United States v. Milwitt ( 2007 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA,  No. 05-10344
Plaintiff-Appellee,
v.  D.C. No.
CR-04-00002-CRB
JOHN MILWITT,
OPINION
Defendant-Appellant.

Appeal from the United States District Court
for the Northern District of California
Charles R. Breyer, District Judge, Presiding
Argued and Submitted
February 14, 2006—San Francisco, California
Filed February 5, 2007
Before: J. Clifford Wallace, Michael Daly Hawkins, and
Sidney R. Thomas, Circuit Judges.
Opinion by Judge Thomas;
Dissent by Judge Wallace
1265
1268 UNITED STATES v. MILWITT
COUNSEL
Michael Shepard and James Mink, Heller Ehrman LLP, San
Francisco, California, for the defendant-appellant.
Kevin V. Ryan, Barbara Valliere, and Shawna Yen, United
States Attorney’s Office, San Jose, California, for the
plaintiff-appellee.
OPINION
THOMAS, Circuit Judge:
John Milwitt (“Milwitt”) appeals his conviction of five
counts of bankruptcy fraud and his sentence of twenty-four
months imprisonment and three years supervised release.
Milwitt challenges his conviction on several bases, including
sufficiency of the evidence. Because the evidence presented
was insufficient to sustain the verdict, we reverse the convic-
tion.
I
Sometime prior to March 1997, Milwitt placed an adver-
tisement in the yellow pages of the phone book under the
UNITED STATES v. MILWITT 1269
headings of “Attorneys” and “Landlord Tenant Law.” The
advertisement was for a company called “AP Assistance” and
suggested that the company could provide both legal services
through attorneys as well as assistance for individuals repre-
senting themselves. The advertisement was one of the few, if
not the only, that explicitly mentioned “tenants’ rights.”
Milwitt never attended law school and has never been admit-
ted to practice law.
Based on the advertisement in the yellow pages, several
tenants, including the six tenants described in the indictment,
who were having problems with their landlords, contacted
Milwitt. The tenants paid Milwitt varying amounts of money
for his assistance with defending their unlawful detainer
actions. Each of the tenants testified that Milwitt represented
himself as an attorney and that he seemed to know what he
was talking about. Milwitt advised the tenants that they were
entitled to withhold rent from their landlords. In addition,
Milwitt told one of the tenants that she could use money that
she withheld from her landlord to pay his fees.
Milwitt collected fees from each of the tenants. The tenants
believed that Milwitt was going to represent them in unlawful
detainer actions filed against them by their landlords.
Although Milwitt collected fees from the tenants with the
understanding that he would represent them in court, Milwitt
only filed papers on their behalf. He did not appear in court
for any of the unlawful detainer actions, and default judg-
ments were entered in favor of each of the landlords.
Although Milwitt listed each of the tenants as appearing
pro per on their court documents, the tenants believed that
Milwitt was their attorney and taking care of their cases. Fur-
ther, Milwitt listed a street address which actually corre-
sponded to a general public mail services business where he
rented a mailbox as the tenants’ address on all documents he
filed with the courts. Therefore, all correspondence relating to
1270 UNITED STATES v. MILWITT
the cases was forwarded to Milwitt rather than to the tenants,
slowing their discovery of Milwitt’s failure to represent them.
Milwitt filed bankruptcy petitions on behalf of several of
the tenants, without their authorization or knowledge. These
bankruptcy petitions listed the relevant landlords as well as
fabricated creditors. While the tenants did not know about or
authorize the filing of these petitions, Milwitt did tell them
that for various reasons they did not have to pay judgments
entered against them or move out after receiving eviction
notices. The petitions were filed under Chapter 13 of the
United States Bankruptcy Code, and the petitions indicated
that the debtors would be filing a plan for repayment of the
debts.
In 1999, Milwitt was indicted and convicted on charges of
the unauthorized practice of law in California state court.
Milwitt was released from state custody in February 2002. On
March 21, 2002, Milwitt was indicted on six counts of bank-
ruptcy fraud in violation of 18 U.S.C. § 157.1 These charges
were based on the bankruptcy petitions he filed on behalf of
the tenants. In particular, the indictment states that between
March 1997 and November 1998, Milwitt made “false and
fraudulent representations, claims and promises concerning or
in relation to a proceeding under [the Bankruptcy Code]” in
relation to a scheme to defraud. The indictment describes the
scheme in the following language:
2. Defendant Milwitt represented to persons threat-
ened with eviction by their landlords that he
would fight their eviction in court or negotiate
an arrangement with their landlord.
1
Milwitt was also charged with six other counts of bankruptcy fraud and
four counts of social security fraud in violation of 42 U.S.C.
§ 408(a)(7)(B) related to petitions he filed in his own name. Those charges
have been held in abeyance and are not relevant to this appeal.
UNITED STATES v. MILWITT 1271
3. Based on his solicitations a number of persons
retained the defendant’s services to stop the
eviction process. Defendant Milwitt normally
charged fees for his services, as well as reim-
bursement for filing fees and other expenses.
4. As a part of and in furtherance of his scheme,
defendant Milwitt filed voluntary petitions with
the United States Bankruptcy Court. . . . Under
a provision of the United States Bankruptcy
Code, the filing of a bankruptcy petition auto-
matically suspends all judgments, collection
activities, foreclosures, and repossessions of
property, and prevents foreclosure on the prop-
erty of a debtor until such time as the landlord
or lender obtains relief from this stay or the
bankruptcy is dismissed.
5. In fact, the bankruptcy petitions were shams: the
clients did not grant defendant Milwitt permis-
sion to file for bankruptcy on their behalf.
Rather, with intent to deceive and for the pur-
pose of filing the bankruptcies identified above,
the defendant forged the names of the clients on
documents filed without their knowledge or con-
sent. As a further part of the scheme to defraud,
he frequently supplied false social security num-
bers on the petitions.
6. By filing the sham petitions, the defendant
fraudulently interfered with the process of the
United States Bankruptcy Court,2 and fraudu-
lently obstructed the creditors’ legal right to col-
lect back rents, and repossess the properties.
2
Fraud on the Bankruptcy Court was not argued at trial, was not
instructed and is not an issue on appeal.
1272 UNITED STATES v. MILWITT
7. On or about the dates listed below, the defendant
John Milwitt, having devised a scheme to
defraud, for the purpose of executing and con-
cealing the scheme and attempting to do so, con-
cerning or in relation to a proceeding under Title
11 of the United States, did file bankruptcy peti-
tions in the Northern District of California in the
following debtors’ names using false and fraud-
ulent representations, each such act being a sep-
arate violation of 18 U.S.C. Section 157.3
At the end of a two day jury trial, Milwitt was convicted
of five counts of bankruptcy fraud.4 Milwitt timely filed a
notice of appeal.
The evidence is sufficient to support a conviction if, “view-
ing the evidence in the light most favorable to the prosecu-
tion, any rational trier of fact could have found the essential
elements of the crime beyond a reasonable doubt.” Jackson v.
Virginia, 443 U.S. 307, 319 (1979). Milwitt challenges the
sufficiency of the evidence to sustain the bankruptcy fraud
conviction, contending that the government proved that he
acted with the intent to defraud the tenants rather than “the
intent to defraud a creditor” of the tenants as charged in the
indictment.
II
Although “[m]odern bankruptcy’s origins are in English
criminal law,” in our country, “the criminal side of bank-
ruptcy has assumed a more modest role.” 1 Collier on Bank-
ruptcy ¶ 7.01 (Alan N. Resnick & Henry J. Sommer, 15th ed.
rev. 2006). Indeed, “every state legislature [has] enacted stat-
3
The indictment goes on to name each of the six tenants on whose
behalf Milwitt filed bankruptcy petitions as well as the case numbers and
the dates those petitions were filed.
4
The government dismissed one count of bankruptcy fraud before trial.
UNITED STATES v. MILWITT 1273
utory and constitutional provisions that limit[ ] or entirely
prohibit[ ] imprisonment for debt.” Becky A. Vogt, State v.
Allison: Imprisonment for Debt in South Dakota, 46 S.D. L.
Review 334, 335 (2001) (internal quotation and citation omit-
ted). The bankruptcy act passed by Congress in 1841 was the
first in world history allowing individuals to obtain voluntary
discharge of their debts. Jason K. Kilborn, Mercy, Rehabilita-
tion, and Quid Pro Quo: A Radical Reassessment of Individ-
ual Bankruptcy, 64 Ohio St. L.J. 855, 858-59 (2003).
[1] Although American bankruptcy law affords honest
debtors civil remedies as a substitute for criminal punishment,
Congress has always provided for the imposition of criminal
penalties for those who abuse the bankruptcy system. The
early enactments of Congress criminalized fraudulent and per-
jurious acts by debtors and creditors in connection with a
bankruptcy. Craig Peyton Gaumer, Bankruptcy Fraud: Crime
and Punishment, 43 S.D. L. Rev. 527, 532 (1998). With some
modifications, these core bankruptcy criminal provisions have
remained intact to this date, with the essential components
codified into 18 U.S.C. § 152. Id. at 532-33.
[2] In 1994, as part of the Bankruptcy Reform Act of 1994,
Pub. L. No. 103-394, Congress enacted a new bankruptcy
crime statute. The centerpiece of the new criminal provisions,
as codified in 18 U.S.C. § 157, was intended to “deter[ ] a
person from using the bankruptcy process to further [ ] fraud-
ulent schemes.” Gaumer, 43 S.D. L. Review at 535. Section
157 was “consciously patterned on the federal mail fraud stat-
ute.” 1 Collier on Bankruptcy ¶ 7.07[1][a].
[3] As opposed to the historic bankruptcy crimes, as exem-
plified in § 152, which concerns acts committed in the bank-
ruptcy context, the focus of § 157 is a fraudulent scheme
outside the bankruptcy which uses the bankruptcy as a means
of executing or concealing the artifice. Specifically, § 157, the
bankruptcy fraud statute under which Milwitt was charged,
provides that:
1274 UNITED STATES v. MILWITT
A person who, having devised or intending to devise
a scheme or artifice to defraud and for the purpose
of executing or concealing such a scheme or artifice
or attempting to do so—
(1) files a petition under title 11, includ-
ing a fraudulent involuntary bankruptcy
petition under section 303 of such title;
(2) files a document in a proceeding
under title 11; or
(3) makes a false or fraudulent represen-
tation, claim, or promise concerning or in
relation to a proceeding under title 11, at
any time before or after the filing of the
petition, or in relation to a proceeding
falsely asserted to be pending under such
title,
shall be fined under this title, imprisoned not more
than 5 years, or both.
18 U.S.C. § 157.
[4] In enacting § 157, Congress made it quite clear that the
new crime was a specific intent crime. As Representative
Brooks, who was Chair of the House Judiciary Committee
and a sponsor of the legislation, stated in his official floor
statement:
An essential element of the new fraud action, as with
other fraud actions, is requirement of proof beyond
a reasonable doubt of a specific intent to defraud.
Under no circumstance is this section to be operative
if the defendant is adjudicated as having committed
the act alleged to constitute fraud for a lawful pur-
pose.
UNITED STATES v. MILWITT 1275
140 Cong. Rec. H10752 (daily ed., Oct. 4, 1994) (statement
of Rep. Brooks).
[5] While we have not interpreted 18 U.S.C. § 157, we
have discussed the elements of 18 U.S.C. § 1341 and 18
U.S.C. § 1343, the mail and wire fraud statutes upon which
§ 157 was modeled, stating:
[t]o allege a violation of the wire and mail fraud pro-
visions, we have required only that the government
show that there is 1) a scheme to defraud, 2) a use
of the mails or wires in furtherance of the scheme,
and 3) a specific intent to deceive or defraud.
United States v. Bonallo, 858 F.2d 1427, 1433 (9th Cir. 1988).5
[6] The specific intent to deceive or defraud element of the
mail and wire fraud crimes requires the prosecution to prove
that the defendant intended to defraud an identifiable individ-
ual. In McNally v. United States, 483 U.S. 350 (1987), the
Supreme Court held that the mail fraud statute only reached
5
Most of the few courts that have interpreted 18 U.S.C. § 157 have
looked to 18 U.S.C. §§ 1341 and 1343 for guidance. See, e.g., United
States v. Wagner, 382 F.3d 598, 613 n.3 (6th Cir. 2004) (looking to analy-
sis of the mail and wire fraud statutes in holding that actual reliance on
the scheme to defraud is not an essential element of the crime); United
States v. Daniels, 247 F.3d 598, 600 (5th Cir. 2001) (citing the constitu-
tionality of the mail fraud statute in holding the bankruptcy fraud statute
constitutional); see also, 1 Collier on Bankruptcy § 7.07[1][a], at 7-119
(“Section 157 is consciously patterned on the federal mail fraud statute.
. . . The parallels between section 1341 and section 157 are close. . . . In
other contexts . . . the Court has looked to decisions under the mail fraud
statute when construing the new statutes. The same will follow for section
157.”); but see United States v. Lee, 82 F. Supp. 2d 389, 392 (E.D. Pa.
2000) (“Similar though the language of the bankruptcy fraud statute is to
that of the various other fraud statutes, we cannot, particularly as a matter
of what appears to be first impression, import wholesale into the bank-
ruptcy fraud statute the thick judicial gloss that has been applied over the
years to these other statutes.”).
1276 UNITED STATES v. MILWITT
the loss of money and property and not to “the intangible right
of the citizenry to good government.” Id. at 356 (overruled on
this point by 18 U.S.C. § 1346). There, the indictment identi-
fied the scheme as devised “to defraud the citizens and gov-
ernment of Kentucky.” Id. at 353. In reversing the mail fraud
convictions, the Court noted that for the jury instruction to
charge a crime under the mail fraud statute, it must show a
loss of money or property from “the Commonwealth itself,”
the victim identified in the jury instructions. Id. at 360. Fur-
ther, the government could not rely on evidence of the loss of
property to another individual to support the conviction
because that individual had not been identified in the jury
instructions. Id. at 361.
We applied McNally in United States v. Mitchell, 867 F.2d
1232 (9th Cir. 1989), a case involving an alleged scheme to
defraud a city and its citizens. In reversing the conviction, we
held that “[a]lthough both indictments alleged a scheme to
obtain money and property, neither alleged a scheme to obtain
them from the governmental body.” Id. at 1233. Similarly, in
United States v. Lew, 875 F.2d 219 (9th Cir. 1989), we cited
McNally, stating that “the Court made it clear that the intent
must be to obtain money or property from the one who is
deceived.” Id. at 221.
[7] Given all of these considerations, we conclude that the
crime of bankruptcy fraud under 18 U.S.C. § 157 requires a
specific intent to defraud an identifiable victim or class of vic-
tims of the identified fraudulent scheme.
III
Applying these legal principles to the case at hand, we con-
clude that the evidence tendered by the government is insuffi-
cient to support the verdict of bankruptcy fraud pursuant to 18
U.S.C. § 157. As we have noted, the government charged
Milwitt with “fraudulently obstruct[ing] the creditors’ legal
right to collect back rents, and repossess the properties.” In
UNITED STATES v. MILWITT 1277
sum, the fraudulent scheme was one to prevent the landlords
from exercising legal rights, and the alleged victims were the
landlords. The required bankruptcy nexus alleged was the fil-
ing of sham Chapter 13 bankruptcy petitions. There were no
allegations in the indictment concerning a scheme to defraud
the tenants, nor were the tenants identified as victims of the
fraudulent scheme.
At trial, the government attempted to prove an entirely dif-
ferent case under an entirely different theory. The govern-
ment’s theory at trial was that the fraudulent scheme was to
deprive the tenants of money, which the tenants gave Milwitt
under the false pretenses that he was acting on their behalf to
forestall eviction proceedings.
Throughout the trial, the government referred to the ten-
ants, rather than the landlords, as the victims of Milwitt’s
fraudulent scheme. For example, in its opening statement, the
government began by telling the story of some of the tenants
who sought help from Milwitt. It went on to describe Mil-
witt’s overall scheme and then stated that “[n]one of the vic-
tims authorized [Milwitt] to file bankruptcy on their behalf.”
Milwitt never filed bankruptcy on behalf of anybody but the
tenants. Further, the government stated,
[t]he evidence will show that the defendant intended
to defraud the [tenants named in the bankruptcy peti-
tions.] He did it by passing himself off as an attorney
and by telling them he would be representing them
and performing various legal services.
The government argued that the effect of the bankruptcy
filing was that it allowed Milwitt to continue to represent to
the tenants that he was taking care of their legal issues with
their landlords. As the government stated,
the defendant’s supposed clients were aware that
they were not being evicted despite having received
1278 UNITED STATES v. MILWITT
this notice to be evicted, and the defendant led them
to believe that that was because he was working dili-
gently on their behalf, he was defending them again
[sic] these eviction proceedings. [The tenants] had
no idea that a bankruptcy stay had anything to do
with the delay—with the halt in the eviction pro-
ceedings.
The government went on to present evidence of fraud on
the tenants throughout its case in chief, presenting nine
witnesses—the six tenants, a former employee of the pub-
lisher of the phone book in which Milwitt advertised, an
expert witness who testified about the effects of the bank-
ruptcy filing and the unlawful detainer process, and the owner
of the mail services business where Milwitt rented a mailbox.
Each of the tenants testified about their living situations, the
conditions that prompted them to contact Milwitt, and their
experiences during the time they thought Milwitt was repre-
senting them. Each of the tenants testified that Milwitt
informed them that they had a right to withhold rent. Further,
after receiving notices of judgments against them, Milwitt
provided various explanations for why they would not have to
pay them or why they would not have to move out.
The phone book employee provided testimony about work-
ing with Milwitt on placing the yellow pages advertisements.
In his dealings with the phone book company, Milwitt repre-
sented himself as “Joe Castle” and stated that he was either
the advertising director or office manager for AP Assistance.
An expert provided testimony about both bankruptcy and
landlord-tenant law, including testimony regarding the impact
of a bankruptcy petition on the filer’s creditors. Finally, the
owner of the mail services business provided testimony about
Milwitt renting a mailbox at her store and an incident in
which she overheard him tell another customer that he could
help because he was an attorney.
UNITED STATES v. MILWITT 1279
[8] None of the landlords testified nor was evidence intro-
duced about any losses they experienced because of Milwitt’s
actions or how Milwitt’s actions might have caused such
losses. Rather, the only connection made between Milwitt’s
actions and loss to the landlords came through the tenants’
testimony regarding the amount of rent withheld and the
expert witness’s testimony regarding the effect of bankruptcy
petitions on outstanding judgments and pending actions. No
evidence was presented concerning any scheme to defraud
creditors, only debtors. There was no proof that Milwitt
received or sought any money or other consideration from the
landlords, only that he defrauded the tenants.
The proof, in fact, tended to show that the landlords were
“slum lords” with a despicable record of repair and mainte-
nance. Indeed, the government presented evidence that the
tenants likely had valid claims against the landlords, justify-
ing the withholding of rent.
[9] Not only did the evidence fail to show that the landlords
were being wrongfully denied money and access to legal
recourse, but the actual bankruptcy petitions did not seek to
discharge the debt owed to the landlords. Rather, the petitions
were filed pursuant to Chapter 13, which does not contem-
plate outright discharge of debts after liquidation of non-
exempt assets, but instead involves adjustment of debts of an
individual with regular income through a court-approved plan
of payment.
[10] In sum, when the government rested its case, it had
presented no proof that there was a scheme to defraud the
landlords, much less that the bankruptcy petitions had been
filed as a means of executing or concealing the scheme.
Rather, the evidence showed that the tenants were likely justi-
fied in not paying the landlords; that the fraudulent scheme
was one by Milwitt to deprive the tenants of money by fraud-
ulently representing to them that he was representing their
1280 UNITED STATES v. MILWITT
interests against the landlord; and that the purpose of the
bankruptcy filing was to conceal the fraud from the tenants.
After the government rested, the court presented counsel
with the jury instructions it intended to give. The instruction
at issue described the third element of bankruptcy fraud as
requiring the jury to find that “the defendant acted with the
intent to defraud a creditor of any person named in the corre-
sponding bankruptcy petition.” The government asked the
court to reconsider the instruction, contending that it con-
strued the indictment too narrowly by requiring proof that
Milwitt intended to defraud a creditor rather than a tenant
based on the general scheme described by the indictment,
including the fraud on the tenants. The court refused to
change the instruction based on paragraph six of the indict-
ment, which states:
By filing the sham petitions, the defendant fraudu-
lently interfered with the processes of the United
States Bankruptcy Court, and fraudulently obstructed
the creditors’ legal right to collect back rents, and
repossess the properties.
After learning of the court’s intended instruction, the gov-
ernment focused its closing argument on demonstrating that
the landlords were the indirect victims of the overall scheme
to defraud, while the tenants were the “primary mechanisms
of the fraud.” Essentially, the government argued that Milwitt
“directly deceiv[ed] the clients and indirectly deceiv[ed] the
landlords.” Therefore, as the government itself stated in its
closing argument, it had to prove that “[Milwitt] had the
intent . . . for the fraud scheme to result in money in his pock-
ets from [the landlords].” However, the government acknowl-
edged, the scheme “was about paying money for himself. . . .
He extracted filing fees for phony lawsuits, lawsuits that he
claimed he was filing. . . . And also it was to get . . . fees for
being a lawyer, which he wasn’t.” All of these filing fees and
attorneys fees were payed directly from the tenants to Milwitt.
UNITED STATES v. MILWITT 1281
Further, the government recognized that “[t]he bankruptcy
petitions were used to . . . cover the fact that the defendant
was actually not a lawyer and he therefore could not actually
file legal papers as he claimed he could and claimed he was
doing. Instead, he was secretly filing bankruptcy petitions that
anybody could file.”
[11] The government argues on appeal that the evidence
demonstrates that Milwitt knew that he would be depriving
the landlords, at least temporarily, of their judgments against
the tenants and possession of their properties by filing the
bankruptcy petitions. However, the evidence demonstrates
that Milwitt’s intent was to prevent the tenants from discover-
ing his fraud by filing the bankruptcy petitions. That he might
have known that the filing would stay the landlords’ claims is
not enough to demonstrate specific intent. See Bloch v. United
States, 221 F.2d 786, 788 (9th Cir. 1955) (reversing a tax
fraud conviction where the judge instructed that “[t]he pre-
sumption is that a person intends the natural consequences of
his acts, and the natural inference would be if a person con-
sciously, knowingly and intentionally did not set up his
income, and thereby the government was cheated or
defrauded of taxes, that he intended to defeat the tax.”). Fur-
ther, the use of a Chapter 13 bankruptcy filing in order to
adjust debts is perfectly proper. The Bankruptcy Code specifi-
cally addresses lessor-lessee relations. See, e.g., 11 U.S.C.
§ 363. Had the tenants consulted with a legitimate attorney,
that attorney might well have recommended a legal course
that involved a Chapter 13 bankruptcy filing, especially if an
attorney had been consulted after Milwitt had allowed the
default judgments to be entered against the tenants without
their knowledge.
[12] Under the mail fraud statute, intent to defraud may be
established by circumstantial evidence, see, e.g., United States
v. Cloud, 872 F.2d 846, 852 n.6 (9th Cir. 1989), and there is
no reason not to apply this principle to the crime of bank-
ruptcy fraud. However, as we have noted, bankruptcy fraud is
1282 UNITED STATES v. MILWITT
a specific intent crime, and even the circumstantial evidence
presented at trial was insufficient to prove that Milwitt had a
specific intent to defraud the landlords rather than the tenants.
There was no proof offered at trial that Milwitt devised a
scheme to defraud creditors of money and filed petitions in
bankruptcy with specific intent to execute or further the
scheme. Therefore, we conclude that the evidence presented
at trial is insufficient to establish the crime.6
IV
[13] The government also argues for the first time on
appeal that Milwitt committed a crime simply by filing bank-
ruptcy petitions when there was evidence that at least some of
the the debtors had sufficient assets to pay off their debts. We
must forcefully reject this argument. First, until the enactment
of the Bankruptcy Abuse Prevention and Consumer Protec-
tion Act of 2005, Pub. L. 109-8, 119 Stat. 23 (2005) (“the
2005 Act”), which does not apply to this case, there was no
statutory means testing at all in bankruptcy.7 Second, this
6
Contrary to the government’s assertions, United States v. Crawford,
239 F.3d 1086 (9th Cir. 2001), does not compel a contrary result. Craw-
ford was charged with wire fraud based on her use of interstate faxes to
sell through an art dealer a valuable painting that she took from her office
at UCLA. On appeal, she alleged insufficiency of evidence because own-
ership of the painting had not been established and, therefore, there was
no identifiable victim. Id. at 1092. However, in Crawford, the fraudulent
scheme was identified and proven, and the government established that
Crawford knew that she had no ownership interest. Crawford is in stark
contrast with the instant case, in which the indictment was based on an
entirely different fraudulent scheme and victims. The dissent essentially
urges an expansion of Crawford to include evidence of fraudulent schemes
other than the one upon which the prosecution was based. This expansive
interpretation would conflict with McNally. The dissent also contends that
other circuits have reached a different conclusion. However, each of the
cited cases involves a situation akin to Crawford in which there were iden-
tical schemes to defraud, but different named victims. This case involves
a reliance on a different fraudulent scheme.
7
The petitions in the case predate the effective date of the 2005 Act. See
id. § 102. Under the 2005 Act, bankruptcy petitioners with relatively high
UNITED STATES v. MILWITT 1283
notion is a serious misapprehension of the nature of a filing
of a voluntary petition in bankruptcy under Chapter 13 of the
Bankruptcy Code. The entire idea of a Chapter 13 filing is to
allow an individual debtor with a regular income to adjust his
or her debts through a plan of repayment approved by the
bankruptcy court. The requirements for Chapter 13 relief
“bar[s] debtors from Chapter 13 eligibility if they are unable
to make plan payments . . . .” 2 Collier ¶ 109.06[1] (emphasis
added). In short, at the time the petitions at issued were filed,
not only was it not a crime for a debtor to file a petition under
Chapter 13 when the debtor had sufficient means to make
payments; it was a requirement of Chapter 13 relief that the
debtor have sufficient means to do so.8
Third, bankruptcy fraud under § 157 cannot be predicated
only on acts that occur within the bankruptcy context that are
untethered to the underlying fraudulent scheme. Other provi-
sions of the bankruptcy criminal statutes address those acts,
including § 152. However, bankruptcy fraud under § 157
must be related to the alleged fraudulent scheme. As Repre-
sentative Brooks put it in his floor statement:
incomes may be prevented from filing under Chapter 7 and instead given
the choice of converting to Chapter 13 (where some debt must be repaid
out of future income) or having their petitions dismissed and receiving no
bankruptcy relief. The presumption prior to passage of the 2005 Act was
that the debtor was entitled to relief under Chapter 7 except upon a show-
ing of substantial abuse. There is a new means test in the 2005 Act for
individuals seeking Chapter 7 relief. However, even under the 2005 Act,
the means test does not affect eligibility for filing for relief under Chapter
13, the chapter under which the petitions in this case were filed; the new
means test only affects the requirements for Chapter 13 plan confirmation.
Id.
8
This is not to say, or imply, that there are no consequences for bank-
ruptcy abuse, which may be subject to sanction under a variety of theories.
Obviously, misrepresentations in a bankruptcy can lead to serious conse-
quences, including potential bankruptcy crime charges under 18 U.S.C.
§ 152. However, the government does not allege that any affirmative mis-
representations were made in the Chapter 13 bare petition filings; rather,
the government argues that the act of filing a Chapter 13 petition itself
when the debtor has sufficient assets is a criminal act under § 157.
1284 UNITED STATES v. MILWITT
It would also not be a crime under this section for a
person to make a false statement or promise concern-
ing a proceeding under title 11, as long as the false
statement or promise was not made as part of a
scheme to defraud involving the bankruptcy pro-
ceeding. Similarly, a person who conveys incorrect
information about the pendency of a bankruptcy or
the planned filing of a bankruptcy case would not be
within the scope of this section unless that informa-
tion was conveyed fraudulently and to further a
fraudulent scheme.
140 Cong. Rec. H 10771 (daily ed. Oct. 4, 1994).
Finally, which perhaps goes without saying, the govern-
ment did not charge the offense upon which it now relies.
[14] In short, the government’s new contention that Milwitt
could be liable for criminal bankruptcy fraud under § 157 for
merely filing a voluntary petition under Chapter 13 when the
debtor has sufficient means to repay the debts is not viable.
V
[15] Because the evidence presented was insufficient to
sustain the verdict, we reverse the conviction and need not
reach any other issue urged by the parties.9
REVERSED.
9
The dissent contends that the dispositive issues were not argued by the
parties. We respectfully disagree. One of the central arguments presented
by Milwitt was that the government’s evidence of fraud against the land-
lords, rather than the tenants, was insufficient to sustain the verdict. The
government was well prepared to address—and did address—the precise
questions at issue.
UNITED STATES v. MILWITT 1285
WALLACE, Senior Circuit Judge, dissenting:
Although the government’s case was less than overwhelm-
ing, the evidence was sufficient for a reasonable jury to find
that Milwitt possessed the requisite fraudulent intent beyond
a reasonable doubt. This is all that is required to sustain a con-
viction against a sufficiency of the evidence challenge.
Additionally, the majority unnecessarily reaches the issue
of whether intent to defraud an identifiable victim is required,
which neither party raised. It resolves the issue in a manner
directly contradicted by our precedents.
I therefore respectfully dissent.
I.
As outlined by the majority, the evidence that Milwitt com-
mitted fraud is overwhelming. In order to appear effective,
Milwitt filed fraudulent bankruptcy petitions on behalf of his
clients without their consent, forged their signatures, and gave
false accounts of their financial status. Many of these petitions
misspelled the tenants’ names or gave inaccurate social secur-
ity numbers. A government expert testified that these inaccu-
racies would make it more difficult for creditors to assert their
rights.
Milwitt filed the bankruptcy petitions in order to have the
bankruptcy court enter “automatic stays” against the petition-
ers’ creditors, here the landlords. These stays forced the land-
lords to halt any legal proceedings against the tenants,
including eviction proceedings and the default judgments
caused by Milwitt.
In several of the fraudulent bankruptcy petitions, Milwitt
specifically listed the applicable landlords by name as credi-
tors, subjecting them to the automatic stay. In at least one
1286 UNITED STATES v. MILWITT
instance, Milwitt also served a landlord-creditor with a “No-
tice of Bankruptcy Stay.”
Milwitt also told at least one of the tenants, Janice Daniels,
that she could pay Milwitt’s fees in lieu of paying her rent.
Daniels further testified that Milwitt told her that she could
withhold rent payments and that all of the legal fees that she
paid to Milwitt came out of rent money she would have other-
wise paid her landlord.
After the jury convicted Milwitt on all five counts of bank-
ruptcy fraud, Milwitt moved for a judgment of acquittal,
which the district court denied.
We review the district court’s denial of a motion for judg-
ment of acquittal based on insufficient evidence de novo.
United States v. Carranza, 289 F.3d 634, 641 (9th Cir. 2002).
Our review of the underlying jury verdict is much more defer-
ential, however. We must defer to a jury’s guilty verdict if,
“after viewing the evidence in the light most favorable to the
prosecution, any rational trier of fact could have found the
essential elements of the crime beyond a reasonable doubt.”
Jackson v. Virginia, 443 U.S. 307, 319 (1979). This “standard
of review is a highly deferential one.” United States v. Hen-
son, 123 F.3d 1226, 1236 (9th Cir. 1997) (internal quotations
omitted); accord United States v. Nyemaster, 116 F.3d 827,
828 (9th Cir. 1997) (“A challenge to the sufficiency of the
evidence is reviewed under a highly deferential standard”)
(internal quotations omitted).
Importantly, “this inquiry does not require a court to ask
itself whether it believes that the evidence at the trial estab-
lished guilt beyond a reasonable doubt.” Jackson, 443 U.S. at
318-19 (internal quotations omitted). Instead, “[t]his familiar
standard gives full play to the responsibility of the trier of fact
fairly to resolve conflicts in the testimony, to weigh the evi-
dence, and to draw reasonable inferences from basic facts to
ultimate facts.” Id. at 319.
UNITED STATES v. MILWITT 1287
We have long recognized that “[i]t is often difficult to
prove fraudulent intent by direct evidence and it must be
inferred in such cases from a pattern of conduct or a series of
acts . . . .” United States v. Lothian, 976 F.2d 1257, 1267 (9th
Cir. 1992) (internal quotations omitted). Therefore, “[i]t is
settled law that intent to defraud may be established by cir-
cumstantial evidence.” United States v. Rogers, 321 F.3d
1226, 1230 (9th Cir. 2003); see also United States v. Bucher,
375 F.3d 929, 934 (9th Cir. 2004) (“Culpable intent can be
inferred from the defendant’s conduct and from the surround-
ing circumstances”) (internal quotations and alterations omit-
ted).
II.
The majority’s holding that “18 U.S.C. § 157 requires a
specific intent to defraud an identifiable victim or class of vic-
tims of the identified fraudulent scheme,” maj. op. at 1276,
will come as somewhat of a surprise to the parties, as neither
side has raised the issue. “Courts generally do not decide
issues not raised by the parties. If they granted relief to peti-
tioners on grounds not urged by petitioners, respondents
would be deprived of a fair opportunity to respond, and the
courts would be deprived of the benefit of briefing . . . .”
Galvan v. Alaska Dep’t of Corr., 397 F.3d 1198, 1204 (9th
Cir. 2005) (footnote omitted). That is true here. The majority
has provided no reason for its deviation from the normal rules
of our adversarial system.
In this case, the government has only argued that it did in
fact show that Milwitt intended to defraud the landlords. I
would require the government to prove intent to defraud the
landlords to the jury. I do not view the government’s state-
ment as an invitation to address an issue not briefed by either
party.
Because the majority insists on deciding this “argument,”
I will address the merits of the majority’s holding. I agree
1288 UNITED STATES v. MILWITT
with the majority that there is a substantial similarity between
wire fraud and bankruptcy fraud; I would apply United States
v. Crawford, 239 F.3d 1086 (9th Cir. 2001), and hold that an
identifiable victim is not an element of bankruptcy fraud.
Crawford squarely rejected the requirement that the govern-
ment prove intent to defraud a specific victim or class of vic-
tims as an element of wire fraud. See id. at 1092-93. The
majority in Crawford also specifically rejected the argument
that McNally v. United States, 483 U.S. 350 (1987), and
United States v. Mitchell, 867 F.2d 1232 (9th Cir. 1989), the
only two supporting cases cited by the majority here, require
proof of an identifiable victim. See Crawford, 239 F.3d at1093 n.6. In short, we decided this issue five years ago.
In one brief footnote, the majority attempts to distinguish
Crawford. Neither of its two rationales is valid. First, the
majority argues that “in Crawford, the fraudulent scheme was
identified and proven, and the government established that
Crawford knew that she had no ownership interest.” Maj. op.
at 1282 n.6. But the same is true here. The evidence that
Milwitt was engaged in a fraudulent scheme is nothing short
of overwhelming. Milwitt was fraudulently representing him-
self as a lawyer and fraudulently filing bankruptcy petitions
on his “clients’ ” behalf without authorization, using phony
information. Milwitt was also fraudulently representing his
activities to his clients. The only question in this appeal is
whether the government actually proved the intent to defraud
the landlords as well as the tenants. That Milwitt was engaged
in a fraudulent scheme, which has been “identified and prov-
en,” cannot be debated seriously. The majority’s attempt to
distinguish Crawford on the basis that the existence of a
fraudulent scheme has not been proven is therefore perplex-
ing.
The majority also attempts to distinguish Crawford on the
basis that Milwitt’s “indictment was based on an entirely dif-
ferent fraudulent scheme and victims.” Maj. op. at 1282 n.6.
The majority does not explain what the material differences
UNITED STATES v. MILWITT 1289
are — except for the implausible contention that the existence
of a fraudulent scheme has not been proved in this appeal. It
is impossible to discern from its opinion a rationale for the
distinction drawn by the majority.
What then has the majority accomplished? The majority
has effectively adopted the legal position advanced by the dis-
senting opinion in Crawford. That dissent begins by stating its
disagreement with the majority: “I dissent because the major-
ity reads an essential element out of the crime of wire fraud
and because the evidence is insufficient to prove that essential
element. Up to now, it has been the law that this crime
requires an identifiable victim . . . .” 239 F.3d at 1094(Tashima, J., dissenting) (emphasis added).
Similarly, while the dissent tried to use McNally and Mitch-
ell in an identical manner as the majority does here, see 239
F.3d at 1094 (Tashima, J., dissenting), the majority in Craw-
ford explicitly rejected the argument that McNally and Mitch-
ell require an identifiable victim. See 239 F.3d at 1093 n.6.
After specifically distinguishing McNally and Mitchell, the
majority in Crawford stated that “we have never held [an
identifiable victim] to be an element of the offense of mail
fraud.” Id. The majority’s attempt to resurrect an argument
that we have already unambiguously rejected is startling. As
a three-judge panel, we lack the authority to change a dissent
into controlling law. See United States v. Rodriguez-Lara, 421
F.3d 932, 943 (9th Cir. 2005) (“a three-judge panel may not
overrule [circuit precedents] absent intervening Supreme
Court or en banc authority”).
Additionally, it appears that the majority opinion in Craw-
ford is in accord with every other circuit to decide this issue.
See United States v. Munoz, 430 F.3d 1357, 1369 (11th Cir.
2005) (“The crime of mail fraud does not include an element
requiring a contemplated harm to a specific identifiable vic-
tim”) (internal quotations omitted); United States v. Henning-
sen, 387 F.3d 585, 590 (7th Cir. 2004) (same); United States
1290 UNITED STATES v. MILWITT
v. Loayza, 107 F.3d 257, 260 (4th Cir. 1997)) (“Indictments
which do not identify specific mail fraud victims by name are
sufficient”) (internal quotations and alterations omitted). The
majority’s holding therefore simultaneously creates unjustifi-
able intra-circuit and inter-circuit conflicts.
I therefore dissent from the majority’s unnecessary, unwise,
and unsupported conclusion that bankruptcy fraud requires an
identifiable victim or class of victims.
III.
This appeal therefore should turn on whether a reasonable
jury could have found that Milwitt possessed an intent to
defraud the landlords. We have previously defined the requi-
site “intent to defraud” as “to act willfully, and with the spe-
cific intent to deceive or cheat for the purpose of either
causing some financial loss to another, or bringing about
some financial gain to oneself.” United States v. Cloud, 872
F.2d 846, 852 n.6 (9th Cir. 1989). A reasonable jury could
easily have concluded that Milwitt acted with “specific intent
to deceive or cheat” the landlords (as well as the tenants) in
order to benefit himself financially.
The success of Milwitt’s scheme to collect legal fees was
dependent in large measure on the landlords being success-
fully defrauded of rent money and forestalled from asserting
their rights against the tenants. A reasonable jury could have
readily concluded that if the landlords had not been fraudu-
lently prevented from evicting the tenants and collecting on
the default judgments caused by Milwitt, the tenants would
have discovered that Milwitt was defrauding them. When the
tenants discovered that Milwitt was defrauding them, they
stopped paying his “legal fees,” as Milwitt undoubtedly
feared. The collection of his legal fees was thus based on
Milwitt’s ability to appear productive in the tenants’ disputes
with the landlords, which in turn was based on his ability to
defraud the landlords successfully.
UNITED STATES v. MILWITT 1291
Milwitt specifically listed the landlords on several of the
fraudulent bankruptcy petitions, which caused the landlords to
be subject to the automatic stay. Milwitt even served one of
them with a “Notice of Bankruptcy Stay.” Milwitt was
undoubtedly aware that the effect of the bankruptcy petition
was to cause the automatic stay, and a reasonable jury was
entitled to infer as much. Because the successful halting of the
landlord’s eviction proceedings was essential to Milwitt’s
ability to collect legal fees, a reasonable jury could also have
concluded that Milwitt possessed the intent to defraud the
landlords, as well as the tenants. This alone is sufficient evi-
dence to support the jury’s verdict.
The government also produced testimony that established
that misspelling the tenants’ names, as well as giving false
social security numbers, would make it more difficult for the
landlord-creditors to invalidate the fraudulently-obtained
stays. The government further produced evidence that Milwitt
was familiar with bankruptcy law and likely knew of this
effect. This evidence therefore further supports the jury’s ver-
dict.
The jury’s verdict is also supported by the testimony of
Janice Daniels, who testified that Milwitt told her to pay
Milwitt’s legal fees instead of paying rent to her landlord. A
reasonable jury could have concluded that Milwitt intended to
defraud the landlords by having his “legal fees” paid at their
expense, which is precisely what occurred. Viewing the evi-
dence in the light most favorable to the government, this testi-
mony reveals clear intent to defraud the landlords and obtain
financial gain at their expense.
I must therefore respectfully, but forcefully, disagree with
the majority’s contention that “[n]o evidence was presented
concerning any scheme to defraud creditors, only debtors.”
Maj. op. at 1279. Absent from the majority opinion is any
demonstration of how the above evidence does not support
the government’s argument that Milwitt intended to defraud
1292 UNITED STATES v. MILWITT
the landlords. While the majority argues that “[t]here was no
proof that Milwitt received or sought any money or other con-
sideration from the landlords, only that he defrauded the ten-
ants,” maj. op. at 1279, a reasonable jury could have easily
concluded Milwitt intended to receive money at the expense
of the landlords — which is precisely what the jury did. Nota-
bly, Cloud only requires “intent to deceive or cheat for the
purpose of either causing some financial loss to another, or
bringing about some financial gain to oneself.” 872 F.2d at852 n.6 (emphasis added). Milwitt need not have “received or
sought any money” directly from the landlords, as long as he
intended to “bring[ ] about some financial gain to [him]self,”
id., at their expense. I conclude that the second type of fraudu-
lent intent under Cloud — which the majority ignores — is
plainly supported by sufficient evidence.
Although the majority’s opinion initially states the Jackson
standard of review, its application strays from the Supreme
Court’s direction. The only relevant question is what a reason-
able jury could have found, not how the majority would weigh
the evidence from a cold record. For example, the majority
argues that “[t]he proof, in fact, tended to show that the land-
lords were ‘slum lords’ with a despicable record of repair and
maintenance.” Maj. op. at 1279 (emphasis added). The rele-
vant question is not what the evidence tends to show to our
panel of judges, however. In relying on the premise that the
landlords were not owed rent based on what the evidence
“tended to show” two appellate judges, the majority fails to
view the evidence in the “light most favorable to the prosecu-
tion.” Jackson, 443 U.S. at 319.
The majority similarly states that “the evidence showed that
the tenants were likely justified in not paying the landlords.”
Maj. op. at 1279 (emphasis added). The majority later argues
that “[h]ad the tenants consulted with a legitimate attorney,
that attorney might well have recommended a legal course that
involved a Chapter 13 bankruptcy filing.” Maj. op. at 1281
(emphasis added). Once again, the question is not what seems
UNITED STATES v. MILWITT 1293
likely to us, or what “might well have” happened, but whether
any reasonable jury could have concluded fraud exists. The
majority’s use of “tended to show” and “were likely justified”
and “might well have recommended” is indicative of the
majority itself weighing the evidence and usurping the role of
the jury. The majority’s analysis thus gravely misconstrues
the nature of our review under Jackson.
The majority also appears to believe that Milwitt could not
simultaneously possess the intent to defraud the tenants and
the landlords. It is true that the government erroneously pur-
sued a wrong trial theory in focusing on fraud on the tenants.
However, the evidence reveals that Milwitt possessed no
shortage of fraudulent intent. The rulings of the district judge
pulled the government back and directed it to the right track.
The case went to the jury under proper instructions requiring
proof beyond a reasonable doubt that Milwitt defrauded the
landlords. Because a reasonable jury could have concluded
that Milwitt’s fraudulent intent was not solely directed toward
the tenants, but also toward the landlords, Milwitt’s convic-
tion must be affirmed.
Unfortunately, the majority opinion does not analyze the
evidence from which the jury could have found fraud on the
landlords. Instead, it substitutes a conclusory discussion,
which, as discussed above, is incorrect. A new trial is not in
order as the Double Jeopardy Clause will bar any retrial of
Milwitt. See Smith v. Massachusetts, 543 U.S. 462, 466-67
(2005) (collecting cases).
Because I believe that the evidence is sufficient to support
the jury’s verdict, I would not reach the government’s argu-
ment regarding the ability of the debtors to pay off their debts.
IV.
The majority seriously exceeds our authority under Jackson
and as a three-judge panel. Simply put, we should not be
1294 UNITED STATES v. MILWITT
weighing evidence as if we were the jury. In addition, we are
not an en banc court that has the power to change dissenting
opinions into controlling law.
This undoubtedly would have been an easier case if the
government had tried this case differently. Nonetheless, the
government’s poor tactical choice should not result in rever-
sal. The majority does not discuss critical evidence supporting
the government’s case and fails to “view[ ] the evidence in the
light most favorable to the prosecution.” Jackson, 443 U.S. at
319. Under this “highly deferential” standard of review, I
come out with the opposite result and would therefore affirm
Milwitt’s conviction.
I also must dissent from the majority’s attempt to change
the dissent in Crawford into the law of our circuit and its
attempt to resurrect an argument based on McNally and
Mitchell that Crawford explicitly rejected. Indeed, it is regret-
table that the majority insisted on reaching an issue that nei-
ther party raised.