United States v. Mark Phillips
2012 U.S. App. LEXIS 26357
| 9th Cir. | 2012Background
- Phillips, MOD Systems’ former CEO and majority shareholder, was charged with four counts of wire fraud, one count of mail fraud, and two counts of money laundering arising from a scheme to divert MOD funds for personal use.
- He used false invoices to wire MOD funds to Wallace Black and then to purchase assets, including two Breguet watches from Feel Good Watches.
- Phillips altered an invoice to disguise payments to Wallace Black, enabling wiring of $30,000 and later $60,000 from MOD funds for personal use.
- Funds were also wired to Wallace Black to facilitate a $25,000 investment in Sampa and a $1.5 million transfer to Phillips’s personal account allegedly for an AnythingBox license, later repaid in part from MOD funds.
- Board members were aware of conflicts of interest in the AnythingBox transaction; Phillips claimed board approval that was not given, leading to further investigation and his resignation.
- At trial Phillips testified in his own defense; the government’s closing argument described him as lying, and the district court later found him to have perjured himself, increasing the guidelines range for obstruction of justice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of mail fraud evidence | Phillips argues the mailings did not advance the MOD scheme. | Government contends the mailed watch/tendered funds were part of the scheme. | Mail fraud reversed; mailings not sufficiently tied to the scheme. |
| Sufficiency of money laundering evidence | Proceeds defined as profits; merger concerns invalidated counts. | Proceeds defined as gross receipts; counts supported; merger not applicable. | Counts 6 and 7 affirmed; proceeds defined as gross receipts; no merger problem. |
| Closing argument misconduct | Phillips argues government closing improperly vouched for credibility by calling him a liar. | Government justified as commenting on evidence and witness credibility. | Plain error not established; arguments within allowable scope. |
| Supervised release condition vagueness | The standard condition prohibiting frequenting places with drug activity is vague/overbroad. | Condition is understandable; mens rea required; not vague as applied. | Condition not plain error; reasonable interpretation; not vague or overbroad. |
| Forfeiture ruling on amount | District court erred by not including a jury determination on forfeiture. | Forfeiture is not a fine; no jury determination required for monetary forfeiture. | Remanded to determine amount; jury not required for monetary forfeiture; enter forfeiture for amount traceable to fraud. |
Key Cases Cited
- Maze, 414 U.S. 395 (U.S. 1973) (mailing must be closely tied to the fraud to sustain mail fraud)
- Santos, 553 U.S. 507 (U.S. 2008) (proceeds may be profits or gross receipts depending on context)
- United States v. Van Alstyne, 584 F.3d 803 (9th Cir. 2009) (proceeds meaning profits when central to scheme; merger concerns apply)
- United States v. Bush, 626 F.3d 527 (9th Cir. 2010) (applies Santos to §1957; merger considerations vary by predicate crimes)
- United States v. Moreland, 622 F.3d 1147 (9th Cir. 2010) (closing argument review; plain error standard applied)
- Libretti v. United States, 516 U.S. 29 (U.S. 1995) (no jury right for statutory forfeiture; preponderance standard acceptable)
- Newman, 659 F.3d 1235 (9th Cir. 2011) (monetary forfeiture must be proven; jury not required for money judgments)
- Fruchter v. United States, 411 F.3d 377 (2d Cir. 2005) (forfeiture not subject to Apprendi when no statutory maximum)
- United States v. Vega, 545 F.3d 743 (9th Cir. 2008) (mens rea required for vagueness challenges to supervision terms)
- United States v. Cruz, 554 F.3d 840 (9th Cir. 2009) (plain error standard for sufficiency challenges when not renewed)