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United States v. McHenry

filed: May 19, 1992.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
DAVID MCHENRY, DEFENDANT-APPELLANT. PLAINTIFF-APPELLEE, V. JOHN GULDE, DEFENDANT-APPELLANT.



Appeal from the United States District Court for the District of Arizona. D.C. No. CR-87-0307-03-RCB UNITED STATES OF AMERICA,. D.C. No. CR-87-0307-01-RCB. Robert C. Broomfield, District Judge, Presiding. Original Opinion Reported at,

Before: Robert R. Beezer, Cynthia Holcomb Hall and Charles Wiggins, Circuit Judges. Opinion by Judge Hall.

Author: Hall

Order AND AMENDED OPINION

HALL, Circuit Judge:

Defendants David McHenry and John Gulde were convicted of conspiracy to commit mail and wire fraud in violation of 18 U.S.C. § 371. Defendants appeal their convictions and the district court's award of restitution. In a separate, unpublished Disposition, we affirmed the convictions. In this opinion, we vacate the restitution award and leave the balance of the sentence intact. We have jurisdiction for this timely appeal under 28 U.S.C. § 1291.

I.

Defendants McHenry and Gulde are in the business of buying and selling coins. Gulde and his wife own a business called the Coin and Stamp Gallery in Phoenix, Arizona. McHenry owns a business called Arizona Rare Coin Exchange, also located in Phoenix, Arizona. In order to market their silver dollars, defendants formed an Arizona partnership named Carson City Reserve. Using this name, defendants ran two advertisements in various newspapers throughout the nation. These advertisements are the basis of the conspiracy and fraud charges alleged in the indictment.

After a nine day trial, the jury convicted both defendants of conspiracy to commit mail and wire fraud and acquitted them on the remaining substantive counts of mail and wire fraud. The district court suspended imposition of sentence, placed both defendants on a five year conditional probation, fined each defendant $10,000.00, and ordered each defendant to perform two hundred hours of community service. The district Judge also ordered defendants to refund the purchase price to all victims of the conspiracy as restitution under the Victim and Witness Protection Act (VWPA), 18 U.S.C. § 3663 (a)(1). To determine the identity of the "victims" and the amount of restitution, the district court authorized the United States Postal Service to create a customer questionnaire and distribute it to all Carson City customers. This questionnaire was reviewed by the parties and approved by the district court.

After a separate restitution hearing, the district court found that all customers who returned the questionnaire and desired a refund were "victims" for purposes of restitution. The district court awarded restitution to all "victims" except those specifically identified in the counts of which defendants were acquitted. The restitution order required defendants to refund the purchase price for 19,294 silver dollars. In total, the amount of restitution was $664,263.00 plus the cost of conducting the customer survey and administering the award.

Defendants challenge the restitution award on three grounds: (1) that it is unlawful under Hughey v. United States, 110 S. Ct. 1979 (1990); (2) that it is unlawful because the questionnaires "contained nothing more than rank hearsay;" and (3) that it is unlawful because the total amount of loss is not stated in the indictment.

II.

The legality of a restitution order is reviewed de novo. United States v. Ahumada-Avalos, 875 F.2d 681, 684 (9th Cir.), cert. denied, 110 S. Ct. 118 (1989). An order complying with the statutory framework, however, is reviewed for an abuse of discretion. United States v. Messer, 785 F.2d 832, 834 (9th Cir. 1986).

In Hughey, the United States Supreme Court held that restitution under the VWPA must be limited to the loss caused by the offense of conviction. The purpose of the VWPA is to insure that the defendant is not penalized for acts other than those to which he pled guilty or of which he was convicted. Id. at 1984. Defendants argue that under Hughey, the restitution order is improper because the conduct underlying the conspiracy conviction did not cause a loss to any customers.*fn1

This Circuit has not decided whether a court may order restitution to victims when the conviction is for conspiracy to commit mail or wire fraud.*fn2 In essence, the issue is whether there can be "victims" of a conspiracy. Theoretically, it is possible to have victims of a conspiracy. The conduct underlying the offense of conspiracy consists of (1) an agreement to accomplish an illegal objective, (2) one or more acts in furtherance of the illegal purpose, and (3) the requisite intent necessary to commit the underlying substantive offense. United States v. Pemberton, 853 F.2d 730, 733 (9th Cir. 1988). In some situations, this conduct can cause a loss to innocent persons who happen to become enmeshed with the conspirators' actions. For example, if a conspirator steals an automobile ...


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