Unpublished Disposition, 861 F.2d 268 (9th Cir. 1986)

MEMORANDUM^* 

Steve Angelica was convicted after a jury trial of 23 counts of mail and wire fraud in violation of 18 U.S.C. §§ 1341 and 1343. He was sentenced to six years in custody, placed on five years consecutive probation, and ordered to pay $451,846 as restitution to his victims, both immediately and as a condition of probation. He appeals both his conviction and his sentence. We affirm his conviction. The sentencing issues are addressed in a separate opinion.

BACKGROUND

Angelica oversaw the day-to-day operation of Kimberly International Gem Corporation ("Kimberly"), which used numerous high-pressure salesmen as part of schemes to defraud clients of diamonds, cash and investment securities. One of Kimberly's schemes was the so-called "diamond takeaway scheme," devised by Angelica and his co-president Stephen Small. Angelica and Small provided Kimberly salesmen with a list of people who had previously purchased diamonds from other companies, together with a script laying out a variety of lies, misrepresentations and high-pressure sales tactics to persuade customers to mail in diamonds supposedly to be sold by Kimberly for a profit. The salesmen, including Angelica, promised their customers the cash proceeds, less a commission, from the sales. Kimberly customers in fact never received the proceeds from the sale of their diamonds. After selling the diamonds, Angelica and his codefendants, without their customers' authorization, would substitute inexpensive garnets for the sale proceeds and keep the proceeds themselves.

Angelica was indicted on 25 counts of mail and wire fraud in violation of 18 U.S.C. §§ 1341, 1343 and convicted of 23 of the counts. During the 19-day trial, 15 victims testified to losing $451,846 in diamonds, cash and bonds. Most of these victims testified to dealing with Kimberly employees, including Angelica, over the telephone or by mail.

DISCUSSION

The government argues that this court lacks jurisdiction to hear this appeal. It asserts that Angelica filed notice of appeal two days after the expiration of the 10-day period allowed by Fed. R. App. P. 4(b).

The notice of appeal in a criminal matter must be filed within 10 days after the entry of judgment. Fed. R. App. P. 4(b). Angelica was sentenced in this matter on October 2, 1986. Notice of appeal was filed on October 14, 1986. However, because October 12, 1986 was a Sunday and October 13, 1986 fell on Columbus Day, notice of appeal in this case was timely. Fed. R. App. P. 26(a).

On August 15, 1983, the Federal Trade Commission ("FTC") filed an action in district court pursuant to sections 5 and 13(b) of the FTC Act, 15 U.S.C. §§ 45, 53(b), against Kimberly and eight of its officers, salesmen and suppliers, including Angelica. The FTC sought injunctions, restitution and other equitable relief in respect to defendants' unfair or deceptive acts or practices. On August 22, 1985, defendant Angelica entered into a stipulated settlement with the FTC that required Angelica to make restitution of $40,000 through the FTC to customers who were injured as a result of Angelica's deceptive acts and practices. Angelica was subsequently indicted in this case.

Angelica raises two interrelated issues with respect to the prior FTC action. First, he asserts that the FTC action was similar in nature to the later criminal prosecution and, therefore, the criminal case was precluded. Second, he claims that the civil settlement prevented the district court from imposing an order of restitution in connection with his criminal sentence.

The preclusive effect of a judgment in a prior case presents a mixed question of law and fact in which the legal issues predominate. Robi v. Five Platters, Inc., 838 F.2d 318, 321 (9th Cir. 1988). The doctrine of res judicata applies to criminal, as well as civil, proceedings, United States v. Cejas, 817 F.2d 595, 598 (9th Cir. 1987), and includes two distinct types of preclusion: claim preclusion and issue preclusion.

Claim preclusion "treats a judgment, once rendered, as the full measure of relief to be accorded between the same parties on the same 'claim' or 'cause of action.' " Robi, 838 F.2d at 321. Here, there was no identity of parties. The FTC and the Justice Department are different in origin, function and jurisdiction.

Furthermore, the two proceedings involved different causes of action. The FTC complaint sought injunctive relief and redress for injured customers in the form of restitution. The trial at issue here was a criminal action, with a higher burden of proof. Different facts were essential to the maintenance of each proceeding. The FTC action needed only to show "unfair methods of competition," or "unfair or deceptive acts." FTC Act Sec. 5, 15 U.S.C. § 45. In order to maintain a criminal action under 18 U.S.C. §§ 1341, 1343, the Department of Justice must allege facts demonstrating (1) the formation of a scheme to defraud, and (2) a knowing use of the wire or mails in furtherance of the scheme. See United States v. Mitchell, 744 F.2d 701, 703 (9th Cir. 1984). Under the statutes, the use of the mail or wire must be made or caused to be made "for the purpose of executing such scheme." United States v. Maze, 414 U.S. 395, 400 (1974).

In arguing that the two actions are the same, Angelica relies heavily on the fact that both sought restitution. This reliance is misplaced. In FTC v. H.N. Singer, Inc., 668 F.2d 1107, 1112 (9th Cir. 1982), we determined that the equitable powers granted in Sec. 13(b) of the FTC Act, 15 U.S.C. § 53(b), included the power to order restitution. An order of restitution under the Victim and Witness Protection Act of 1982, 18 U.S.C. §§ 3579, 3580 is a "criminal penalty carrying the stigma associated with other authorized criminal sanctions." United States v. Keith, 754 F.2d 1388, 1391 (9th Cir. 1985). Moreover, "a restitution order under the Act ..... does not bar a subsequent civil action for damages based upon the same incident." Id.; see also 18 U.S.C. §§ 3579(c) (2), 3580(e).

Alternatively, Angelica argues that even if the causes of action were not the same, issue preclusion forbids further restitution in the criminal action. This circuit employs a three-step process in analyzing a collateral estoppel claim. United States v. Bernhardt, 840 F.2d 1441, 1448 (9th Cir. 1988). First, the issues in the two actions are identified to determine whether they are sufficiently similar and material to justify invoking the doctrine. Second, we examine the first record to determine whether the issue was fully litigated. Finally, from our examination of the record, we ascertain whether the issue was necessarily decided in the prior case.

While this circuit has in the past given preclusive effect to settlement agreements, we have allowed it only when "it is clear that the parties intended the stipulation of settlement and judgment entered thereon to adjudicate once and for all the issues raised in that action." Green v. Ancora-Citronelle Corp., 577 F.2d 1380, 1383 (9th Cir. 1978). The settlement agreement at issue provided that: " [A]ll claims which the Federal Trade Commission has or may have had ... shall be discharged and forever barred, and the defendant Steve Angelica shall be released from any liability including restitution or redress to the Federal Trade Commission." (Emphasis added). Thus, it purports to bind only the FTC.

Moreover, it is nowhere apparent that the FTC proceeding "fully litigated" or "necessarily decided" Angelica's liability to any of his defrauded customers. No issues of fact or law were determined in the FTC proceeding. The stipulated settlement, in which Angelica specifically did not admit the FTC allegations, required only that Angelica deposit $40,000 into an FTC escrow account for the purpose of "provid [ing] redress to customers who may have been injured as a result of defendant's practices." (Emphasis added). Furthermore, there is no possibility of any "double recovery" in light of the subsequent criminal restitution order. The judge in the criminal trial ordered that any restitution to be paid by Angelica to the victims in the criminal trial be reduced by any recovery obtained from the FTC settlement.

We conclude that neither res judicata nor collateral estoppel bar the criminal proceedings.

Angelica alleges that he was prejudiced by the passage of time between the time of his actions at Kimberly and his later indictment. He contends that during the pre-indictment delay witnesses' memories dimmed and that the government intentionally delayed the indictment to gain a tactical advantage. Because Angelica failed to raise this issue before the district court, we review it under the plain error standard.

In order to prevent or invalidate prosecution for reasons of pre-indictment delay, "the defendant must first show actual, non-speculative prejudice resulting from the delay." United States v. Rogers, 722 F.2d 557, 561 (9th Cir. 1983). Upon a showing of prejudice, the court must determine the length of and reasons for the delay in order to assess the government's culpability. Id. To prove actual prejudice, a defendant must give more than " [m]ere assertions that ... witnesses' memories may have faded with the passage of time." United States v. Horowitz, 756 F.2d 1400, 1405 (9th Cir. 1985).

Angelica contends that he suffered actual prejudice because three witnesses had difficulty recalling details of their involvement with him despite the use of notes for the purpose of refreshing their memories.¹  The government argues that, rather than being prejudiced, Angelica actually benefited from the impaired recollections.²  The defense apparently took full advantage of these problems. Absent the required showing of actual prejudice, it is unnecessary to consider the length of, or reasons for, the delay. Horowitz, 756 F.2d at 1405.

Angelica contends that the prosecutor "made eight separate misstatements of witness testimony in closing argument." Only one of these instances was specifically objected to at the time. Prosecutorial comments to which an objection is raised are reviewed for "harmless error," while the standard of review for comments in which no objection is raised is "plain error." United States v. Endicott, 803 F.2d 506, 513 (9th Cir. 1986).

In six of the instances of alleged "misstatements," (testimony of witnesses Ottley, Stephenson, Madison, Hoogs, Olwin and Laux), the prosecutor either characterized the testimony accurately or else misstated a trivial or irrelevant detail. Only slightly less trivial was the prosecutor's recollection that witness Hardy spoke to Angelica "I believe ... four, maybe five times, but something along that line," whereas Hardy testified that he spoke to Angelica one or two times. We do not find that this misstatement regarding the number of conversations was material or prejudicial, particularly because the prosecutor repeatedly reminded the jurors that their own recollections were controlling. Although the prosecutor mistakenly referred to Kimberly's bookkeeper, Zvonkin, as an "accountant," this error was harmless both because defense counsel, in his contemporaneous objection, argued that she was a bookkeeper, and because the jury was admonished to rely on its own recollection.

Following the return of the verdicts on July 18, 1986, the district court learned that a dictionary had been brought into the jury room on the fourth day of deliberations. An evidentiary hearing was held by the district court on August 1, 1986 and each juror was examined as to when the dictionary came into the jury room and how it was used. The district court found that the jury consulted the dictionary definition of "artifice." That definition was inconsistent with the court's instructions, in that it suggested that "artifice" need not imply intent to defraud. Based upon the information derived from the evidentiary hearing, Angelica and his codefendants moved for a new trial. The district court granted a new trial to codefendant Leslie Small, but denied Angelica's motion, finding that the dictionary played no role in Angelica's conviction as the jury had already reached verdicts against him prior to the use of the dictionary.

While we review the district court's denial of a motion for a new trial for abuse of discretion, United States v. Kenny, 645 F.2d 1323, 1343 (9th Cir. 1981), we review alleged jury misconduct independently in light of the entire record. United States v. Bagnariol, 665 F.2d 877, 885 (9th Cir. 1981).

It is well established that unauthorized reference to dictionary definitions constitutes reversible error which the government must prove harmless beyond a reasonable doubt. E.g., United States v. Kupau, 781 F.2d 740, 744 (9th Cir.), cert. denied, 107 S. Ct. 93 (1986).

The trial court, upon learning of a possible incident of juror misconduct, must hold an evidentiary hearing to determine the precise nature of the extraneous information. The defendant is entitled to a new trial if the judge finds a "possibility that the extrinsic material could have affected the verdict."

Bagnariol, 665 F.2d at 885 (quoting United States v. Vasquez, 597 F.2d 192, 193 (9th Cir. 1979)). The district court should consider the strength of the government's case, the importance of the extraneous material, and any particular circumstances affecting the impact of the information on the jury's verdict. See Kupau, 781 F.2d at 744; United States v. Steele, 785 F.2d 743, 746-47 (9th Cir. 1986).

Here, the trial judge scrupulously adhered to the procedure prescribed in Bagnariol. Upon becoming aware that the court's secretary provided the jury with a dictionary, the trial judge advised counsel and requested that the parties lodge proposed questions to be asked of the jurors and file memoranda of points and authorities concerning the legal effect of the jury's improper use of the dictionary.³  She then held an evidentiary hearing to determine to what extent the dictionary had been used by the jurors. At the evidentiary hearing, all but one juror testified that unanimous verdicts as to all counts against Angelica had been reached before the dictionary was consulted.⁴  In view of this fact, together with the overwhelming proof against Angelica, the district court determined that although the jury's use of the dictionary was significant, there was no reasonable possibility that the dictionary could have affected the verdict as to Angelica.

We agree. The testimony of Kimberly employees showed Angelica, together with Stephen Small, to have controlled virtually every phase of Kimberly's operations, including the creation of the diamond take-away scheme. Several victims testified as to Angelica's personal involvement in deceiving them. The strength of the government's case was borne out by the examination of the jurors, which revealed that unanimous verdicts had been reached against Angelica and Stephen Small before the dictionary was introduced, and that the dictionary was used only in the deliberations as to Leslie Small, against whom the evidence was not as strong. We find that the error was harmless as to Angelica, and that the district court did not err in refusing to grant Angelica a new trial.

Angelica further contends that the jurors were confused as to the applicable law, as reflected by their desire for the dictionary and their sending several notes to the trial judge requesting clarification on various issues of law. He does not, however, claim that the responsive instructions, agreed upon by counsel, were erroneous. Where, as here, the jury was properly instructed, we will not disturb the verdict in response to defendant's vague allegation of jury "confusion."

As part of the fraudulent scheme, Angelica and his codefendants forwarded to their customers certain certificates of appraisal which purported to place a value on the gemstones substituted for the diamonds. Angelica moved to have the appraisal values admitted into evidence to establish his good faith belief that Kimberly "was delivering value-for-value." The district court repeatedly admonished all defendants to establish the necessary foundation before the appraisal certificates could be admitted. Ultimately, the district court admitted the appraisal certificates with the appraisal values redacted. The district court apparently excluded the "values" on hearsay and relevance grounds. Angelica urges on appeal that the appraisal values were admissible. While we review evidentiary rulings for an abuse of discretion, the district court's construction of the rules of evidence is reviewed de novo. United States v. Emmert, 829 F.2d 805, 810 (9th Cir. 1987).

The appraisal "values" were not being introduced to prove the truth of the garnets' particular dollar value but rather to establish Angelica's state of mind, ie., his reliance in good faith on the value of the gemstones being substituted for the diamonds. Although the "values" were thus nonhearsay, it does not follow that they were admissible. Only evidence that is relevant is admissible. Fed.R.Evid. 402. The district court gave Angelica the opportunity to show whether "anybody at Kimberly actually was involved in the appraisals or used them or did anything else with respect to [them]." Angelica apparently never took advantage of that opportunity. The record indicates that the appraisals were never put to any use by anybody at Kimberly.⁵  Kimberly acted merely as a conduit in passing on the certificates furnished by the International Gemological Society to Kimberly's customers. Because of the lack of any evidentiary foundation for the claim of reliance on the appraisals by anyone at Kimberly, the district court acted within its discretion in excluding them as irrelevant.

The appellant's conviction is AFFIRMED.