million. The government did
not present the District Court in Chin's case, however, with a
figure for the loss amount that would have reflected its view of
the actual amount that customers paid for the fraudulent shipments
made by NECC that would have been less than the greatest loss
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amount that it sought but more than the $1.4 million amount. At
Chin's sentencing, the government merely advanced its sweeping
claim that any NECC sales during the relevant period necessarily
constituted "loss." That was so, we note, even though the
government was on notice that the District Court was aware of the
argument that the government had failed to prove that all NECC
products were sold pursuant to a fraudulent scheme from the
arguments made at Cadden's sentencing, which preceded Chin's.
Accordingly, much as we concluded when facing the
similar issue in Cadden's case, see Cadden, ___ F.3d at ___ [slip
op. at 69-70], we hold that the District Court acted well within
its discretion in identifying specific shipments that were shown
to be fraudulent and using NECC's revenue from those shipments to
ground its loss calculation. The District Court was not obliged
to speculate on the extent to which NECC's revenues also reflected
other fraudulent sales that were not specifically identified by
the government. See U.S.S.G. § 2B1.1 cmt. n.3(C) ("The court need
only make a reasonable estimate of the loss. . . . [T]he court's
loss determination is entitled to appropriate deference."); United
States v. Flete-Garcia, 925 F.3d 17, 28 (1st Cir. 2019) ("[A] loss
calculation need not be precise: the sentencing court need only
make a reasonable estimate of the range of loss."); United States
v. Rivera-Rodríguez, 489 F.3d 48, 53 (1st Cir. 2007) ("In arriving
at an appropriate sentence, a district court enjoys 'broad
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discretion in the information it may receive and consider regarding
[a] defendant and his conduct.'" (alteration in original) (quoting
United States v. Curran, 926 F.2d 59, 61 (1st Cir. 1991))). We
thus decline the government's request to vacate and remand the
sentence so that the District Court may undertake the kind of
calculation that the government failed to request be made at
sentencing.
2.
The government next takes issue with the District
Court's refusal under the Guidelines to apply the two-level
enhancement that kicks in when an "offense involved . . . the
conscious or reckless risk of death or serious bodily injury."
U.S.S.G. § 2B1.1(b)(16).5 The District Court found the enhancement
inapplicable because Chin had not committed an offense that carried
with it the requisite risk identified in the enhancement. The
District Court's conclusion rested on an interpretation of the
Guidelines, and so we review it de novo. See Benítez-Beltrán, 892
F.3d at 469. We agree with the government that the District Court
erred.
The District Court appears to have concluded that, as a
matter of law, the enhancement could only apply if Chin had
committed a criminal offense that, by its nature, involved the
5 At the time the District Court handed down Chin's sentence
in 2018, the enhancement was codified at U.S.S.G. § 2B1.1(b)(15).
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conscious or reckless risk of death or serious bodily injury. The
District Court then found that the nature of his offenses did not
pose the requisite kind of risk. According to the District Court,
this was so because, with respect to those offenses, the "victims
that were identified were the clinics and the hospitals who
purchased the drugs," not the patients who were actually put at
risk, as those patients "were not recipients of NECC's [fraudulent]
representations."
The District Court did go on to consider whether it could
find, contrary to the jury, that Chin had committed second-degree
murder. The District Court appears to have thought that offense
might carry with it the conscious or reckless risk identified in
the enhancement. But, the District Court concluded, "the evidence
did not establish a reckless and knowing disregard of a reasonable
certainty of causing death or great bodily harm." Thus, consistent
with the jury verdict, it found that Chin had not committed second-
degree murder.
The problem with the District Court's reasoning is the
following. As we explained in Cadden, see ___ F.3d at ___ [slip
op. at 71-72], in considering the nature of the risk involved in
Chin's "offense," U.S.S.G. § 2B1.1(b)(16), the District Court
needed to evaluate the "relevant conduct" for which the Guidelines
hold him accountable in relation to the offenses for which he was
convicted, id. § 1B1.1 cmt. n.1(I) (defining "offense"). That
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"relevant conduct" includes, among other things, "all acts and
omissions" that Chin "committed, aided, abetted, counseled,
commanded, induced, procured, or willfully caused . . . that
occurred during the commission of the offense of conviction." Id.
§ 1B1.3(a)(1)(A). Thus, Chin was subject to the enhancement so
long as his conduct during the commission of the offenses for which
he was convicted -- whether federal mail fraud, or racketeering
and racketeering conspiracy based on predicate acts of
racketeering involving mail fraud6 -- carried with it the risk
identified in the enhancement.
Thus, it is not necessarily determinative -- as the
District Court appeared to conclude -- that the direct targets of
the mail-fraud-based offenses that he was convicted of committing
were hospitals and medical providers and not the patients who were
at risk of being hurt downstream. Chin's participation in a scheme
to distribute medications that are subject to USP-797 -- including
high-risk sterile ones like MPA -- but that are not compounded in
compliance with it despite representations to the contrary could
potentially constitute "relevant conduct" that "involved . . . the
conscious or reckless risk of death or serious bodily injury."
Id. § 2B1.1(b)(16). Thus, it was legal error for the District
6The government does not argue that actions associated with
any of the FDCA convictions could serve to make the enhancement
applicable.
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Court to conclude that such a finding could not trigger the
enhancement simply because the patients who might inject those
medications were not themselves defrauded and only NECC's direct
customers were.
Chin argues that we can nonetheless affirm the District
Court. Chin bases that contention on a finding that the District
Court made in the course of addressing the jury's determination
that Chin did not commit the predicate acts of racketeering
activity involving second-degree murder. The finding was that
Chin did not act with "a reckless and knowing disregard of a
reasonable certainty of causing death or great bodily harm."
Chin asserts that, by finding that he did not have that
state of mind, the District Court necessarily found that he did
not act, as the enhancement requires, with a "conscious or reckless
risk of death or serious bodily injury." Thus, he argues, the
District Court necessarily found that this Guidelines enhancement
did not apply.
Here, too, the District Court's analysis turns on an
interpretation of the Guidelines and thus presents a question of
law that we review de novo. See Benítez-Beltrán, 892 F.3d at 469.
And, here, again, we agree with the government.
The District Court found that Chin did not act with a
"reckless and knowing" state of mind in disregarding a "reasonable
certainty of . . . death or great bodily harm." The sentencing
- 24 -
enhancement, however, describes the requisite mental state using
disjunctive language: the enhancement applies so long as the
defendant acted in spite of either a "conscious or reckless risk."
U.S.S.G. § 2B1.1(b)(16)(A) (emphasis added). Thus, the District
Court's finding does not foreclose the possibility that Chin's
offense involved the mental state necessary for the enhancement's
application. We therefore vacate and remand the sentence for the
District Court to assess whether any of Chin's relevant conduct,
as defined under U.S.S.G. § 1B1.3(a), "involved . . . the
conscious or reckless risk of death or serious bodily injury."
Id. § 2B1.1(b)(16).
3.
We next consider the government's challenge to the
District Court's refusal to apply a two-level enhancement that the
government requested based on its contention that Chin "knew or
should have known that a victim of the offense was a vulnerable
victim." U.S.S.G. § 3A1.1(b)(1). We also consider the
government's related challenge to the District Court's refusal to
apply an additional two-level increase, insofar as that vulnerable
victim enhancement applied, based on the government's contention
that "the offense involved a large number of" those "vulnerable
victims." Id. § 3A1.1(b)(2).
The District Court ruled that the harmed patients were
not "victims" within the meaning of either enhancement. It did so
- 25 -
because it determined -- seemingly as a matter of law -- that they
could not constitute "victims" because they were not the direct
targets of the false representations to company customers on which
the mail fraud-based convictions depended. But, reviewing this
question of Guidelines' interpretation de novo, see Benítez-
Beltrán, 892 F.3d at 469, we agree with the government that, just
as we explained in Cadden, "'[t]o come within the guidelines'
definition' of 'victim,' 'one need not be a victim of the charged
offense so long as one is a victim of the defendant's other
relevant conduct,'" ___ F.3d at ___ [slip op. at 75] (alteration
in original) (quoting United States v. Souza, 749 F.3d 74, 86 (1st
Cir. 2014)).
The "relevant conduct" that the Guidelines hold Chin
accountable for engaging in includes, as noted, any action he took
during the commission of mail fraud. If, for instance, Chin failed
to comply with appropriate safety procedures in compounding the
fatal lots of MPA, the patients who died from being injected with
those lots could potentially be "victims" of his offense. Thus,
the District Court erred in concluding that only individuals who
received fraudulent representations from NECC could be "vulnerable
victims" for the purpose of the enhancements at issue.
Chin nonetheless urges us to affirm the District Court's
decision not to apply these enhancements on an alternative ground.
He argues that the patients, even if "victims," are not
- 26 -
"vulnerable" ones. But, because the District Court ruled that the
patients could not be victims at all, it has not yet addressed the
question. Thus, as in Cadden, we leave it for the District Court
to address the issue in the first instance on remand. See ___
F.3d at ___ [slip op. at 76].
In doing so, we pass no judgment on whether Chin's
relevant conduct actually justified the application of the
enhancement. We thus leave it to the District Court in the first
instance to address, among other things, whether his actions were
analogous to those of a fraudster who "market[s] an ineffective
cancer cure," who the Guidelines indicate would merit the
enhancement, U.S.S.G. § 3A1.1 cmt. n.2, and whether the fact that
medical providers, not the patients themselves, dealt with NECC
directly affects the patients' status as "vulnerable."7
4.
The government's last challenge to Chin's prison
sentence concerns the District Court's refusal to apply the
enhancement set forth in U.S.S.G. § 3B1.1. That enhancement
increases the offense level of the defendant based on the
defendant's "role in the offense." Id.
7 The government does not argue that any conduct associated
only with his convictions on the FDCA counts could require the
application of the vulnerable victims enhancement.
- 27 -
At sentencing, the government argued that Chin was "an
organizer or leader of a criminal activity that involved five or
more participants" and that his offense level thus should be
increased by four levels. Id. § 3B1.1(a). The District Court
found at sentencing, however, that Chin was only "a supervisor or
manager" of such an activity, "but not an organizer or leader."
See id. § 3B1.1(b). Accordingly, it increased his offense level by
only three.
The District Court reasoned as follows:
The organizer and leader of the enterprise was
Barry Cadden. Consequently, he was given the
full four-point upward adjustment. That
description does not, however, apply to Mr.
Chin. Rather, the evidence established at
trial, as the government accurately states on
page 12 of its sentencing memorandum, that Mr.
Chin was "the supervisory pharmacist at NECC
who managed both of NECC's cleanrooms."
The government contends that the District Court erred by
concluding that Chin could not have been a "leader" or "organizer"
because Cadden had already filled such a role and because of Chin's
title as "supervisory pharmacist." Our review is de novo. See
Benítez-Beltrán, 892 F.3d at 469.
The government is right that "[t]here can . . . be more
than one person who qualifies as a leader or organizer of a
criminal association or conspiracy." U.S.S.G. § 3B1.1 cmt. n.4.
The government is also correct that, in conducting the leader-
organizer analysis, "titles such as 'kingpin' or 'boss' are not
- 28 -
controlling." Id. Thus, to the extent that the District Court
relied only on Chin's title and Cadden's leadership role at NECC
in determining that Chin was neither a "leader" nor an "organizer,"
we agree with the government that the District Court's approach
was erroneous.
Chin urges us to conclude, however, that the District
Court in the relevant passage at sentencing was referring to
"evidence" other than Chin's title and Cadden's place at the top
of the NECC hierarchy. But, while we may affirm the District
Court's application of an enhancement where we can infer its
reasoning based on "what was argued by the parties or contained in
the pre-sentence report," United States v. Sicher, 576 F.3d 64, 71
(1st Cir. 2009) (quoting United States v. Hoey, 508 F.3d 687, 694
(1st Cir. 2007)), we are unable to do so here.
The District Court did not indicate its agreement with
the theory that Chin advances on appeal, which is that Chin "had
no ultimate decision-making authority" because he took all of his
actions "at Cadden's direction." The record also includes evidence
supportably showing that Chin directed other NECC workers to
prepare medications in ways that the government alleges were
incompatible with representations made by NECC. See United States
v. Carrero-Hernández, 643 F.3d 344, 350 (1st Cir. 2011) ("[T]he
defendant must have exercised some degree of control over others
involved in the commission of the offense or he must have been
- 29 -
responsible for organizing others for the purpose of carrying out
the crime." (quoting United States v. Fuller, 897 F.2d 1217, 1220
(1st Cir. 1990))). The District Court's description of Chin's
conduct as "supervisory" in nature, moreover, is not itself
preclusive of a finding that, in performing his supervisory duties,
Chin took on the role of an "organizer" within the meaning of the
enhancement. Nor does the pre-sentence report prepared by the
United States Office of Probation and Pretrial Services shed any
light on the District Court's thinking; that report concluded that
Chin was either an organizer or a leader.
Thus, "[g]iven the impact that a possible error would
have had on the sentence and the need for further clarification
before we can determine whether an error occurred," United States
v. Lacouture, 835 F.3d 187, 191-92 (1st Cir. 2016), we decline to
affirm the District Court's ruling on the ground Chin proposes.
Instead, "we think the wisest course here is to follow our
occasional practice" of vacating and "remanding the matter to the
district court" in light of the lack of clarity about the basis
for the District Court's ruling. Id.
5.
In light of the issues we have identified with the
treatment of three enhancements, the District Court may find on
remand that application of one or more of these enhancements is
warranted and that recalculation of Chin's sentencing range is
- 30 -
necessary. If it does, then the District Court may of course in
imposing a final sentence consider the parties' arguments about
how the traditional concerns of sentencing play out given the
modified range. Even if the District Court must reconsider its
analysis in these respects, though, we are not thereby inviting
the District Court to revisit other conclusions it reached in
calculating Chin's sentencing range under the Guidelines that are
not affected by our decision today. Thus, aside from the three
enhancements the District Court failed to give a legally adequate
rationale for declining to apply, the District Court may not on
remand reconsider its initial determinations about whether any
adjustments to Chin's total offense level are or are not
applicable.
B.
We next consider the government's challenge to the
forfeiture order. The government does so on the ground that it
rested on an unduly limited view of the amount of funds that could
be subject to forfeiture.
Due to his racketeering and racketeering conspiracy
convictions, Chin was required to forfeit "any property
constituting, or derived from, any proceeds which [he] obtained,
directly or indirectly, from racketeering activity." 18 U.S.C.
§ 1963(a)(3). At sentencing, the District Court agreed with the
government's contention that Chin's salary from NECC provided an
- 31 -
appropriate starting point for the forfeiture calculation and held
that Chin's earnings from March of 2010 to October of 2012 were
subject to forfeiture. That was the period during which NECC,
according to the District Court, was operating as a "criminal
enterprise."8
Chin earned $473,584.50 in salary over this period of
time. The District Court did not require Chin to forfeit this
full amount, however. Instead, the District Court limited the
forfeiture order to $175,000. The government contends that neither
of the two reasons that the District Court gave for limiting the
forfeiture order in that way -- one of which was statutory, and
one of which was constitutional -- is sustainable. We agree.
1.
The District Court first explained that Chin could not
be required to forfeit his full salary because he never "obtained"
proceeds that were paid as taxes to the United States Treasury
within the meaning of 18 U.S.C. § 1963(a)(3). The District Court
indicated that, if this reason had been the sole one for reducing
the size of Chin's forfeiture order, then it would have reduced
8
The government had requested that Chin be required to
forfeit his salary over a longer period of time, stretching back
to 2006. On appeal, the government does not challenge the District
Court's finding that the relevant period was from March of 2010 to
October of 2012.
- 32 -
the forfeiture amount from $473,584.50 to $348,084.60 rather than
to the amount of $175,000 to which it ultimately reduced it.
To the extent this question presents one of law, our
review is de novo. See United States v. Ponzo, 853 F.3d 558, 589
(1st Cir. 2017). But, "to the extent factual issues are
intermingled, [we] consider mixed questions of law and fact under
the more deferential clear error standard." Id.
As we explained in Cadden, see ___ F.3d at ___ [slip op.
at 81], a defendant convicted of racketeering must forfeit property
even when "it has merely been held in custody by that individual
and has been passed along to its true owner," United States v.
Hurley, 63 F.3d 1, 21 (1st Cir. 1995). Thus, the fact that the
offender is required to pay a certain portion of his salary to the
federal government as taxes does not affect the fact that he
"obtained" that portion.
The District Court expressed concern that, because Chin
was forced to forfeit money that he had already paid in federal
taxes, he was "being asked, in effect, to pay his taxes twice."
But, the purpose of criminal forfeiture -- unlike a federal tax
-- is to punish a racketeering offender. See United States v.
Bajakajian, 524 U.S. 321, 332 (1998) (noting that "in personam,
criminal forfeitures . . . have historically been treated as
punitive"); Hurley, 63 F.3d at 21 (viewing "criminal forfeiture
[for racketeering] as a kind of shadow fine," where "the size of
- 33 -
the amount transported is some measure of the potential harm from
the transaction"). Under our established precedent, an in personam
forfeiture order against a racketeering offender is based on the
gross amount of proceeds he acquires, even temporarily, and it is
thus entirely unremarkable that such a forfeiture order may exceed
the net amount of the offender's ill-gotten gains. See Hurley, 63
F.3d at 21. Thus, the District Court's taxes-based reason for
reducing the amount of Chin's "proceeds" is not sustainable.
2.
The District Court's other reason for reducing the size
of Chin's forfeiture order was to avoid an "excessive fine" in
violation of the Eighth Amendment of the federal Constitution.
See U.S. Const. amend. VIII ("Excessive bail shall not be required,
nor excessive fines imposed, nor cruel and unusual punishments
inflicted."). The District Court acknowledged that Chin and his
wife had a net worth of about $423,000 and that the couple had
spent almost $700,000 in the sixteen months prior to the entry of
the forfeiture order. Nevertheless, the District Court noted the
costs that Chin would face in raising his two young children and
also concluded that Chin had little prospect of earning a
professional-level salary again, given his lack of an education
outside of the pharmaceutical industry. The District Court on
that basis found that imposing the nearly half-a-million dollar
forfeiture would unconstitutionally deprive Chin of the ability to
- 34 -
earn a livelihood in violation of the Excessive Fines Clause. See
Bajakajian, 524 U.S. at 335-36 (1998).
"The factual findings made by the district courts in
conducting the excessiveness inquiry . . . must be accepted unless
clearly erroneous." Id. at 336 n.10. But, we review the question
of whether those facts add up to a constitutional violation de
novo. Id.
The government offers a variety of arguments for why the
Eighth Amendment does not require the cap imposed by the District
Court. We need focus on only its final one, in which it contends
that the District Court's findings do not suffice to show that the
full forfeiture amount sought by the government would deprive Chin
of the ability to earn a livelihood that the Eighth Amendment
limitation on excessive fines protects.
In United States v. Levesque, 546 F.3d 78 (1st Cir.
2008), we considered a challenge to a forfeiture order of more
than $3 million by a defendant who claimed to have "nothing of
value left to forfeit." Id. at 80. Without suggesting that the
defendant herself might have a meritorious Eighth Amendment
challenge to the size of her forfeiture order, we stated that it
was not "inconceivable that a forfeiture could be so onerous as to
deprive a defendant of his or her future ability to earn a living,
thus implicating the historical concerns underlying the Excessive
Fines Clause," and remanded for further proceedings. Id. at 85.
- 35 -
As the District Court itself noted, however, Levesque
made clear that "a defendant's inability to satisfy a forfeiture
at the time of conviction, in and of itself, is not at all
sufficient to render a forfeiture unconstitutional." 546 F.3d at
85. Levesque also stressed that, "even if there is no sign that
the defendant could satisfy the forfeiture in the future, there is
always a possibility that she might be fortunate enough to
legitimately come into money." Id. (quotations omitted).
As Levesque recognizes, the bar for a forfeiture order
to be unconstitutionally excessive on livelihood-deprivation
grounds is a high one. The District Court's findings about Chin's
net worth, familial obligations, and inability to earn a
professional-level salary simply are not sufficient to ground a
determination that the full forfeiture order sought by the
government would constitute the type of "ruinous monetary
punishment[]" that might conceivably be "so onerous as to deprive
a defendant of his or her future ability to earn a living" and
thus violate the Eighth Amendment's Excessive Fine Clause. Id. at
84-85. Nor has Chin identified any authority to suggest otherwise.
Cf. United States v. Sepúlveda-Hernández, 752 F.3d 22, 37 (1st
Cir. 2014) (rejecting a challenge to a $1 million forfeiture order
on plain error review); United States v. Aguasvivas-Castillo, 668
F.3d 7, 16-17 (1st Cir. 2012) (rejecting a challenge to a $20
million order on plain error review); United States v. Fogg, 666
- 36 -
F.3d 13, 17-20 (1st Cir. 2011) (reversing a District Court's
determination that issuing a $264,000 forfeiture order to a
defendant who was deeply in debt would be unconstitutional).
Accordingly, we vacate the forfeiture order and direct the District
Court to enter a forfeiture order in the full amount sought by the
government.
C.
We come, then, to the last of the government's
challenges. Here, the government takes aim at a conclusion reached
by the District Court in calculating Chin's restitution
obligation.
Chin was convicted of an offense "committed by fraud or
deceit." 18 U.S.C. § 3663A(c)(1)(A)(ii). The Mandatory Victims
Restitution Act ("MVRA") thus required the District Court to order
Chin to "make restitution to the victim[s] of the offense or . . .
[their] estate[s]." Id. § 3663A(a)(1).
In a preliminary order, the District Court found that
the only "victims" entitled to restitution were the "medical
facilities who purchased drugs from NECC," but that "the patients
who were adversely affected by NECC's drugs" were "not 'victims'
. . . under the MVRA's statutory definition." The District Court
noted that the "sine qua non of mail fraud" is a scheme to "obtain[]
money or property by means of false or fraudulent pretenses,
representations, or promises" transmitted to some recipient, see
- 37 -
18 U.S.C. § 1341, and reasoned that NECC's "misrepresentations"
were made "to the hospitals and clinics that purchased the drugs,"
not to "end-users and patients." Thus, the District Court declined
to require Chin to pay restitution to patients or insurance
companies. It instead deferred calculation of the final
restitution amount and thus the imposition of a final order
containing that amount until the completion of the trials of Chin's
co-defendants. The District Court did indicate, however, as part
of Chin's criminal judgment, that restitution to hospitals and
clinics would be mandatory.
The government challenges the District Court's narrow
construction of who counts as a "victim."9 We review factual
findings underlying a restitution order for clear error and legal
9 Under our established precedent, we treat a restitution
order as an appealable final judgment even when it does not
indicate the amount of restitution. See United States v. Cheal,
389 F.3d 35, 51 (1st Cir. 2004) (citing 18 U.S.C. § 3664(o)). Two
Supreme Court precedents have subsequently addressed the
appealability of a restitution calculation in a deferred
restitution scenario such as this one, see Manrique v. United
States, 137 S. Ct. 1266, 1270-72 (2017); Dolan v. United States,
560 U.S. 605, 616-18 (2010), but neither of them purports to make
a holding about the jurisdiction of appellate courts to hear
appeals of preliminary restitution orders, see Manrique, 137 S.
Ct. at 1271; Dolan, 560 U.S. at 617-18. No party, however, asks
us to conclude from the subsequent Supreme Court precedent that
this is the rare case in which we may depart from prior Circuit
precedent based on new developments. We thus stick to the law of
the circuit as articulated by Cheal, under which we have
jurisdiction to consider the government's appeal, notwithstanding
that the amount of restitution has not been specified.
- 38 -
conclusions de novo. See Soto, 799 F.3d at 97. The final order
is reviewed for abuse of discretion. Id.
The MVRA defines "victim" as "a person directly and
proximately harmed as a result of the commission of an offense for
which restitution may be ordered." 18 U.S.C. § 3663A(a)(2). When
an offense "involves as an element a scheme, conspiracy, or pattern
of criminal activity," like Chin's mail fraud and racketeering-
related convictions, see id. §§ 1341, 1963(c), 1963(d), "any
person directly harmed by the defendant's criminal conduct in the
course of the scheme, conspiracy, or pattern" is a victim. Id.
§ 3663A(a)(2).
We disagree with the District Court's conclusion that
patients and insurers were, as a matter of law, not "victims"
within the scope of the MVRA. The restitution analysis focuses on
the causal relationship "between the conduct and the loss," not
between the nature of the statutory offense and the loss. United
States v. Cutter, 313 F.3d 1, 7 (1st Cir. 2002) (emphasis added)
(quoting United States v. Vaknin, 112 F.3d 579, 590 (1st Cir.
1997)); see also Robers v. United States, 572 U.S. 639, 645 (2014)
(focusing on the relationship between "the harm alleged" and the
defendant's "conduct" (quoting Lexmark Int'l, Inc. v. Static
Control Components, Inc., 572 U.S. 118, 133 (2014))). This
approach to the "victim" analysis tracks the language of the
statute, as it focuses on whether the victim was "harmed as a
- 39 -
result of the commission of an offense" or "by the defendant's
criminal conduct in the course of [a] scheme, conspiracy, or
pattern [of criminal activity]." 18 U.S.C. § 3663A(a)(2)
(emphasis added).
Chin nonetheless argues that we must affirm the District
Court's ruling for the following reason. The "directly and
proximately" language of the MVRA incorporates "a proximate cause
requirement." Robers, 572 U.S. at 645 (discussing 18 U.S.C.
§ 3663A(a)(2)). In assessing whether that requirement has been
satisfied, we ask "'whether the harm alleged has a sufficiently
close connection to the conduct' at issue." Id. (quoting Lexmark
Int'l, Inc., 572 U.S. at 133); see also Cutter, 313 F.3d at 7
("[R]estitution is inappropriate if the conduct underlying the
conviction is too far removed, either factually or temporally,
from the loss."). Put otherwise, the statute asks, "was the harm
foreseeable?" Soto, 799 F.3d at 98.
Chin contends that the District Court made a factual
finding about the lack of proximate causation, which he would have
us review under the deferential "clear error" standard and sustain.
We see no indication, however, that the District Court made such
a proximate cause finding. It rooted its conclusion that the
patients were not "victims" on its reading of the mail fraud
statute, and its determination that the "sine qua non" of mail
fraud identified the direct recipients of fraudulent
- 40 -
representations as the sole "victims" of such fraud. It thus did
not attempt to evaluate the "factual[] or temporal[]" link between
"the conduct underlying the conviction" and "the loss." Cutter,
313 F.3d at 7.
The District Court did at one point state:
To the extent that patients may have
implicitly relied on NECC's representations by
relying on their doctors as learned
intermediaries, this additional layer of
insulation between NECC and the patient
further renders any such reliance "too
attenuated" to satisfy the "direct causation"
standard of the MVRA. See Cutter, 313 F.3d at
7.
But, the District Court invoked this attenuation concern
only to respond to the government's contention that the patients
indirectly relied on NECC's representations such that they
themselves were defrauded. We thus do not take the District Court
to have engaged in a proximate cause analysis of whether the harm
that would flow to the patients from Chin's conduct was
foreseeable. Accordingly, we vacate and remand the restitution
order.
IV.
We affirm Chin's convictions and vacate and remand his
sentence, forfeiture order, and restitution order.
- 41 -