USCA1 Opinion
United States Court of Appeals
For the First Circuit
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No. 95-2102
UNITED STATES,
Appellee,
v.
RICHARD D. MANGONE,
Defendant, Appellant.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
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Before
Torruella, Chief Judge,
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Bownes, Senior Circuit Judge,
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and Stahl, Circuit Judge.
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Bruce Green for appellant.
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Paul G. Levenson, Assistant United States Attorney, with whom
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Donald K. Stern, United States Attorney, and Victor A. Wild, Assistant
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United States Attorney, were on brief for appellee.
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January 28, 1997
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BOWNES, Senior Circuit Judge. Defendant Richard D.
BOWNES, Senior Circuit Judge.
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Mangone was convicted after a lengthy jury trial on counts of
conspiracy, bank fraud, unlawful receipt of monies by a
credit union officer, and money laundering. He appeals both
his conviction and the district court's decision to depart
upward from the applicable Sentencing Guidelines range.
I
I
Facts
Facts
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In order to understand the issues properly, a
thorough recitation of the scope of defendant's criminal
conduct is required. We relate the facts in the light most
favorable to the verdict. See United States v. Wihbey, 75
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F.3d 761, 764 (1st Cir. 1996). Between December 1985 and
March 1991, defendant conspired with James Smith, Robert
Cohen, and Ambrose Devaney to defraud two separate lending
institutions, the Barnstable Community Federal Credit Union
("BCCU") and the Digital Employees Federal Credit Union
("Digital"). Defendant, president of Digital and a founder
of BCCU, and Smith, a real estate developer and a founder of
BCCU, were the primary organizers of the fraud. Robert Cohen
was general counsel to both credit unions. Ambrose Devaney
was a real estate developer on Cape Cod. This court's
affirmance of the convictions and sentences of Smith, Cohen
and Devaney is found at United States v. Smith, 46 F.3d 1223
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(1st Cir.), cert. denied, 116 S. Ct. 176 (1995).
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Defendant and Smith used their control over the two
credit unions to obtain tens of millions of dollars in loans
for their own speculative real estate ventures. The loans
were used in part to finance the purchase of commercial real
estate on Cape Cod, usually motel properties or raw land for
residential subdivisions. The loans were, in many instances,
funded in amounts far in excess of the purchase price of the
property, with much of the excess going directly into the
pockets of defendant, Smith, and Devaney. In order to avoid
the credit union's policies restricting "insider" loans as
well as policies limiting maximum borrowing by an individual,
the conspirators formed over a dozen nominee trusts to create
the fiction that the loans were going to many different
borrowers. As president of Digital, which had experienced
explosive growth since its founding in 1980, defendant
enjoyed the confidence of that credit union's board of
directors and staff. Defendant was therefore able to induce
Digital to allocate approximately $20,000,000 for
"investment" in participation loans with BCCU, without
disclosing the fact that defendant himself was one of the
ultimate borrowers of those funds. All of the participation
loans were made to trusts owned by defendant and Smith (and
in most cases Devaney). In each instance, the participation
loans were funded in amounts far in excess of the actual
purchase price of the commercial property. These excess
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funds, known as "pie," were siphoned off and diverted to
accounts controlled by defendant or Smith for further
distribution. The amount of "pie" varied but was generally
between $75,000 and $200,000 per partner per loan.
For all of the participation loans and for many
additional loans, defendant and his co-conspirators concealed
their ownership interests by placing in BCCU's and Digital's
files phony certificates of beneficial interest, falsely
naming certain individuals as beneficiaries of the trusts.
In order to obtain loans well in excess of the purchase price
of the property, defendant and Smith forged and altered
purchase and sale agreements, often inflating prices by over
one million dollars. For most of the participation loans,
defendant, Smith, and Lynn Vasapolle, an unindicted co-
conspirator, prepared fake financial statements to create the
false impression that the putative borrowers (the "trustees")
were wealthy individuals capable of repaying the loans being
extended.
Most of the participation loans were initially
closed between December 1985 and October 1988, and were made
with "interest only" notes for relatively short terms (1-2
years), with a balloon payment of the full principal due upon
expiration. When they were unable to find legitimate buyers
to whom they could sell the properties at a profit sufficient
to cover both the original purchase price and the excess
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"pie" they had received, the conspirators began to pyramid
their loans.
Beginning in 1986, as loans came due on subdivision
properties, Cohen would draw up papers "selling" a portion of
the original subdivision to a newly created trust. Defendant
and Smith would then cause BCCU to make a loan to the new
trust to finance the purchase. The new loan proceeds would
then be used to pay off the proportionate share of the prior
loan. Purchase "prices" were again artificially inflated so
as to provide cash which was used to cover interest payments
on the new loans and to help with debt service on the
existing loans. By March 1991, when BCCU was seized by the
National Credit Union Administration, the outstanding balance
of the Mangone-Smith-Devaney loans amounted to between forty
and sixty million dollars.
On September 12, 1992, defendant, Smith, Cohen, and
Devaney were indicted for conspiracy (18 U.S.C. 371) to
commit bank fraud (18 U.S.C. 1344); unlawful receipt of
monies by a credit union officer (18 U.S.C. 1006); and
money laundering (18 U.S.C. 1957). The case was tried on a
redacted indictment that included a conspiracy count, seven
bank fraud counts, seven parallel unlawful receipt counts
(which concerned defendant alone) and the money laundering
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charges. Defendant was convicted on all counts.1 Defendant
fled prior to sentencing and remained at large for eighteen
months before he surrendered. On September 12, 1995,
defendant was sentenced to twenty-four years of incarceration
after the district court departed upward by two years from
the maximum sentence under the Guidelines.
II
II
The Bruton Error
The Bruton Error
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Defendant appeals his conviction on the basis of
alleged error under Bruton v. United States, 391 U.S. 123
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(1968). This issue has already been decided against
defendant's co-conspirator Smith, who asserted a factually
identical claim of Bruton error in his appeal, which we found
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to have been harmless error. Smith, 46 F.3d at 1229-30.
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Although we could dispose of defendant's claim on the ground
of stare decisis, we provide a brief analysis.
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The Supreme Court held in Bruton that, because of
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the substantial risk that the jury, despite instructions to
the contrary, will look to a codefendant's incriminating
extrajudicial statement in determining the defendant's guilt,
admission of a codefendant's statement in a joint trial
violates the defendant's right of cross-examination under the
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1. Smith was also convicted on all counts. Cohen was
convicted on all counts except for four money laundering
charges. Devaney was convicted of conspiracy, three counts
of bank fraud and one count of money laundering. Smith, 46
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F.3d at 1227.
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Confrontation Clause of the Sixth Amendment. Bruton, 391
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U.S. at 126. The evidentiary basis for the Bruton claim is
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as follows.
On the last day of trial testimony, co-defendant
Cohen called to the stand Professor Richard Huber, an
authority on the professional responsibilities of attorneys.
Testifying under the district court's limiting instruction
that the testimony was relevant as to Cohen only, and had
nothing to do with any of Cohen's co-defendants, Professor
Huber reiterated the events of April 4, 1991, when Cohen met
with him to obtain advice concerning his representation of
BCCU, which by that time was in the hands of federal
regulators. Huber testified that Cohen explained to him that
Cohen's clients, "a former officer of the bank, a former
director of the bank, and a bank manager came in and spoke to
[Cohen] . . . concerning activities that involved them and
their work at the bank." Smith, 46 F.3d at 1228. According
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to Huber, Cohen stated that "certain documents had been
changed, the information had been changed, figures had been
changed, data had been changed, [and] that this had been done
after preparation by Mr. Cohen and after they had been
presumptively completed." Id.
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Like Smith before him, defendant asserts that
Huber's testimony constitutes reversible Bruton error because
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it "expressly implicate[s] the defendant, leaving no doubt
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that it would prove powerfully incriminating." Id. (internal
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quotation marks and citations omitted)(alteration in
original). In Smith, we assumed without deciding that the
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admission of Huber's testimony constituted Bruton error, but
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held that any such error was harmless beyond a reasonable
doubt. 46 F.3d at 1229.
Relying on Chapman v. California, 386 U.S. 18
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(1967), and related cases, defendant argues strenuously that
the error was not harmless. We disagree. We remain
convinced that any Bruton error that may have occurred below2
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was harmless for the reasons stated in Smith:
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The jury convicted all the defendants on
the conspiracy count, and Cohen on most
of the substantive counts. Even if the
jury threw the curative instructions to
the wind and considered the stricken
testimony as evidence against [Mangone],3
the scenario which implicates Bruton, it
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could not have believed Cohen's claim
that the unnamed clients confessed to him
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at the close of the conspiracy. No one
confesses to a partner in crime.
Admittedly, Cohen's statement might
tend to incriminate [Mangone] and Devaney
by showing that the coconspirators met to
discuss damage control. In this sense,
however, the statement falls far outside
the pale of the "powerfully
incriminating" evidence that produces
Bruton errors. Vasapolle had already
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testified in detail to the
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2. As we did in Smith, we "assume without deciding that the
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district court correctly found that Bruton error had
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occurred." Smith, 46 F.3d at 1229.
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3. The name "Mangone" has been substituted for "Smith."
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coconspirators' meetings in the wake of
the BCCU takeover. Thus, once Cohen's
statement is considered as something
other than an account of the
codefendants' confessions, it becomes
merely cumulative of the government's
case and could not have produced Bruton
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error.
The right of confrontation ensures
that a criminal defendant can cross-
examine his or her accusers. Had Cohen
testified to the confession himself,
[Mangone's] cross-examination of Cohen
would have sought to show that no
confession ever occurred. The verdicts
suggest that the jury, if it considered
this evidence, found just that. The
jury, even if it disregarded the limiting
instructions, plainly did not believe
Cohen's claim that his codefendants had
confessed to him. It is clear,
therefore, that any Bruton error was
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harmless beyond a reasonable doubt.
46 F.3d at 1229-30 (footnote and citations omitted). Because
there is no difference between defendant's claim of Bruton
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error and the Bruton error asserted by Smith in his appeal,
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we follow the holding of Smith and affirm defendant's
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c o n v i c t i o n .
III
III
The Sentencing Appeal
The Sentencing Appeal
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At sentencing, the district court departed upward
by two years from the maximum sentence allowed under the
Sentencing Guidelines. Defendant appeals this departure on
two grounds: (1) that the district court failed to provide
him with notice of its planned departure, as required under
Federal Rule of Criminal Procedure 32, as interpreted in
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Burns v. United States, 501 U.S. 129 (1991); and (2) that the
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upward departure was impermissible as a matter of law. We
begin our analysis with a recitation of the district court's
procedure at sentencing.
Indicating that it was following its "usual
procedure," the district court stated that it would "go
through mathematically the requirements of the Sentencing
Guidelines, and if anyone, government or defense, disagrees
with the numbers as I state them . . . we will then discuss
and resolve the differences right at that time." After
having verified that the defendant had read and understood
the Presentence Report (PSR), the district court proceeded to
calculate the applicable Guidelines sentence, assisted
throughout by both the government and defense counsel. The
district court scrupulously determined the applicability of
each guideline and made certain that both government and
defense agreed on the accuracy of the court's calculations.
The court then turned to the question of departure
from the Guidelines, inviting argument from both government
and defense. The government urged an upward departure of two
years on the basis of defendant's eighteen-month flight from
justice. Defense counsel argued against departing upward on
the basis of flight, suggesting that modest credit should be
given to defendant for surrendering, and that consideration
should be given to defendant's age in weighing departure
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upward from an already lengthy sentence. The district court
then provided defendant with an opportunity to address the
court, during which defendant expressed remorse for his
actions. The district court then announced the sentence:
[T]his court sentences you to a total of
24 years in the custody of the United
States Attorney General . . . .
The total sentence of 24 years
exceeds the maximum on the various counts
of which you stand convicted. And,
therefore, it's appropriate to explain
the manner in which the sentence will be
calculated and the counts on which it
will be calculated.
. . . .
I depart upward not on the ground
that the government has adverted to; I do
not punish you for a crime, though you
admit it here, for which you have never
been indicted, and never been brought
before a jury and never had the process
of law. I depart upward solely because,
in my judgment, having presided over this
case, the egregiousness, evilness of your
conduct, on each of the criteria
considered by the Sentencing Guidelines
taken in their entirety, takes you out of
the heartland of the guidelines.
I adopt the argument that, in
effect, you max out under the guidelines
at a sentence that undervalues the actual
criminality of your conduct if it is an
appropriate goal of the criminal justice
system to punish.
. . . .
Mr. Mangone, you've ruined people's
lives; lots of lives, people you don't
even know. Being sorry to these various
financial institutions isn't the half of
it. That's the sentence of the Court.
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At the same time I'm not insensitive to
the Draconian nature of this sentence. I
believe it's appropriate in the
circumstances and I arrive at it only
after most careful reflection. That's
the sentence of the Court.
Notice
Notice
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The PSR contains no information which could be
construed to provide notice to the defendant that the court
was contemplating an upward departure based upon this
particular ground. In fact, when the district court asked
the government about the possibility that the Guidelines
sentence undervalued defendant's criminality, the government
expressly stated that "the guidelines adequately address the
enormity of the offense here."
In Burns the precise question was whether Fed. R.
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Crim. P. 32(a)(1), now 32(c)(1), required the sentencing
court to give notice to the parties of its intent to make sua
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sponte departures from the Guidelines. Subdivision (c)(1) of
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Rule 32 does not contain a specific notice provision but
requires the district court to afford the parties "'an
opportunity to comment upon . . . matters relating to the
appropriate sentence' at the sentencing hearing." Burns, 501
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U.S. at 132. The Court observed, "In our view, it makes no
sense to impute to Congress an intent that a defendant have
the right to comment on the appropriateness of a sua sponte
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departure but not the right to be notified that the court is
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contemplating such a ruling." Id. at 135-36. The Court held
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that
before a district court can depart upward
on a ground not identified as a ground
for upward departure either in the
presentence report or in a prehearing
submission by the Government, Rule 32
requires that the district court give the
parties reasonable notice that it is
contemplating such a ruling. This notice
must specifically identify the ground on
which the district court is contemplating
an upward departure.
Id. at 138-39 (footnote omitted). The Burns rule has been
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incorporated into an application note to 6A1.2 of the
Guidelines.
Defendant challenges the district court's departure
on the basis that he was not provided with notice of the
court's intention to depart upward. Because the defendant
failed to object to the lack of notice at the sentencing
hearing, we review the district court's actions under the
rigorous standard of "plain error" review. See United States
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v. Jones, 1 F.3d 1167, 1170 (11th Cir. 1993)(lack of Burns
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notice subject to plain error review), cert. denied, 510 U.S.
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1100 (1994); United States v. Lowenstein, 1 F.3d 452, 454
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(6th Cir. 1993)(same).
Fed. R. Crim. P. 52(b) provides: "Plain errors or
defects affecting substantial rights may be noticed although
they were not brought to the attention of the court." The
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Court in United States v. Olano, 507 U.S. 725 (1993), teaches
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that
the authority created by Rule 52(b) is
circumscribed. There must be an "error"
that is "plain" and that "affect[s]
substantial rights." Moreover, Rule
52(b) leaves the decision to correct the
forfeited error within the sound
discretion of the court of appeals, and
the court should not exercise that
discretion unless the error "'seriously
affect[s] the fairness, integrity or
public reputation of judicial
proceedings.'"
Id. at 732 (quoting United States v. Young, 470 U.S. 1, 15
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(1985)) (other citation omitted) (alteration in original).
We now proceed with our Olano analysis.
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There must, first of all, be an "error."
"Deviation from a legal rule is 'error' unless the rule has
been waived." Olano, 507 U.S. at 732-33. There can be no
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doubt that there was a deviation from a legal rule in this
case. As stated supra, Burns requires that "before a
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district court can depart upward on a ground not identified
as a ground for upward departure either in the presentence
report or in a prehearing submission by the Government, . . .
the district court [must] give the parties reasonable notice
that it is contemplating such a ruling." 501 U.S. at 138.
This rule was completely ignored.
We reject the government's contention that, because
the PSR contained a full recitation of the defendant's
criminal conduct, this put defendant on notice of the factors
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on which the court relied for the upward departure. If we
accepted the government's theory, all defendants would be on
notice as to any sua sponte departure so long as the
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departure was based on facts contained in the PSR. Under
that theory the Court's holding in Burns would become
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meaningless.
It is worth noting that the sentencing facts here
are remarkably similar to those in Burns. In Burns, at the
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conclusion of the sentencing hearing, the district court
announced that it was departing upward from the Guidelines
sentencing range, despite a statement in the PSR that
"'[t]here are no factors that would warrant departure from
the guideline sentence.'" Id. at 131 (quoting PSR). There
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was a similar statement in the PSR in this case.
The next question is whether the rule was "waived"
or "forfeited." Olano teaches that "[w]aiver is different
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from forfeiture. Whereas forfeiture is the failure to make
the timely assertion of a right, waiver is the 'intentional
relinquishment or abandonment of a known right.'" 507 U.S.
at 733 (quoting Johnson v. Zerbst, 304 U.S. 458, 464 (1938)).
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In the case at bar there was a forfeiture, the failure to
make the timely assertion of a right, but no waiver. "If a
legal rule was violated during the district court
proceedings, and if the defendant did not waive the rule,
then there has been an 'error' within the meaning of Rule
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52(b) despite the absence of a timely objection." 507 U.S.
at 733-34. We have no difficulty finding error.
Following Olano, we determine whether the error was
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"plain," which is defined as "synonymous with 'clear' or,
equivalently, 'obvious'." Id. at 734. We think the error
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here easily fits within the definition of plain error.
Our next inquiry is whether the plain error
affected the substantial rights of the defendant. Id. at
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734. We think it did. An increase of two years in time
spent behind bars cannot help but affect one of the most
precious rights an individual has, to live in freedom.
Accordingly, we find that the district court's plainly
erroneous departure affected the defendant's substantial
rights. Cf. United States v. Miranda-Santiago, 96 F.3d 517,
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531 (1st Cir. 1996) (finding a case in which "the claimed
error could well have an impact on the length of defendant's
incarceration" to present a "compelling case" for the
application of the plain error doctrine).
Our final step in the Olano analysis is to
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determine whether we should, in our discretion, order
correction of this plain error that affects substantial
rights. As Olano points out, "Rule 52(b) is permissive, not
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mandatory." 507 U.S. at 735. The standard that should guide
us in the exercise of our remedial discretion is whether the
error "'seriously affect[s] the fairness, integrity or public
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reputation of judicial proceedings.'" Id. at 736 (quoting
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United States v. Atkinson, 297 U.S. 157, 160 (1936))
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(alteration in original). We think this standard has been
met here. When a district court fails to follow a rule
established by the Supreme Court, even though such failure
was not intentional, there is bound to be an adverse effect
on the fairness, integrity, and public reputation of judicial
proceedings. Prior notice is one of the most zealously
guarded rights of criminal defendants. It is embodied in the
Due Process Clause of the Fifth Amendment. In Burns, the
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Court stated, "In this case, were we to read Rule 32 to
dispense with notice, we would then have to confront the
serious question whether notice in this setting is mandated
by the Due Process Clause." 501 U.S. at 138. The singular
importance of such notice in the criminal arena means that
disregard for it cannot help but have a denigrating effect on
the fairness, integrity, and public reputation of judicial
proceedings.
It must be noted that the district court expressly
refused to depart upward on the basis of defendant's flight
before sentencing. This was within his discretion.
For the foregoing reasons the conviction is
affirmed and the sentence of the district court is reduced by
two years, the amount of additional time imposed pursuant to
the unlawful upward departure. The total sentence of
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incarceration to be served is twenty-two years. The judgment
shall be so modified.
So Ordered.
So Ordered.
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- Concurring Opinion Follows -
- Concurring Opinion Follows -
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STAHL, Circuit Judge (concurring). I concur with
STAHL, Circuit Judge (concurring).
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my brethren that the failure to comply with the requirements
of Fed. R. Crim. P. 32(c)(1) warrants a vacatur of Mangone's
sentence. The right to prior notice embodied in that rule,
however, affords a party the opportunity to comment upon the
appropriate sentence; it does not guarantee a lesser one.
Unlike the majority, therefore, I would remand the case to
the district court for resentencing consistent with this
opinion.
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