United States v. Mutuc, Ernesto G. ( 2003 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-1116
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
ERNESTO MUTUC,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 01 CR 405—David H. Coar, Judge.
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ARGUED SEPTEMBER 19, 2003—NOVEMBER 21, 2003
____________
Before BAUER, RIPPLE, WILLIAMS, Circuit Judges.
BAUER, Circuit Judge. Defendant-Appellant Ernesto
Mutuc appeals his conviction and resulting sentence for
having committed bankruptcy fraud. He argues ineffective
assistance of counsel, failure to properly instruct the jury,
and an erroneous sentence calculation. We affirm Mutuc’s
conviction and sentence.
I. BACKGROUND
In 1994, Mutuc’s marriage ended in divorce. Under the
divorce decree, Mutuc’s former wife, Julie Kanealy, received
2 No. 03-1116
alimony, child support, the marital domicile, and the funds
within Mutuc’s 401(k). The 401(k) funds, approximately
$36,000 as of May 2, 1994, were to be used in paying the
marital debts. Kanealy failed to pay the creditors.
The divorce proceedings also provided for reciprocal re-
leases and indemnity agreements for the spousal debts
occurring after October 1, 1992. Nevertheless, in 1998
James B. Pritikin, Kanealy’s divorce attorney, obtained a
judgment for attorney’s fees against Mutuc for $9,812.50.
Shortly thereafter, Mutuc filed for bankruptcy, represented
by attorney George Jonscher.
Mutuc, through Jonscher, filed a Chapter 7 bankruptcy
petition in the Northern District of Illinois on April 4, 1998.
Mutuc stated that his total secured debt amounted to
$51,427, his monthly income was $1,560.28, and his
monthly expenses were $3,463.70. More importantly, Mutuc
claimed that he owned no real estate, had a limited number
of stock options from his former employer, and had a
checking account with Mid-Town Bank with a balance of
zero. He also claimed his money market account at North-
ern Trust was closed in November of 1997 when he gave the
final balance of $15,914.43 to his sister.
Essentially, Mutuc claimed that he had no assets or
money to satisfy debts that equaled approximately $80,000.
The bankruptcy court granted Mutuc a discharge of his
debts. It later became apparent that much of this informa-
tion was false.
Mutuc’s stated reason for filing for bankruptcy was to
force his ex-wife to pay the marital debts. In doing so, he
badly misrepresented his net worth. The facts show, among
other things, that Mutuc concealed various bank accounts
and stock options, that he concealed his ownership of real
property and failed to disclose the transaction in which he
obtained the property, and that he misrepresented his gross
No. 03-1116 3
income. Many of these false statements were made in
documents filed in the bankruptcy court and others given
orally while under oath.
At some point during an August 27, 1998 deposition
regarding the dischargeability of Pritikin’s attorney’s fees,
Mutuc admitted to being the true owner of the real property
mentioned above. Pritikin then informed the office of the
United States Attorney that Mutuc had committed bank-
ruptcy fraud.
The government charged Mutuc with one count of filing a
bankruptcy petition in furtherance of a scheme to defraud,
18 U.S.C. § 157; two counts of making false statements,
under penalty of perjury, 18 U.S.C. § 152(3); and one count
of making a false oath or account in a bankruptcy case, 18
U.S.C. § 152(2). After a six day jury trial, Mutuc was found
guilty as charged and sentenced to twenty three months’
imprisonment, three years’ supervised release, and fined
$4,000. This appeal followed.
II. DISCUSSION
A. Ineffective Assistance of Counsel
Mutuc takes issue with the representation he received
during the divorce proceedings and bankruptcy proceedings,
by attorney Jonscher, and the criminal trial, by attorney
James Fennerty.
In an attempt to show ineffective assistance of counsel,
Mutuc points to Jonscher’s representation during the
bankruptcy proceedings. Jonscher was not Mutuc’s attorney
for the criminal proceedings and there is no constitutional
right to a competent attorney in civil proceedings.
Mutuc also argues that Fennerty, his trial counsel, was
ineffective; that Fennerty’s weak grasp of bankruptcy law
made him incompetent to deal with the issues in the crim-
4 No. 03-1116
inal case. Specifically, he points to Fennerty’s examination
of Jonscher, his failure to secure a particular jury instruc-
tion, his poor relationship with Mutuc, and his failure to file
motions in limine or to object to certain evidence introduced
by the government as demonstrations of incompetency.
Mutuc claims that Fennerty’s examination of Jonscher
was “lacking” and that he was incompetent to deal with the
various bankruptcy issues involved in the criminal case. On
the contrary, Fennerty’s examination elicited responses that
tended to show that Jonscher either was intimately famil-
iar, or should have been intimately familiar, with Mutuc’s
assets. He brought out the fact that Jonscher was not a
regular bankruptcy attorney and that he filed only a few
bankruptcy cases a year. He brought out that Jonscher was
aware of certain assets in which Mutuc had an interest that
were not mentioned in the bankruptcy proceedings. Finally,
he noted that Jonscher was receiving only a small fee for
his work related to the bankruptcy proceedings. In short,
Fennerty’s examination of Jonscher supported the defense’s
theory of the case. The examination arguably centered on
showing Jonscher’s failure to properly guide Mutuc, a
reasonable trial strategy when taken as support for Mutuc’s
argument that he relied on the advice of Jonscher when
filing for bankruptcy. The examination did not fall below
the objective standard of reasonableness as set out in
Strickland. Strickland v. Washington, 466 U.S. 668, 688
(1984).
As to Fennerty’s failure to obtain the “good faith” jury
instruction, a defendant “is not entitled to a specific good
faith instruction . . . so long as, considering the instructions
as a whole, the jury was adequately instructed upon his
theory of defense.” United States v. Given, 164 F.3d 389, 394
(7th Cir. 1999). Here, the jury had to find that Mutuc had
an intent to defraud. It is self-evident that one with an
intent to defraud does not act in good faith.
No. 03-1116 5
The irreconcilable differences between Mutuc and
Fennerty do not support a finding of ineffective assistance
of counsel. The Sixth Amendment does not guarantee a
friendly and happy attorney-client relationship. Morris v.
Slappy, 461 U.S. 1, 14 (1983). The fact that Fennerty and
Mutuc did not get along does not translate into an inability
of Fennerty to zealously defend his client; it does not mean
that “the objectives of representation could not be fulfilled.”
(Br. of Def-Appellant at 25.) Mutual admiration societies
are not constitutional guarantees and conclusory state-
ments that Fennerty “took a dive” shows antagonism
toward the lawyer but, without more, does not show antag-
onism from the lawyer toward the client.
Mutuc also points to his trial counsel’s failure to file mo-
tions in limine in order to bar the introduction of what he
claims was expert testimony as further examples of inef-
fective assistance of trial counsel. Assuming arguendo that
the evidence was expert testimony, the claim still fails to
meet the prejudice prong of Strickland.
It is clear that, if required, the two witnesses would
have been qualified as experts in their fields under Federal
Rule of Evidence 702. The first witness merely explained a
business record generated by her department at the de-
fendant’s former place of employment. The second wit-
ness, Pritikin, an experienced divorce attorney, essentially
explained the nuances of divorce proceedings. The com-
plained-of evidence was relevant and not overly prejudicial.
Therefore, filing a motion to exclude such expert testimony
would have been fruitless.
Moreover, the Tenth Circuit has said “[c]onsidering that
a motion in limine is sought to aid counsel in formulating
his trial strategy, the decision regarding whether to file
such a motion is clearly part of the process of establishing
trial strategy.” Jones v. Stotts, 59 F.3d 143, 146 (10th Cir.
1995). Because there is a strong presumption that strategy
6 No. 03-1116
decisions are sound and Mutuc offers nothing to overcome
this presumption, his argument fails the performance prong
of Strickland as well. Strickland, 466 U.S. at 690.
Finally, Mutuc argues that trial counsel should have
objected to witness Pritikin’s testimony regarding divorce
fraud. The simple fact is that he did object and the objection
was sustained.
In summary, none of the arguments forwarded by Mutuc
warrant any remedy. As explained in detail by the above
discussion, the defendant’s right to effective assistance of
counsel was not violated.
B. Failure to Properly Instruct The Jury
Mutuc claims that the trial court erred by refusing to
instruct the jury on “good faith.” As the government cor-
rectly asserts, it is unclear whether the defendant takes
issue with a failure to give: 1) the tendered instruction, 2)
the Cheek instruction1, or 3) a good-faith reliance on advice-
of-counsel instruction. Nevertheless, defendant was not
entitled to any of them.
A district court’s refusal to give a tendered theory of
defense jury instruction is reviewed de novo. United States
v. Irorere, 228 F.3d 816, 825 (7th Cir. 2000). Where there is
no objection raised to a refusal to give a particular instruc-
tion we review for plain error only. Id. Where an instruction
has not been tendered, we likewise review for plain error.
A defendant is entitled to have the jury consider any
theory of defense supported by law and evidence. United
States v. Kelley, 864 F.2d 569, 572 (7th Cir. 1989). However,
this does not mean that a defendant is entitled to any
1
An instruction dealing with tax cases where willfulness is at
issue. United States v. Cheek, 3 F.3d 1057, 1063 (7th Cir. 1993).
No. 03-1116 7
particular jury instruction. To be entitled to a particular
theory of defense instruction, the defendant must show the
following: 1) the instruction is a correct statement of the
law, 2) the evidence in the case supports the theory of
defense, 3) that theory is not already part of the charge, and
4) a failure to provide the instruction would deny a fair
trial. United States v. Chavin, 316 F.3d 666, 670 (7th Cir.
2002).
The only instruction which was formally tendered to the
court was entitled, “Good Faith” and comes from the
Federal Criminal Jury Instructions of the Seventh Circuit
section 6.10. Mutuc’s submitted instruction reads as follows:
Good faith on the part of the defendant is inconsistent
with intent to defraud, an element of Count 1 of the in-
dictment. The burden is not on the defendant to prove
his good faith; rather, the government must prove be-
yond a reasonable doubt that the defendant acted with
intent to defraud.
(R. on Appeal at 43.)
The district court refused to give the instruction to the
jury, noting that good faith was a “straw man.” The judge
continued:
You erect the straw man good faith and then you say,
“The burden is not on us to prove the straw man.” The
burden is on the government—I will instruct the jury
that the burden is on the government to show intent to
defraud.
(Tr. 671.)
Clearly, the district court believed, as do we, that the gist
of the proposed instruction was already part of the charge.
The instructions that were ultimately given to the jury
uniformly required the jury to find that the defendant com-
8 No. 03-1116
mitted the relevant acts “knowingly” and “fraudulently.”
(Tr. 866-68.) The instructions defined “fraudulently” as an
act “done with intent to deceive . . . .” (Tr. 869.) Both
common sense and common law require us to find that “an
action taken in good faith is on the other side of an action
taken knowingly.” United States v. Koster, 163 F.3d 1008,
1012 (7th Cir. 1998). In other words, it is impossible to in-
tend to deceive while simultaneously acting in good faith.
Mutuc also argues that he was entitled to the Cheek
instruction, found at section 6.11 of the Federal Criminal
Jury Instructions of the Seventh Circuit. This instruction
was never formally tendered and is inappropriate for bank-
ruptcy fraud cases. It clearly does not apply to Mutuc’s case.
Mutuc seeks a new trial because the jury was not given a
good-faith reliance on counsel instruction. He characterizes
the instruction as one which “charges the jury that a
defendant may be found not guilty if the jury believes that
[the defendant] acted in good faith reliance on the advice of
his attorney.” (Br. of Def.-Appellant at 26.) It is clear that
the requested instruction, which was never tendered to the
court, was inappropriate. Assuming arguendo that Jonscher
told Mutuc to lie under oath, this advise cannot support a
defense to perjury. The instructions tendered to the jury
treated the issues fairly and accurately and they will not be
disturbed on appeal. United States v. Cheek, 3 F.3d 1057,
1064 (7th Cir. 1993), (citing United States v. Thibodeaux,
758 F.2d 199, 202 (7th Cir. 1985)).
C. Adjustment for Intended Loss
Mutuc argues that the trial court erred by enhancing his
sentence under United States Sentencing Guideline
§ 2B1.1. He claims that the loss should be calculated at zero
dollars because he intended to force his former wife to pay
No. 03-1116 9
the debt, as was required by their divorce and because, he
says, he intended no loss be visited upon his creditors. The
argument is unpersuasive.
A district court’s calculation of the intended loss is re-
viewed for clear error. United States v. Smith, 332 F.3d 455,
457 (7th Cir. 2003). The application of that fact to the
Sentencing Guideline is then reviewed de novo. Id.Under U.S.S.G. § 2B1.1(b) loss is to be calculated as
the greater of “actual loss” or “intended loss.” U.S.S.G.
§ 2B1.1, application Note 2(A). This court has held that the
proper loss calculation in bankruptcy fraud cases is the
amount of the debt that the defendant sought to discharge
in bankruptcy. United States v. Holland, 160 F.3d 377, 381
(7th Cir. 1998).
Defendant argues that “the relevant understanding of
values for the purposes of determining the intended loss
under the sentencing guidelines is that of the criminal, not
that of the victim.” (Br. of Def.-Appellant at 35-36) (quoting
United States v. Fearman, 297 F.3d 660, 661 (7th Cir.
2002). We agree with defendant that his state of mind is the
relevant benchmark. He states that his “intention was to
force his ex-wife to honor the marital settlement agreement,
reduced to judgment in the divorce court, obligating her to
pay the marital debts as agreed and ordered by the divorce
court.” But the facts show that Mutuc filed for bankruptcy
in order to discharge a debt of more than $30,000 and less
than $70,000. It is undisputed that he intended to leave the
creditors with the false impression that he had insufficient
funds to pay his debts. A successful discharge in bankruptcy
would have left the creditors without recourse against
Mutuc; it follows that Mutuc intended a loss equal to the
amount to be discharged in bankruptcy. While Mutuc may
have intended that his creditors be paid, his overall intent
was that he would not be the one to pay. The adjustment
will stand.
10 No. 03-1116
D. Adjustment for Perjury
Defendant asks that the two-level adjustment under
U.S.S.G. § 3C1.1 for perjury be vacated. He says that the
government failed to abide by the district court’s standing
order governing objections to the presentence investigation
report and the district court failed to specify particular
instances of perjury. Neither of these arguments are bourne
out by the record.
The first portion of Mutuc’s argument complains that the
government failed “to abide by the District Court’s standing
order requiring the Defendant to be provided notice of what
statements would be used against him.” (Reply Br. of
Appellant at 13.)
In an order entitled, “Order Governing Objections to the
Presentence Investigation Report and Motions for Depar-
ture from the Sentencing Range Under the Guidelines,” the
district court imposed the following requirements:
As to any factual matters contained in the presentence
report which are disputed, the party who objects to the
facts as contained in the report shall file a written ob-
jection/correction . . . . A copy of the objection/correction
shall be served on opposing counsel and the defendant.
(R. on Appeal at 50.) A similar instruction was given for
objections to the calculations made by the probation officer.
The government filed no objection/correction to the
presentence investigation report’s treatment of the obstruc-
tion of justice enhancement.
The presentence investigation report, in relevant part,
says:
This officer was not present at court during trial and
therefore, cannot determine whether the defendant
No. 03-1116 11
willfully provided false testimony to constitute “mate-
rial” matter that, if believed, would tend to influence or
affect the issue under determination. In addition, this
officer has not reviewed a copy of the transcript of the
defendant’s testimony. Therefore, the probation depart-
ment does not have sufficient information to determine
whether defendant gave false testimony and whether
that testimony would meet the criteria for obstruction
of justice, pursuant to § 3C1.1. Therefore, this officer
will defer to the Court’s interpretation of the defen-
dant’s testimony to determine whether the two-level
enhancement is applicable.
(R. on Appeal 83.)
From the two passages above, it is clear that the govern-
ment did not violate the standing order of the district court.
The presentence investigation report did not make a factual
finding or calculation to which the government could object.
The defendant’s argument on this issue is meritless.
A related argument is Mutuc’s claim that the government
failed to notify him of its intention to seek an adjustment
under U.S.S.G. § 3C1.1. This is simply untrue. The govern-
ment’s intention to seek the adjustment is stated on the
eighth page of the “Government’s Version of the Offense”
and within the presentence investigation report itself. (R.
on Appeal 83.) Mutuc even objected to the recommendation
for adjustment on the fourth page of his “Supplemental
Objection to Government Presentence Report.” (R. on
Appeal 76.) Mutuc was clearly informed that a decision was
contemplated. See United States v. Jackson, 32 F.3d 1101,
1106 (7th Cir. 1994) (quoting Mullane v. Central Hanover
Bank & Trust Co., 339 U.S. 306, 314 (1950)).
Finally, Mutuc takes issue with the district court’s failure
to annunciate any specific instances of perjury when it
applied the adjustment. Instead, the judge said:
12 No. 03-1116
I have said in this case in the past that Mr. Mutuc is
one of two things. He is either a liar or he has managed
to convince himself of the truthfulness of what he says
even though it is painfully obvious to everybody it is
untrue.
....
But I don’t see how you can read the transcript in this
case and not come away with the unmistakable view
that Mr. Mutuc didn’t tell the truth. It’s obvious that
Mr. Mutuc didn’t tell the truth. If there’s anybody in
the world who believes that he was telling the truth, it’s
only Mr. Mutuc.
(Sentencing Tr. 34-35.)
Mutuc did not object to the court’s lack of specific findings
at sentencing. He claims that he did object “on substantive
and procedural grounds” by referring to his “Supplemental
Objection to Government Presentence Report.” This objec-
tion is insufficient. Because Mutuc did not object at sentenc-
ing, the issue is waived. See United States v. Wade, 114
F.3d 103, 106 (7th Cir. 1997); United States v. Krankel, 164
F.3d 1046, 1055 n.3 (7th Cir. 1998).
For the reasons stated above, we AFFIRM.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—11-21-03