UNITED STATES OF AMERICA, Plaintiff-Appellee, v. MIJA S. ROMER, Defendant-Appellant. UNITED STATES OF AMERICA, Plaintiff-Appellee, v. KHEM C. BATRA, Defendant-Appellant.
No. 97-4342, No. 97-4343
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
June 24, 1998
PUBLISHED. Argued: January 29, 1998. Appeals from the United States District Court for the Eastern District of Virginia, at Alexandria. Leonie M. Brinkema, District Judge. (CR-96-350-A). Before MURNAGHAN, NIEMEYER, and MOTZ, Circuit Judges.
ARGUED: John Hale Shenefield, MORGAN, LEWIS & BOCKIUS, L.L.P., Washington, D.C.; Cary Steven Greenberg, GREENBERG, BRACKEN & TRAN, P.C., Alexandria, Virginia, for Appellants. John J. Powers, III, Antitrust Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Donald C. Klawiter, MORGAN, LEWIS & BOCKIUS, L.L.P., Washington, D.C.; John M. Tran, GREENBERG, BRACKEN & TRAN, P.C., Alexandria, Virginia, for Appellants. Joel I. Klein, Assistant Attorney General, A. Douglas Melamed, Deputy Assistant Attorney General, Marion L. Jetton, Anthony V. Nanni, James T. Clancy, Kathleen M. Mahoney, Antitrust Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.
OPINION
MURNAGHAN, Circuit Judge:
Mija Romer and Khem Batra (Appellants), were tried by a jury for various offenses stemming from their involvement in a conspiracy to rig bids at real estate foreclosure auctions. Both Appellants were convicted of violating the Sherman Act,
I.
Appellants are real estate speculators who, together with others, participated in a conspiracy to limit bidding competition at certain public foreclosure auctions in Fairfax County, Virginia. The purpose of the conspiracy was to hold down the price of auctioned properties by agreeing not to bid against one another at auctions -- an activity commonly known as “bid-rigging.” During an auction, most members of the conspiracy would refrain from bidding, while one designated member would bid on and receive the property at a much-reduced
Under Virginia law, all sales of foreclosed properties must be conducted at public auctions. See
As a result of their bid-rigging activities, Appellants were indicted by a federal grand jury on September 12, 1996. The indictment charged both Appellants, inter alia, with violating the Sherman Act,
The case proceeded to a jury trial on January 21, 1997, in the United States District Court for the Eastern District of Virginia. At trial, Romer testified that she had attended and bid at private auctions on ten properties, and Batra admitted his involvement with six. The Government introduced evidence suggesting that members of the conspiracy had been concerned about having their illegal earnings detected and that they had agreed to make auction payments in cash in order to evade the Internal Revenue Service (IRS). Co-conspirator Leo Gulley testified that, following one private auction in March of 1994, members of the conspiracy, including both Appellants, had discussed the danger of creating a “paper trail” by making payments to each other with checks. Those present agreed that all payments would be made in cash. Gulley‘s testimony was confirmed by that of coconspirator Alexander Giap, who had become a government infor-
The Government also produced evidence regarding Romer‘s fraudulent effort to obtain a loan from Herbert Bank and Trust Co. in October 1993. The evidence showed that in order to obtain approval for the loan, Romer, who is a CPA, informed bank officials that her gross income for 1992 was approximately $90,000. The bank approved Romer‘s loan based on her oral statement, but requested that Romer submit a tax return to substantiate her income. In response to that request, Romer submitted a bogus IRS Form 1040, which she claimed to be her 1992 tax return and which overstated her gross income by approximately $85,000.
Appellants were convicted of violating the Sherman Act, and Romer was convicted of bank fraud and conspiracy to defraud the IRS. In determining Romer‘s sentence, the district court began with a base-offense level of 10, pursuant to U.S.S.G. § 2R1.1(a). The court then granted a 1-level enhancement, as authorized by U.S.S.G. § 2R1.1(b)(1), for submitting non-competitive bids in an antitrust conspiracy. The court also granted a 2-level enhancement for obstruction of justice, under U.S.S.G. § 3C1.1, based on the court‘s finding that Romer had intentionally withheld material information during sentencing. After grouping Romer‘s antitrust and tax conspiracy offenses, pursuant to U.S.S.G. § 3D1.2(c), and combining the result, as required by U.S.S.G. § 3D1.4, with Romer‘s bank fraud conviction, the court arrived at an offense level of 14. The court then sentenced Romer, within the applicable range, to a term of 18 months imprisonment on each count, followed by a total of 3 years supervised release, and ordered Romer to pay $27,269 in fines and restitution. This appeal followed.
II.
Appellants contend that the district court erred in denying their motion for judgment of acquittal, pursuant to Fed. R. Crim. P. 29(c), since the Government failed to demonstrate that the conspiracy‘s bid-
Section 1 of the Sherman Act provides in pertinent part that “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, . . . is hereby declared to be illegal.”
In a Sherman Act prosecution, the government bears the burden of proving beyond a reasonable doubt a connection between the defendant‘s activities and interstate commerce.1 See McLain v. Real Estate
Although the McLain standards are often described as “tests,” we explained in Foley that “[o]bviously these are not bright line, mutually exclusive tests,” and that it may be “quite possible to analyze a particular pattern of activities without express reliance upon either.” 598 F.2d at 1328; see, e.g., Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975). Therefore, although our analysis may be guided by the McLain standards, we are mindful that our goal is to answer the “more general question, whether the activities under alleged restraint have a sufficient nexus with interstate commerce.” Foley, 598 F.2d at 1329.
In the present case, Appellants argue that the Government has failed to carry its burden of establishing that their seemingly local bid-rigging activities had the required nexus with interstate commerce. In support of that contention, Appellants point out that the auctions involved Virginia real property; took place entirely within the Commonwealth of Virginia; and that the participants, including the trustee and all non-institutional bidders, were Virginia residents. In light of those facts, Appellants contend that the thrust of the conspiracy‘s activities was purely local.
We disagree. As an initial matter, we note that the narrow conception of interstate commerce reflected in the Appellants’ argument is
In light of the broad nature of our inquiry, we disagree with the Appellants’ characterization of their auction-rigging activities as purely local. The driving force behind each auction was the financial interest of an out-of-state lender, who initiated the auction to recover the balance of an outstanding debt. Although each sale of property was conducted through the conduit of a Virginia trustee, that relationship was one of form rather than substance. In reality, the trustee was a mere resident agent, appointed by the lender to conduct the auction on the lender‘s terms. Despite superficial appearances, it was the lender who initiated the foreclosure, who directed the terms of the auction, and who, at the close of each sale, received across state lines some portion of the proceeds in satisfaction of its interest in the property. Therefore, we find it inescapable that, far from being purely local events, the auctions were interstate transactions of the most fundamental sort.
Appellants’ next contention is that, even assuming the auctions were interstate in nature, the Government has failed to demonstrate, under Goldfarb, 421 U.S. at 784, that the Appellants’ participation was “integral” to or “inseparable” from the auctions. Appellants argue that the presence of non-institutional bidders, like themselves, was not necessary to the conduct of the auctions because, even in the absence of non-institutional bidders, the lender‘s own representative could bid on and receive the property at a price sufficient to cover the outstanding debt.
We find that argument unpersuasive. While it is no doubt true that the auctions could have proceeded in the absence of non-institutional bidders, Appellants were not convicted of rigging bids at hypothetical auctions they did not attend. Their convictions were for collusive
In a final attempt to escape liability under the Sherman Act, Appellants argue, in reliance on United States v. Lopez, 514 U.S. 549 (1995), that the Sherman Act exceeds Congress‘s power to regulate pursuant to the Commerce Clause, because it grants federal jurisdiction over local activities with only a de minimis or attenuated connection to interstate commerce. However, under the express language of Lopez, an act of Congress is a valid exercise of the commerce power where, as here, the act contains a “jurisdictional element which . . . ensure[s], through case-by-case inquiry, that the [activity] in question affects interstate commerce.” Id. at 561. Because we have conducted such an inquiry in the case at bar, we are confident that we have satisfied our obligations under Lopez.
In summary, we hold that when viewed in the light most favorable to the Government the evidence is sufficient to convince a jury beyond a reasonable doubt that the Appellants’ bid-rigging activities had the requisite nexus with interstate commerce. We therefore affirm the district court‘s denial of judgment of acquittal.
III.
Appellants maintain that the district court erroneously stated applicable law when it gave a supplemental jury instruction regarding the meaning of interstate commerce. The instruction included a hypothetical example in which three Virginia Volvo dealers conspired to fix the prices they charged for automobiles received from Volvo of America. The court explained that this type of agreement, “although formed in state, is going to have an impact on interstate commerce . . . [b]ecause part of the goods that are involved here are shipped from out of state . . . .” Hence, the court explained, “one of the things you have to look at in this case is the extent to which you find that there are out-of-state aspects of the real estate foreclosure process.” According to Appellants, the court‘s instruction was erroneous
We review the district court‘s jury instructions “in their entirety and in context.” United States v. Muse, 83 F.3d 672, 677 (4th Cir. 1996) (citing Cupp v. Naughten, 414 U.S. 141, 146-47 (1973)). Therefore, we consider the language of the supplemental instruction together with all other instructions given by the district court on the interstate commerce issue. In the present case, Appellants failed to object to the district court‘s supplemental instruction during trial. Pursuant to
Upon a thorough review of the record, we cannot say that the district court‘s instructions were erroneous, let alone plainly erroneous. Contrary to Appellants’ contentions, we find the court‘s choice of an automobile analogy to be appropriate. Although a piece of real estate being sold in interstate commerce does not itself pass across state lines, title certificates, advertising, financing, and other goods and services generated by the transaction pass from state to state as readily as automobiles. And the district court was careful to inform the jury that the focus of their inquiry was not the out-of-state activities themselves, but the relationship or impact of the Appellants’ conduct to those activities. We therefore find no error in the district court‘s instructions.
IV.
Appellants challenge the district court‘s refusal to grant two jury instructions pertaining to the defense‘s theory of the case. The first
It is well-settled that a district court should grant a jury instruction requested by the defense so long as the instruction has evidentiary foundation and accurately states applicable law. See United States v. Stotts, 113 F.3d 493, 496 (4th Cir. 1997) (citations omitted). Ordinarily, we review the district court‘s refusal to grant a proposed instruction for an abuse of discretion, see United States v. Russell, 971 F.2d 1098, 1107 (4th Cir. 1992), but in the present case, although Appellants requested that the proposed instructions be given, they failed to object to the district court‘s denial of those requests. Therefore, under Olano, 507 U.S. at 731-32, our review of the district court‘s rulings is limited to plain error. See United States v. Arthurs, 73 F.3d 444, 448 (1st Cir. 1996) (applying plain error analysis where defendant requested instruction but failed to object when denied); United States v. Tringali, 71 F.3d 1375, 1380 (7th Cir. 1995) (same), cert. denied sub nom. Hernandez v. United States, 117 S. Ct. 87 (1996).
In the instant case, we are not convinced that the district court‘s rejection of the proposed instructions was plain error. As the court obviously recognized, the first instruction threatened to confuse the jury‘s understanding of applicable law. Given that danger, the court‘s own instruction -- that “forming a partnership or an agreement to bid on a contract [is not] necessarily a violation of the [Sherman A]ct” -- was adequate to inform the jury of the point the defendants sought to make.
As to the second instruction, it is true that bid-rigging is typically defined as an agreement “between competitors” to submit or withhold contract offers from a third party. See United States v. Portsmouth Paving Corp., 694 F.2d 312, 325 n.18 (4th Cir. 1982) (“[C]ollusive bidding is `an agreement between competitors in a bidding contest to submit identical bids or, by preselecting the lowest bidder, to abstain from all bona fide effort to obtain the contract.‘“) (quoting 1 R. Call-
We have recently held that to establish the third prong of the Olano plain error analysis in cases of jury misinstruction, the defendant bears the burden of proving that “the error actually affected the outcome of the proceedings,” United States v. Hastings, 134 F.3d 235, 240 (4th Cir. 1998) (citations omitted), in other words, “that the jury actually convicted him based upon an erroneous understanding of the [law],” id. at 243 (citation omitted).
In the instant case, Appellants cannot meet their burden of demonstrating actual prejudice, since there was no evidence on which a properly instructed jury could have concluded that Appellants and their cohorts were anything but competitors. According to Appellants’ own testimony, members of the conspiracy agreed to hold down the price of auctioned property by not bidding against one another. There was no evidence whatsoever that the purpose of that collusion was, as Appellants have suggested, merely a “partnership” to pool resources, share research, or spread risks. Quite the contrary, all the evidence suggested that the purpose of the conspiracy was to obtain property at artificially depressed prices and to divide the savings among those competitors who refrained from bidding. In light of all this, we find no reason to believe that a properly instructed jury could have acquitted the Appellants, and we affirm their convictions accordingly.
V.
Appellants maintain that the district court erred in admitting two pieces of evidence during trial. We review the district court‘s rulings
A. Newspaper Article
The first piece of contested evidence is a Washington Post newspaper article that described a recent bid-rigging conviction in the District of Columbia. The Government introduced the article to provide background to a taped conversation that occurred on October 1, 1994, in which the conspirators referred to the article and its discussion of convictions. According to Appellants, the article was inadmissible hearsay under Rules 801 and 802 of the Federal Rules of Evidence, and, in any event, was more prejudicial than probative and should have been excluded under Rule 403.
With respect to the first contention -- that the article was inadmissible hearsay -- the district court held that the article was admissible because it was not offered to prove the truth of its contents, see Fed. R. Evid. 801(c), but rather to place in its proper context the conspirators’ taped discussion about the article. The district court cautioned the jury that the article was not offered “to prove the guilt or innocence of any of the defendants in this court or to establish that there was, in fact, a conspiracy in th[e] District [of Columbia]. It simply was introduced in the area of the reactions to the article and certain comments that may have been made about it.” In light of the independent relevance of the article and the district court‘s careful instruction to the jury regarding the limits of its use, we are confident that the article was admissible.
We also reject Appellants’ contention that the article was impermissibly inflammatory under Rule 403, which provides that otherwise relevant evidence “may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury . . . .” In the present case, although the article may have had some prejudicial impact, we cannot say that such impact substantially outweighed the article‘s probative value. Moreover, any danger of prejudice was substantially minimized by the district court‘s careful instructions to the jury that the article was being
B. Plea Agreement
The next piece of challenged evidence is the testimony of co-conspirator Alexander Giap regarding a plea agreement he reached with the Government. When called by the Government to testify at trial, Giap explained that, as a result of his involvement with the conspiracy, he had pled guilty to three felonies, including bid-rigging, which he described as participating in an “agreement not to compete at . . . public auctions.” Such was the full extent of evidence heard by the jury regarding Giap‘s plea agreement. The agreement itself was neither read to the jury nor submitted into evidence.
Although it is generally recognized that the prosecution can introduce evidence of a plea agreement during direct examination of a government witness, that freedom is not unlimited. See United States v. Henderson, 717 F.2d 135, 137 (4th Cir. 1983). Whenever the government offers evidence of a plea agreement, there is a danger that “the agreement may aid the government by indicating the witness‘s knowledge of the crime or by [conveying] . . . the unspoken message . . . `that the prosecutor knows what the truth is and is assuring its revelation.‘” Id. (quoting United States v. Roberts, 618 F.2d 530, 536 (9th Cir. 1980)). To guard against such danger, we have held that the government may elicit testimony regarding a plea agreement only if: (1) the prosecutor‘s questions do not imply that the government has special knowledge of the witness‘s veracity; (2) the trial judge instructs the jury on the caution required in evaluating the witness‘s testimony; and (3) the prosecutor‘s closing argument contains no improper use of the witness‘s promise of truthful cooperation. See id. at 138.
In the present case, the district court fully complied with the safeguards laid out in Henderson. At no point during questioning or closing argument did the Government imply special knowledge or guarantee of Giap‘s veracity, and the district court gave a cautionary instruction that, due to Giap‘s status as an informant, his testimony
VI.
Romer contends that the Government‘s evidence and arguments at trial constituted a variance from her indictment. According to Romer, although her indictment alleged bank fraud by way of submission of false documents, the Government‘s evidence at trial suggested that she also facilitated fraud by way of oral statements to bank officials.
We have previously explained that a variance occurs when “the evidence at trial establishes facts materially different from those alleged in the indictment.” United States v. Kennedy, 32 F.3d 876, 883 (4th Cir. 1994) (citations omitted). Where a variance is found to have occurred, reversal is required only if the defendant demonstrates that the error infringed his or her “substantial rights” and thereby resulted in “actual prejudice.” Id. at 883 (citations omitted). In United States v. Fletcher, 74 F.3d 49 (4th Cir.), cert. denied, 117 S. Ct. 157 (1996), we explained that prejudice may result if the variance surprises the defendant at trial and thereby hinders his or her ability to prepare a defense, or if the variance exposes the defendant to the risk of a second prosecution for the same offense, see id. at 53 (citations omitted).
In the case at bar, we are not persuaded that a variance was committed. Although Romer‘s indictment does not mention oral statements, the language of the indictment is broad and non-exclusive. It alleges that Romer “executed a scheme . . . to defraud a financial institution . . . by means of false and fraudulent pretenses, representations and promises,” and that, “[a]s part of the loan application process,” Romer submitted a false IRS Form 1040. Although the indictment mentions Romer‘s false IRS form, it does not exclude other statements or submissions that were part and parcel of the same fraudulent endeavor.
In any event, even assuming, arguendo, that a variance occurred, Romer has failed to demonstrate actual prejudice. Under
VII.
Romer claims that the district court erred in denying her motion for judgment of acquittal, pursuant to Fed. R. Crim. P. 29(c), since the evidence was insufficient to support her conviction for defrauding the IRS. As discussed previously, we review the district court‘s ruling on a motion for judgment of acquittal de novo, see United Medical, 989 F.2d at 1401-02, asking whether the evidence, when viewed in the light most favorable to the Government, is sufficient to sustain a finding of guilt beyond a reasonable doubt as to each essential element of the offense, see Jackson, 443 U.S. at 319.
Romer was convicted of conspiracy to evade the payment of federal taxes, in violation of
We disagree. With respect to the first element, the Government presented sufficient evidence, by way of tape-recorded conversations, to establish that members of the conspiracy reached an agreement to make private auction payments in cash. At one meeting, Rosen asked Romer, Batra, Giap, and Gulley, “If I‘m the successful bidder . . . [d]o I put [it] on my income tax? . . . [I]s this money being reported or
As to the third element, Romer contends that the Government‘s evidence was insufficient to prove a specific intent to defraud the IRS of tax revenues, as opposed to an intent merely to avoid detection for bid-rigging. We find that argument to be unpersuasive. Although it is well-settled that a Klein conspiracy exists only when an objective of the agreement is “to thwart the IRS‘s efforts to determine and collect income taxes,” United States v. Vogt, 910 F.2d 1184, 1202 (4th Cir. 1990) (citations omitted), the evidence here is sufficient to support a determination that such a purpose existed. We are confident that a jury, when faced with the tape-recorded conversations -- including, most notably, Romer‘s statement that “if the IRS catches us, we‘ll be dead” -- could reasonably have concluded that Romer was at least in part motivated by the desire to evade the payment of federal taxes. We therefore affirm Romer‘s conviction for tax fraud.
VIII.
Romer‘s appeal alleges five assignments of error with respect to her sentence. We have carefully considered each of those contentions, and we find that only two necessitate extended discussion. In reviewing the remaining contentions, we are required by statute to give “due regard to the opportunity of the district court to judge the credibility of the witnesses,” and must “accept the findings of fact of the district court unless they are clearly erroneous.”
A. “Non-Competitive Bids”
Romer contends that the district court erred in granting an upward enhancement in her sentence, pursuant to U.S.S.G. § 2R1.1(b)(1). That provision authorizes a one-level upward enhancement “[i]f the conduct involved participation in an agreement to submit non-competitive bids . . . .” According to Romer, that enhancement was intended to apply only to “bid-rotation” cases and was, therefore, improperly applied in the case at bar.
In support of her argument, Romer relies exclusively on the Seventh Circuit‘s decision in United States v. Heffernan, 43 F.3d 1144 (7th Cir. 1994). In that case, the defendant was a steel drum manufacturer who had conspired with other manufacturers to sell drums to customers at identical prices. See id. at 1145. The district court granted a one-level enhancement in the defendant‘s sentence, pursuant to § 2R1.1(b)(1), on the grounds that the conspiracy‘s activities constituted bid-rigging. On appeal to the Seventh Circuit, the court reversed, holding that price-fixing by way of submission of identical bids was not the sort of behavior to which § 2R1.1(b)(1) was intended to apply. See generally id. at 1146-50. In reaching that conclusion, the court determined, among other things, that § 2R1.1(b)(1) applied only to bid-rotation cases, and that the price-fixing engaged in by the conspiracy did not qualify as bid-rotation. Romer asks us to reach the same conclusions in the case at bar.
We decline to do so. For starters, we are not persuaded that § 2R1.1(b)(1) is limited to bid-rotation cases.2 The language of the guideline is broad and non-exclusive. It authorizes a one-level enhancement for all cases involving the submission of “non-competitive bids.” If the Sentencing Commission intended the enhancement to apply only to bid-rotation cases, it is reasonable to believe that the general term “non-competitive bids” would have been replaced by a more particular term, like “bid-rotation” or “comple-
In any event, even if we assume, arguendo, that § 2R1.1(b)(1) applies only to bid-rotation cases, we are not convinced that auction-rigging is excluded from that category. It was undisputed that, prior to each auction, members of the conspiracy discussed which of them would submit the lowest bid, and the others agreed to abstain from bidding or, at the very least, not to outbid the chosen bidder. Bidding of that nature is complementary in the sense that the bids submitted and withheld are designed to assist the chosen bidder in obtaining the property at the lowest possible price, with the understanding that, over time, each conspirator will receive an appropriate pay-off. That is very different from the conduct faced in Heffernan, where the manufacturers merely agreed to sell their drums for an identical price and no complementary bids were exchanged. Therefore, even assuming that § 2R1.1(b)(1) applies only to bid-rotation, we are confident that auction-rigging falls within that category. We therefore conclude that the district court was justified in granting an upward enhancement.
B. Obstruction of Justice
Romer‘s final argument is that the district court erred in granting an enhancement in her sentence for obstruction of justice, pursuant to U.S.S.G. § 3C1.1. The court granted the enhancement on the grounds that Romer had failed to provide the probation office with a complete accounting of her assets, which included various lines of credit amounting to over $36,000; the proceeds of seven properties Romer sold during 1996, which totaled more than $400,000; and the proceeds from the sale of a time-share property in Florida, which totaled more than $4,500.
Section 3C1.1 authorizes a two-level upward enhancement “[i]f the defendant willfully obstructed or attempted to obstruct or impede, the administration of justice during the investigation, prosecution, or sentencing of the instant offense . . . .” The commentary to § 3C1.1 pro-
In the case at bar, Romer maintains that the district court erred in failing to make an explicit finding of materiality with respect to the information withheld from the probation officer. We are unpersuaded. Although it is true that the district court did not make an express finding of materiality, our cases have never held that such a finding is required. Instead, it is sufficient if a finding of materiality may be implied from the court‘s statements during sentencing. See United States v. Saintil, 910 F.2d 1231, 1233 (4th Cir. 1990). Here, the district court imposed an upward enhancement after providing Romer with the opportunity to explain her failure to be forthcoming with regards to her assets. In response to Romer‘s explanation that this failure was a mere oversight, the district judge stated, “I have problems with somebody who‘s a CPA being that lax in remembering the details, especially in a context that‘s as important as a presentence investigation . . . . [I am unable] to accept your statement that you merely forgot to fully disclose all of your assets.” We believe a finding of materiality is implicit in the court‘s remarks. The court‘s statements and the context in which they were given reveal that the matter was given careful consideration and that the court believed that Romer had intentionally withheld information material to the presentence investigation.3 The upward enhancement is therefore affirmed.
In summary, we affirm the district court on all matters.
AFFIRMED