US v. Christopher Rice, No. 13-4182 (4th Cir. 2014)

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UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 13-4182 UNITED STATES OF AMERICA, Plaintiff - Appellee, v. CHRISTOPHER C. RICE, Defendant - Appellant. No. 13-4183 UNITED STATES OF AMERICA, Plaintiff - Appellee, v. SAMUEL B. JACOBS, Defendant - Appellant. Appeals from the United States District Court for the Eastern District of Virginia, at Newport News. Mark S. Davis, District Judge. (4:10-cr-00149-MSD-TEM-2; 4:10-cr-00149-MSD-TEM-1) Submitted: November 26, 2013 Before TRAXLER, Judges. Chief Judge, Decided: and DAVIS and January 7, 2014 THACKER, Circuit Affirmed by unpublished per curiam opinion. Jon M. Babineau, RIDDICK BABINEAU, PC, Norfolk, Virginia, for Appellant Jacobs. Lawrence H. Woodward, Jr., SHUTTLEWORTH, RULOFF, SWAIN, HADDAD & MORECOCK, PC, Virginia Beach, Virginia, for Appellant Rice. Jeffrey H. Knox, Chief, Justin Goodyear, Fraud Section, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Dana J. Boente, Acting United States Attorney, Alexandria, Virginia, Brian J. Samuels, Assistant United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Newport News, Virginia, for Appellee. Unpublished opinions are not binding precedent in this circuit. 2 PER CURIAM: Appellants Samuel Jacobs ( Jacobs ) and Christopher Rice ( Rice ) were charged in a 29-count superseding indictment with conspiracy to commit mail fraud, multiple counts of mail fraud, multiple counts of money laundering, and multiple counts of forgery, all of which arose out of a fraudulent investment scheme. Jacobs was convicted, after a jury trial, of all counts except for conspiracy to commit mail fraud (Count 1) and one of the mail fraud counts (Count 6). The district court sentenced Jacobs to 144 months imprisonment on Counts 2-5 and 15-20, and 120 months imprisonment on Counts 7-14 and Counts 2129, all to be served concurrently. On appeal, Jacobs challenges the at sufficiency of the evidence trial as calculation of his Sentencing Guidelines range. 1 well as the Rice was found guilty by the same jury of seven counts of transactional money 1 Jacobs has filed a motion for leave to file a pro se supplemental brief, along with a pro se supplemental brief. Because Jacobs is represented by counsel who has filed an extensive merits brief, as opposed to a brief pursuant to Anders v. California, 386 U.S. 738 (1967), he is not entitled to file a pro se supplemental brief and we, therefore, deny his motion. See United States v. Penniegraft, 641 F.3d 566, 569 n.1 (4th Cir. 2011) (denying motion to file pro se supplemental brief because the defendant was represented by counsel), cert. denied, 132 S.Ct. 564 (2011). 3 laundering (Counts 8-14) and of one count of forgery (Count 25), and not guilty of the remaining counts against him. 2 sentenced to two concurrently, five-year with no terms term of of Rice was probation, imprisonment. to run Rice s sole challenge on appeal is the sufficiency of the evidence at trial. We have reviewed the record and find no reversible error. Accordingly, we affirm. I. Both presented Jacobs and insufficient convictions. Rice evidence contend at that trial to the Government support It is well settled that [a] defendant challenging the sufficiency of the evidence faces a heavy burden. States v. Foster, 507 F.3d 233, 245 (4th Cir. 2007). such challenges de novo. In so doing, appeal most the light United We review United States v. Kelly, 510 F.3d 433, 440 (4th Cir. 2007). in their we view the evidence on favorable to the government in determining whether any rational trier of fact could find the essential elements of the crime beyond a reasonable doubt. United States v. Cone, 714 F.3d 197, 212 (4th Cir. 2013) (citing United States v. Collins, 412 F.3d 515, 519 (4th Cir. 2005)). We do not weigh the evidence or review the credibility of the 2 Rice was not charged in Counts 15-20 of the superseding indictment for money laundering to conceal mail fraud, in violation of 18 U.S.C. § 1956. 4 trial witnesses, and we assume that the jury resolved discrepancies in testimony in favor of the government. We will uphold the jury s verdict if substantial all See id. evidence supports it and will reverse only in those rare cases of clear failure by the prosecution. Id. A. Jacobs first contends that there was evidence to support his mail fraud convictions. insufficient To convict an individual of mail fraud, in violation of 18 U.S.C. § 1341, the Government must prove beyond a reasonable doubt that the defendant: (1) devised a scheme to defraud; and (2) used the mails in furtherance of the scheme. 684 F.3d 473, 477 (4th Cir. See United States v. Wynn, 2012). Proof of a scheme to defraud requires proof of the specific intent to deprive one of something of value through a misrepresentation or other similar dishonest method, which indeed would cause him harm. Id. at 478. Jacobs argues only that the Government failed to prove beyond a reasonable doubt that he had the specific intent to deprive Alliance s investors of their money. Therefore, only the first element of mail fraud is at issue here. When viewed in the light more favorable to the Government, it is clear that substantial evidence was presented for a rational jury to conclude beyond a reasonable doubt that Jacobs engaged in mail fraud. The evidence demonstrated that 5 Jacobs falsely told investors that the money invested with Alliance Financial Services, Inc. ( Alliance ) would be put into legitimate investment vehicles, such as real estate. 3 He also falsely represented to investors that the investments would earn interest Jacobs failed and that personal to included the assets. disclose transfers personal investors. and investments the to In business secure addition, actual JBS, were use of transfers debts, and and Jacobs Alliance to pay off repayments backed by misleadingly funds, which Jacobs of own earlier There was substantial evidence for a rational trier of fact to conclude that Jacobs made these misrepresentations and omissions to investors with the intent to induce victims to invest and reinvest their money with Alliance. B. Jacobs and Rice both argue that there was insufficient evidence to support their convictions for transactional money 3 In 1998, Jacobs organized and formed JBS, Inc. ( JBS ) in Newport News, Virginia. JBS operated several low power television stations, which broadcasted religious sermons in local markets from area pastors and sold advertising and airtime. Jacobs was the president of JBS and owned the majority of its shares. Rice began working at JBS in the early 2000s, handling the technical operations for the television stations. In 2005, JBS and Jacobs were experiencing significant financial problems -- the debts of JBS and Jacobs totaled approximately $1.9 million. In December 2005, Jacobs incorporated Alliance. Jacobs was the president of Alliance, and Rice was its secretary/treasurer. 6 laundering. The offense of transactional money laundering, in violation of 18 U.S.C. § 1957(a), requires the Government to prove beyond a reasonable doubt that the defendant knowingly engaged in a monetary transaction in criminally derived property of a value greater than $10,000 and is derived from specified unlawful activity. 18 U.S.C. § 1957(a); States v. Cherry, 330 F.3d 658, 668 (4th Cir. 2003). derived property is defined by statute as United Criminal any property constituting, or derived from, proceeds obtained from a criminal offense. 18 U.S.C. § 1957(f)(2). Therefore, to convict Jacobs and Rice of this offense, the jury was required to find: (1) that Jacobs and Rice knowingly participated in a monetary transaction involving criminally derived property; and (2) that the criminally derived property was proceeds derived from specified unlawful activity -- that is, the mail fraud in Counts 2-6 under 18 U.S.C. § 1341. With convictions derivative respect for of to See Cherry, 330 F.3d at 668. Jacobs, transactional his challenge his money to his sole challenge to his laundering is mail convictions. fraud entirely Specifically, Jacobs argues that because he did not engage in mail fraud, he necessarily could transactional money laundering. Jacobs mail fraud convictions 7 not have been convicted of However, as explained above, were supported by substantial evidence. Therefore, his argument challenging his convictions for transactional money laundering fails. Turning now to Rice, he first argues that the evidence at trial was insufficient to show that he personally effected the transfers that supported Counts 8-14. He contends that the Government offered no testimony or evidence to indicate which defendant signed the checks argument is unpersuasive. or transferred the funds. This The Government presented substantial evidence of the differences between the checks to which Jacobs admitted to signing Rice s name and the other checks written from Alliance s bank account. Some of these differences included the manner in which the payee line and the amount line was written. In addition, the Government presented differing Chris Rice signatures, which demonstrated one style of signature on the check that Jacobs acknowledged he signed and a different style on the remaining checks that support Counts 814. Finally, the Government presented the jury with checks from Rice s personal bank account. The jury was permitted to compare authentic on handwriting (i.e., Rice s personal checks) to contested handwriting (i.e., on checks supporting Counts 8-14) and conclude that they match. See United States v. Dozie, 27 F.3d 95, 98 (4th Cir. 1994) (explaining that under Federal Rule of Evidence necessary). 901(b)(3), expert Therefore, opinion there 8 was on handwriting substantial is evidence not to support the jury s conclusion that Rice personally effected the transfers that supported Counts 8-14. Rice next argues that the Government failed to demonstrate that Rice knew that the funds in question involved criminally derived property. Rice contends that the Government did not present any evidence that Rice knew of any fraudulent activity separate from that which was presented in Count 1 (Conspiracy) and Counts 2-6 (Mail Fraud), which was rejected by the jury as to Rice. While it is true that the jury returned not guilty verdicts for the conspiracy and mail fraud charges with respect to Rice, there was evidence presented at trial that Rice was aware that the funds he was transferring from Alliance to JBS came from Jacobs fraud on the investors. Specifically, Rice s notes from board meetings demonstrated that he was aware of Jacobs Nevertheless, account for misrepresentations Rice wrote purposes a to number that of were Alliance checks from investors. Alliance s inconsistent with the representations that he knew Jacobs had made to investors. addition, Canning, there who was evidence invested that $100,000 Rice with told Alliance, investor that In Susan Alliance funds would be used to offer mortgages and loans to members of the church. funds were The evidence, however, demonstrated that Alliance actually transferred to JBS, Jacobs, and Rice. Therefore, there was substantial evidence to support the jury s 9 conclusion that Rice knowingly participated in a monetary transaction involving criminally derived property. 4 Finally, Rice relies on the Supreme Court s decision in United States v. Santos, 553 U.S. 507 (2008) to argue that the term proceeds in 18 U.S.C. § 1957 should be defined narrowly to mean only profits and not the total receipts from unlawful activity. Santos is inapplicable As the Government correctly explains, here. Our court has summarized the Supreme Court s holding in Santos as follows: in order to avoid a merger of the crimes of money laundering and operating an illegal gambling business, the term proceeds in the money laundering statute must be construed to mean net profits, not gross receipts, of the illegal gambling business. 4 United Although the jury acquitted Rice of the mail fraud and the conspiracy to commit mail fraud counts, this does not mean that there was insufficient evidence to support a jury s finding that Rice knew the funds at issue in Counts 8-14 came from unlawful activity. The mens rea requirement under the statute is only that the defendant knows that the monetary transaction involves criminally derived property. 18 U.S.C. § 1957(a). Criminally derived property means any property constituting, or derived from, proceeds obtained from a criminal offense. Id. § 1957(f)(2). Indeed, the Government is not required to prove the defendant knew that the offense from which the criminally derived property was derived was specified unlawful activity. Id. § 1957(c) (emphasis supplied). All the Government must prove is that the defendant knew that the property was obtained from some criminal offense. Therefore, Rice s acquittals relating to mail fraud -- which is specified unlawful activity under the statute -- does not automatically mean that there was insufficient evidence to support Rice s conviction for transactional money laundering. 10 States v. Halstead, 634 F.3d 270, 271 (4th Cir. 2011). We further explained that when the illegal activity includes money transactions to pay for the costs of the illegal activity, a merger problem can occur transactions also to laundering. Id. at if the prosecute 279. [G]overnment the Here, uses those for money defendant however, the financial transactions of the predicate offense -- i.e., Jacobs mail fraud -- are different money laundering -- Alliance funds. from i.e., the transactions Rice s subsequent See id. at 279-80. prosecuted as transfers of Therefore, there is no merger problem and Santos does not apply. C. Jacobs next argues that there was insufficient evidence to support his additional money laundering convictions in Counts 15-20. mail fraud, in The offense of money laundering to conceal violation of 18 U.S.C. § 1956(a)(1)(B)(i), requires the Government to prove beyond a reasonable doubt the following four elements: (1) an actual or attempted financial transaction; (2) involving the proceeds of a specified unlawful activity; (3) knowledge that the transaction involves the proceeds of some unlawful activity; and (4) knowledge that the transaction was designed in whole or in part to conceal the nature, location, source, ownership, or control of the proceeds of a specified unlawful activity. 11 Cone, 714 F.3d at 214. Just transactional like money Jacobs challenge laundering to described his convictions above, Jacobs for sole challenge to his convictions for money laundering to conceal mail fraud is entirely derivative of his challenge to his mail fraud convictions. Specifically, Jacobs argues that because he did not engage in mail fraud, he necessarily could not have been convicted of money laundering to conceal mail fraud. as explained supported by above, Jacobs substantial mail evidence. fraud However, convictions Therefore, his were argument challenging his convictions for money laundering to conceal mail fraud fails. D. Finally, both Jacobs and Rice contend that there was insufficient evidence to support their convictions for forgery. To convict an individual of possessing and uttering a forged security, in violation of 18 U.S.C. § 513(a), the Government must prove beyond a reasonable doubt that the defendant did (1) make, utter, or possess (2) a forged security of an organization (3) with intent government. to deceive another person, organization, or 18 U.S.C. § 513(a). With respect to Jacobs, when viewed in the light most favorable to the Government, substantial evidence was presented for a rational jury to conclude beyond a reasonable doubt that Jacobs possessed and uttered a forged security with the intent 12 to deceive Alliance s another bank person. account, and Rice a was bank the only signatory representative on testified that no one other than Rice was authorized to sign checks from the Alliance account. However, there was substantial evidence at trial from which a jury could conclude that Jacobs signed Rice s name to numerous without authorization. checks from Alliance s bank account A number of examples of the handwriting of Jacobs and Rice were introduced during the course of trial. In particular, Jacobs stipulated to having prepared and signed Rice s name to the check supporting Count 25, and he testified to having repeatedly signed Rice s name on Alliance checks. The check supporting Count 25 as well as various other checks were presented to the jury. The jury was entitled to consider the handwriting evidence and the testimony regarding who signed the various checks to determine whether Jacobs possessed and uttered a forged security. See Dozie, 27 F.3d at 98. Accordingly, there was substantial evidence for the jury to convict Jacobs of Counts 21 through 29. Turning next to Rice, when viewed in the light most favorable to the Government, substantial evidence was presented for a rational jury to conclude beyond a reasonable doubt that Rice possessed and uttered a forged security in support of his conviction for Count 25. Count 25 relates to a check written by Jacobs to Pastor Willie Royster on August 21, 2007 from the 13 Alliance account, on which Jacobs signed Rice s name. Pastor Royster had requested a withdrawal of the funds he had invested in Alliance Alliance. because of his dissatisfaction with The August 21, 2007 check bounced. Jacobs and At a September 2007 board meeting, Rice attempted to explain what happened, claiming that the bad check was written from the wrong Alliance account. The evidence at trial, however, revealed that Alliance only had one bank account. evidence from which a Rice s attempted explanation was jury could concluded that Rice had knowledge and involvement with the August 21, 2007 check, which the jury concluded was a forgery to support Jacobs Count 25 conviction. Moreover, because Rice was the sole authorized signer on Alliance s account, Rice received account statements, which would have demonstrated a number of instances in which Jacobs admittedly signed Rice s name to Alliance checks. Indeed, based on the evidence that Rice regularly received Alliance account statements that indicated checks had been signed by someone other that Rice, the jury was permitted to infer that Rice made Alliance checks available to Jacobs despite Rice s knowledge of Jacobs practice of signing Rice s name to checks. check was the August 21, stipulated was signed by 2007 check, Jacobs. which Therefore, One such all parties there was substantial evidence for the jury to convict Rice of Count 25. 14 II. As an alternative to his sufficiency of evidence arguments, Jacobs challenges the district court s calculation of his Sentencing Guidelines range. We review a sentence reasonableness, applying an abuse of discretion standard. v. United whether States, a 552 district U.S. court 38, 51 (2007). properly for Gall In the applied considering Sentencing Guidelines, we review the district court s factual findings for clear error and its legal conclusions de novo. v. Osborne, 514 F.3d 377, 387 (4th Cir. United States 2008) (internal quotation marks omitted). Clear error exists only if, on the entire left evidence, we are with the definite conviction that a mistake has been committed. and firm United States v. Manigan, 592 F.3d 621, 631 (4th Cir. 2010) (internal quotation marks and alterations omitted). A. Jacobs first argues that the district court erred in adopting the attributable loss corresponding Sentencing calculating Presentence at Report s more 14-level Guidelines (the than $400,000 enhancement ( U.S.S.G. ) attributable loss, PSR ) the and under § the Guidelines states, [i]n 15 a assessing United Guidelines case of a States 2B1.1(b)(1)(H). certain amounts to be credited toward the loss. to calculation provide When for The commentary involving collateral pledged or otherwise provided by the defendant, the amount to be credited toward the loss is the amount the victim has recovered at the time of sentencing from disposition of that collateral, or if the collateral has not been disposed of by that time, the fair market value of the collateral at the time of sentencing. U.S.S.G. § 2B.1.1 cmt. n.3(E)(ii). Jacobs contends that the district court should have credited, against his attributable loss, the value of the collateral that Jacobs pledged to secure the investments in Alliance. Jacobs cites executed multiple testimony promissory from trial notes showing pledging that those he assets constituting his personal net worth as collateral to cover all of the loans made from Alliance to JBS and Jacobs personally. According to Jacobs, these assets included television stations and FCC licenses owned by JBS, which had a fair market value of between two and half and three million dollars. Jacobs is wrong. As property the that is Government notes, pledged security as collateral Black s Law Dictionary (9th ed. 2009). against a refers debt. to See Neither the promissory notes nor Jacobs oral guarantees ever identified any specific property that served investments in Alliance. as security for the investor s Although Jacobs owned the television stations and the potentially valuable FCC licenses that came 16 with them, the testimony at trial revealed that one cannot grant a security interest in an FCC license. As such, it was not clearly erroneous for the district court to refuse to credit the fair market value attributable loss. of the FCC licenses against Jacobs Accordingly, the district court did not err in adopting the PSR s calculation of attributable loss at more than $400,000 and assessing a corresponding 14-level enhancement. B. Jacobs next argues that the district court erred by assessing a four-level enhancement under U.S.S.G. § 2B1.1(b)(2)(B), which provides that the offense level should be increased four levels if the offense involved 50 or more victims. The commentary to the Guidelines defines victim as any person who sustained any part of the actual loss determined under subsection (b)(1). loss in turn is U.S.S.G. § 2B1.1 cmt. n.1. defined as the reasonably pecuniary harm that resulted from the offense. cmt. n.3(A)(i). Jacobs contends that Actual foreseeable Id. § 2B1.1 because many of the investors were reimbursed for their losses prior to sentencing, the actual number of victims was less than 50. Jacobs PSR contains a chart that identifies 138 victims and lists the amount each gave to Alliance, the amount that was returned, and the amount still owed. 17 The PSR, which the district court adopted, notes that of the victims who had been repaid, most initiated by agents. Jacobs does were repaid after an investigation was J.A. 1741. not challenge this finding, but merely contends that only the 30 victims to whom Jacobs was ordered to pay restitution could be counted as victims. The commentary to U.S.S.G. § 2B1.1, however, makes clear that that is not correct. Specifically, comment 3(E) states: (E) Credits Against Loss. Loss shall be reduced by the following: (i) The money returned . . . by the defendant or other persons acting jointly with the defendant, to the victim before the offense was detected. The time of detection of the offense is the earlier of (I) the time the offense was discovered by a victim or government agency; or (II) the time the defendant knew or reasonably should have known that the offense was detected or about to be detected by a victim or government agency. U.S.S.G. § 2B1.1 cmt. n.3(E). This comment demonstrates that the amounts obtained by Alliance but repaid after Jacobs had reason to know his offense was detected or about to be detected constitute part of the actual loss. entities from whom Alliance As such, the people and obtained this money constitute victims of his offense, regardless of whether they were still owed money at the time of sentencing. Accordingly, the district court did not err in concluding that Jacobs offense involved 50 or more victims. 18 C. Jacobs next challenges the district court s inclusion of a two-level enhancement after finding that Jacobs conduct in running Alliance pursuant to constituted U.S.S.G. § sophisticated 2B1.1(b)(10). The means of commentary fraud to the Guidelines defines sophisticated means as especially complex or especially intricate offense conduct pertaining execution or concealment of the offense. n.8(B). or to the Id. § 2B1.1 cmt. Examples of sophisticated means include hiding assets transactions, entities, or corporate both, through shells, or the offshore use of fictitious financial accounts. Id. In this case, the district court found that the sophisticated means enhancement was appropriate because Alliance did not conduct any real investing or any legitimate business. Instead, it existed solely so that Jacobs could hide from the investors the transactions in which he paid his old business debts and personal expenses. In addition, Jacobs made misrepresentations to the board members so they would recruit additional investors into Alliance. Jacobs promised high returns on investments, but he initially repaid investors the promised rates using other investors money. were not clearly erroneous. 19 These findings Jacobs promised investors that he would safely invest their money, but instead he transferred it to JBS, to himself, and to Rice. All the while, Jacobs assured investors that their investments were safe and earning a return. Jacobs engaged in conduct amounting to intentional concealment so that he could improperly use investor funds. Accordingly, the district court s findings were supported by substantial evidence, and it did not err in applying the sophisticated means enhancement. D. Lastly, Jacobs challenges the four-level enhancement pursuant leader to of U.S.S.G. a § criminal 3B1.1(a) activity for being that an organizer involved five or or more participants or was otherwise extensive. The commentary to the Guidelines explains whether otherwise extensive, that, in the considered district court may a scheme is consider all persons involved during the course of the entire offense. Id. § 3B1.1 cmt. n.3. For instance, a fraud that involved only three but participants outsiders could be used the considered unknowing services extensive. Id. of many (emphasis supplied). In organized this and led case, Rice the evidence through the scheme to defraud Alliance investors. organizer or leader of criminal 20 is clear that participation Jacobs of Jacobs Therefore, Jacobs was an activity. Further, the district court s finding that the extensive was not clearly erroneous. scheme was otherwise Indeed, Jacobs created and maintained a business entity for more than three and a half years, fraudulently individuals and obtained entities, money and from relied on 138 different the unwitting participation of at least six pastors whom Jacobs made board members members, of Alliance. each church members. of Jacobs whom then was dishonest solicited with investments the board from their Considering these facts, the district court did not err in finding that Jacobs was a leader or organizer of criminal activity that was otherwise extensive. III. For the reasons stated, we affirm Jacobs conviction and sentence. We also affirm Rice s conviction. We dispense with oral argument because the facts and legal contentions are adequately presented in the materials before this court and argument would not aid the decisional process. AFFIRMED 21

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