United States v. Tkhilaishvili

United States Court of Appeals
For the First Circuit
No. 18-1027
UNITED STATES OF AMERICA,
Appellee,
v.
JAMBULAT TKHILAISHVILI,
Defendant, Appellant.
No. 18-1098
UNITED STATES OF AMERICA,
Appellee,
v.
DAVID TKHILAISHVILI,
Defendant, Appellant.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Douglas P. Woodlock, U.S. District Judge]
Before
Howard, Chief Judge,
Torruella and Selya, Circuit Judges.
Michael Tumposky, with whom Hedges & Tumposky, LLP was on
brief, for appellant Jambulat Tkhilaishvili.
William W. Fick, with whom Fick & Marx LLP was on brief, for
appellant David Tkhilaishvili.
Alexia R. De Vincentis, Assistant United States Attorney,
with whom Andrew E. Lelling, United States Attorney, was on brief,
for appellee.
June 5, 2019
SELYA, Circuit Judge. Victor Torosyan, together with
defendants-appellants Jambulat Tkhilaishvili and David
Tkhilaishvili, planned to open a suboxone clinic (the Clinic) for
the treatment of opioid addiction. The defendants had represented
to Torosyan that they would provide the know-how as long as he
furnished the bulk of the necessary financing. But while Torosyan
was depleting his resources in order to get the Clinic up and
running, the Tkhilaishvili brothers attempted to relieve him of
some portion of his share in the business through extortionate
means. Torosyan blew the whistle and, after a week-long trial, a
jury convicted the defendants of conspiring to commit Hobbs Act
extortion and other crimes. The defendants appeal. After careful
consideration, we reverse the judgment of conviction on an
embezzlement count brought against David; otherwise, we find the
defendants' manifold claims of error either lacking in merit or
waived (or in some instances both) and, therefore, affirm the
remaining judgments of conviction. Finally, we remand to the
district court for further consideration of David's sentence and
the concomitant restitution order in light of the reversed
conviction.
I. BACKGROUND
We start by rehearsing the relevant facts, taking them
in the light most hospitable to the verdict, consistent with record
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support. See United States v. DiDonna, 866 F.3d 40, 43 (1st Cir.
2017). We then recount the travel of the case.
In 2014, David approached Torosyan about opening a
suboxone clinic in Quincy, Massachusetts. David boasted that he
and his brother Jambulat had experience running a suboxone clinic
but needed a significant capital infusion to get the project off
the ground. Torosyan, who had known David socially, agreed to
invest $500,000 in the project.
In December of 2014, the parties entered into a letter
agreement establishing the structure of the business and the
membership interests of each principal. Under the letter
agreement, the venture consisted of two Massachusetts limited
liability companies: Allied Health Clinic (AHC) and Health
Management Group (HMG). Torosyan received a 41% Class A share in
both AHC and HMG; David received a 40% Class A share in HMG and a
4% Class B share in AHC; and Jambulat received a 45% Class A share
in AHC and a 5% Class B share in HMG. The remaining Class B
interests in AHC and HMG were reserved for other anticipated
employees of the proposed suboxone clinic, all of whom were
relatives or former associates of the defendants.
Given Torosyan's role as the primary (indeed, the sole)
investor, the letter agreement granted him a special consent
authority, which entitled him to decide any contested matters
involving the Clinic until his capital investment had been fully
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recouped. It also granted him a secured guarantee of 50% of his
investment, collateralized by the Tkhilaishvilis' pizza parlor.
With the letter agreement in place, the trio moved
forward with their plans to open the Clinic. From Torosyan's
perspective, things did not go smoothly. In the Spring of 2015,
he learned that the defendants had hoodwinked him about the
progress of construction. He also learned of prior violent
behavior by the defendants. It was not until August 6, 2015 —
months later than anticipated — that the Clinic finally received
a certificate of occupancy from the City of Quincy. By then,
Torosyan had infused approximately $400,000 of his personal
savings into the Clinic.
Matters went downhill from there. On August 22, the
defendants asked Torosyan to release his security interest in the
pizza parlor so that they could sell that business and focus on
the Clinic. Torosyan agreed, but as soon as he had signed the
release, the defendants started to threaten him. They demanded
that he surrender his special consent authority and relinquish a
portion of his ownership interest. They warned that if he refused
to comply, they would "burn down the Clinic" and that he and his
family were "going to be hurt."
The next day, Torosyan suggested to David that they
mediate the dispute in accordance with the letter agreement. David
replied that he would "put a bullet in [the mediator's] head" and
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said that his brother "shot . . . people in the head." Torosyan
was "very, very scared."
Although shaken by this dramatic shift in the
defendants' attitude, Torosyan nonetheless decided to move forward
with the Clinic. In September, lawyers for Torosyan and the
defendants negotiated and drafted formal operating agreements.
Except for minor adjustments to the distribution of membership
interests, the operating agreements retained most features of the
letter agreement (including Torosyan's special consent authority).
In addition, the operating agreements included new "duty of
loyalty" provisions, which had the potential to trigger forfeiture
of any breaching member's ownership interest.
Torosyan and those persons holding minor membership
interests signed the operating agreements on September 11.
Jambulat signed the following day, after declaring that "contracts
mean[t] nothing" to him. He also demanded that Torosyan
immediately give 5% of Torosyan's ownership interest to a creditor
of the defendants and agree to give 40% of the Clinic's profits to
David when the Clinic began receiving reimbursements from
insurance companies. Torosyan deflected these demands, saying
that he would speak to his lawyer. David, who was traveling,
signed the operating agreements sometime within the next few days.
The Clinic opened in October of 2015, after receiving a
license from state public health authorities. Around that time,
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Torosyan loaned David $3,000, with the understanding that the money
would serve as David's salary for November unless repaid within
one week. David never repaid the loan but nonetheless withdrew
salary payments for November totaling $3,500.
On November 9, David requested that Torosyan meet him at
the Clinic. When Torosyan arrived, the defendants asked to speak
privately with him in an exam room. Once inside, they locked the
door and demanded that he turn over 40% of available Clinic funds
to them and cede 5% of his ownership interest to their friend. In
Torosyan's presence, David suggested to Jambulat that they needed
to "get rid of" him. The threats continued as Torosyan retreated
to the parking lot, where Torosyan saw Jambulat withdraw a knife
from the glove compartment of David's car.
By then, Torosyan had sunk roughly $580,000 into the
Clinic. He reported the threats to his attorneys and thereafter
met with agents of the Federal Bureau of Investigation (FBI). At
the FBI's behest, he agreed to wear a wire and surreptitiously
record conversations with the defendants. In recordings made on
November 25 and 30, David made several incriminating statements,
reiterating earlier threats, referring to previous violent acts
undertaken by both defendants, and suggesting that he had
connections with members of Russian organized crime.
On January 6, 2016, Torosyan sought to exorcise the
defendants: he invoked the "duty of loyalty" provision to remove
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them from Clinic membership. Shortly thereafter, a federal grand
jury sitting in the District of Massachusetts charged both
defendants with conspiring and attempting to commit Hobbs Act
extortion (counts 1 and 2). See 18 U.S.C. § 1951. In addition,
David was charged with embezzlement from a health care benefit
program (counts 3 and 4). See id. § 669.
Both defendants maintained their innocence and, in
advance of trial, moved to exclude evidence of prior violent acts.
See Fed. R. Evid. 404(b). At a pretrial hearing, the district
court ruled such evidence admissible "to the degree that the
witness has expressed a concern or is aware of prior acts of
violence by the defendants." A week-long jury trial ensued, and
the defendants timely moved for judgment of acquittal. See Fed.
R. Crim. P. 29(a). The district court reserved decision, see Fed.
R. Crim. P. 29(b), and sent the case to the jury, which found the
defendants guilty on all counts.
A consolidated sentencing proceeding was conducted on
two separate days. During that hearing, the district court denied
the defendants' motions for judgment of acquittal (including a
supplemental motion filed by David over the government's objection
on the eve of the first day). The court proceeded to sentence
David to four concurrent 36-month terms of immurement followed by
a three-year term of supervised release; ordered him to pay a
special assessment of $400 ($100 per count), see 18 U.S.C. § 3013;
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and decreed that he make restitution in the amount of $3,500. The
court sentenced Jambulat to two consecutive nine-month terms of
immurement followed by a three-year term of supervised release,
and ordered him to pay a special assessment of $200. These timely
appeals ensued.
II. HOBBS ACT EXTORTION
The defendants challenge on three fronts their
convictions for conspiring and attempting to commit Hobbs Act
extortion (counts 1 and 2). We deal sequentially with these
challenges.
A. Sufficiency of the Evidence.
The defendants' principal challenge is to the
sufficiency of the evidence. To the extent that they preserved
this challenge, we review the district court's denial of their
Rule 29 motions de novo. See United States v. Iwuala, 789 F.3d 1,
8 (1st Cir. 2015). In that process, we evaluate "whether, after
assaying all the evidence in the light most amiable to the
government, and taking all reasonable inferences in its favor, a
rational factfinder could find, beyond a reasonable doubt, that
the prosecution successfully proved the essential elements of the
crime." United States v. Chiaradio, 684 F.3d 265, 281 (1st Cir.
2012) (quoting United States v. O'Brien, 14 F.3d 703, 706 (1st
Cir. 1994)).
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The Hobbs Act forbids conduct that "in any way or degree
obstructs, delays, or affects commerce or the movement of any
article or commodity in commerce, by robbery or extortion or
attempts or conspires so to do." 18 U.S.C. § 1951(a). Here, the
government was required to prove beyond a reasonable doubt both
that the defendants conspired and attempted to commit extortion
and that their actions affected interstate or international
commerce. See United States v. Cruz-Arroyo, 461 F.3d 69, 73 (1st
Cir. 2006).
At the outset, the defendants contend that the evidence
presented was insufficient to establish that they either conspired
or attempted to commit extortion. Extortion is defined under the
Hobbs Act as "the obtaining of property from another, with his
consent, induced by wrongful use of actual or threatened force,
violence, or fear, or under color of official right." 18 U.S.C.
§ 1951(b)(2). Against this statutory backdrop, the defendants
focus on the specific conduct referenced in counts 1 and 2: their
attempt to obtain a percentage of Torosyan's ownership interest
for their friend. They theorize that the requisite "obtaining" of
property cannot be satisfied by a showing that a third party
(rather than the defendants themselves) stood to garner the fruits
of the extortion. In their view, the government had to show that
the defendants sought to take possession of the extorted property
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for themselves or, at the very least, that they somehow sought to
benefit from the extortionate transfer.
This contention is simply wrong. As we recently
explained, a defendant may "obtain" property within the meaning of
the Hobbs Act by bringing about its transfer to a third party,
regardless of whether the defendant received a personal benefit
from the transfer. See United States v. Brissette, 919 F.3d 670,
680, 685-86 (1st Cir. 2019) (holding that threatening to withhold
event permits if victim did not hire workers from a specific union
could constitute "obtaining" for purposes of Hobbs Act). It
follows that the government was not required to show that the
defendants stood to benefit personally from the extortionate
transfer of Torosyan's property to a third party. We therefore
hold that the government presented sufficient evidence for a
reasonable factfinder to conclude that the defendants conspired
and attempted to "obtain" Torosyan's property in violation of the
Hobbs Act.1
The defendants mount a second challenge to the
sufficiency of the evidence: they say that because the Clinic was
not profitable at the time of the attempted extortion, an ownership
1 The government argues in the alternative that it presented
evidence sufficient to support a finding that the defendants
personally sought to obtain property from Torosyan. Because we
conclude that the transfer of property to a third party may satisfy
the "obtaining" element, we need not reach this argument.
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interest in the Clinic was not "property" within the meaning of
the Hobbs Act. But there is a rub: "[a] party who identifies an
issue, and then explicitly withdraws it, has waived the issue."
United States v. Rodriguez, 311 F.3d 435, 437 (1st Cir. 2002). So
it is here. The defendants advanced this argument in their motions
for judgment of acquittal and then abandoned it when, arguing
before the district court that the transfer of property to a third
party could not comprise extortion, they conceded that property
was involved and agreed with the court's statement that "we don't
have a property problem." Once waived, a claim typically is "dead
and buried; it cannot thereafter be resurrected on appeal." United
States v. Eisom, 585 F.3d 552, 556 (1st Cir. 2009).
The defendants advance yet a third challenge to the
sufficiency of the evidence of Hobbs Act extortion. Their
challenge trumpets that the government failed to prove that their
conduct "obstructed, delayed, or affected interstate or
international commerce." Cruz-Arroyo, 461 F.3d at 75 (citing 18
U.S.C. § 1951(a)). This ipse dixit does not withstand scrutiny.
"The scope of the Hobbs Act extends as far as Congress's
power to regulate conduct under the Commerce Clause." United
States v. Rodríguez-Casiano, 425 F.3d 12, 14 (1st Cir. 2005). To
affect commerce for purposes of the Hobbs Act, it is not necessary
that the charged crime be soaked in the stream of commerce. To
the contrary, "[w]e have regularly held that commerce is 'affected'
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for the purposes of the Hobbs Act if there is a 'realistic
probability of a de minimis effect on interstate commerce.'"
United States v. Capozzi, 486 F.3d 711, 725-26 (1st Cir. 2007)
(quoting United States v. McKenna, 889 F.2d 1168, 1171-72 (1st
Cir. 1989)). "Even potential future effects may be the basis for
interstate commerce jurisdiction under the Hobbs Act." Id. at
726.
Struggling to place themselves beyond the reach of these
precedents, the defendants posit that, when the victim of a Hobbs
Act crime is an individual rather than a business, the de minimis
standard no longer pertains. They instead insist that a
"heightened showing" of an effect on interstate commerce is
required. Building on this porous foundation, they charge that
the government failed to satisfy this enhanced requirement.
The defendants' argument appears to rest on a misreading
of our case law. They stake their claim principally on our
decision in United States v. McCormack, 371 F.3d 22 (1st Cir.
2004), vacated on other grounds, 543 U.S. 1098 (2005). While it
is true that we referred there to a "heightened standard" to be
applied to Hobbs Act crimes directed at an individual, id. at 28,
we clarified in United States v. Nascimento that this language
"relates to the degree of scrutiny, not the quantum of proof,"
491 F.3d 25, 37 n.3 (1st Cir. 2007). The defendants' insistance
that we have endorsed an alternative to the de minimis standard
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for individual victims of Hobbs Act crimes is therefore nothing
more than wishful thinking. See id. (rejecting argument that
government is required to show "a heightened effect on commerce to
sustain a Hobbs Act conviction when the victim . . . [i]s not a
business"); see also United States v. Shavers, 693 F.3d 363, 375-
76 (3d Cir. 2012) (rejecting request to adopt "a heightened
interstate commerce requirement when the victim of the alleged
crime is an individual rather than a business"); cf. Rodríguez-
Casiano, 425 F.3d at 15 (rejecting argument that robbery directed
at individual cannot engender sufficient effect on interstate
commerce to satisfy de minimis standard).
To be sure, a court must engage in a "multifaceted and
case-specific inquiry" when determining whether the de minimis
standard has been satisfied. McCormack, 371 F.3d at 28. Moreover,
a court must be "more cautious" in applying the standard to
criminal acts directed at individuals as such acts "often have a
less obvious effect on interstate commerce" than acts directed at
businesses. Rodríguez-Casiano, 425 F.3d at 15; cf. United States
v. Jiménez-Torres, 435 F.3d 3, 7-8 (1st Cir. 2006) ("Where . . .
the crime concerns the robbery of a home rather than of a business,
we approach the task of applying the de minimis standard with some
caution, lest every robbery (which by definition has some economic
component) become a federal crime."). Thus, in McCormack we
rejected the government's argument that an "extortionate demand of
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$100,000, standing alone, [wa]s sufficient to satisfy" the de
minimis standard with respect to an individual victim. 371 F.3d
at 28. Despite the fact that the government asserted that "any
reasonable factfinder would conclude that, in order to satisfy
such an exorbitant demand, the victim would need to liquidate
assets in a manner affecting interstate commerce," we concluded
that more was necessary to trace the connection between the
individual victim's assets and interstate commerce. Id. at 28-
29.
Our rejection of the government's proposed rule
notwithstanding, we found that the government had shown the
requisite de minimis impact on interstate commerce through a tried
and true method: demonstrating that the defendant's criminal
activity "cause[s] or create[s] the likelihood that the individual
will deplete the assets of an entity engaged in interstate
commerce." Id. at 29 (alteration in original) (quoting United
States v. Collins, 40 F.3d 95, 100 (5th Cir. 1994)); see Cruz-
Arroyo, 461 F.3d at 75. Here, as in McCormack, the government
embraced this theory — a particularly suitable approach given that
the distinction between Torosyan's funds and the Clinic's funds as
the target of the crime was "one of form, not of substance." Cruz-
Arroyo, 461 F.3d at 75; see United States v. Devin, 918 F.2d 280,
286, 293 (1st Cir. 1990) (finding de minimis standard satisfied
where individual was president and proprietor of business
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operating in interstate commerce). The government offered
evidence to show that the defendants targeted Torosyan because he
was the sole investor in the Clinic and that the primary "asset"
sought by them was an ownership interest in the business. The
government also adduced evidence showing that the Clinic engaged
in interstate commerce and that the defendants' attempted
extortion had the potential to deplete the Clinic's assets. Taken
in cumulation, this evidence was more than enough to ground a
finding that the effect on the Clinic's business could be
considered in determining whether the government had satisfied the
"interstate commerce" element of the Hobbs Act counts. See Cruz-
Arroyo, 461 F.3d at 75; United States v. Diaz, 248 F.3d 1065, 1089
(11th Cir. 2001).
The defendants half-heartedly argue that the Clinic — "a
Massachusetts limited liability company with no funds held out of
state" — was not an "entity engaged in interstate commerce." But
this is thin gruel: as the defendants conceded below, the Clinic
purchased substantial quantities of drugs and supplies from out-
of-state vendors. Activities of this kind are sufficient to
warrant a finding that a nexus with interstate commerce exists.
See, e.g., Jiménez-Torres, 435 F.3d at 8 (finding Puerto Rican gas
station participated in interstate commerce when government showed
gas station purchased products from U.S. Virgin Islands);
Rodríguez-Casiano, 425 F.3d at 14 (finding Puerto Rican firms that
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purchased products from mainland United States were engaged in
interstate commerce). And in all events, the Clinic contracted to
receive payments from Medicare, a federal program, with a nunc pro
tunc effective date of July 1, 2015. That an entity receives
regular Medicare payments from the federal government, without
more, is enough to establish a nexus with interstate commerce.
See Diaz, 248 F.3d at 1090.
In a feat of legal legerdemain, the defendants attempt
to switch the focus of their claims to the second component of the
depletion-of-assets theory. They argue that the government failed
to demonstrate that their attempted extortion had the potential to
deplete the Clinic's assets. Because "the completed extortion
would merely have transferred [Torosyan's] interest in the Clinic
to other individuals," their thesis runs, "[t]he Clinic would not
have lost a penny."
This simplistic characterization does not square with
the multifaceted and case-specific inquiry required in connection
with the de minimis standard. The government adduced evidence
that the defendants repeatedly threatened Torosyan (the sole
investor in the Clinic) during a period in which the Clinic still
depended upon his financial support. The government also showed
that the defendants purposed to give a portion of Torosyan's
ownership interest to one of their creditors — a person who had no
involvement either in constructing or operating the Clinic. The
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defendants' attempt to distinguish the ownership interest sought
here from the financial resources more commonly targeted in Hobbs
Act extortion cases, see, e.g., Devin, 918 F.2d at 286, 293, does
not dull the force of this showing.
We summarize succinctly. Based on all the evidence of
record, a jury reasonably could find that the defendants'
extortionate acts had the potential to chill Torosyan's ardor and
reduce the inflow of cash from him to the Clinic without
substituting any new source of financial support. The likely
result would be that the Clinic would no longer be able to operate
in interstate commerce (or, indeed, at all). Given this
hypothesis, we think that a jury reasonably could find that the
criminal activity had the potential to impact the Clinic's
operations in a manner that would deplete its assets and, thus,
affect interstate commerce. Cf. United States v. Vega Molina, 407
F.3d 511, 527 (1st Cir. 2005) ("The commission of a violent crime
in the workplace inevitably will constitute a wrenching, if
unquantifiable, blow to morale and productivity.").
That ends this aspect of the matter. We conclude,
without serious question, that the evidence was sufficient to show
both that the defendants conspired and attempted to extort property
from Torosyan and that their acts had at least a de minimis effect
on interstate commerce. Consequently, the district court did not
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err in denying the defendants' Rule 29 motions vis-á-vis the
extortion counts.
B. Jury Instructions.
The frailty of the defendants' sufficiency-of-the-
evidence claims makes short work of their corresponding claims of
instructional error. We take a two-tiered approach to an
assignment of instructional error: "we afford de novo review to
questions about 'whether the instructions conveyed the essence of
the applicable law,' while affording review for abuse of discretion
to questions about 'whether the court's choice of language was
unfairly prejudicial.'" United States v. Sabean, 885 F.3d 27, 44
(1st Cir. 2018) (quoting United States v. Sasso, 695 F.3d 25, 29
(1st Cir. 2012)).
The defendants' challenges to the jury instructions
mirror their challenges to the sufficiency of the evidence. See
supra Part II(A). The "obtaining" property and "effect on
interstate commerce" claims of instructional error therefore fail
for the reasons elucidated above. Because the transfer of property
to a third party may comprise "obtaining" property for the purpose
of Hobbs Act extortion, the district court did not err in
instructing the jury that a defendant could have "obtained the
property of another" by means of a transfer of legal right to that
property from the victim to "a person that the defendant
designates." And because the instruction regarding the interstate
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commerce element was substantially correct — the district court
told the jury that the government only had to show "any effect at
all on interstate commerce," even a "minimal" or "potential" one
— the defendants' second claim of instructional error fails.
The defendants' third challenge to the jury instructions
echoes their waived sufficiency argument that an ownership
interest in the Clinic could not comprise "property" within the
meaning of the Hobbs Act because the Clinic was not generating a
profit (and, therefore, in Jambulat's words, was "worthless") at
the time the crime was committed. The defendants find fault with
the definition of "property" set out in the jury instructions:
"an economic interest which is capable of being transferred from
one person to another." They assert that "there must be some proof
that the item has value in order for it to be considered property."
This assertion lacks force. In applying the Hobbs Act,
the caselaw consistently has read "property" more broadly than the
defendants urge. We agree with the Eleventh Circuit that "the
Hobbs Act applies to extortion of property in general." Diaz, 248
F.3d at 1090. As there is no valuation requirement for such
property, we find no error in the challenged instruction.2
2David attempts to advance an additional challenge concerning
the wording of the jury instructions. Because that challenge was
not raised below and because there is no plausible basis for a
claim of plain error, we reject it out of hand.
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C. Rule 404(b).
The defendants' last complaint concerning the Hobbs Act
counts centers on the notion that the district court abused its
discretion when it admitted evidence of the defendants' prior
violent acts. This disputed evidence consisted of testimony by
Torosyan and Olga Dorofyeyeva (Jambulat's former girlfriend and a
Clinic employee) about conversations in which Dorofyeyeva told
Torosyan that David flipped over a table in anger at a prior
business; that David once knocked down his girlfriend, also at a
prior business; that Jambulat used force against Dorofyeyeva when
they were dating; and that Dorofyeyeva had heard that Jambulat
stabbed someone in Boston.3 The district court concluded that
evidence of the defendants' prior violent acts was admissible both
to show the defendants' intent to threaten Torosyan and to show
Torosyan's state of mind upon hearing those threats. We review a
district court's rulings admitting or excluding evidence for abuse
of discretion. See Sabean, 885 F.3d at 55.
3 We need not linger long over the defendants' argument that
the district court abused its discretion in admitting
Dorofyeyeva's testimony on redirect examination that Jambulat
threatened to cut her if she crossed him. In support, they point
out that Torosyan was unaware of this threat. What the defendants
overlook, however, is that Jambulat's counsel paved the way for
this testimony when he asked Dorofyeyeva during cross-examination
whether she had ever heard Jambulat threaten anyone. Where, as
here, the defendant opens the door wide, the district court acts
well within the compass of its discretion in permitting the
government to go through the door. See United States v.
Balthazard, 360 F.3d 309, 317 (1st Cir. 2004).
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Our lodestar is Federal Rule of Evidence 404(b).
Although the rule provides that "[e]vidence of a crime, wrong, or
other act is not admissible to prove a person's character in order
to show that on a particular occasion the person acted in
accordance with the character," it goes on to provide that such
evidence "may be admissible for another purpose, such as proving
motive, opportunity, intent, preparation, plan, knowledge,
identity, absence of mistake, or lack of accident." Fed. R. Evid.
404(b). To determine whether other-acts evidence should be
admitted under Rule 404(b), a trial court must engage in a two-
step analysis. See United States v. Lopez-Cotto, 884 F.3d 1, 13
(1st Cir.), cert. denied, 139 S. Ct. 124 (2018); Devin, 918 F.2d
at 286. First, it "must ascertain whether the evidence has a
'special relevance' in that it is offered not to show a defendant's
evil inclination but rather to establish some material fact."
Veranda Beach Club Ltd. P'ship v. W. Sur. Co., 936 F.2d 1364, 1373
(1st Cir. 1991) (quoting United States v. Hadfield, 918 F.2d 987,
994 (1st Cir. 1990)). "If the trial court finds sufficient
relevance, the next step requires that it gauge probative weight
against prejudicial effect[.]" Id. This balancing is to be
conducted in pursuance of Federal Rule of Evidence 403. See id.
With respect to the first step, we detect no abuse of
discretion. As the court below concluded, the evidence of prior
violent acts was specially relevant to the defendants' intent to
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threaten Torosyan. After all, "whether a defendant has attempted
to induce fear in a victim depends only in part on what the
defendant has said or done to the victim. It also depends on what
the defendant thinks or reasonably should think the victim
independently believes about the context in which both are
operating." United States v. Goodoak, 836 F.2d 708, 714 (1st Cir.
1988). Where, as here, the defendants had reason to believe that
Torosyan would have learned of their prior violent acts,4 they
could rely on him "to put two and two together and to feel afraid."
Id. Thus, the disputed evidence was relevant to a determination
concerning what the defendants likely thought Torosyan believed
about the context in which all three operated. It follows that
the district court did not abuse its discretion in concluding that
evidence of the defendants' prior violent acts was specially
relevant to the jury's assessment of the defendants' intent.
If more were needed — and we doubt that it is — evidence
that Torosyan had been told about the defendants' prior violent
acts was also specially relevant to show Torosyan's state of mind,
including his reasonable belief in the defendants' threats of
4For instance, the defendants were well aware that Torosyan
worked closely with their former coworkers and girlfriends. In
addition, Torosyan testified that he had communicated with David
concerning at least some of the acts that Dorofyeyeva had described
to him. On this record, a jury reasonably could conclude that the
defendants premised their threats on an understanding that
Torosyan was aware of at least some of their prior violent acts.
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violence. See Iwuala, 789 F.3d at 6. Where the question is
whether the defendants' "words and acts amounted to an attempt to
induce fear, the jury is surely entitled to know whether those
words and acts did in fact induce fear." Goodoak, 836 F.2d at
712. Similarly, evidence concerning the victim's reasonable
beliefs about the context in which he and his putative extorter
are operating is relevant to show the victim's state of mind. See
id. at 713.
To be sure, Torosyan did not testify in so many words
that what he knew of the defendants' prior violent acts made him
more fearful. However, Torosyan did testify that, upon learning
of those prior violent acts, he "felt terrible" and "didn't know
what to do." Everything depends on context; and given this
description and the setting in which it occurred, a jury reasonably
could conclude that Torosyan felt fear. In the last analysis,
there are no magic words that a victim must utter in order to
render a putative extorter's prior violent acts relevant to prove
state of mind.
This brings us to the second step of the two-step
analysis: the district court's balancing under Rule 403. "The
balance of probative value and unfairly prejudicial effect is,
within wide limits, one for the trial court to strike." United
States v. Walker, 665 F.3d 212, 229 (1st Cir. 2011). "Only rarely
— and in extraordinarily compelling circumstances — will we, from
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the vista of a cold appellate record, reverse a district court's
on-the-spot judgment concerning the relative weighting of
probative value and unfair effect." Freeman v. Package Mach. Co.,
865 F.2d 1331, 1340 (1st Cir. 1988).
We descry no such compelling circumstances here. The
defendants' threats were central to the Hobbs Act extortion counts,
and — as we have said — evidence that Torosyan knew of the
defendants' prior violent acts was probative as to both the
defendants' intent to threaten and to Torosyan's perception that
he was being threatened. We do not gainsay that evidence of the
defendants' prior violent acts, by its very nature, was
prejudicial. Cf. United States v. Rodriguez-Estrada, 877 F.2d
153, 156 (1st Cir. 1989) ("By design, all evidence is meant to be
prejudicial."). But that evidence was also significantly
probative, and the Rule 403 balance does not insulate a party from
any and all evidence that is harmful to his cause. Rather, it
"bars only unfair prejudice." Iwuala, 789 F.3d at 8 (emphasis in
original).
The defendants argue that because the probative value of
the violent acts evidence was minimal and what it was admitted to
prove was not in dispute, the admission of such prejudicial
evidence was unfair. See United States v. Varoudakis, 233 F.3d
113, 123 (1st Cir. 2000). This argument rests on a faulty premise.
Throughout the trial, the defendants continued to asseverate that
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the government had failed to show that the intent element was met,
asserting that their alleged threats to Torosyan were not made or
perceived as preludes to actual violence. The evidence of the
defendants' prior violent acts presents a sharp contrast to this
characterization and, therefore, conveys significant probative
value as to at least one necessary element of the crime that was
very much in dispute.
In the end, we think that the able district court
performed its balancing function well, and we discern no unfair
prejudice here. What is more, any risk of unfair prejudice was
palliated by carefully crafted limiting instructions given both
before and after Torosyan's testimony and reiterated as part of
the court's end-of-case jury instructions. See United States v.
Pelletier, 666 F.3d 1, 6 (1st Cir. 2011). We hold, therefore,
that the district court did not abuse its discretion in admitting
the disputed evidence.
III. EMBEZZLEMENT
Although the jury convicted David on two counts of
embezzlement (counts 3 and 4), the government conceded during the
pendency of these appeals that his conviction on count 3 cannot be
sustained. Without belaboring the government's reasons for this
concession, we limit our analysis to David's conviction on count
4, which charged him with embezzling $2,000 from a "health care
benefit program," as defined in 18 U.S.C. § 24(b).
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18 U.S.C. § 669(a) prohibits, inter alia, the knowing
and willful embezzlement of "moneys, funds, securities, premiums,
credits, property, or other assets of a health care benefit
program." Congress has defined the term "health care benefit
program" to include "any individual or entity who is providing a
medical benefit, item, or service for which payment may be made
under [a public or private] plan or contract." 18 U.S.C. § 24(b).
David's attack on his conviction under count 4 is three-
pronged. First, he asserts that AHC was not a health care benefit
program at the time of the alleged embezzlement.5 Second, he
asserts that the embezzlement described in count 4 involved funds
that came from HMG, a management company distinct from AHC (and
not itself a health care benefit program). Third, he asserts that
he was authorized to withdraw the disputed sum under the letter
agreement.
At bottom, all three of these claims of error constitute
challenges to the sufficiency of the evidence. Thus, they engender
de novo review. See Iwuala, 789 F.3d at 8.
David's first two assertions need not detain us. In his
post-trial Rule 29 motion, David averred that the government did
5 Specifically, David tries to argue that because the relevant
reimbursement contracts were executed in 2016 and only became
effective retroactively for the period that included the date on
which the alleged embezzlement occurred, AHC was not a health care
benefit program when the charged crime was committed.
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not satisfy its burden of proof on count 4 because it had "failed
to present evidence that at the time of the alleged embezzlement
. . . , [AHC] was a 'health care benefit program' as that term is
defined in 18 U.S.C. § 24(b)." Specifically, he argued that the
government was obliged to adduce evidence that "there was actually
reimbursement" for the medical services rendered. The government
rejoined that the parties had stipulated that AHC was a health
care benefit program at and after November 1, 2015.
David did not challenge the government's evidence of the
stipulation but, rather, changed his tune and debuted his other
two sufficiency challenges in a supplemental Rule 29 motion.6
There, he acknowledged that the government "did present at trial
. . . documentation indicating that [AHC] was a health care benefit
program and the defendant agreed to stipulate to that fact."
Instead, he argued that the government had presented no such
evidence for HMG and that, in all events, he was authorized to
withdraw the allegedly embezzled sum.
6 On the second day of the sentencing hearing, David's counsel
expressed some buyer's remorse regarding the stipulation. He
stated that it had become apparent during the trial that "there
was [a] lack of evidence . . . regarding treatments being actually
made to patients during the relevant time period and requests for
reimbursement from these insurance carriers." He nevertheless
conceded that any argument as to whether AHC was a health care
benefit program was "precluded to the extent there was a
stipulation."
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Stipulations are an important tool in the orderly
administration of justice. Once made, they cannot be disregarded
as lightly as a tarantula sheds its skin. See Cabán Hernández v.
Philip Morris USA, Inc., 486 F.3d 1, 6 (1st Cir. 2007). Having
stipulated that AHC was a health care benefit program,
"affirmatively agree[ing] to not put the government to its proof
of an element of a crime," David "relinquished all other defenses,
factual and legal, pertaining to the stipulated element." United
States v. Meade, 175 F.3d 215, 223 (1st Cir. 1999).
David seems to suggest that equitable considerations
counsel in favor of relieving him of the burden of the stipulation.
This suggestion is unpersuasive. For one thing, David never asked
the district court to vacate the stipulation, and we are reluctant
to entertain a request for relief that could have been made in the
district court, but was not. See Shervin v. Partners Healthcare
Sys., Inc., 804 F.3d 23, 41 (1st Cir. 2015) ("As a general rule,
a party is not entitled to relief on appeal that she did not seek
below."); Beaulieu v. IRS, 865 F.2d 1351, 1352 (1st Cir. 1989)
("[I]t is black letter law that it is a party's first obligation
to seek any relief that might fairly have been thought available
in the district court before seeking it on appeal."). For another
thing, David entered into the stipulation despite having access to
the same facts regarding contractual approval dates, see supra
note 5, that he now argues preclude such a finding. We therefore
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discern no hint of inequity in holding David to the stipulation
into which he freely entered.
David mounts one last argument concerning the
stipulation. He points out that the stipulation was neither
entered into evidence nor read to the jury. While it certainly
would have been correct practice for the government to have asked
the district court to communicate the gist of the stipulation to
the jury, David never suggested such a course of action below.
Nor did he mention this oversight to the district court at the
close of the government's case. Thus, the claim of error that he
now advances is nothing but an unpreserved challenge to the
sufficiency of the evidence — and we review such challenges only
for clear and gross injustice. See United States v. Pratt, 568
F.3d 11, 18 (1st Cir. 2009). We detect nothing resembling an
injustice here because David had conceded the facts set out in the
stipulation. It follows that the failure to apprise the jury of
the stipulation constituted, at most, a technical error. See id.
(reaching this conclusion where stipulation was not communicated
to jury prior to jury instructions). In the circumstances of this
case, that technical error is harmless.
This brings us to David's argument, raised for the first
time in his supplemental Rule 29 motion, that the allegedly
embezzled sum was withdrawn from an entity (HMG) that the
government never established was a health care benefit program.
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But David waived this argument: throughout the trial, all of the
parties (including David) treated AHC and HMG as a unit. In his
summation, for instance, David's trial counsel repeatedly accepted
the government's framework that the two entities comprised a single
business — "Allied Health" — which he variously referred to as
"the business" and "the company." Having treated the Clinic as a
single entity comprising both AHC and HMG, David waived any
subsequent argument that there was a meaningful distinction
between the two entities for purposes of count 4. Cf. United
States v. Orsini, 907 F.3d 115, 119-20 (1st Cir. 2018) (holding
that defendant who explicitly affirmed fact before district court,
had waived issue and could not "resurrect it on appeal").
Of course, courts have discretion to relieve a party of
the effects of a waiver in the interests of justice. See United
States v. Torres-Rosario, 658 F.3d 110, 116 (1st Cir. 2011). The
district court heard arguments bearing on this possibility in
connection with David's supplemental Rule 29 motion. The
government proffered evidence proving that the funds David
withdrew from HMG had been transferred directly from AHC to HMG
that same day. David did not contest the veracity of this
evidence, and the district court declined to excuse David's waiver.
We think that this ruling was a sound exercise of the district
court's discretion.
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David's last assignment of error focuses on whether the
evidence was sufficient to show embezzlement under 18 U.S.C. § 669.
Some background is helpful. An individual who "knowingly and
willfully embezzles, steals, or otherwise without authority
converts" moneys or assets of a health care benefit program
violates Section 669. "The crime of embezzlement has long had a
clear meaning[:] . . . 'the fraudulent conversion of the property
of another by one who is already in lawful possession of it.'"
United States v. Young, 955 F.2d 99, 102 (1st Cir. 1992) (quoting
2 Wayne R. LaFave & Austin W. Scott, Jr., Substantive Criminal Law
§ 8.6, at 368 (1986)). An individual engages in fraudulent
conversion when, for instance, he "us[es] money entrusted to him
by another person for his own purposes or benefit and in a way
that he knows the 'entruster' did not intend or authorize." Id.
Here, the government posited that David embezzled funds
from AHC when he withdrew $2,000 toward his salary for the month
of November despite having agreed that a $3,000 loan from Torosyan
would comprise his salary for that month, if not repaid.7 In
support, the government presented Torosyan's testimony about the
loan and the lack of any repayment. It also introduced evidence
7 Earlier in the month, David also withdrew $1,500 toward his
November salary. This withdrawal of funds was the centerpiece of
count 3 — a count that the government has now disavowed.
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of Torosyan's check for $3,000 bearing a notation that it was
"borrowed."
David's argument in opposition is that he acted with
authority when he withdrew the funds because the letter agreement
entitled him to "an incremental additional amount of salary" once
the Clinic was operational. The district court rejected this
argument and so do we. Merely pointing to abstract authority that
may entitle an individual to withdraw funds does not establish as
a matter of law that a particular withdrawal was authorized. See
United States v. García-Pastrana, 584 F.3d 351, 375-76 (1st Cir.
2009). Based on the evidence of record, a jury reasonably could
conclude — as this jury did — that the $2,000 withdrawal was not
authorized because David took that sum in violation of his
agreement with Torosyan. Consequently, the district court did not
err in refusing to order judgment of acquittal on count 4.
IV. INEFFECTIVE ASSISTANCE OF COUNSEL
David has one last shot in his sling. Represented by
new counsel on appeal, he alleges for the first time that his trial
counsel provided him with constitutionally ineffective assistance,
in derogation of the Sixth Amendment. See U.S. Const. amend VI;
see also Strickland v. Washington, 466 U.S. 668, 687 (1984). "We
have held with a regularity bordering on the monotonous that fact-
specific claims of ineffective assistance of counsel cannot make
their debut on direct review of criminal convictions, but, rather,
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must originally be presented to, and acted upon by, the trial
court." United States v. Mala, 7 F.3d 1058, 1063 (1st Cir. 1993).
This prudential rule rests on sound reasoning. As we explained in
Mala, ineffective assistance claims "typically require the
resolution of factual issues that cannot efficaciously be
addressed in the first instance by an appellate tribunal." Id.
"[T]he trial judge, by reason of his familiarity with the case, is
usually in the best position to assess both the quality of the
legal representation afforded to the defendant in the district
court and the impact of any shortfall in that representation."
Id.
There is, of course, an isthmian exception to the Mala
rule. When "the critical facts are not genuinely in dispute and
the record is sufficiently developed to allow reasoned
consideration" of an ineffective assistance of counsel claim, we
may, as a matter of discretion, adjudicate the claim ab initio.
United States v. Natanel, 938 F.2d 302, 309 (1st Cir. 1991).
Elsewise, the proponent of a previously unexplored ineffective
assistance of counsel claim must raise it in a collateral
proceeding brought under 28 U.S.C. § 2255. See, e.g., United
States v. Santana-Dones, 920 F.3d 70, 82-83 (1st Cir. 2019); United
States v. Miller, 911 F.3d 638, 640 (1st Cir. 2018).
The Mala rule fits this case like a glove. The record
before us is rife with ambiguities that prevent us from determining
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whether or not David's representation satisfied the Sixth
Amendment standard. Of critical importance, there is little in
the record to illuminate "why [David's] lawyer[] did what [he]
did." United States v. Moran, 393 F.3d 1, 10 (1st Cir. 2004).
Without this information, it is virtually impossible to assess
what reasoning, if any, guided counsel's actions. United States
v. Ladd, 885 F.2d 954, 961 (1st Cir. 1989) ("[R]obes and gavels
are the tools of a jurist's trade — not tea leaves or crystal
balls."). Here, as in Moran, "[f]actfinding will be required to
make th[ose] determination[s], which means that the district court
should hear the claim in the first instance." 393 F.3d at 11. We
therefore dismiss this claim of error; without prejudice, however,
to David's right, if he so elects, to raise it through a petition
for post-conviction relief under 28 U.S.C. § 2255.
V. CONCLUSION
We need go no further. For the reasons elucidated above,
we reverse David's conviction on count 3 and otherwise affirm the
convictions of both defendants; without prejudice, however, to
David's right, if he so elects, to prosecute his ineffective
assistance of counsel claim through a petition for post-conviction
relief under 28 U.S.C. § 2255. We remand with instructions to the
district court to consider whether and to what extent (if at all)
a modification of David's sentences on counts 1, 2, and 4 may be
in order. See United States v. García-Ortiz, 657 F.3d 25, 31 (1st
- 35 -
Cir. 2011) ("When a defendant successfully challenges one of
several interdependent [counts], the proper course often is to
remand for resentencing on the other (non-vacated) counts.");
United States v. Genao-Sánchez, 525 F.3d 67, 71 (1st Cir. 2008)
(holding remand appropriate where dropped counts may "alter the
dimensions of the sentencing 'package'"); see also United States
v. Pimienta-Redondo, 874 F.2d 9, 14 (1st Cir. 1989) (en banc)
("[W]hen a defendant is found guilty on a multicount indictment
. . . [, and] the conviction on one or more of the component counts
is vacated, common sense dictates that the judge should be free to
review the efficacy of what remains in light of the original
[sentencing] plan, and to reconstruct the sentencing architecture
upon remand."). The district court should, at the same time,
revise the special assessments and the restitution order in David's
case to reflect the reversal of his conviction on count 3.
So Ordered.
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