United States v. Boscarino, Nick S. ( 2006 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-2657
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
NICK S. BOSCARINO,
Defendant-Appellant.
____________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 02 CR 86-1—John F. Grady, Judge.
____________
ARGUED JANUARY 19, 2006—DECIDED FEBRUARY 8, 2006
____________
Before EASTERBROOK, MANION, and KANNE, Circuit
Judges.
EASTERBROOK, Circuit Judge. A jury concluded that an
insurance agency overcharged the City of Rosemont for
its services and kicked back part of the excess to Nick
Boscarino, who helped the agency secure the business.
Boscarino also helped Ralph Aulenta, one of the agency’s
managers, hide money that Aulenta had taken from the till.
To top it off, Boscarino failed to report as income much of
the ill-gotten gains and committed other tax offenses.
Aulenta pleaded guilty and testified against Boscarino, who
was convicted of mail fraud, money laundering, and tax
crimes. His sentence is 36 months’ imprisonment, 24
months’ supervised release, a $55,000 fine, restitution of
2 No. 05-2657
$288,670, special assessments of $1,700, and the costs of
prosecution, which the judge set at $4,692—for Boscarino is
the rare criminal defendant who has legitimate assets
sufficient to cover all of these monetary exactions.
Boscarino’s appellate lawyer has pursued almost every
contention that trial counsel raised and lost. The result is
that none of the issues has been developed in depth, and
strong contentions (if any) have been buried under anemic
ones. “Experienced advocates since time beyond memory
have emphasized the importance of winnowing out
weaker arguments on appeal and focusing on one cen-
tral issue if possible, or at most on a few key issues.” Jones
v. Barnes, 463 U.S. 745, 751-52 (1983). We discuss only
three of the contentions; the rest have been considered
but are too feeble to call for exposition.
Every year that Rosemont placed its insurance through a
brokerage that the parties call ABI/Acordia, Aulenta caused
the firm to write a check to a corporation that Boscarino
controlled. Though the money supposedly was a referral fee
to compensate Boscarino for his assistance in persuading
Rosemont to give ABI/Acordia the business, the check was
never made out to Boscarino. He did not deposit the funds
into the corporate accounts; instead he endorsed the checks
to Aulenta, who returned half of the amount in monthly
dollops over the coming year and kept the rest. The prosecu-
tion’s theory was that Aulenta was stealing money from
ABI/Acordia and sharing half of the takings with Boscarino,
in part for his assistance in disguising the transaction; the
brokerage did not miss the money because Aulenta simulta-
neously was overbilling Rosemont, so that ABI/Acordia’s
books balanced. A jury was entitled to find that Boscarino,
who has considerable experience in business, recognized
that these transactions had the hallmarks of fraud rather
than above-board referral fees. Corporate insiders don’t
keep half of bona fide referral fees, nor are such fees paid
No. 05-2657 3
from an insider’s personal account after such a roundabout
transaction.
Because many of the payments passed through the mails,
the indictment included a charge of mail fraud. 18 U.S.C.
§1341. And because Aulenta owed ABI/Acordia a fiduciary
duty of loyalty, the indictment alleged that one aspect of the
scheme was to defraud ABI/Acordia of Aulenta’s honest
services. 18 U.S.C. §1346. This sets up Boscarino’s chal-
lenge to his conviction for money laundering, in violation of
18 U.S.C. §1956. Section 1956 makes it a crime to engage in
financial transactions with the proceeds of “specified
unlawful activity.” That phrase, a defined term, includes
“any act or activity constituting an offense listed in section
1961(1) of this title”. 18 U.S.C. §1956(c)(7)(A). Section
1961(1) in turn refers to mail fraud, in violation of §1341,
but does not mention §1346. Because the mail fraud charge
in this case included a reference to §1346, Boscarino
contends, it cannot serve as a predicate offense for money
laundering—at least not unless the jury was instructed to
disregard the honest-services aspect of the scheme, and his
jury was not so instructed.
Whether a mail-fraud scheme that was carried out, in
part, by depriving one person of another’s honest services
may be a predicate offense for a money-laundering con-
viction is a question of first impression among the
courts of appeals. But the answer is not difficult. Section
1346 does not create a separate crime. It is a defini-
tional clause, reading in full: “For the purposes of this
chapter, the term ‘scheme or artifice to defraud’ includes a
scheme or artifice to deprive another of the intangible right
of honest services.” The scheme to defraud itself violates
§1341, which is a listed predicate offense for the money-
laundering statute.
Boscarino observes that only “proceeds” can be laundered,
and depriving one’s employer of honest services need not
4 No. 05-2657
yield “proceeds.” That’s true enough, but when the offense
does create proceeds, which are laundered to hide detection,
it is sensible to treat them the same as any other proceeds
of mail or wire fraud. Consider, for example, the bribery of
public officials, as in United States v. Murphy, 768 F.2d
1518 (7th Cir. 1985). Judge Murphy took money from
litigants in cases over which he presided. Doing this
deprived the public of his honest services. He did not take
money from the public coffers, but the bribes were “pro-
ceeds” of the scheme to defraud, and if he had engaged in
financial transactions with these proceeds Judge Murphy
could have been convicted of money laundering as well as
the scheme to defraud the public. Just so here. Aulenta
deprived ABI/Acordia of both his honest services and the
firm’s money; the cash, which he shared with Boscarino,
was “proceeds” that the two could (and did) launder to
disguise the money’s origin.
Boscarino’s jury was instructed that it could convict
him of the §1956 charge only if it found that he engaged
in financial transactions with the “proceeds” of a fraud.
There is no chance that the jury thought that Boscarino
laundered Aulenta’s chicanery. One launders money (or
clothes) but not “services,” honest or otherwise. Anyway,
Boscarino did not ask for an instruction that would have
made it pellucid that “proceeds” means money and other
things of value to third parties, rather than Aulenta’s
duty of loyalty.
Restitution is the second subject we must cover. The
district court ordered Boscarino to repay ABI/Acordia
what Aulenta had extracted during the scheme. That’s
inappropriate, Boscarino contends, because Rosemont
rather than ABI/Acordia is the victim; after all, Aulenta
obtained that money for the brokerage in the first place
by bilking the City. One response is that even a thief can be
the victim of a crime. See, e.g., Levin v. United States, 338
F.2d 265 (D.C Cir. 1965). ABI/Acordia was not entitled to
No. 05-2657 5
this money vis-à-vis Rosemont, but it has rights superior to
those of Aulenta and Boscarino. See, e.g., Anderson v.
Gouldberg, 51 Minn. 294, 296, 53 N.W. 636, 637 (1892);
Ward v. People, 3 Hill 395 (N.Y. 1842). Another, and more
functional, response is that ABI/Acordia is just a way
station for the funds. Once Boscarino reimburses the
immediate victim, ABI/Acordia will be able to repay
Rosemont. Instead of determining the ultimate incidence of
costs created by criminal activity, judges should direct
restitution to the immediate victim; other persons’ rights in
the funds then may be sorted out under normal rules of
contract and property law. See United States v. Shepard,
269 F.3d 884, 886-87 (7th Cir. 2002).
Finally, we consider Boscarino’s contention that his
sentence is unreasonably high. Thirty-six months falls
within a properly constructed range under the Sentenc-
ing Guidelines. (For the loss involved, the range is 33 to
41 months.) Instead of comparing his sentence to the range,
however, Boscarino wants us to compare it to Aulenta’s
sentence. Had Aulenta not pleaded guilty, his range would
have been 41-51 months. His guilty plea cut the range to
30-37 months. Because Aulenta assisted the prosecution by
testifying against Boscarino, the United States proposed a
reduction under U.S.S.G. §5K1.1, and Aulenta’s actual
sentence was 20 months. District judges are supposed to
reduce disparity in sentencing, see 18 U.S.C. §3553(a)(6),
and Boscarino contends that it is unacceptably disparate to
give the lower sentence to the more culpable offender.
Until recently we refused to address arguments by
criminal defendants who sought below-Guideline sentences,
at least when district judges recognized their authority to
depart. See United States v. Franz, 886 F.2d 973 (7th Cir.
1989). United States v. Booker, 543 U.S. 220 (2005), which
abolished “departures” by making the Guidelines advisory,
abolished this rule too. See United States v. Vaughn, No. 05-
1518 (7th Cir. Jan. 6, 2006); United States v. Arnaout, 431
6 No. 05-2657
F.3d 994 (7th Cir. 2005). We held in Franz that a request
for a below-guideline sentence did not fit any of the catego-
ries in 18 U.S.C. §3742(a), which authorizes appellate
review of sentences at defendants’ behest. After Booker,
however, an “unreasonable” sentence is an unlawful
sentence, and §3742(a)(1) authorizes the correction of any
illegal sentence. Because sentences within the Guideline
range are presumptively but not conclusively reasonable,
we are authorized to entertain contentions that a particular
Guideline sentence is unreasonably high.
This is as far as Boscarino gets, however. His argument
misunderstands what §3553(a)(6) means when saying
that district judges must consider “the need to avoid
unwarranted sentence disparities among defendants
with similar records who have been found guilty of simi-
lar conduct”. Boscarino and Aulenta had similarly clean
records before these convictions, and they engaged in
similar conduct, but a sentencing difference is not a forbid-
den “disparity” if it is justified by legitimate considerations,
such as rewards for cooperation. Indeed, before Booker a
district judge was forbidden to reduce one defendant’s
sentence because of a discount properly given to another.
See United States v. Meza, 127 F.3d 545 (7th Cir. 1997). See
also, e.g., United States v. Joyner, 924 F.2d 454 (2d Cir.
1991). The norms of sentencing are no longer so unyielding;
Booker turns rules into standards, and the rule of Meza is
one of those that have been transfigured. See United States
v. Newsom, 428 F.3d 685, 688-89 (7th Cir. 2005).
Still, Booker is about the allocation of fact-finding author-
ity between judge and jury, and about the burden
of persuasion. It does not change rules of law. See, e.g.,
United States v. Duncan, 413 F.3d 680, 683 (7th Cir. 2005);
United States v. Rivera, 411 F.3d 864, 866-67 (7th Cir.
2005); United States v. Lee, 399 F.3d 864, 866 (7th Cir.
2005); McReynolds v. United States, 397 F.3d 479, 481 (7th
Cir. 2005). A reason bad before Booker (e.g., alienage, race,
sex) is bad today. One rule of law that preceded Booker, and
No. 05-2657 7
retains vitality after it, is that a sentencing difference based
on one culprit’s assistance to the prosecution is legally
appropriate.
There would be considerably less cooperation—and thus
more crime—if those who assist prosecutors could not
receive lower sentences compared to those who fight to
the last. Neither Booker nor §3553(a)(6) removes the
incentive for cooperation—and because this incentive
takes the form of a lower sentence for a cooperator than
for an otherwise-identical defendant who does not co-
operate, the reduction cannot be illegitimate. After all,
§3553(a)(6) disallows “unwarranted sentence disparities”
(emphasis added), not all sentence differences.
Another way to put this point is to observe that the
kind of “disparity” with which §3553(a)(6) is concerned is an
unjustified difference across judges (or districts) rather than
among defendants to a single case. If the national norm for
first offenders who gain $275,000 or so by fraud is a
sentence in the range of 33 to 41 months, then system-wide
sentencing disparity will increase if Boscarino’s sentence is
reduced so that it comes closer to Aulenta’s. Instead of one
low sentence, there will be two low sentences. But why
should one culprit receive a lower sentence than some
otherwise-similar offender, just because the first is “lucky”
enough to have a confederate turn state’s evidence? Yet that
is Boscarino’s position, which has neither law nor logic to
commend it.
Sentencing disparities are at their ebb when the Guide-
lines are followed, for the ranges are themselves designed
to treat similar offenders similarly. That was the main goal
of the Sentencing Reform Act. The more out-of-range
sentences that judges impose after Booker, the more
disparity there will be. A sentence within a properly
ascertained range therefore cannot be treated as unrea-
sonable by reference to §3553(a)(6).
AFFIRMED
8 No. 05-2657
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—2-8-06