United States v. Don H. Pace , 314 F.3d 344 ( 2002 )

314 F.3d 344

UNITED STATES of America, Plaintiff-Appellee,
v.
Don H. PACE, Defendant-Appellant.

No. 01-10458.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 12, 2002.

Filed August 22, 2002.

Amended December 24, 2002.

COPYRIGHT MATERIAL OMITTED Bruce R. Heurlin, Karp, Heurlin & Weiss, Tucson, AZ, for the defendant-appellant.

Christina M. Cabanillas, Assistant U.S. Attorney, Tucson, AZ, for the plaintiff-appellee.

Appeal from the United States District Court for the District of Arizona; Frank R. Zapata, District Judge, Presiding. D.C. No. CR-97-00208-FRZ.

Before: GOODWIN, HAWKINS and FISHER, Circuit Judges.

GOODWIN, Circuit Judge:

1

Don Pace appeals his conviction and sentence for two counts of wire fraud, in violation of 18 U.S.C. § 1343, and one count of subscribing a false tax return, in violation of 26 U.S.C. § 7206(1). The main issue on appeal is whether venue existed in the District of Arizona. For the reasons that follow, we vacate Pace's wire fraud convictions but affirm his conviction for subscribing a false tax return.

Background

2

For 23 years, Don Pace ("Pace") worked as a successful trial attorney in Cleveland, Ohio. In 1986, he left his law practice and, two years later, formed Pace American Group ("PAG"), an insurance holding company. He remained president and CEO of the corporation until 1994. Pace also served as the vice president and director of American Bonding Company ("ABC"), a subsidiary of PAG providing surety bonds to construction contractors on federal, state, and local government projects. At the time of the alleged offenses, ABC was headquartered in Tucson, Arizona, and maintained a branch office in Pasadena, California.

3

In 1990, ABC expanded its business into Mexico and entered into a cooperative bonding agreement with Afianzadora Mexicana ("AFIMEX"). Under the terms of the agreement, ABC would reinsure and share the risks of bonds issued by AFIMEX in Mexico. In return, AFIMEX would remit a percentage of the bond premiums to ABC.

4

In 1992, AFIMEX deposited $17,919.28 of bond premiums to two bank accounts at the ABACO Financial Institution ("ABACO") in Mexico City. One account was under the name of ABC; the other was under American Insurance Group (AIG changed its name to Pace American Group in 1993). ABC was not aware that these accounts existed, and Pace did not disclose them to the company.

A. Count 78

5

On April 27, 1992, AFIMEX sent Pace a summary report of the premiums transferred to the ABC / AIG accounts at ABACO. It noted that two deposits had already been completed and that an additional $18,740 would be sent pursuant to wire transfer instructions from Pace. AFIMEX mailed this correspondence to AIG's business address in Tucson, Arizona.

6

Upon learning of the letter, Pace authorized his secretary to provide AFIMEX with his personal bank information. On April 27, 1992 — the date of the letter — AFIMEX wrote a check out to ABC in the amount of $18,740, but mailed it to Pace's Ohio bank for deposit. The check did not clear because it was made payable to ABC. On June 19, AFIMEX successfully wired the money to Pace's bank account in Ohio.

B. Count 77

7

On April 30, 1992, Pace faxed ABACO instructions to transfer any funds in the ABC account to his personal bank account in Ohio. This fax was sent on letterhead from ABC's Pasadena office. On or about May 8, 1992 (after Pace faxed his wire transfer instructions), ABACO wired $17,919.28 to Pace's personal account in Cleveland, Ohio.

C. Count 81

8

Pace's 1992 tax returns were prepared by accountant John Patton ("Patton") in Westlake, Ohio. Patton sent Pace a 1992 "organizer" in order to secure updated financial information from Pace for that tax year. The organizer was mailed to Pace's address in Arizona. Upon its receipt, Pace mailed a list of his 1992 income sources to Patton, but did not include any income from the AFIMEX and ABACO wire transfers.

9

Enclosed in the organizer was also a questionnaire regarding income. Pace checked "no" when asked whether he had any income from foreign sources in 1992. Pace further replied that he had no financial interest in, or signing authority over, any foreign bank accounts.

10

Using the information provided in the organizer, Patton compiled Pace's 1992 statement of financial condition and sent it to Pace in Arizona. The statement did not list the ABC / AIG accounts at ABACO, and it did not report the $36,659.28 that Pace received as a result of the wire transfers. Pace verified the accuracy of the 1992 statement and assured Patton that, "to the best of [his] knowledge and belief," he had "made all financial records and related data available" to Patton. The confirmation letter listed Pace's Arizona address in its heading.

11

When Patton completed the tax return, he sent it to Pace in Tucson. Pace testified that he reviewed the return while he was out of town on a business trip and that he signed the return while he was in Buffalo, New York.

D. Procedural history

12

On April 6, 1997, a federal grand jury filed an 81-count superseding indictment charging Pace with: conspiracy to commit mail fraud, mail fraud, wire fraud, money laundering, subscribing a false tax return, and forfeiture.1

13

At trial, through the testimony of AFIMEX employee Carolina Garcia-Mena ("Garcia-Mena"), the government introduced a number of financial documents between AFIMEX and ABC, including: (1) an April 27 letter sent by AFIMEX in which it reported $18,740 in premiums owed to ABC; and (2) an April 30 correspondence from Pace to ABACO, confirming his instructions to wire all amounts deposited into the ABC / AIG accounts at ABACO to Pace's personal account in Ohio.

14

On December 14, 2000, the jury acquitted Pace on all but three counts: Counts 77 and 78 (wire fraud) and Count 81 (making and subscribing a false tax return).

15

Several weeks after the jury verdict, the government disclosed a letter Garcia-Mena had written to the IRS two years earlier ("the IRS letter"). The IRS letter was written in response to the government's desire to utilize her as a trial witness. Garcia-Mena indicated that she could not confirm the accuracy of bank documents issued before she assumed a managing position at the treasury department of AFIMEX. She then recommended Julian Salle-Arevalo as a more appropriate witness.

16

Pace moved for a new trial because of the untimely disclosure of the IRS letter. The district court found that the content of the IRS letter was already elicited during Garcia-Mena's cross-examination and denied the motion. At sentencing, Pace requested a downward departure based on the late disclosure. The district court denied the motion and granted a downward departure only for aberrant behavior. The court then ordered Pace to pay ABC $36,659.28 in restitution and sentenced him to four months of imprisonment, followed by concurrent two-year terms of supervised release on each count.

Discussion

A. Wire fraud

17

Pace argues that venue for Counts 77 and 78 did not lie in Arizona because the "essential conduct" of wire fraud was not committed there. The government contends that venue appropriately lay in Arizona pursuant to one of two statutes. First, it contends that venue could lie pursuant to the "continuing offense" statute of 18 U.S.C. § 3237(a) because Pace's wire fraud scheme was "begun" or at least "continued" while he was in Arizona. Alternatively, the government contends that venue was proper under the "high seas" statute, 18 U.S.C. § 3238, because the wire transfers originated in Mexico.

18

Article III of the Constitution, the Sixth Amendment, and Rule 18 of the Federal Rules of Criminal Procedure guarantee that a defendant will be tried in the state where the crime was committed. U.S. Const. art. III, § 2, cl. 3; U.S. Const. amend. VI; Fed.R.Crim.P. 18. When a defendant has been indicted on multiple counts, venue must be proper for each count. United States v. Corona, 34 F.3d 876, 879 (9th Cir.1994). The government bears the burden of establishing venue by a preponderance of the evidence. United States v. Angotti, 105 F.3d 539, 541 (9th Cir.1997). "[D]irect proof of venue is not necessary where circumstantial evidence in the record as a whole supports the inference that the crime was committed in the district where venue was laid." United States v. Childs, 5 F.3d 1328, 1332 (9th Cir.1993) (internal quotation marks and citation omitted).

19

In order to decide whether venue was proper in the District of Arizona, we "must initially identify the conduct constituting the offense (the nature of the crime) and then discern the location of the commission of the criminal acts." United States v. Rodriguez-Moreno, 526 U.S. 275, 279, 119 S.Ct. 1239, 143 L.Ed.2d 388 (1999); accord United States v. Ruelas-Arreguin, 219 F.3d 1056, 1061 (9th Cir.2000). To determine the "nature of the crime," we look to the "essential conduct elements" of the offense. See Rodriguez-Moreno, 526 U.S. at 280, 119 S.Ct. 1239.2

20

The wire fraud statute, 18 U.S.C. § 1343, provides:

21

Whoever, having devised or intending to devise any scheme ... to defraud, or for obtaining money or property by means of false or fraudulent pretenses ... transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings ... for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than five years, or both.

22

We have recognized that the nature of a wire fraud offense — the "gist and crux" of the offense — is the misuse of wires. See United States v. Garlick, 240 F.3d 789, 792 (9th Cir.2001). It is appropriate, therefore, that we interpret the essential conduct prohibited by § 1343 to be the misuse of wires as well as any acts that cause such misuse. See id. at 790.

23

The government, however, urges a broader reading of § 1343, and argues that venue is appropriate wherever Pace concocted his "scheme to defraud" ABC, AIG, AFIMEX, and ABACO. Although a fraudulent scheme may be an element of the crime of wire fraud, it is using wires and causing wires to be used in furtherance of the fraudulent scheme that constitutes the prohibited conduct. See, e.g., United States v. Condolon, 600 F.2d 7, 8 (4th Cir.1979) (gravamen of wire fraud offense is the misuse of interstate communication facilities to execute any scheme to defraud). Therefore, venue is established in those locations where the wire transmission at issue originated, passed through, or was received, or from which it was "orchestrated." See United States v. Palomba, 31 F.3d 1456, 1461 (9th Cir.1994). In other words, venue may lie only where there is a direct or causal connection to the misuse of wires. Our focus on the use of the wires for venue purposes is consistent with our opinion in Garlick, in which we held that each use of the wires constitutes an independent violation of the law. See 240 F.3d at 793. Multiple convictions can arise from the same fraudulent scheme. See id. A scheme to defraud, however, without the requisite illegal use of wires, does not violate the wire fraud statute. Cf. United States v. Dischner, 974 F.2d 1502, 1521 (9th Cir.1992) (fraud need not succeed for there to be conviction under wire fraud statute), overruled on other grounds by United States v. Morales, 108 F.3d 1031, 1035 n. 1 (9th Cir.1997) (en banc).

A1. 18 U.S.C. § 3237(a)

24

"Crimes consisting of a single noncontinuing act are ``committed' in the district where the act is performed. Crimes that are not unitary but instead span space and time, however, may be considered continuing offenses under 18 U.S.C. § 3237(a). Continuing offenses may be prosecuted ``in any district in which such offense was begun, continued, or completed.'" Corona, 34 F.3d at 879 (citations omitted); see 18 U.S.C. § 3237(a);3 see also Rodriguez-Moreno, 526 U.S. at 281, 119 S.Ct. 1239 ("[W]here a crime consists of distinct parts which have different localities the whole may be tried where any part can be proved to have been done.") (internal quotation marks and citations omitted). Wire fraud is a "continuing offense" and thus venue may lie in all of the places where any part was accomplished. See 18 U.S.C. § 3237(a).

25

The government has not met the burden of showing that Pace "beg[a]n, continued, or completed" wire fraud in Arizona. It contends that Pace regularly communicated with ABACO and AFIMEX from his Tucson business address. As support, the government offers the testimony of Pace's secretary, who confirmed that Pace had a business address in Tucson and that parties who needed to communicate with him with respect to ABC affairs would write or fax him using that address. This information, by itself, does not indicate that Pace "used" wires in Arizona or that he otherwise "caused" such use from Arizona.

26

The government also identifies two communications that AFIMEX sent to Pace in Tucson, Arizona: (1) the April 27 letter, in which AFIMEX requested wire transfer instructions, and (2) a June 18, 1992 letter AFIMEX sent confirming that it had deposited $17,608 into the ABC / AIG accounts at ABACO. The government argues that these two communications suggest that Pace, while he was in Arizona, instructed AFIMEX to wire $18,740 and ABACO to wire $17,919.28 to his personal account.

27

Neither of these communications "caused" the wire transfers at issue, at least not from Arizona. The confirmation letter came after Pace issued the wire transfer instructions and thus obviously could not have caused the transfers. The April 27 letter presents a slightly more difficult question. Although Pace almost certainly learned of the April 27 letter and subsequently authorized his secretary to provide AFIMEX with his personal bank account information (for the transfer of $18,740), the government has not produced sufficient evidence that Pace gave this authorization from Arizona.4 Therefore, venue did not lie in the District of Arizona.

28

The government also relies on the April 30 fax from Pace to ABACO, in which Pace instructed ABACO to wire the funds that were the subject of Count 77 to his personal account in Ohio. The government contends that Pace faxed the instructions in response to AFIMEX's April 27 letter, which was sent to Pace's office in Tucson. Even if the government is correct, however, it has produced no evidence that Pace sent the fax from Arizona. The evidence instead suggests that the fax was sent from Pasadena, California. The record contains no other correspondence regarding subsequent or alternative wire transfer instructions.

A2. 18 U.S.C. § 3238

29

The government contends that, alternatively, venue exists pursuant to 18 U.S.C. § 3238, the federal venue statute for offenses begun or committed on the high seas or "elsewhere out of the jurisdiction of any particular State or district." The government contends that, under § 3238, venue could lie in the District of Arizona, where Pace was arrested.

30

A review of the record indicates that the wire fraud offenses were "begun" in the United States. As we explained above, the wire fraud statute prohibits the use of wires, but also criminalizes conduct that "causes" a wrongful transmittal. See 18 U.S.C. § 1343. The offense will begin with the first prohibited act. Here, the transmissions were caused by Pace's instructions to his secretary to provide AFIMEX with his personal information (to facilitate the Count 78 wire transfer), and by the fax to ABACO directing it to wire the Count 77 funds to Pace's account in Ohio. Because there is no evidence that Pace was in Mexico when he made either of these communications, we cannot conclude that the offenses began in Mexico.

31

In addition, the offenses were "committed" in part in the United States. Although the wire transfers originated in Mexico, they were received in Ohio. The wire fraud offenses were, therefore, partially "committed" in the District of Ohio. See Palomba, 31 F.3d at 1461. It is true that the offenses were also committed in Mexico, but § 3238 does not apply unless the offense was committed entirely on the high seas or outside the United States (unless, of course, the offense was "begun" there).5

32

In sum, venue did not exist pursuant to the "high seas" venue statute because the wire fraud was not begun on the high seas or "out of the jurisdiction of any particular State or district" and it was committed in part in the United States.

33

Because venue did not exist in Arizona for the wire fraud offenses, the convictions for Counts 77 and 78 must be vacated.

B. Subscribing a false tax return

34

Pace contends that venue for Count 81 did not lie in the District of Arizona because his accountant prepared the false tax return in Ohio and Pace signed it in New York. Section 7206(1) makes it unlawful for any person willfully to make and subscribe a false tax return. See 26 U.S.C. § 7206(1). False statements may be "made" where they are ultimately received. See Angotti, 105 F.3d at 542. However, the offense does not begin and end there.

35

A communication must be sent before it is received. Thus, the crime of "making" a false tax return commences when one furnishes information essential to the return, and is not completed until the information is received by the party to whom it is addressed. This conclusion is consistent with Angotti, in which we held that "making" a false statement to a federal agency is a continuing offense and may be prosecuted in a district not only where the false statement is initially provided but where it is ultimately received. Id. at 543. In so holding, we explained: "``[t]he statements continued to be false ... not only when initially presented but also upon arrival[at the place] where the decision was reached....'" Id. at 542-43 (alterations in original) (quoting United States v. Candella, 487 F.2d 1223, 1228 (2d Cir.1973)). Consequently, the offense may be tried in a district where the defendant prepared and transmitted the false statements. Id. at 544 (citing United States v. Zwego, 657 F.2d 248, 251 (10th Cir.1981)).

36

The same can be said for an offense under § 7206(1). The act of making a tax return commences when one prepares and furnishes information material to the return and continues until that information is received by the IRS. For such continuing offenses, venue is proper in any district in which the continuing conduct has occurred. See 18 U.S.C. § 3237(a); Rodriguez-Moreno, 526 U.S. at 282, 119 S.Ct. 1239; United States v. Barnard, 490 F.2d 907, 910 (9th Cir.1973).

37

Here, Pace provided information essential to his tax return in Arizona. In response to a questionnaire sent by his accountant, Pace indicated he had no foreign income and no control over any foreign bank accounts in 1992. Based on the questionnaire, the accountant then compiled a statement of financial condition, which served as the basis for preparing Pace's tax return. The statement did not list the ABC / AIG accounts at ABACO, and it did not report the $36,659.28 that Pace received as a result of the wire transfers. Pace not only confirmed the statement's accuracy but also indicated that he had "made all financial records and related data available" to Patton. As Pace furnished information essential to the completion of the tax return in Arizona, the § 7206(1) offense was properly tried there.

C. Remaining Issues

38

Pace argues several other issues relating to Counts 77 and 78, including the district court's denial of his motion for a new trial or, alternatively, its failure to depart downward at sentencing because of the untimely disclosure of the IRS letter. He also contends that he should not have to pay restitution to ABC because the company owes him over $800,000. We do not reach these issues in light of our decision to vacate his wire fraud convictions.

39

We AFFIRM Pace's conviction on Count 81, VACATE the judgment of conviction on Counts 77 and 78, and REMAND for resentencing on Count 81.

Notes:

1

Counts 1 through 76 involve allegations that Pace, in his capacity as company director, used ABC to generate "kickbacks" to a real estate partnership owned by Pace and his son. Pace was acquitted of all counts related to this transaction

2

We note that the Court inRodriguez-Moreno recognized that the verbs of a statute may be helpful to "identify[ ] the conduct that constitutes an offense" but emphasized that the "``verb test' ... cannot be applied rigidly, to the exclusion of other relevant statutory language." 526 U.S. at 280, 119 S.Ct. 1239.

3

18 U.S.C. § 3237(a) provides that "any offense against the United States begun in one district and completed in another, or committed in more than one district, may be inquired of and prosecuted in any district in which such offense was begun, continued, or completed."

4

The government argues that there is circumstantial evidence that Pace gave the authorization from Arizona because AFIMEX sent the funds to Pace's account in Ohio on April 27 — the date of the letter that AFIMEX sent to Pace's Arizona office requesting wire transfer instructions. At best, however, the timing provides circumstantial evidence that Pace was made aware of AFIMEX's request. It does not demonstrate by a preponderance of the evidence that he was in Arizona when he instructed his secretary to give AFIMEX his bank information

5

But see United States v. Jensen, 93 F.3d 667, 671 (9th Cir.1996) (B.Fletcher, J., concurring).