United States v. Binday
804 F.3d 558
2d Cir.2015Background
- Defendants (insurance brokers Binday, Kergil, Resnick) ran a STOLI scheme: they recruited elderly "straw" applicants, submitted applications misrepresenting financials and intent so insurers would issue large life policies that investors would purchase; defendants collected large commissions.
- Government proved at trial ~92 fraudulent applications, 74 policies issued (over $100M face) and roughly $11.7M in commissions to defendants; defendants admitted submitting false applications but disputed criminality.
- Indictment charged conspiracy to commit mail and wire fraud, mail fraud, wire fraud; Kergil and Resnick also charged with conspiracy to obstruct justice via document destruction ( §1512 ).
- Central legal dispute: whether defendants contemplated a cognizable economic harm under the mail/wire fraud statutes — i.e., did their deceit deprive insurers of potentially valuable economic information or otherwise affect an essential element of the bargain.
- Trial evidence included testimony of insurance executives that insurers view STOLI as economically different (lapse rates, funding levels, mortality correlations, use of grace periods) and that issuing STOLI posed underwriting/reinsurance/tax and reputational risks; jury convicted on all counts and district court imposed below-Guidelines sentences (remanded only to revise restitution amount).
Issues
| Issue | Government's Argument | Defendants' Argument | Held |
|---|---|---|---|
| Whether defendants contemplated cognizable harm under mail/wire fraud | Misrepresentations deprived insurers of economically valuable information and exposed them to unbargained-for risks (lapse rates, funding, mortality correlations, grace-period use); intent can be inferred from scheme and evasion of insurer protections | Fraud only induced transactions insurers might willingly have entered (no economic difference); harms alleged were speculative/windfalls; intent to cause economic harm not shown | Convictions affirmed: executive testimony sufficed to show insurers expected economic differences and jury could infer intent to deprive insurers of information/introduce risk |
| Sufficiency of indictment / constructive amendment | Indictment alleged specific economic harms and costs; trial proof substantially corresponded though additional tangential harms were shown | Trial proof broadened theory (e.g., commissions, soft costs, tax/reinsurance impacts) beyond indictment | No constructive amendment: core criminality alleged (fraudulent applications inducing economically disadvantageous policies) remained consistent |
| Jury instruction on "cognizable harm" | Charge required economic harm and loss of right to control only when scheme would cause economic harm; government and parties jointly proposed instruction | Defendants contended instruction permitted conviction on mere "no-sale" (moral) theory or was unclear about what qualifies as economic harm — preserved challenge | Instruction adequate (and defendants had agreed to wording); any clarity objection waived; no prejudice shown |
| Obstruction (Resnick) — sufficiency and related evidentiary claims | Resnick destroyed/erased hard drive after direction to "get rid" of files; paid to have drive wiped; recorded admissions and timing made grand jury proceeding foreseeable; jury could infer conspiracy to destroy evidence | Resnick claimed he merely imaged/secured files for counsel and ultimately produced documents; argued recordings taken in violation of rules and unfair rebuttal summation comments | Conviction affirmed: evidence supported intent to destroy/conceal, nexus to foreseeable grand-jury proceeding; recordings admissible (pre-indictment informant authorized); curative instruction cured summation remark |
Key Cases Cited
- United States v. Starr, 816 F.2d 94 (2d Cir.) (fraud requires discrepancy between reasonably anticipated benefits and actual benefits)
- United States v. Wallach, 935 F.2d 445 (2d Cir.) (fraud deprives victim of potentially valuable economic information)
- United States v. Rossomando, 144 F.3d 197 (2d Cir.) (right to control property includes access to information necessary for discretionary economic decisions)
- United States v. Carlo, 507 F.3d 799 (2d Cir.) (intent to harm may be inferred from exposing victim to potential loss by depriving material information)
- United States v. Novak, 443 F.3d 150 (2d Cir.) (government must prove defendants contemplated actual harm, not that harm actually occurred)
- United States v. Shellef, 507 F.3d 82 (2d Cir.) (distinguishes between mere inducement to transact and misrepresentations going to essential element of bargain)
- United States v. Chandler, 98 F.3d 711 (2d Cir.) (loan-application fraud upheld where deceit exposed lender to unexpected risk)
- United States v. Walker, 191 F.3d 326 (2d Cir.) (fraudulent misrepresentation about quality/extent of services supports mail fraud conviction)
- United States v. Frank, 156 F.3d 332 (2d Cir.) (misrepresentations exposing customer to regulatory fines/permitting loss of permit implicated mail fraud)
- United States v. Paccione, 949 F.2d 1183 (2d Cir.) (use of mails to procure services with intent not to perform is within §1341)
- United States v. Regent Office Supply Co., 421 F.2d 1174 (2d Cir.) (deceit must affect essential element of bargain)
- United States v. Coppola, 671 F.3d 220 (2d Cir.) (sentencing loss estimate need only be a reasonable estimate by preponderance)