United States v. Thomas H. Hornick, Dolores Hornick, Hastings, Youket, M. Merrill Miller, Frank J. Marano and Richard T. Gow, Thomas H. Hornick, Dolores Hornick, M. Merrill Miller and Frank J. Marano

Citations: 942 F.2d 105; 68 A.F.T.R.2d (RIA) 5588; 1991 U.S. App. LEXIS 18187Docket: 1223

Court: Court of Appeals for the Second Circuit; August 7, 1991; Federal Appellate Court

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Thomas J. Hornick, Delores Hornick, and Frank J. Marano appeal convictions from the U.S. District Court for the Northern District of New York following a jury trial. Thomas Hornick was convicted of multiple offenses, including mail and wire fraud, false tax returns, obstruction of justice, and conspiracy, while Delores was found guilty of similar charges. Frank Marano faced convictions for fraud and conspiracy. The defendants, described as unscrupulous promoters, exploited investors' greed and fear by selling limited partnerships in oil well projects, falsely promising significant returns and tax advantages. They marketed these investments through various means, including direct sales and seminars, emphasizing Thomas Hornick's background as a former IRS agent. Investors were misled into believing their money would solely fund drilling efforts with minimal risk, claiming that profits would be derived from oil production and offering guarantees against losses. Ultimately, investors were defrauded out of millions when the promised returns did not materialize.

Defendants issued checks ranging from $100 to $300 to investors, labeled as pre-production payments or profit distributions to maintain investor satisfaction, but these payments were funded by other investors' contributions rather than actual profits. Over four years, they falsely claimed 37 successful drilling projects, despite minimal oil production, while never disclosing drilling costs. Investor funds were improperly pooled in single accounts without proper accounting, and one project was sold under different names. The defendants also filed fraudulent tax returns, misrepresenting deductions and leading investors to file false returns. Of the funds raised, only $1.1 million was used for drilling; the majority was funneled into personal accounts and lavish expenditures by Delores Hornick. 

The defendants raised multiple appeal issues, primarily challenging evidentiary sufficiency, jury instructions, and sentencing calculations, with most claims deemed meritless. One significant issue involved Thomas Hornick's sentencing for sending threatening communications to investors soliciting contributions for his legal defense. The court ruled that his letters constituted threats, resulting in an increased offense level under Sentencing Guidelines due to evidence of intent to carry out those threats.

Judge McAvoy adopted the presentence report's recommendation, which noted that a letter sent to investor Howard Baumel on July 14, 1988, was followed by Hornick double-selling Baumel's interest. Hornick denied the allegation, asserting the double-sale occurred in May 1987, prior to the letter. He argued that this timing negated any claim of intent to fulfill a threat not yet made. The government accepted Hornick's timeline, with witness Elmer Shaw testifying he discovered the double-sale during a May 1987 visit to Texas. The district court did not definitively determine when the double-sale occurred. If it had concluded the sale happened after the letter was sent, such a finding would be erroneous based on trial records. Conversely, if it believed the sale occurred before the letter but interpreted that as evidence of intent to carry out a threat, this legal interpretation would be reviewed de novo. 

Legal principles dictate that a person's actions cannot serve as proof of intent to carry out a threat until the threat has been made. The commentary on guideline 2A6.1 emphasizes the necessity of intent and the timing of actions related to a threat. The government argued that Baumel retained his interest despite the double-sale, suggesting Hornick's past actions indicated a willingness to carry out the threat. However, this reasoning was deemed unconvincing, as it would allow for an automatic upward adjustment based on past conduct unrelated to the threat itself. Consequently, the court concluded that any conduct showing intent to carry out a threat must occur at or after the threat is made, leading to the determination that the district court incorrectly raised Hornick's offense level to 18 under guideline 2A6.1(b)(1).

Hornick was sentenced to a total of 133 months in prison, comprised of 97 months for guideline counts and 36 months for non-guideline counts, followed by three years of supervised release. The district court mandated restitution and a special assessment. In determining the sentence, offenses were categorized into three groups: Group I for wire and mail fraud (offense level 25), Group II for conspiracy to impede the IRS (offense level 22), and Group III for sending threatening communications. The court increased the offense level for Group III from 12 to 18 due to evidence of intent to carry out a threat, applying U.S.S.G. 2A6.1(a). Additionally, the court assigned multiple count adjustments, resulting in a combined adjusted offense level of 28 rather than 27, which would have changed Hornick’s maximum sentence to 87 months—10 months less than the imposed 97 months for guideline counts. The parties concurred that remanding for resentencing was appropriate, as it is uncertain whether the district court would have imposed additional time for the non-guideline counts had the correct guidelines been applied. Consequently, Hornick's sentence is vacated, and his case is remanded for resentencing, while his conviction remains affirmed. The convictions and sentences for co-defendants Delores Hornick and Frank J. Marano are also affirmed.