United States v. Seward, Laurence ( 2001 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-1241
United States of America,
Plaintiff-Appellee,
v.
Laurence Seward,
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 97 CR 851--Blanche M. Manning, Judge.
Argued January 12, 2001--Decided November 15, 2001
Before Easterbrook, Diane P. Wood, and
Williams, Circuit Judges.
Diane P. Wood, Circuit Judge. Until his
death at age 83, Wendell O’Neal was a
boarder in Laurence Seward’s house, and,
so he may have thought, a friend of
Seward. After O’Neal died, however,
Seward proved himself to be far less than
a faithful companion. Instead, Seward
embarked on a scheme to appropriate
O’Neal’s assets. He began by forging a
number of bank signature cards and using
the cards to transfer funds from O’Neal’s
accounts into his own accounts. The
trustee of O’Neal’s estate caught on to
what was happening rather soon, but that
did not stop Seward. He promptly forged a
will in which O’Neal supposedly left his
entire estate to Seward, and he attempted
to force the forged will through probate.
Reality overtook him, however, and he was
eventually convicted of one count of bank
fraud in violation of 18 U.S.C. sec.
1344, one count of wire fraud in
violation of 18 U.S.C. sec. 1343, one
count of mail fraud in violation of 18
U.S.C. sec. 1341, and two counts of money
laundering in violation of 18 U.S.C. sec.
1957. The district court sentenced Seward
to concurrent terms of 53 months on each
count and ordered him to pay $209,050 in
restitution. Seward appeals various
aspects of his conviction and sentence.
We affirm Seward’s conviction but vacate
his sentence and remand for a new
sentencing hearing.
I
According to Seward, he and Wendell
O’Neal were long-time friends and
business partners. At the time of his
death on June 20, 1994, O’Neal was living
in a rented room in Seward’s home. O’Neal
was not in regular contact with any of
his relatives, and at the time of his
death Seward was not aware that O’Neal
had left a will. After O’Neal died,
Seward wasted no time in starting his
campaign to steal O’Neal’s assets. On the
very day O’Neal died, Seward deposited a
forged check for $65,000 drawn on
O’Neal’s account at First National Bank
of Chicago (First National) into one of
Seward’s own accounts. The next day, he
presented Bell Federal Savings Bank with
forged signature cards that purported to
change O’Neal’s individual account at
that bank into a joint account in
O’Neal’s and Seward’s names. Seward also
deposited another forged check drawn on
the First National account, this time for
$14,000, into one of Seward’s own
accounts. A few days later, on June 24,
Seward opened a joint account in his and
O’Neal’s names at Commercial National
Bank (CNB). He then called Harris Bank,
where O’Neal had a certificate of deposit
(CD), and, impersonating O’Neal, had the
bank transfer the proceeds of the CD to
the new joint account at CNB. Finally, on
June 30, Seward deposited a cashier’s
check made out to O’Neal, on which
O’Neal’s signature had been forged, into
a joint account in both their names.
At the same time he was busy
appropriating O’Neal’s money, Seward
notified O’Neal’s next of kin, three
sisters living in Texas, that O’Neal had
died. He waited until June 22 to do so,
and even then he merely sent a letter by
regular mail. O’Neal’s relatives thus
learned of O’Neal’s death on June 24. On
that date, O’Neal’s nephew, Carl Taylor,
called Seward, and Seward assured Taylor
that there was no need to rush to Chicago
because Seward was "taking care of
things." Nevertheless, Taylor arrived in
Chicago on June 28 and advised Seward
that he (Taylor) was the executor of
O’Neal’s will. After a brief
investigation into O’Neal’s finances,
Taylor uncovered Seward’s scheme and
discovered the fraudulent transfers from
O’Neal’s accounts. Through Taylor’s quick
action, the banks were able to reverse
many of Seward’s fraudulent transactions,
and the estate was able to recover all
but $79,050 of the over $260,000 of
O’Neal’s money that Seward had tried to
acquire.
When Taylor first arrived in town,
Seward expressed surprise that O’Neal had
left a will. One might have thought that
Seward would have had the sense to
abandon his effort to plunder the estate
at that point, but either greed or a lack
of good sense kept him going. Noting that
the will Taylor had filed was executed in
1983, Seward produced a competing will,
purportedly executed in 1989, in which
O’Neal left his entire estate to Seward.
Seward filed the alleged 1989 will with
the probate court, which forced Taylor
into a legal battle to defend the 1983
will. Taylor filed motions with the
probate court arguing that the 1989 will
was a forgery and seeking sanctions
against Seward for advancing the false
will. Seward filed a response in which he
swore that the 1989 will was genuine and
attached a copy of the purported will
along with several other documents, all
apparently forged, which Seward argued
demonstrated Seward’s close business and
personal relationship with O’Neal. Seward
also mailed a copy of this pleading and
the attached documents to Taylor in
Texas, and this mailing formed the basis
of the mail fraud count against
him.Ultimately, the probate court found
that the 1989 will was false, accepted
the 1983 will, and ordered Seward to pay
$105,000 in legal fees, $25,000 in
executor’s fees, and $50,000 in punitive
damages to O’Neal’s estate. This
prosecution followed in time, leading to
Seward’s convictions.
II
On appeal, Seward challenges the
sufficiency of the evidence against him
on both the mail fraud and money
laundering counts. He faces the usual
stringent standard of review: if the
evidence presented at trial, taken in the
light most favorable to the prosecution,
can support the jury’s conclusion, his
effort must fail. See United States v.
Irorere, 228 F.3d 816, 822 (7th Cir.
2000). And, as even the facts we have
already recounted suggest, this case was
not a close one for the prosecution.
To convict Seward of mail fraud under 18
U.S.C. sec. 1341, the government had to
prove (1) that the defendant participated
in a scheme to defraud; (2) that the
defendant intended to defraud; and (3)
that the defendant used the mails in
furtherance of the scheme. United States
v. Montani, 204 F.3d 761, 769 (7th Cir.
2000). Seward apparently concedes the
sufficiency of the government’s evidence
on the first two elements, but he argues
that the government did not meet its
burden of proving the third element, use
of the mails in furtherance of the
scheme.
The mail fraud count rested entirely on
Seward’s mailing of his response to
Taylor’s motions for sanctions in
theprobate court to Taylor’s home in
Texas. Seward argues that he mailed these
documents to Taylor nearly seven months
after his scheme ended, and accordingly,
that the mailing could not have been made
"for the purposes of executing the
scheme," as the mail fraud statute
requires. United States v. Castor, 558
F.2d 379, 384 (7th Cir. 1977). Seward is
correct that the mail fraud statute does
not reach every single use of the mails
that is in any way remotely related to a
scheme to defraud. See United States v.
Maze, 414 U.S. 395, 399-402 (1974). The
mailing must, at the least, be incidental
to an essential part of the scheme or be
a step in the plot. Schmuck v. United
States, 489 U.S. 705, 710-11 (1989). In
other words, the success of the scheme
must in some measure depend on the
mailing. Maze, 414 U.S. at 402. Seward’s
argument works only if the jury had to
define the scheme in question as one that
was limited to his initial withdrawals of
money from O’Neal’s accounts through the
use of the forged signature forms and
checks--an enterprise that we can assume
ended in July 1994 when Taylor discovered
it and began reversing the transactions.
The indictment was not so limited,
however: it charged O’Neal more broadly
with a fraudulent scheme that lasted from
June 20, 1994 until April 23, 1996. The
specific allegations in the indictment
covered both the efforts to withdraw mon
ey from O’Neal’s accounts and the effort
to grab the entire estate by obtaining
the probate court’s acceptance of the
forged will. When Seward mailed his
response to Taylor’s motion for sanctions
to Taylor in Texas and attached to it the
forged will and various forged documents
purporting to show the close business and
personal relationship between O’Neal and
himself, Seward was still trying to
convince Taylor that the forged will was
legitimate and that Taylor should drop
the probate fight (and, not
coincidentally, relinquish his status as
executor of the estate). Had that effort
been successful, Seward would have
succeeded in defrauding O’Neal’s estate
out of every last cent. The jury could,
and apparently did, believe the
government’s theory as to Seward’s
intentions when he mailed the response,
and we find that the evidence of the
mailing to Texas was sufficient to
sustain Seward’s conviction for mail
fraud.
Seward also challenges the sufficiency
of the evidence against him on the two
money laundering counts. In order to
convict him of money laundering, the
government had to prove that Seward
derived property from a specified
unlawful activity and that he engaged in
a monetary transaction involving that
property. See 18 U.S.C. sec. 1957. The
transaction or transactions that created
the criminally-derived proceeds must be
distinct from the money-laundering
transaction, because the money laundering
statutes criminalize "transaction[s] in
proceeds, not the transaction[s] that
create[ ] the proceeds." United States v.
Mankarious, 151 F.3d 694, 705 (7th Cir.
1998). Seward argues that the government
did not allege that he engaged in any
money-laundering transactions that were
distinct from the bank, mail, and wire
fraud scheme that the government alleged
in the first three counts of the
indictment.
The government based the money-
laundering counts on the following facts:
On June 24, 1994, about four days after
O’Neal’s death, Seward went to CNB and
used forged signature cards to open a
joint account in his and O’Neal’s names.
Shortly after he opened the account,
Seward called Harris Bank and,
impersonating O’Neal, asked that Harris
Bank liquidate a CD that O’Neal held
there and transfer the proceeds to the
new joint account at CNB. Harris Bank
complied with the request and transferred
$84,447.27 into the CNB account. This was
the first deposit into the CNB account. A
few days later, Seward wrote two checks
on the CNB account: one for $34,000 to
pay down Seward’s home equity line of
credit, and one for $21,000 which Seward
deposited in a friend’s bank account.
Each of these checks formed the basis for
one of the money laundering counts.
These transactions demonstrate both
unlawful activity and distinct
transactions in the criminally derived
proceeds. When Seward impersonated O’Neal
and defrauded Harris Bank into
transferring O’Neal’s CD proceeds to the
CNB account, Seward committed bank and
wire fraud. That act of fraud was
complete, and Seward had control over the
proceeds of the fraud, once the money was
placed in the CNB account. The checks
Seward then wrote on the account were,
therefore, transactions in the proceeds
of the bank fraud. Seward argues that
these transactions could not be used to
support the money laundering conviction
because the government included the two
checks drawn on the CNB account in a list
set forth in the indictment of
transactions in furtherance of the mail,
wire, and bank fraud schemes. According
to Seward, the indictment language shows
that under the government’s own
conception of the case, the two checks
were a part of Seward’s fraud scheme.
Therefore, Seward reasons, those same
transactions could not also be
transactions in the proceeds of the
schemes.
This argument misunderstands the
applicable law. Although it is true that
the defendant must have control of the
proceeds of a fraudulent transaction
before he can engage in money laundering
with those proceeds, there is no
requirement that the entire fraudulent
scheme be complete before the defendant
starts laundering the proceeds from early
portions of the scheme. See United States
v. Butler, 211 F.3d 826, 830 (4th Cir.
2000) (funds are "criminally derived if
they are derived from a completed phase
of an ongoing offense"); United States v.
Morelli, 169 F.3d 798, 804 (3d Cir. 1999)
(proceeds of a completed phase of an
ongoing offense can be laundered "even if
the money laundering transaction can also
be considered a part of the continuing
specified unlawful activity"). In fact,
this court has noted that money
laundering can be a critical element in a
complex fraud scheme because it helps
keep the scheme afloat and helps disguise
the source of the fraud proceeds. See
United States v. Wilson, 98 F.3d 281,
282-83 (7th Cir. 1996). Thus, there is no
reason that the government could not have
viewed the checks drawn from the CNB
account both as Seward’s attempt to
launder the proceeds of the early,
already completed phases of his
fraudulent scheme, and as part of his
ongoing effort to defraud O’Neal’s estate
and to conceal his fraud. The evidence
was also sufficient to sustain Seward’s
conviction for money laundering.
III
Having determined that Seward has
presented no reason why his convictions
should be reversed, we turn to his
challenges to his sentence. Seward raises
three challenges to the way in which the
district court applied the Sentencing
Guidelines to his conduct. In addition,
Seward challenges the amount of
restitution the district court ordered
him to pay. We find that some of these
arguments have merit, and thus have
concluded that we must vacate the
sentence in its entirety and remand the
case for new sentencing proceedings
consistent with this opinion. In so
doing, we note that, on remand, the
district court will be writing on a clean
slate with respect to sentencing and will
be free to address all the issues
pertinent to sentencing that the parties
have briefed in this appeal as well as
any other relevant considerations not
inconsistent with this opinion. See
United States v. Young, 66 F.3d 830, 836
& n.4 (7th Cir. 1995).
A.
Seward first argues that the district
court erred in increasing his Guideline
offense level by two levels for
obstruction of justice. The Sentencing
Guidelines permit a two-level enhancement
if the defendant "willfully obstructed or
impeded, or attempted to obstruct or
impede, the administration of justice
during the investigation, prosecution, or
sentencing of the . . . offense."
U.S.S.G. sec. 3C1.1. The obstruction
enhancement is not warranted merely
because the defendant took the stand and
the jury did not believe his testimony;
the enhancement is warranted, however, if
the court finds that the defendant
committed perjury. A finding of perjury
in turn is proper if, while under oath or
affirmation, the defendant gave false
testimony concerning a material matter
with the willful intent to provide false
testimony. United States v. Dunnigan, 507
U.S. 87, 94 (1993). If the obstruction
enhancement is based on the defendant’s
perjury and the defendant objects to the
enhancement at sentencing, as Seward did,
the district court must make a finding of
obstruction of justice that encompasses
all of the factual predicates for a
finding of perjury (false testimony,
materiality, and willful intent); it is
preferable, although not absolutely
required, for the court to address each
element of the alleged perjury in a
separate and clear finding. Id. at 95;
see also United States v. Webster, 125
F.3d 1024, 1037 (7th Cir. 1997).
The district court’s findings at
Seward’s sentencing unfortunately fell
below the standards set out in Dunnigan.
Seward’s sentencing hearing took place in
two phases, separated by about three
weeks. At the first hearing, the district
court stated that Seward’s trial
testimony was "incredible" and "obviously
peppered with untruths," but ultimately
the court decided to "give [Seward] the
benefit of the doubt" and not to impose
an obstruction of justice enhancement.
The judge explained that even though
Seward’s testimony "sounded incredible to
the Court," she thought it possible that
Seward "thought he was telling the
truth," and that his testimony was
"simply contrary to the Government’s tes
timony." She therefore did not sentence
Seward at that time, choosing instead to
continue the hearing to give Seward a
chance to file a "Defendant’s Version"
explaining his view of the evidence. A
few weeks later, Seward filed his
Defendant’s Version, against the advice
of counsel. The document vehemently
reiterated Seward’s position that he and
O’Neal were business partners, that
everything he did was pursuant to
O’Neal’s wishes, and that none of the
documents he presented was forged. At the
second sentencing hearing, after reading
the Defendant’s Version, the district
court returned to the obstruction of
justice issue. This time, the court
reiterated its earlier position that it
"found much of what Mr. Seward testified
to at trial to be incredible" and that
Seward’s testimony "appeared to be
peppered with untruths." The court then
held that, although it did not make a
formal finding that Seward had lied at
the first hearing, the fact that Seward
continued to insist on his version of the
story in the Defendant’s Version
"solidifie[d]" the court’s belief that
Seward was being untruthful. Therefore,
the court stated that it was "now making
a finding of fact that [Seward] has, in
fact, and is, in fact, being untruthful."
The court based the obstruction
enhancement on this finding.
The district court’s bare holding that
Seward was "being untruthful" falls short
of even a liberal application of
Dunnigan. Although the district court’s
ruling certainly indicates that the court
found one element of perjury, false
testimony, and read generously, could
also indicate a finding that Seward’s
false testimony was willful, the district
court gave no indication that it
considered the false testimony material
to any of the matters before the court.
Indeed, although the court found that
Seward’s testimony was "peppered with
untruths," it did not identify any
particular statements it believed were
false. This makes it nearly impossible
for us to assess whether the district
court’s errors were harmless in the end,
because we cannot assess the materiality
of any of the lies the court found Seward
was telling.
This is not to say that Seward’s
sentence could not properly have been
enhanced for obstruction of justice. To
the contrary, the government presented
ample evidence of particular statements
that Seward made, both at trial and in
the Defendant’s Version, which the
government contends amount to perjury. On
remand, the district court should
consider the government’s contentions and
make the explicit findings required by
Dunnigan. If after making such findings,
the district court is convinced that an
obstruction enhancement is appropriate,
the court will of course be free to
include that enhancement in Seward’s new
sentence calculation.
B.
Seward next challenges the district
court’s calculation of the actual and
intended loss that resulted from his
scheme. The Sentencing Guideline for
fraud crimes, U.S.S.G. sec. 2F1.1, keys a
defendant’s offense level, and hence his
sentence, to the amount of loss the
defendant’s scheme, if successful, would
have caused to his victims. See U.S.S.G.
sec. 2F1.1, Application Note 8. In
addition, 18 U.S.C. sec. 3663A instructs
the district court to assess restitution
based on the amount of actual loss caused
by the defendant’s offense. See United
States v. Brierton, 165 F.3d 1133, 1139
(7th Cir. 1999). Applying these
provisions, the district court calculated
the intended loss from Seward’s scheme at
$390,558.41, which included $79,050 in
actual losses from the fraudulent bank
transactions, $181,508.41 in intended
losses from the additional fraudulent
transactions that Taylor was able to
reverse, and $130,000 in attorneys’ and
executor’s fees that the probate court
assessed against Seward after it
determined that the 1989 will was
fraudulent. The court also assessed
$209,050 in restitution to compensate
O’Neal’s estate for the $79,050 in actual
losses from the fraudulent transactions
and for the $130,000 in attorneys’ and
executor’s fees.
Seward asserts that the district court
should not have included the attorneys’
and executor’s fees in the loss
calculations. Because, as he points out,
these are consequential or incidental
damages, we agree with him that they are
not properly included in the total. In
calculating both the intended loss amount
for the Sentencing Guidelines and the
actual loss amount for restitution, the
district court should include in the
calculation all direct damages, but not
include consequential or incidental
damages. See United States v. Green, 114
F.3d 613, 618 (7th Cir. 1997) (loss
calculation); United States v. Simmonds,
235 F.3d 826, 833 (3d Cir. 2000)
(restitution); United States v.
Mikolajczyk, 137 F.3d 237, 245 (5th Cir.
1998) (same); see also United States v.
Arvanitis, 902 F.2d 489, 497 (7th Cir.
1990) (considering restitution prior to
the enactment of 18 U.S.C. sec. 3663A).
Attorneys’ fees incurred in fighting a
fraudulent scheme are properly classified
as consequential, not direct, damages, as
we held in Arvanitis, 902 F.2d at 497.
For this reason, it was clear error for
the district court to include the
attorneys’ and executor’s fees in its
calculation of the intended loss and the
restitution amount. On remand, the court
should recalculate the intended loss and
restitution amounts without reference to
these fees.
Before leaving this subject, however, we
note that we are somewhat puzzled as to
why Seward raised this issue in his
appeal, because it appears that the
district court actually calculated the
intended loss from his scheme at an
amount lower than the loss that Seward’s
scheme, if successful, would have caused.
According to the government’s version of
this case, Seward’s scheme had two
distinct phases: the fraudulent bank
transfers and the attempt to force the
1989 will through probate. We have no
quarrel with the district court’s
calculation of the intended loss from the
first phase of the scheme. We do not
understand, however, why the second phase
did not place at risk the entire estate,
given that success would have left Seward
as the sole inheritor. On remand, the
government is free to argue that the
appropriate amount of intended loss from
that portion of the scheme was the full
value of the estate; Seward may respond,
if any response is possible. The record
does not reveal the full value of
O’Neal’s estate, and it is of course
possible that that amount will turn out
to be lower than the district court’s
initial calculation. The restitution
amount should be set at the $79,050 of
actual loss that Seward caused through
the fraudulent bank transactions.
C.
Seward’s final argument is that the
district court erred in applying the
"vulnerable victim" enhancement found in
U.S.S.G. sec. 3A1.1(b) to his sentence.
Seward did not object to the vulnerable
victim enhancement at his sentencing
hearings, and the government argues that
we should therefore consider the argument
waived. The government is correct that in
some cases we have found that a defendant
who states at sentencing that he has no
objections to a presentence report has
waived any objections and cannot raise
them for the first time on appeal. See,
e.g., United States v. Staples, 202 F.3d
992, 995 (7th Cir. 2000). In other cases,
depending on the exact words used and the
circumstances, we have held that a
failure to object to a presentence report
results merely in a forfeiture of the
objections, and that we can review the
objections on appeal under a plain error
standard of review. See, e.g., United
States v. Perry, 223 F.3d 431, 433 (7th
Cir. 2000). The record here might look
more like the waiver cases than the
forfeiture cases, but as we are remanding
for full resentencing in any event and
this issue will arise again, we say a
word about it here.
The "vulnerable victim" enhancement
provided by the Guidelines reflects the
fact that some potential crime victims
have a lower than average ability to
protect themselves from crime. Those who
prey on them incur reduced risks and
costs in committing their crimes, which
necessitates a higher than average
punishment to deter the criminal
behavior. See United States v. Grimes,
173 F.3d 634, 637 (7th Cir. 1999). In
this case, the presentence report
identified two categories of vulnerable
victims. First, the report found that
O’Neal himself was a victim of the fraud,
because Seward’s fraud interfered with
O’Neal’s wishes for the disposition of
his estate. Because O’Neal was dead at
the time of the fraud, he was obviously
unable to do anything to discover or
thwart the fraud. Second, the report
noted that O’Neal’s sisters, his heirs,
were vulnerable because of their advanced
ages, the long distance between their
residences and Seward’s arena of
operations, and because they were
initially unaware that O’Neal had left a
will naming them as his beneficiaries.
The district court accepted the
recommendation in the presentence report
and found that both O’Neal and the
sisters could be considered vulnerable
victims of Seward’s fraud.
We cannot accept the idea that the
Guidelines go so far as to recognize the
deceased for purposes of the vulnerable
victim enhancement. It is the estate in
the first instance, and ultimately the
living heirs, whose interests took over
at the moment of O’Neal’s death. Although
the sisters did not have an immediate
interest in O’Neal’s assets until after
the probate court concluded its
proceedings and the assets were ready for
distribution, they were the ones who
would have been injured in the end if
Seward’s scheme had succeeded. In that
sense, we believe they can be considered
as victims of Seward’s fraud, even if the
estate was the technical victim during
probate. See United States v. McCall, 174
F.3d 47, 52 (2d Cir. 1998) (noting need
to evaluate particular characteristics of
estate to assess vulnerability).
The difficult question here is whether
we ought to be looking at the sisters,
who we are satisfied were vulnerable, or
at Taylor, who appears to have been a
competent manager of the estate. If
Taylor’s role as executor had been secure
regardless of Seward’s machinations, then
we would be inclined to say that the
sisters were too far removed from
Seward’s actions to qualify as the
immediate victims. So, for example, if
the sisters had been shareholders of a
closely held corporation and Taylor its
manager, the sisters would not be the
victims of a person trying to defraud the
company. But two reasons here persuade us
that the sisters were indeed Seward’s
intended victims for this purpose. First,
Taylor was not even on the scene between
June 20 and June 28, the date when he
arrived in Chicago. Seward had been
moving quickly and effectively, and even
though Taylor was able to undo many of
his transfers, $79,050 of loss remained
from that period. Second, as we have
stressed in other contexts for this case,
Seward’s fraud included his effort to
throw out the 1983 will, and along with
it, Taylor’s appointment as executor of
the estate pursuant to that will. Had he
succeeded in that effort, there would
have been little thereafter that the
three sisters could have done to stop him
from looting the entire estate.
For these reasons, we do not find any
clear error in the district court’s
decision that the sisters, elderly and
distant as they were, were particularly
unlikely to detect or thwart Seward’s
crime, and therefore vulnerable for
purposes of the enhancement. See United
States v. Gill, 99 F.3d 484, 486 (1st
Cir. 1996); United States v. Stewart, 33
F.3d 764, 771 (7th Cir. 1994) (elderly
may be vulnerable victims of fraud when
faced with issues of grief and
mortality). Thus, on remand, the district
court may apply the vulnerable victim
enhancement once again.
For the foregoing reasons, we Affirm
Seward’s conviction, Vacate Seward’s
sentence, and Remand the case to the
district court for resentencing
consistent with this opinion.