United States v. Christopher Rice

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-4182
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
CHRISTOPHER C. RICE,
Defendant - Appellant.
No. 13-4183
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
SAMUEL B. JACOBS,
Defendant - Appellant.
Appeals from the United States District Court for the Eastern
District of Virginia, at Newport News. Mark S. Davis, District
Judge. (4:10-cr-00149-MSD-TEM-2; 4:10-cr-00149-MSD-TEM-1)
Submitted: November 26, 2013 Decided: January 7, 2014
Before TRAXLER, Chief Judge, and DAVIS and THACKER, Circuit
Judges.
Affirmed by unpublished per curiam opinion.
Jon M. Babineau, RIDDICK BABINEAU, PC, Norfolk, Virginia, for
Appellant Jacobs. Lawrence H. Woodward, Jr., SHUTTLEWORTH,
RULOFF, SWAIN, HADDAD & MORECOCK, PC, Virginia Beach, Virginia,
for Appellant Rice. Jeffrey H. Knox, Chief, Justin Goodyear,
Fraud Section, UNITED STATES DEPARTMENT OF JUSTICE, Washington,
D.C.; Dana J. Boente, Acting United States Attorney, Alexandria,
Virginia, Brian J. Samuels, Assistant United States Attorney,
OFFICE OF THE UNITED STATES ATTORNEY, Newport News, Virginia,
for Appellee.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
Appellants Samuel Jacobs (“Jacobs”) and Christopher
Rice (“Rice”) were charged in a 29-count superseding indictment
with conspiracy to commit mail fraud, multiple counts of mail
fraud, multiple counts of money laundering, and multiple counts
of forgery, all of which arose out of a fraudulent investment
scheme.
Jacobs was convicted, after a jury trial, of all
counts except for conspiracy to commit mail fraud (Count 1) and
one of the mail fraud counts (Count 6). The district court
sentenced Jacobs to 144 months imprisonment on Counts 2-5 and
15-20, and 120 months imprisonment on Counts 7-14 and Counts 21-
29, all to be served concurrently. On appeal, Jacobs challenges
the sufficiency of the evidence at trial as well as the
calculation of his Sentencing Guidelines range. 1 Rice was found
guilty by the same jury of seven counts of transactional money
1
Jacobs has filed a motion for leave to file a pro se
supplemental brief, along with a pro se supplemental brief.
Because Jacobs is represented by counsel who has filed an
extensive merits brief, as opposed to a brief pursuant to Anders
v. California, 386 U.S. 738 (1967), he is not entitled to file a
pro se supplemental brief and we, therefore, deny his motion.
See United States v. Penniegraft, 641 F.3d 566, 569 n.1 (4th
Cir. 2011) (denying motion to file pro se supplemental brief
because the defendant was represented by counsel), cert. denied,
132 S. Ct. 564 (2011).
3
laundering (Counts 8-14) and of one count of forgery (Count 25),
and not guilty of the remaining counts against him. 2 Rice was
sentenced to two five-year terms of probation, to run
concurrently, with no term of imprisonment. Rice’s sole
challenge on appeal is the sufficiency of the evidence at trial.
We have reviewed the record and find no reversible
error. Accordingly, we affirm.
I.
Both Jacobs and Rice contend that the Government
presented insufficient evidence at trial to support their
convictions. It is well settled that “[a] defendant challenging
the sufficiency of the evidence faces a heavy burden.” United
States v. Foster, 507 F.3d 233, 245 (4th Cir. 2007). We review
such challenges de novo. United States v. Kelly, 510 F.3d 433,
440 (4th Cir. 2007). In so doing, “we view the evidence on
appeal in the light most favorable to the government in
determining whether any rational trier of fact could find the
essential elements of the crime beyond a reasonable doubt.”
United States v. Cone, 714 F.3d 197, 212 (4th Cir. 2013) (citing
United States v. Collins, 412 F.3d 515, 519 (4th Cir. 2005)).
We do not weigh the evidence or review the credibility of the
2
Rice was not charged in Counts 15-20 of the superseding
indictment for money laundering to conceal mail fraud, in
violation of 18 U.S.C. § 1956.
4
trial witnesses, and we assume that the jury resolved all
discrepancies in testimony in favor of the government. See id.
“We will uphold the jury’s verdict if substantial evidence
supports it and will reverse only in those rare cases of clear
failure by the prosecution.” Id.
A.
Jacobs first contends that there was insufficient
evidence to support his mail fraud convictions. To convict an
individual of mail fraud, in violation of 18 U.S.C. § 1341, the
Government must prove beyond a reasonable doubt that the
defendant: (1) devised a scheme to defraud; and (2) used the
mails in furtherance of the scheme. See United States v. Wynn,
684 F.3d 473, 477 (4th Cir. 2012). Proof of a “scheme to
defraud” requires proof of “the specific intent to deprive one
of something of value through a misrepresentation or other
similar dishonest method, which indeed would cause him harm.”
Id. at 478. Jacobs argues only that the Government failed to
prove beyond a reasonable doubt that he had the specific intent
to deprive Alliance’s investors of their money. Therefore, only
the first element of mail fraud is at issue here.
When viewed in the light more favorable to the
Government, it is clear that substantial evidence was presented
for a rational jury to conclude beyond a reasonable doubt that
Jacobs engaged in mail fraud. The evidence demonstrated that
5
Jacobs falsely told investors that the money invested with
Alliance Financial Services, Inc. (“Alliance”) would be put into
legitimate investment vehicles, such as real estate. 3 He also
falsely represented to investors that the investments would earn
interest and that the investments were secure and backed by
Jacobs’ personal assets. In addition, Jacobs misleadingly
failed to disclose the actual use of Alliance funds, which
included transfers to JBS, transfers to pay off Jacobs’ own
personal and business debts, and repayments of earlier
investors. There was substantial evidence for a rational trier
of fact to conclude that Jacobs made these misrepresentations
and omissions to investors with the intent to induce victims to
invest and reinvest their money with Alliance.
B.
Jacobs and Rice both argue that there was insufficient
evidence to support their convictions for transactional money
3
In 1998, Jacobs organized and formed JBS, Inc. (“JBS”) in
Newport News, Virginia. JBS operated several low power
television stations, which broadcasted religious sermons in
local markets from area pastors and sold advertising and
airtime. Jacobs was the president of JBS and owned the majority
of its shares. Rice began working at JBS in the early 2000s,
handling the technical operations for the television stations.
In 2005, JBS and Jacobs were experiencing significant
financial problems -- the debts of JBS and Jacobs totaled
approximately $1.9 million. In December 2005, Jacobs
incorporated Alliance. Jacobs was the president of Alliance,
and Rice was its secretary/treasurer.
6
laundering. The offense of transactional money laundering, in
violation of 18 U.S.C. § 1957(a), requires the Government to
prove beyond a reasonable doubt that the defendant knowingly
engaged “in a monetary transaction in criminally derived
property of a value greater than $10,000 and is derived from
specified unlawful activity.” 18 U.S.C. § 1957(a); United
States v. Cherry, 330 F.3d 658, 668 (4th Cir. 2003). “Criminal
derived property” is defined by statute as “any property
constituting, or derived from, proceeds obtained from a criminal
offense.” 18 U.S.C. § 1957(f)(2). Therefore, to convict Jacobs
and Rice of this offense, the jury was required to find: (1)
that Jacobs and Rice knowingly participated in a monetary
transaction involving criminally derived property; and (2) that
the criminally derived property was proceeds derived from
specified unlawful activity -- that is, the mail fraud in Counts
2-6 under 18 U.S.C. § 1341. See Cherry, 330 F.3d at 668.
With respect to Jacobs, his sole challenge to his
convictions for transactional money laundering is entirely
derivative of his challenge to his mail fraud convictions.
Specifically, Jacobs argues that because he did not engage in
mail fraud, he necessarily could not have been convicted of
transactional money laundering. However, as explained above,
Jacobs’ mail fraud convictions were supported by substantial
7
evidence. Therefore, his argument challenging his convictions
for transactional money laundering fails.
Turning now to Rice, he first argues that the evidence
at trial was insufficient to show that he personally effected
the transfers that supported Counts 8-14. He contends that the
Government offered no testimony or evidence to indicate which
defendant signed the checks or transferred the funds. This
argument is unpersuasive. The Government presented substantial
evidence of the differences between the checks to which Jacobs
admitted to signing Rice’s name and the other checks written
from Alliance’s bank account. Some of these differences
included the manner in which the “payee” line and the “amount”
line was written. In addition, the Government presented
differing “Chris Rice” signatures, which demonstrated one style
of signature on the check that Jacobs acknowledged he signed and
a different style on the remaining checks that support Counts 8-
14. Finally, the Government presented the jury with checks from
Rice’s personal bank account. The jury was permitted to compare
authentic handwriting (i.e., on Rice’s personal checks) to
contested handwriting (i.e., on checks supporting Counts 8-14)
and conclude that they match. See United States v. Dozie, 27
F.3d 95, 98 (4th Cir. 1994) (explaining that under Federal Rule
of Evidence 901(b)(3), expert opinion on handwriting is not
necessary). Therefore, there was substantial evidence to
8
support the jury’s conclusion that Rice personally effected the
transfers that supported Counts 8-14.
Rice next argues that the Government failed to
demonstrate that Rice knew that the funds in question involved
criminally derived property. Rice contends that the Government
did not present any evidence that Rice knew of any fraudulent
activity separate from that which was presented in Count 1
(Conspiracy) and Counts 2-6 (Mail Fraud), which was rejected by
the jury as to Rice. While it is true that the jury returned
not guilty verdicts for the conspiracy and mail fraud charges
with respect to Rice, there was evidence presented at trial that
Rice was aware that the funds he was transferring from Alliance
to JBS came from Jacobs’ fraud on the investors. Specifically,
Rice’s notes from board meetings demonstrated that he was aware
of Jacobs’ misrepresentations to Alliance investors.
Nevertheless, Rice wrote a number of checks from Alliance’s
account for purposes that were inconsistent with the
representations that he knew Jacobs had made to investors. In
addition, there was evidence that Rice told investor Susan
Canning, who invested $100,000 with Alliance, that Alliance
funds would be used to offer mortgages and loans to members of
the church. The evidence, however, demonstrated that Alliance
funds were actually transferred to JBS, Jacobs, and Rice.
Therefore, there was substantial evidence to support the jury’s
9
conclusion that Rice knowingly participated in a monetary
transaction involving criminally derived property. 4
Finally, Rice relies on the Supreme Court’s decision
in United States v. Santos, 553 U.S. 507 (2008) to argue that
the term “proceeds” in 18 U.S.C. § 1957 should be defined
narrowly to mean only “profits” and not the “total receipts”
from unlawful activity. As the Government correctly explains,
Santos is inapplicable here. Our court has summarized the
Supreme Court’s holding in Santos as follows: “in order to avoid
a merger of the crimes of money laundering and operating an
illegal gambling business, the term ‘proceeds’ in the money
laundering statute must be construed to mean ‘net profits,’ not
‘gross receipts,’ of the illegal gambling business.” United
4
Although the jury acquitted Rice of the mail fraud and the
conspiracy to commit mail fraud counts, this does not mean that
there was insufficient evidence to support a jury’s finding that
Rice knew the funds at issue in Counts 8-14 came from unlawful
activity. The mens rea requirement under the statute is only
that the defendant knows that the monetary transaction involves
“criminally derived property.” 18 U.S.C. § 1957(a). Criminally
derived property “means any property constituting, or derived
from, proceeds obtained from a criminal offense.” Id.
§ 1957(f)(2). Indeed, “the Government is not required to prove
the defendant knew that the offense from which the criminally
derived property was derived was specified unlawful activity.”
Id. § 1957(c) (emphasis supplied). All the Government must
prove is that the defendant knew that the property was obtained
from some criminal offense. Therefore, Rice’s acquittals
relating to mail fraud -- which is “specified unlawful activity”
under the statute -- does not automatically mean that there was
insufficient evidence to support Rice’s conviction for
transactional money laundering.
10
States v. Halstead, 634 F.3d 270, 271 (4th Cir. 2011). We
further explained that “when the illegal activity includes money
transactions to pay for the costs of the illegal activity, a
merger problem can occur if the [G]overnment uses those
transactions also to prosecute the defendant for money
laundering.” Id. at 279. Here, however, “the financial
transactions of the predicate offense” -- i.e., Jacobs’ mail
fraud -- “are different from the transactions prosecuted as
money laundering” -- i.e., Rice’s subsequent transfers of
Alliance funds. See id. at 279-80. Therefore, there is no
merger problem and Santos does not apply.
C.
Jacobs next argues that there was insufficient
evidence to support his additional money laundering convictions
in Counts 15-20. The offense of money laundering to conceal
mail fraud, in violation of 18 U.S.C. § 1956(a)(1)(B)(i),
requires the Government to prove beyond a reasonable doubt the
following four elements: (1) an actual or attempted financial
transaction; (2) involving the proceeds of a specified unlawful
activity; (3) knowledge that the transaction involves the
proceeds of some unlawful activity; and (4) knowledge that the
transaction was designed in whole or in part to conceal the
nature, location, source, ownership, or control of the proceeds
of a specified unlawful activity. Cone, 714 F.3d at 214.
11
Just like Jacobs’ challenge to his convictions for
transactional money laundering described above, Jacobs’ sole
challenge to his convictions for money laundering to conceal
mail fraud is entirely derivative of his challenge to his mail
fraud convictions. Specifically, Jacobs argues that because he
did not engage in mail fraud, he necessarily could not have been
convicted of money laundering to conceal mail fraud. However,
as explained above, Jacobs’ mail fraud convictions were
supported by substantial evidence. Therefore, his argument
challenging his convictions for money laundering to conceal mail
fraud fails.
D.
Finally, both Jacobs and Rice contend that there was
insufficient evidence to support their convictions for forgery.
To convict an individual of possessing and uttering a forged
security, in violation of 18 U.S.C. § 513(a), the Government
must prove beyond a reasonable doubt that the defendant did (1)
make, utter, or possess (2) a forged security of an organization
(3) with intent to deceive another person, organization, or
government. 18 U.S.C. § 513(a).
With respect to Jacobs, when viewed in the light most
favorable to the Government, substantial evidence was presented
for a rational jury to conclude beyond a reasonable doubt that
Jacobs possessed and uttered a forged security with the intent
12
to deceive another person. Rice was the only signatory on
Alliance’s bank account, and a bank representative testified
that no one other than Rice was authorized to sign checks from
the Alliance account. However, there was substantial evidence
at trial from which a jury could conclude that Jacobs signed
Rice’s name to numerous checks from Alliance’s bank account
without authorization. A number of examples of the handwriting
of Jacobs and Rice were introduced during the course of trial.
In particular, Jacobs stipulated to having prepared and signed
Rice’s name to the check supporting Count 25, and he testified
to having repeatedly signed Rice’s name on Alliance checks. The
check supporting Count 25 as well as various other checks were
presented to the jury. The jury was entitled to consider the
handwriting evidence and the testimony regarding who signed the
various checks to determine whether Jacobs possessed and uttered
a forged security. See Dozie, 27 F.3d at 98. Accordingly,
there was substantial evidence for the jury to convict Jacobs of
Counts 21 through 29.
Turning next to Rice, when viewed in the light most
favorable to the Government, substantial evidence was presented
for a rational jury to conclude beyond a reasonable doubt that
Rice possessed and uttered a forged security in support of his
conviction for Count 25. Count 25 relates to a check written by
Jacobs to Pastor Willie Royster on August 21, 2007 from the
13
Alliance account, on which Jacobs signed Rice’s name. Pastor
Royster had requested a withdrawal of the funds he had invested
in Alliance because of his dissatisfaction with Jacobs and
Alliance. The August 21, 2007 check bounced. At a September
2007 board meeting, Rice attempted to explain what happened,
claiming that the bad check was written from the wrong Alliance
account. The evidence at trial, however, revealed that Alliance
only had one bank account. Rice’s attempted explanation was
evidence from which a jury could concluded that Rice had
knowledge and involvement with the August 21, 2007 check, which
the jury concluded was a forgery to support Jacobs’ Count 25
conviction.
Moreover, because Rice was the sole authorized signer
on Alliance’s account, Rice received account statements, which
would have demonstrated a number of instances in which Jacobs
admittedly signed Rice’s name to Alliance checks. Indeed, based
on the evidence that Rice regularly received Alliance account
statements that indicated checks had been signed by someone
other that Rice, the jury was permitted to infer that Rice made
Alliance checks available to Jacobs despite Rice’s knowledge of
Jacobs’ practice of signing Rice’s name to checks. One such
check was the August 21, 2007 check, which all parties
stipulated was signed by Jacobs. Therefore, there was
substantial evidence for the jury to convict Rice of Count 25.
14
II.
As an alternative to his sufficiency of evidence
arguments, Jacobs challenges the district court’s calculation of
his Sentencing Guidelines range. We review a sentence for
reasonableness, applying an abuse of discretion standard. Gall
v. United States, 552 U.S. 38, 51 (2007). In considering
whether a district court properly applied the Sentencing
Guidelines, “we review the district court’s factual findings for
clear error and its legal conclusions de novo.” United States
v. Osborne, 514 F.3d 377, 387 (4th Cir. 2008) (internal
quotation marks omitted). Clear error exists “only if, on the
entire evidence, we are left with the definite and firm
conviction that a mistake has been committed.” United States v.
Manigan, 592 F.3d 621, 631 (4th Cir. 2010) (internal quotation
marks and alterations omitted).
A.
Jacobs first argues that the district court erred in
adopting the Presentence Report’s (the “PSR”) calculation of
attributable loss at more than $400,000 and assessing a
corresponding 14-level enhancement under United States
Sentencing Guidelines (“U.S.S.G.”) § 2B1.1(b)(1)(H). When
calculating attributable loss, the Guidelines provide for
certain amounts to be credited toward the loss. The commentary
to the Guidelines states, “[i]n a case involving collateral
15
pledged or otherwise provided by the defendant,” the amount to
be credited toward the loss is “the amount the victim has
recovered at the time of sentencing from disposition of that
collateral, or if the collateral has not been disposed of by
that time, the fair market value of the collateral at the time
of sentencing.” U.S.S.G. § 2B.1.1 cmt. n.3(E)(ii).
Jacobs contends that the district court should have
credited, against his attributable loss, the value of the
“collateral” that Jacobs “pledged” to secure the investments in
Alliance. Jacobs cites testimony from trial showing that he
executed multiple promissory notes pledging those assets
constituting his personal net worth as collateral to cover all
of the loans made from Alliance to JBS and Jacobs personally.
According to Jacobs, these assets included television stations
and FCC licenses owned by JBS, which had a fair market value of
between two and half and three million dollars. Jacobs is
wrong.
As the Government notes, “collateral” refers to
property that is pledged as security against a debt. See
Black’s Law Dictionary (9th ed. 2009). Neither the promissory
notes nor Jacobs’ oral guarantees ever identified any specific
“property” that served as security for the investor’s
investments in Alliance. Although Jacobs owned the television
stations and the potentially valuable FCC licenses that came
16
with them, the testimony at trial revealed that one cannot grant
a security interest in an FCC license. As such, it was not
clearly erroneous for the district court to refuse to credit the
fair market value of the FCC licenses against Jacobs’
attributable loss. Accordingly, the district court did not err
in adopting the PSR’s calculation of attributable loss at more
than $400,000 and assessing a corresponding 14-level
enhancement.
B.
Jacobs next argues that the district court erred by
assessing a four-level enhancement under U.S.S.G.
§ 2B1.1(b)(2)(B), which provides that the offense level should
be increased four levels if the offense involved 50 or more
victims. The commentary to the Guidelines defines “victim” as
“any person who sustained any part of the actual loss determined
under subsection (b)(1).” U.S.S.G. § 2B1.1 cmt. n.1. “Actual
loss” in turn is defined as “the reasonably foreseeable
pecuniary harm that resulted from the offense.” Id. § 2B1.1
cmt. n.3(A)(i). Jacobs contends that because many of the
investors were reimbursed for their losses prior to sentencing,
the actual number of victims was less than 50.
Jacobs’ PSR contains a chart that identifies 138
victims and lists the amount each gave to Alliance, the amount
that was returned, and the amount still owed. The PSR, which
17
the district court adopted, notes that of the victims who had
been repaid, “most were repaid after an investigation was
initiated by agents.” J.A. 1741.
Jacobs does not challenge this finding, but merely
contends that only the 30 victims to whom Jacobs was ordered to
pay restitution could be counted as victims. The commentary to
U.S.S.G. § 2B1.1, however, makes clear that that is not correct.
Specifically, comment 3(E) states:
(E) Credits Against Loss.—Loss shall be reduced by the
following:
(i) The money returned . . . by the defendant or
other persons acting jointly with the defendant, to
the victim before the offense was detected. The time
of detection of the offense is the earlier of (I) the
time the offense was discovered by a victim or
government agency; or (II) the time the defendant knew
or reasonably should have known that the offense was
detected or about to be detected by a victim or
government agency.
U.S.S.G. § 2B1.1 cmt. n.3(E). This comment demonstrates that
the amounts obtained by Alliance but repaid after Jacobs had
reason to know his offense was detected or about to be detected
constitute part of the actual loss. As such, the people and
entities from whom Alliance obtained this money constitute
victims of his offense, regardless of whether they were still
owed money at the time of sentencing. Accordingly, the district
court did not err in concluding that Jacobs’ offense involved 50
or more victims.
18
C.
Jacobs next challenges the district court’s inclusion
of a two-level enhancement after finding that Jacobs’ conduct in
running Alliance constituted “sophisticated means” of fraud
pursuant to U.S.S.G. § 2B1.1(b)(10). The commentary to the
Guidelines defines “sophisticated means” as “especially complex
or especially intricate offense conduct pertaining to the
execution or concealment of the offense.” Id. § 2B1.1 cmt.
n.8(B). Examples of sophisticated means include “hiding assets
or transactions, or both, through the use of fictitious
entities, corporate shells, or offshore financial accounts.”
Id.
In this case, the district court found that the
sophisticated means enhancement was appropriate because Alliance
did not conduct any real investing or any legitimate business.
Instead, it existed solely so that Jacobs could hide from the
investors the transactions in which he paid his old business
debts and personal expenses. In addition, Jacobs made
misrepresentations to the board members so they would recruit
additional investors into Alliance. Jacobs promised high
returns on investments, but he initially repaid investors the
promised rates using other investors’ money. These findings
were not clearly erroneous.
19
Jacobs promised investors that he would safely invest
their money, but instead he transferred it to JBS, to himself,
and to Rice. All the while, Jacobs assured investors that their
investments were safe and earning a return. Jacobs engaged in
conduct amounting to intentional concealment so that he could
improperly use investor funds. Accordingly, the district
court’s findings were supported by substantial evidence, and it
did not err in applying the sophisticated means enhancement.
D.
Lastly, Jacobs challenges the four-level enhancement
pursuant to U.S.S.G. § 3B1.1(a) for being “an organizer or
leader of a criminal activity that involved five or more
participants or was otherwise extensive.” The commentary to the
Guidelines explains that, in considered whether a scheme is
“otherwise extensive,” the district court may consider “all
persons involved during the course of the entire offense.” Id.
§ 3B1.1 cmt. n.3. For instance, “a fraud that involved only
three participants but used the unknowing services of many
outsiders could be considered extensive.” Id. (emphasis
supplied).
In this case, the evidence is clear that Jacobs
organized and led Rice through the participation of Jacobs’
scheme to defraud Alliance investors. Therefore, Jacobs was an
“organizer or leader of criminal activity.” Further, the
20
district court’s finding that the scheme was “otherwise
extensive” was not clearly erroneous. Indeed, Jacobs created
and maintained a business entity for more than three and a half
years, fraudulently obtained money from 138 different
individuals and entities, and relied on the unwitting
participation of at least six pastors whom Jacobs made board
members of Alliance. Jacobs was dishonest with the board
members, each of whom then solicited investments from their
church members. Considering these facts, the district court did
not err in finding that Jacobs was a leader or organizer of
criminal activity that was “otherwise extensive.”
III.
For the reasons stated, we affirm Jacobs’ conviction
and sentence. We also affirm Rice’s conviction. We dispense
with oral argument because the facts and legal contentions are
adequately presented in the materials before this court and
argument would not aid the decisional process.
AFFIRMED
21