United States v. 2006-03-21 | 05-30071 | USA VWILLIAMS | precedential | opinion |

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
 UNITED STATES OF AMERICA, No. 05-30071
Plaintiff-Appellee, D.C. No.
v.  CR-03-60104-HO
JOHN ANTHONY WILLIAMS, OPINION
Defendant-Appellant. 
Appeal from the United States District Court
for the District of Oregon
Michael R. Hogan, District Judge, Presiding
Argued and Submitted
January 12, 2006—Portland, Oregon
Filed March 21, 2006
Before: Diarmuid F. O’Scannlain, Andrew J. Kleinfeld, and
Susan P. Graber, Circuit Judges.
Opinion by Judge Graber
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COUNSEL
Ruben L. Iniguez, Assistant Federal Public Defender, Port-
land, Oregon, for the defendant-appellant.
Christopher L. Cardani, Assistant United States Attorney,
Eugene, Oregon, for the plaintiff-appellee.
OPINION
GRABER, Circuit Judge:
Defendant John Anthony Williams appeals his conviction
and sentence for mail and wire fraud and money laundering.
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His main argument is that the government improperly charged
him under an “intangible rights” theory of mail and wire
fraud, because that theory does not apply to private individu-
als, and that the absence of a special verdict makes it impossi-
ble to determine whether the jury found “direct” fraud or
“intangible rights” fraud. Since Congress passed 18 U.S.C.
§ 1346, we have not addressed directly whether the “intangi-
ble rights” theory applies to private-sector fraud. We hold
that, under 18 U.S.C. §§ 1341 and 1343, the “intangible
rights” theory applies to private-sector fraud, at least where
(as here) the defendant has a fiduciary duty to the victim.
Because the government correctly charged Defendant under
both an “intangible rights” and a “direct” theory of fraud, the
general verdict stands.
Defendant also challenges his conviction and sentence on
four other grounds: (1) 18 U.S.C. § 1346 is unconstitutionally
vague as applied because Defendant would not reasonably
expect it to apply to a private individual; (2) Count 12, charg-
ing Defendant with foreign transportation of stolen money,
failed to state an offense because Defendant did not person-
ally transport the money in question to Belize; (3) the district
court violated the Ex Post Facto Clause and Defendant’s due
process rights by sentencing him pursuant to United States v.
Booker, 543 U.S. 220 (2005), when the jury rendered its ver-
dict before the Supreme Court decided Booker; and (4) the
district court erred by finding the facts underlying a “vulnera-
ble victim” sentencing enhancement. In response to those
arguments, we hold: (1) 18 U.S.C. § 1346 is not unconstitu-
tionally vague as applied because a person of ordinary intelli-
gence would know that it is a crime for a licensed financial
planner to cause his client to sign a power of attorney in his
favor and then, by using the mail and wires, employ the
power of attorney to steal hundreds of thousands of dollars
from the client; (2) Count 12 stated an offense because it is
sufficient for the defendant to have caused the transportation
of stolen money to a foreign country; (3) United States v.
Dupas, 419 F.3d 916 (9th Cir. 2005), has resolved Defen-
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dant’s Booker arguments against him; and (4) the district
court did not clearly err by finding that the victim, who was
87 years old, financially inexperienced, and suffering from the
loss of a close family member, was vulnerable. Accordingly,
we affirm the conviction and the sentence in all respects.
FACTUAL AND PROCEDURAL BACKGROUND
From 1993 to 2003, Defendant John Anthony Williams
worked as a self-employed insurance seller and licensed
financial planner. In 1998, Oregon financial services company
Waddell & Reed hired Defendant as a commissioned sales
agent. That year, he sold an $88,000 annuity to victim Loyd
Stubbs. Later in 1998, Stubbs inherited $92,000 as the benefi-
ciary of his brother Verlin’s life insurance policy. Stubbs and
Verlin had been partners in a sheep ranch. Verlin managed the
finances and Stubbs, who had only an eighth-grade education,
provided the labor. The two brothers were close. Stubbs was
87 years old when Verlin died. Defendant advised Stubbs to
consolidate all of his financial holdings, totaling approxi-
mately $198,000, into one account, which he did. The bank
then transferred the account to Waddell & Reed.
In 1999, Stubbs bought another $437,960.21 in annuities
through Defendant. In July 1999, at Defendant’s instruction,
Stubbs signed a durable power of attorney naming Defendant
as his agent. On the same day, and without Stubbs’ knowl-
edge, Defendant opened a private mailbox in Stubbs’ name.
The next day, by means of the power of attorney, Defendant
opened a joint bank account in the names of Stubbs and
Defendant. He also presented Stubbs with surrender forms for
three of Stubbs’ annuities. Defendant used the surrender
forms to liquidate Stubbs’ annuities and deposited the result-
ing funds in the joint bank account.
Soon thereafter, Defendant spent $35,000 of Stubbs’
money on Defendant’s personal expenses. In August 1999,
Defendant wrote two checks from the joint bank account to
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“Cash,” one for $300,000 and the other for $70,000. Defen-
dant deposited the cash in his personal bank account.
Defendant then opened a bank account with the Bank of
Belize and started a shell corporation in Belize. Defendant
wire-transferred Stubbs’ money from Defendant’s personal
account to his accounts in Belize and in Baton Rouge, Louisi-
ana.
Defendant and his wife moved to Belize and used Stubbs’
money to buy a condominium. In 2000, Defendant returned to
Oregon and wire-transferred $80,000 from the Belize account
back to his personal account in Oregon.
Thereafter, the grand jury in Oregon issued an indictment
against Defendant, charging him with four counts of wire
fraud in violation of 18 U.S.C. §§ 1343 and 2, three counts of
mail fraud in violation of 18 U.S.C. § 1341, two counts of
money laundering in violation of 18 U.S.C. §§ 1956(a)(1)
(B)(i) and 2, and two counts of money laundering in violation
of 18 U.S.C. §§ 1957 and 2. In a superseding indictment, the
government added one count of foreign transportation of
stolen money in violation of 18 U.S.C. §§ 2314 and 2, and
amended each of the mail and wire fraud charges to include
references to 18 U.S.C. § 1346.
After a three-day trial, a jury convicted Defendant of all
charges except one count of money laundering. The district
court sentenced Defendant to 51 months in prison plus three
years of supervised release. It also ordered Defendant to pay
$450,223.82 in restitution and a $1,100 special assessment. At
sentencing, the court found that Stubbs qualified as a “vulner-
able victim” and applied an enhancement to the advisory
Guidelines sentence. Defendant now brings this timely
appeal.
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DISCUSSION
A. Defendant’s conviction under the “intangible rights”
theory embodied in 18 U.S.C. § 1346
1. The “intangible rights” theory can apply in a private
commercial setting.
[1] In the original indictment, the government charged
Defendant with mail and wire fraud in violation of 18 U.S.C.
§§ 1341 and 1343, respectively. Section 1341 provides in
part:
Whoever, having devised or intending to devise
any scheme or artifice to defraud, or for obtaining
money or property by means of false or fraudulent
pretenses, representations, or promises . . . , places
in any post office or authorized depository for mail
matter, any matter or thing whatever to be sent or
delivered by the Postal Service, or deposits or causes
to be deposited any matter or thing whatever to be
sent or delivered by any private or commercial inter-
state carrier, or takes or receives therefrom, any such
matter or thing, or knowingly causes to be delivered
by mail or such carrier according to the direction
thereon, or at the place at which it is directed to be
delivered by the person to whom it is addressed, any
such matter or thing, shall be fined under this title or
imprisoned not more than 20 years, or both.
Section 1343 states, as relevant:
Whoever, having devised or intending to devise
any scheme or artifice to defraud, or for obtaining
money or property by means of false or fraudulent
pretenses, representations, or promises, transmits or
causes to be transmitted by means of wire, radio, or
television communication in interstate or foreign
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commerce, any writings, signs, signals, pictures, or
sounds for the purpose of executing such scheme or
artifice, shall be fined under this title or imprisoned
not more than 20 years, or both.
Both sections codify a “direct” theory of fraud in which the
object of the fraudulent scheme is to obtain money or other
tangible property.
[2] The superseding indictment added a reference to 18
U.S.C. § 1346 in each of the seven fraud counts. Section 1346
states:
For the purposes of this chapter, the term “scheme
or artifice to defraud” includes a scheme or artifice
to deprive another of the intangible right of honest
services.
Section 1346 thus codifies an “intangible rights” theory of
fraud. Under this theory, the object of the fraudulent scheme
is the victim’s intangible right to receive honest services.
The government charged Defendant under both fraud theo-
ries in the alternative. The jury returned a general verdict of
guilty on all seven fraud counts. Neither party requested a
special verdict form, so the jury did not specify the theory of
fraud on which it relied, nor did it specify whether it reached
unanimity on either or both of the two theories.
Defendant argues that the “intangible rights” theory of
fraud does not apply to private individuals. Therefore, he
argues, in the absence of a special verdict confirming that the
jury found him guilty of violating 18 U.S.C. §§ 1341 and
1343 through “direct” fraud, his fraud convictions must be
vacated under the principles announced in Yates v. United
States, 354 U.S. 298, 312 (1957), overruled in part on other
grounds by Burks v. United States, 437 U.S. 1 (1978).
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[3] Yates involved a single-count federal indictment against
the defendants, which charged them with conspiracy “(1) to
advocate and teach the duty and necessity of overthrowing the
Government of the United States by force and violence, and
(2) to organize, as the Communist Party of the United States,
a society of persons who so advocate and teach.” Id. at 300.
The Court held that the term “organized” in this context
referred to the initial formation of the party. Id. at 310-11.
This holding rendered the “organizing” object of the conspir-
acy charge legally insufficient on statute of limitations
grounds. Id. at 312. The Supreme Court then applied the rule
of Stromberg v. California, 283 U.S. 359, 367-68 (1931), and
held: “In these circumstances we think the proper rule to be
applied is that which requires a verdict to be set aside in cases
where the verdict is supportable on one ground, but not on
another, and it is impossible to tell which ground the jury
selected.” Yates, 354 U.S. at 312.
[4] In Griffin v. United States, 502 U.S. 46, 55 (1991), the
Court noted:
Yates, however, was the first and only case of ours
to apply Stromberg to a general verdict in which one
of the possible bases of conviction did not violate
any provision of the Constitution but was simply
legally inadequate (because of a statutory time bar).
As we have described, that was an unexplained
extension, explicitly invoking neither the Due Pro-
cess Clause (which is an unlikely basis) nor our
supervisory powers over the procedures employed in
a federal prosecution.
Despite that negative commentary, Griffin did not provide the
Court with an opportunity to reevaluate Yates. Thus, Yates
remains the controlling rule. See United States v. Fulbright,
105 F.3d 443, 451 (9th Cir. 1997) (“Where a jury returns a
general verdict that is potentially based on a theory that was
legally impermissible or unconstitutional, the conviction can-
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not be sustained” because “jurors, as non-lawyers, cannot be
expected to eliminate the legally impermissible option.”). We
must, therefore, decide whether 18 U.S.C. § 1346 provides a
legally sufficient ground for the fraud counts. We review de
novo the district court’s holding. United States v. Frega, 179
F.3d 793, 802 n.6 (9th Cir. 1999).
The “intangible rights” theory has been a subject of contro-
versy in the history of the federal mail and wire fraud statutes.
Before 1987, this circuit, among others, interpreted §§ 1341
and 1343 to proscribe two categories of fraudulent “schemes.”
United States v. Bohonus, 628 F.2d 1167, 1171 (9th Cir.
1980). The first included schemes to deprive others of tangi-
ble property interests, and the second included schemes to
deprive others of intangible rights. Id.
In 1987, the Supreme Court decided McNally v. United
States, 483 U.S. 350 (1987). McNally effectively limited the
scope of the fraud statutes by holding that §§ 1341 and 1343
“protect[ ] property rights, but do[ ] not refer to the intangible
right of the citizenry to good government.” Id. at 356. Defen-
dant argues that § 1346 is exclusively a “public corruption”
statute that cannot be used to prosecute private individuals for
acts of fraud. We disagree.
[5] We look, first, at the text of the statute as the best guide
to congressional intent. City of Edmonds v. Wash. State Bldg.
Code Council, 18 F.3d 802, 804 (9th Cir. 1994). Neither the
words of § 1346 nor its context suggests the public-
corruption-only limitation for which Defendant argues. Sec-
tion 1346 refers, without limitation, to “the intangible right of
honest services,” and sections 1341 and 1343 contain no spe-
cial reference to public corruption.
We consider, next, our pre-McNally cases because, by
overruling McNally, Congress restored the pre-McNally land-
scape. See Frega, 179 F.3d at 803 (observing “it is clear that
Congress reacted, at the Court’s invitation, to overrule
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McNally”). In our pre-McNally cases, we applied the intangi-
ble rights theory of fraud to both public officials and private
citizens. See, e.g., United States v. Louderman, 576 F.2d
1383, 1387 (9th Cir. 1978) (affirming the convictions of two
private citizens under § 1343 on the ground that the defen-
dants’ actions deprived targeted individuals of their right to
privacy and of a service for which they were paying); see also
Bohonus, 628 F.2d at 1172 (applying the mail fraud statute
against a private insurance manager and holding that “a
scheme to defraud an employer of loyal service is prohibited
under § 1341 provided the mails were used in the furtherance
of the scheme and specific intent . . . is shown”).
[6] Although we have not addressed directly whether the
intangible rights theory should still apply to private defen-
dants after the passage of § 1346, other circuits have done so
and have found such application appropriate. For example, the
Second Circuit in United States v. Rybicki, 354 F.3d 124, 127
(2d Cir. 2003) (en banc), upheld the mail fraud and wire fraud
convictions of two private lawyers who were giving illegal
payments to insurance claims adjusters with the intent of
inducing the adjusters to expedite the settlement of certain
claims. The court defined “scheme or artifice to deprive
another of the intangible right to honest services” in relation
to private actors as a
scheme or artifice to use the mails or wires to enable
an officer or employee of a private entity (or a per-
son in a relationship that gives rise to a duty of loy-
alty comparable to that owed by employees to
employers) purporting to act for and in the interests
of his or her employer (or of the other person to
whom the duty of loyalty is owed) secretly to act in
his or her or the defendant’s own interests instead,
accompanied by a material misrepresentation made
or omission of information disclosed to the employer
or other person.
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Id. at 141-42 (footnote omitted).
[7] The Sixth Circuit, in United States v. Frost, 125 F.3d
346, 366 (6th Cir. 1997), held that “private individuals, such
as [the defendants who were university professors], may com-
mit mail fraud by breaching a fiduciary duty and thereby
depriving the person or entity to which the duty is owed of the
intangible right to the honest services of that individual.”
Frost, therefore, refused to reinstate the Sixth Circuit’s pre-
McNally decision of United States v. Gray, 790 F.2d 1290
(6th Cir. 1986) (per curiam), rev’d by McNally, 483 U.S. 350,
which had limited the “intangible rights” theory to the prose-
cution of public officials. See also United States v. Vinyard,
266 F.3d 320, 326 (4th Cir. 2001) (affirming the mail fraud
conviction of a private attorney and holding that, “[a]lthough
the honest services theory of mail fraud is directed primarily
at the deterrence and punishment of corruption among public
officials, the courts have consistently recognized the statute’s
province to encompass dishonest acts perpetrated in private
commercial settings”); United States v. Devegter, 198 F.3d
1324, 1330 (11th Cir. 1999) (holding that the § 1346 theory
applies to private-sector defendants but that such cases must
involve a breach of fiduciary duty and reasonably foreseeable
economic harm); United States v. Sun-Diamond Growers of
Cal., 138 F.3d 961, 973 (D.C. Cir. 1998) (holding that the
§ 1346 theory can support the conviction of a private defen-
dant where “there [is] a failure to disclose something which
in the knowledge or contemplation of the employee poses an
independent business risk to the employer” (internal quotation
marks and alteration omitted)). We follow our sister circuits
and hold that the “intangible rights” theory of fraud, as codi-
fied by § 1346, can apply to private individuals as well as to
public figures.
[8] The next step in the inquiry, then, is whether Defendant
is the type of private individual who falls within the scope of
the statute’s provisions. The text of § 1346 reaches, without
express limitation, “a scheme or artifice to deprive another of
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the intangible right of honest services.” (Emphasis added.)
The undifferentiated term “another” has led a number of cir-
cuits to question whether Congress really meant to give
§ 1346 unlimited breadth. See Rybicki, 354 F.3d at 135 & n.7
(surveying circuit courts’ treatments of the issue). At a mini-
mum, we and other circuits have recognized the viability of
the “intangible rights” theory when the private defendant
stands in a fiduciary or trust relationship with the victim of
the fraud. Because Defendant had such a relationship with his
victim, we need not and do not decide whether Congress
intended “another” to reach even further. See Or. Rev. Stat.
§ 127.045 (providing that “an attorney-in-fact or agent [under
a power of attorney] must use the property of the principal for
the benefit of the principal”).
In Bohonus, we recognized that the “intangible rights” the-
ory of fraud most often is applied to cases involving bribery
of public officials. “The requisite ‘scheme or artifice to
defraud’ is found in the deprivation of the public’s right to
honest and faithful government. When a public official is
bribed, he is paid for making a decision while purporting to
be exercising his independent discretion. The fraud element is
therefore satisfied.” Bohonus, 628 F.2d at 1171. We held,
though, that the same rationale that governs the public
official/constituent relationship also applies in the employee/
employer context. “[D]epriving an employer of one’s honest
services and of its right to have its business conducted hon-
estly can constitute a ‘scheme to defraud’ under § 1341.” Id.
at 1172.
Although the facts of Bohonus did not require us to decide
what other classes of private individuals are subject to prose-
cution under the intangible rights theory of mail and wire
fraud, the opinion suggests that other fiduciary relationships
would qualify. See id. (noting that a “breach of a fiduciary
duty, . . . standing alone, [does not] show a § 1341 violation;
there must be a recognizable scheme formed with intent to
defraud”). As the Second Circuit explained in Rybicki: “Al-
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though the bulk of the pre-McNally honest-services cases
involved employees, we see no reason the principle they
establish would not apply to other persons who assume a legal
duty of loyalty comparable to that owed by an officer or
employee to a private entity.” Rybicki, 354 F.3d at 142 n.17
(citing precedent from the Second, Eighth, and Tenth Circuits
in which the intangible rights theory was applied to various
fiduciary relationships).
[9] Stubbs employed Defendant as a fiduciary, and Defen-
dant therefore undertook the high duties of honesty and loy-
alty to him. Specifically, Stubbs hired and relied on
Defendant as a financial advisor and estate planner. He
entrusted Defendant with large sums of money and signed a
durable power of attorney naming Defendant as his agent. In
these circumstances, the § 1346 theory underlying the charges
against Defendant was legally valid. Because Defendant was
a fiduciary, we have no occasion to decide whether the “intan-
gible right of honest services” in § 1346 applies to persons
who are not fiduciaries.
2. Because both theories of the prosecution were legally
valid, no error resulted from the use of a general ver-
dict.
[10] Whether the prosecution fulfilled its burden to prove
that Defendant was guilty under the intangible rights theory
is a separate question, and one that we need not reach.
“ ‘[W]hen a jury returns a guilty verdict on an indictment
charging several acts in the conjunctive . . . , the verdict
stands if the evidence is sufficient with respect to any one of
the acts charged.’ ” Griffin, 502 U.S. at 56-57 (alteration in
original) (quoting Turner v. United States, 396 U.S. 398, 420
(1970)).
[11] The government charged Defendant with “direct” mail
and wire fraud under 18 U.S.C. §§ 1341 and 1343, respec-
tively. The government charged Defendant under § 1346 only
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as an alternative theory based on the same underlying con-
duct.
[12] The elements of “direct” mail and wire fraud are (1)
engaging in a scheme or artifice to defraud and (2) using or
causing the use of the mails or wires in order to further the
fraudulent scheme or artifice. United States v. Manion, 339
F.3d 1153, 1156 (9th Cir. 2003) (per curiam). Here, Defen-
dant used his position as Stubbs’ financial planner to induce
Stubbs to award a power of attorney over those assets to
Defendant. Defendant used that power of attorney to create a
joint bank account in the names of Stubbs and himself, with-
out Stubbs’ knowledge. Without informing Stubbs, Defendant
transferred Stubbs’ assets to the joint bank account and then
caused the mails or wires to be used to move the money into
Defendant’s own accounts in Belize and in Louisiana. That
evidence supports Defendant’s convictions under §§ 1341 and
1343 for “direct” fraud. Therefore, we affirm his mail fraud
and wire fraud convictions.
B. Vagueness
Defendant next argues that 18 U.S.C. § 1346 is unconstitu-
tionally vague as applied to him. On de novo review, United
States v. Carranza, 289 F.3d 634, 643 (9th Cir. 2002), we dis-
agree.
[13] In examining a statute for vagueness, we must deter-
mine whether a person of average intelligence would reason-
ably understand that the charged conduct is proscribed.
United States v. Mazurie, 419 U.S. 544, 553 (1975). The stat-
ute “must be examined in the light of the facts of the case at
hand.” Id. at 550.
[14] Defendant took advantage of his position as a financial
advisor to gain the trust of 87-year-old Stubbs. In the context
of that relationship, he convinced Stubbs to grant him a power
of attorney, with which he stole about $400,000 from Stubbs,
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using the mails and wires. With Stubbs’ money, Defendant
paid his own expenses and bought a home for himself and his
wife in Belize, all without Stubbs’ knowledge. A person of
ordinary intelligence would reasonably understand that those
actions were proscribed by a statute that criminalizes the use
of the mails and wires to perpetrate a fraud.
C. Failure to State an Offense
Count 12 of the superseding indictment charged Defendant
with the foreign transportation of stolen money in violation of
18 U.S.C. § 2314. It alleged:
On or about March 21, 2001, in the District of
Oregon and elsewhere, defendant JOHN
ANTHONY WILLIAMS, knowingly caused
$80,000 to be transported, transmitted and trans-
ferred, from an account at Belize Bank in Belize,
Central America, to an account at Bank of America
in Oregon, knowing such funds were stolen, con-
verted and taken by fraud.
(Emphasis added.)
Defendant claims that Count 12 does not state an offense
because it charges him with causing $80,000 to be trans-
ported, instead of charging him with the actual transport of
the funds as § 2314 requires. That claim, which we review de
novo, United States v. Enslin, 327 F.3d 788, 793 (9th Cir.
2003), misperceives the reach of the statute.
[15] The first two paragraphs of 18 U.S.C. § 2314 state:
Whoever transports, transmits, or transfers in
interstate or foreign commerce any goods, wares,
merchandise, securities or money, of the value of
$5,000 or more, knowing the same to have been
stolen, converted or taken by fraud; or
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Whoever, having devised or intending to devise
any scheme or artifice to defraud, or for obtaining
money or property by means of false or fraudulent
pretenses, representations, or promises, transports or
causes to be transported, or induces any person or
persons to travel in, or to be transported in interstate
or foreign commerce in the execution or conceal-
ment of a scheme or artifice to defraud that person
or those persons of money or property having a
value of $ 5,000 or more[.]
(Emphasis added.) The statute expressly encompasses the act
of causing stolen funds to be transported in foreign com-
merce. That being so, Count 12 properly stated a claim under
18 U.S.C. § 2314.
D. Ex Post Facto
The Supreme Court issued its decision in Booker after the
jury returned its verdict in Defendant’s case but before the
district court imposed sentence. The court sentenced Defen-
dant in compliance with Booker. Defendant argues that
because his conviction predated Booker, his sentencing under
Booker principles violates the Ex Post Facto and Due Process
Clauses. His arguments are foreclosed by Dupas, 419 F.3d at
918.
E. Vulnerable Victim Enhancement
[16] The district court enhanced Defendant’s sentence
because it found that Stubbs was a “vulnerable victim” within
the meaning of the now-advisory United States Sentencing
Guidelines, U.S.S.G. § 3A1.1. See United States v. Kimbrew,
406 F.3d 1149, 1152 (9th Cir. 2005) (holding that a district
court should still consult the now-advisory Sentencing Guide-
lines for advice in determining an appropriate sentence). A
district court must find that a victim is “vulnerable” by a pre-
ponderance of the evidence. United States v. Dare, 425 F.3d
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634, 642 (9th Cir. 2005). We review such a finding for clear
error. United States v. Veerapol, 312 F.3d 1128, 1131 (9th
Cir. 2002).
[17] Stubbs was 87 years old. He had just suffered the
death of his brother, with whom he had a close familial and
working relationship. He was financially inexperienced and
had only an eighth grade education. Although he and his
brother co-owned a sheep ranch, Stubbs’ brother alone man-
aged the finances of the business while Stubbs provided the
labor. On this record, the district court did not clearly err in
finding that Stubbs was a vulnerable victim.
AFFIRMED.
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