Argued and Submitted: September 10, 2013, San Francisco, California
Appeal from the United States District Court for the Eastern District of California. D.C. No. 2:09-cr-00293-EJG-1. Edward J. Garcia, Senior District Judge, Presiding.
AFFIRMED IN PART, VACATED IN PART AND REMANDED.
Affirming in part and vacating in part the district court's judgment, the panel held that mailings sent to avoid detection or responsibility for a fraudulent scheme fall within the mail fraud statute, 18 U.S.C. § 1341, when they are sent prior to the scheme's completion and that, to determine when a scheme is completed, the court looks to the scope of the scheme as devised by the perpetrator.
The panel affirmed the defendant's mail fraud conviction on count 2 of the indictment because a reasonable jury could have found that the defendant's September 16, 2004, letter was sent before the completion of the embezzlement scheme he devised.
The panel also held that the district court properly applied sentencing enhancements for making a misrepresentation during the course of a bankruptcy proceeding (U.S.S.G. § 2B1.1(b)(9)(B)) and for using sophisticated means (U.S.S.G. § 2B1.1(b)(10)(C)).
In accord with the government's concession, the panel held that the district court plainly erred by including $44,715.21 in restitution for fraudulent credit card charges and $1,851.38 in restitution for wage overpayments that were not part of the offenses of conviction and by failing to note the waiver of interest on restitution on the judgment.
Concurring in the majority's judgment, Judge Wallace wrote separately to point out the opinion's limited holding and unnecessary reasoning. He wrote that the majority's narrow focus wrongly implies a " statute of limitations" approach to mail fraud liability, and that the majority incorrectly dismisses the weight of precedent from sister circuits.
John Balazs (argued), Sacramento, California, for Defendant-Appellant.
Benjamin B. Wagner, United States Attorney, Camil A. Skipper, Appellate Chief, and S. Robert Tice-Raskin (argued), Assistant United States Attorney, Sacramento, California, for Plaintiff-Appellee.
Before: J. Clifford Wallace, Raymond C. Fisher, and Marsha S. Berzon, Circuit Judges. Opinion by Judge Fisher; Concurrence by Judge Wallace.
FISHER, Circuit Judge.
We must decide when mailings sent to avoid detection or responsibility for a fraudulent scheme are sent " for the purpose of executing such scheme." 18 U.S.C. § 1341. We hold that such mailings fall within the mail fraud statute when they are sent prior to the scheme's completion and that, to determine when a scheme is completed, we look to the scope of the scheme as devised by the perpetrator. Because a reasonable jury could have found that defendant Thomas Tanke's September 16, 2004 letter was sent before the completion of the embezzlement scheme he devised, we affirm his mail fraud conviction on count 2 of the indictment. We also hold that the district court properly applied sentencing enhancements under United States Sentencing Guidelines Manual § 2B1.1(b)(9)(B) and (b)(10)(C).
A. Tanke's Embezzlement
Rafael Martin and his family operated two construction businesses, Azteca Construction Company and Construction Equipment Rental and Service (CERS). Defendant Thomas Tanke worked for Azteca between 1999 and 2004, serving as vice president of operations between 2000 and July 2004, with authority to approve or issue checks from Azteca accounts. He was not employed by CERS and had no authority to receive CERS income or pay CERS's obligations. Tanke also maintained his own consulting business, Cedar Creek Associates.
Over a 20-month period, Tanke embezzled more than $192,000 from Azteca and CERS. From November 2002 through February 2004, Tanke caused the issuance of 21 Azteca checks, totaling $74,762.82, for his personal expenses. The Azteca checks, most signed by Tanke, were paid to his creditors or businesses he patronized, including General Motors Acceptance Corporation (for an auto lease), Audi Financial Services (financing for an Audi A4 Quattro), Capital One Services (for a credit card), Household Credit Services and HSBC Card Services, Inc. (for a credit card), Providian National Bank (for a credit card), Onyx Acceptance Corporation (financing for a BMW), Steve Larsen's Wheel Works (a retail bicycle shop) and Kenny G. and Company (a jeweler). Tanke was never authorized to use Azteca checks to pay personal obligations or to pay these specific creditors or businesses.
Tanke falsified records to conceal these payments. He used at least six false invoices to make it appear that the checks were issued for legitimate business expenses. For example, a false invoice from " Onyx Corporation," ostensibly for " [p]igging of lines and testing of all pipe," was actually a $10,027.92 payment for a BMW Z4. Tanke also falsified carbon copies of checks in Azteca's check register on at least 10 occasions, also to conceal the true nature of the payments. For example, a check made payable to " Providian" (to pay Tanke's personal Providian Visa card) contained no memo notation, whereas the carbon copy falsely stated that the check was paid to " Providian Products" and referenced " 02420-0046-M," an existing Azteca job number and cost code.
Between February and July 2004, Tanke also diverted seven checks payable to CERS, Martin and Azteca, totaling $117,486.25, into his Cedar Creek bank account. The four checks payable to Martin and Azteca had a handwritten endorsement making the check payable to Cedar Creek, a forged signature and a printed endorsement making the check payable to Cedar Creek. The three checks payable to CERS had a printed endorsement making them payable to Cedar Creek.
B. Cedar Creek Cover Story
Tanke left Azteca in July 2004. It appears that Martin at least suspected Tanke's embezzlement a short time later. In an August 5, 2004 email, Martin asked Tanke about a missing April 2004 check, in the amount of $39,330, from Southern Quality Trucks to CERS. Tanke responded by email that he did " not have any check from Southern Quality Trucks" and that all checks he had received had been turned over to accounting or used to pay outstanding vendors and debts. In fact, Tanke had long since deposited the check into his Cedar Creek account.
In an August 6 email, Martin told Tanke that he knew the check had been deposited into the Cedar Creek account. In an email response that day, Tanke acknowledged that he had diverted the money into his account, but told Martin that this and similar diversions were legitimate transactions to compensate him for consulting work Cedar Creek had allegedly performed for Azteca and CERS. Tanke's email attached what he claimed were three " very old invoices" from Cedar Creek and asserted that his actions had " ensured that Cedar Creek was paid for these long overdue invoices." In addition to casting the diversions as legitimate payments to Cedar Creek, Tanke's email also used thinly veiled threats to discourage Martin from reporting the matter to authorities. Tanke wrote that this was " purely a 'business issue'" and that he " hope[d Martin would] not try to expand it to anything else." Tanke warned that, if Martin pursued the matter further, he would report Martin to federal and state agencies, writing: " You do not want to see this happen, as it could involve you personally in criminal or civil action that could put you in prison or forfeit all of your personal holdings."
On August 17, Tanke emailed Martin that he should have received invoices by mail showing that over $98,000 was due to Cedar Creek for consulting fees. Tanke noted that Martin had filed documents leading to a hold on the Cedar Creek account and that, if Martin did not lift that hold, he would report Martin's " numerous frauds and false claims" to authorities. Tanke concluded the email by writing: " I just want what has been and is due to me and we can part friends. Please do not force me to take action that will cause you harm."
Martin replied by email on August 18 that the invoices were " not real," that Tanke was a salaried employee who received wages and that Azteca did not owe Tanke or Cedar Creek any consulting fees. Martin added, " [i]n response to your threats, if you ha[d] knowledge of any wrongdoing by Azteca..., you should have reported it."
On September 16, Tanke caused a letter to be sent from Cedar Creek to Martin by U.S. mail. This mailing, charged as count 2 of the indictment, stated that Azteca and CERS had previously paid some invoices due to Cedar Creek (again, an apparent reference to Tanke's diversion of checks
into his Cedar Creek account) and alleged that Azteca had provided " false information" to Cedar Creek's bank, which resulted in reversal of these payments. The letter enclosed an invoice from Cedar Creek that requested payment for the previous invoices as well as interest, totaling $159,990.95.
In a letter dated September 23, Martin rejected the new invoice and stated that Azteca had never paid any of the previous fictitious invoices either. Martin later testified at trial that Cedar Creek did not perform any of the claimed services reflected on the September 16 Cedar Creek invoice. He also testified that neither Tanke nor Cedar Creek had ever consulted for CERS.
C. Criminal Proceedings
In 2009, a grand jury indicted Tanke on five counts of bank fraud, for violation of 18 U.S.C. § 1344, and two counts of mail fraud, for violation of 18 U.S.C. § 1341. The first mail fraud count, charged as count 1 of the indictment, was for a July 22, 2004 check from Industrial Tractor Co. to CERS for approximately $33,000, delivered via Federal Express from South Carolina to California. Tanke does not challenge his conviction on ...