United States v. Phillip Narum

FILED
NOT FOR PUBLICATION JUN 02 2014
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 12-10467
Plaintiff - Appellee, D.C. No. 4:10-CR-03578-DCB-
HCE-1
v.
PHILLIP ERNEST NARUM, MEMORANDUM*
Defendant - Appellant.
UNITED STATES OF AMERICA, No. 12-10658
Plaintiff - Appellee, D.C. No. 4:10-CR-03578-DCB-
HCE-1
v.
PHILLIP ERNEST NARUM,
Defendant - Appellant.
Appeal from the United States District Court
for the District of Arizona
David C. Bury, District Judge, Presiding
Argued and Submitted May 13, 2014
San Francisco, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Before: D.W. NELSON, McKEOWN, and M. SMITH, Circuit Judges.
Phillip Narum pled guilty to two counts of filing a false tax return and one
count of failure to file an income tax return, and was found guilty of fourteen
counts of wire fraud after a jury trial. Narum received principally a 48-month
sentence and was ordered to pay $632,685.99 in restitution to Michael Young and
Bryant Young. Narum appeals his wire fraud convictions, his sentence, and his
restitution order. We have jurisdiction under 28 U.S.C. § 1291, and we reverse in
part, affirm in part, vacate in part, and remand for further proceedings.
Narum first argues that the district court erred by admitting into evidence all
transfers of money from Young & Sons’ accounts to Narum, including money he
received pursuant to the terms of his employment contracts. We reject this
argument. The charged wire fraud is inextricably intertwined with Narum’s
employment history with Young & Sons and the transfers of money from the
company to Narum. United States v. King, 200 F.3d 1207, 1215 (9th Cir. 1999);
United States v. Vizcarra-Martinez, 66 F.3d 1006, 1012–13 (9th Cir. 1995).
Narum next argues that we should reverse his conviction for counts 1, 2, and
6 of the indictment, which charged Narum with wire fraud arising out of transfers
from his personal bank account to pay for a dragster and dragster parts. We agree.
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Once Narum converted Young & Sons’ funds by transferring them to his personal
bank account, his subsequent use of the wires to buy dragsters was not in
furtherance of his scheme to defraud, but instead was meant to allow him to enjoy
the fruits of his crime. United States v. Redcorn, 528 F.3d 727, 739 (10th Cir.
2008). The conduct charged in counts 1, 2, and 6 thus does not constitute wire
fraud as a matter of law. United States v. McNeil, 320 F.3d 1034, 1040 (9th Cir.
2003) (“Wire fraud has three elements: a scheme to defraud, use of the wires in
furtherance of the scheme, and the specific intent to defraud.”). We reject the
government’s contention that a wire fraud conviction may be based on any wire
transfer taking place during the time period encompassed by the scheme to
defraud. Wire fraud requires a use of the wires in furtherance of a scheme to
defraud, not merely a use of the wires during a scheme to defraud.
Narum next argues that there was insufficient evidence to convict him of
wire fraud based on his use of the Young & Sons credit card for personal expenses.
We reject this argument. Although Narum contends that he intended to repay
Young & Sons and that his personal use of the company card was therefore
authorized, viewed in the light most favorable to the prosecution, a rational jury
was free to reject this argument and conclude Narum never intended to repay the
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company. United States v. Inzunza, 638 F.3d 1006, 1013 (9th Cir. 2011) (amended
opinion).
Turning to sentencing, Narum argues that the district court erred by
grouping Narum’s wire fraud and tax convictions under U.S.S.G. § 3D1.2, and by
denying Narum a reduction for acceptance of responsibility for pleading guilty to
the tax counts. We reject these arguments. The counts were properly grouped
because “one of the counts embodies conduct that is treated as a specific offense
characteristic in, or other adjustment to, the guideline applicable to another of the
counts.” U.S.S.G. § 3D1.2(c). Specifically, the tax counts were subject to a two-
level enhancement due to the conduct underlying the wire fraud, because the
fraudulently derived income Narum failed to report was from a “source of income
exceeding $10,000 in any year from criminal activity.” Id. § 2T1.1(b)(1). Since
Narum did not plead guilty to all of the properly grouped offenses, he was not
entitled to an acceptance of responsibility adjustment. United States v. Ginn, 87
F.3d 367, 370 (9th Cir. 1996) (“[A] defendant is not entitled to an adjustment when
he does not accept responsibility for all of the counts of which he is convicted.”);
United States v. Garrido, 596 F.3d 613, 618–19 (9th Cir. 2010) (limiting Ginn in
cases where counts are grouped separately and it is thus “possible to calculate
acceptance of responsibility for each separate offense”).
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Finally, Narum argues that the district court erroneously calculated
restitution and loss by (1) undervaluing Narum’s work on the Copper Hills Project,
(2) failing to credit him the full $500,000 he was purportedly owed under his
second written employment contract, and (3) concluding that the restitution and
loss figures included the excess pay he received prior to the date he obtained
signatory authority over the Young & Sons accounts. We reject the first argument.
While Narum points out that the government submitted inconsistent valuations of
this work at different points in the case, the district court’s restitution order
carefully explains these inconsistencies, and its final valuation did not constitute
clear error. United States v. Lawrence, 189 F.3d 838, 844 (9th Cir. 1999). We also
reject the second argument. Narum’s second written employment contract
contemplated that he would be paid $100,000 per year, and Bryant Young testified
that he did not approve payments in excess of that amount. We agree, however,
with Narum’s third argument. According to the testimony at trial, all payments
Narum received prior to the date he obtained signatory authority were approved by
Bryant Young, and there was no evidence that Narum obtained this approval by
fraud. Instead, the evidence merely showed that Narum asked for money beyond
what he was due under his contract, and that Young gave him the money. Thus,
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the excess payments Narum received prior to obtaining signatory authority over
Young & Sons’ accounts were not obtained through Narum’s scheme to defraud.
Although the district court’s loss figure was therefore inflated, the error was
not material to the district court’s application of the Guidelines. Subtracting the
pre-signatory authority overpayments from the district court’s computation of loss
could not yield a loss figure below $400,000, leading to the same base offense
level the district court used in its determination of Narum’s Guidelines sentence.
Thus, we affirm Narum’s sentence of 48 months. The restitution figure, however,
should be reduced to exclude the pre-signatory authority excess payments
approved by Young. We remand for further proceedings to allow the district court
to calculate the precise amount of this reduction, allocate the reduction between
Michael Young and Bryant Young, and then reenter a restitution order against
Narum.
Accordingly, we REVERSE Narum’s convictions on counts 1, 2, and 6 of
the indictment, AFFIRM Narum’s remaining conviction and sentence, VACATE
the district court’s order directing Narum to pay restitution to Michael Young and
Bryant Young, and REMAND for further proceedings consistent with this
disposition.
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