Court: Court of Appeals for the Second Circuit; August 25, 2000; Federal Appellate Court
Defendants-appellants Kalmen Stern, David Goldstein, Jacob Elbaum, and Benjamin Berger appeal their November 1999 convictions and sentences for conspiracy and related crimes, claiming various legal errors. They argue that they were wrongly convicted of a single conspiracy, asserting that the evidence indicated multiple conspiracies, which they allege caused substantial prejudice. Berger contends that his convictions should be overturned due to insufficient evidence of his involvement and claims of a constructive amendment of charges. Goldstein asserts that his withdrawal from the conspiracy in 1991 renders the charges against him time-barred. All appellants challenge the district court's rejection of their Batson claim regarding the prosecutor's exclusion of a Jewish juror. Lastly, they contest the court's decision to enhance their sentences due to misrepresentation of affiliation with an educational institution.
The appellate court affirms the district court’s decisions, concluding that: 1) there was sufficient evidence to support a finding of a single conspiracy; 2) Berger's convictions are upheld based on adequate evidence of his participation; 3) Goldstein did not legally establish his withdrawal; 4) the Batson claim was properly rejected; and 5) the sentence enhancements were justified. The original indictment charged the appellants, along with two fugitives, with conspiracy to defraud several federal agencies, leading to substantive counts for various fraud-related offenses. The trial revealed a significant scheme to defraud federal programs, particularly through obtaining illicit student financial aid and other benefits, involving key figures in the Hasidic community of New Square, New York.
Conspirators defrauded the Department of Education’s Pell Grant Program by falsely enrolling numerous individuals, particularly from New Square, in non-existent schools, primarily Toldos Yakov Yosef Seminary (TYY), which received over $11 million in Pell Grants. They fabricated academic records and misled the Accrediting Council for Continuing Education and Training (ACCET) to secure accreditation for TYY. Each appellant had a specific role: Elbaum served as Board Secretary with financial control, Stern acted as Administrator and impersonated the Registrar, Goldstein also served as Administrator and later provided false statements to investigators, and Berger was an alleged mentor facilitating payments to a fictitious employee.
Additionally, conspirators defrauded the HUD’s Section 8 housing subsidy program by failing to report income to increase subsidy eligibility. Elbaum and Stern concealed payments from Berger-controlled accounts. Benjamin Berger, as a landlord, disguised property ownership to collect rent payments fraudulently.
The group also engaged in schemes to defraud the Social Security Administration (SSA) and the Small Business Administration (SBA). They attempted to conceal income from the IRS, with Elbaum failing to file a tax return for one year and Berger concealing income through accounts in another's name. The defendants moved to dismiss charges, but the district court denied these motions, affirming that the conspiracy charge appropriately combined crimes, Goldstein's charges were not time-barred, and Berger's wire fraud allegations aligned with the indictment.
On January 25, 1999, after a two-and-a-half month trial, a jury found all appellants guilty on all counts. In November 1999, the district court sentenced them to prison terms between 30 and 78 months and ordered restitution ranging from approximately $500,000 to over $10 million. The appellants appealed, arguing that the jury received incorrect instructions regarding the conspiracy charge, that the evidence indicated multiple conspiracies rather than the single conspiracy charged, and that any variance was prejudicial.
The court upheld the convictions, concluding that the jury was properly instructed on the existence of a single conspiracy. The district court's basic charge and supplemental instruction clarified that to establish the conspiracy charged in Count 1, it was sufficient for the jury to find that two or more conspirators agreed to achieve at least one illegal objective. The instruction did not erroneously direct the jury to find the single conspiracy merely based on agreement on one objective. Despite the appellants’ claims, the supplemental instruction adequately informed the jury about the possibility of multiple conspiracies and required them to evaluate whether all conspirators participated in a collective venture directed toward a common goal. The court found no error or prejudice in the instructions provided.
The court emphasized the jury’s responsibility to consider the possibility of multiple conspiracies and clarified that a mere agreement on a single objective does not suffice for establishing a single conspiracy if there are agreements on other objectives. Jurors were instructed that if they identified multiple conspiracies, they must acquit the defendants unless they unanimously and beyond a reasonable doubt determined that at least one of those conspiracies was the single conspiracy charged in Count 1. This legal standard was affirmed despite the appellants’ arguments to the contrary.
The court clarified that acquittal is not automatic upon finding multiple conspiracies; the jury can find one of those conspiracies to be the charged conspiracy. The instructions stressed the need for a unanimous finding of the single conspiracy and individual participation from each defendant. The original and supplemental jury charges adequately communicated these points, and the district court did not err in its instructions.
The jury was deemed sufficiently informed to determine the existence of the single conspiracy charged in Count 1. The evidence was found adequate to support the jury’s verdict, with the determination of whether one or multiple conspiracies existed being a factual question for the jury. The evidence must demonstrate that the criminal enterprise aligns with the single conspiracy alleged, and that each defendant was aware of their role in the collective venture. A single conspiracy can exist despite different phases or operations as long as there is mutual dependence and assistance among participants. Specifically, in narcotics operations, shared goals and interdependence among groups indicate a single conspiracy. The evidence, viewed favorably for the government, supported the jury's finding of a single conspiracy.
The schemes collectively aimed to support the needs of New Square's community institutions and were orchestrated by a core group of leaders, including Chaim Berger and several unindicted co-conspirators. Common participants, including the appellants, were involved in these interdependent frauds, where fraudulent documents from one scheme aided others. The conspirators employed similar methods across schemes, such as creating sham organizations, submitting fraudulent documentation for public funding eligibility, opening special bank accounts to hide illicit funds, and using aliases and religious organizations to obscure income.
The appellants' attempt to liken their situation to the conspiracies in Berger v. United States and Kotteakos v. United States was unsuccessful. Those cases involved multiple conspiracies linked by common participants, while the current case demonstrated interrelated schemes through shared purpose, overlapping participants, and mutual dependency. The jury could reasonably conclude that all appellants understood the broader conspiracy's nature, despite not participating in every aspect. Significant overlap existed among members across schemes, particularly regarding fraud against the DOE and HUD.
Even if multiple conspiracies were proven, the appellants could not demonstrate substantial prejudice from this variance. The evaluation of prejudice considered whether a Pinkerton jury charge was given, the use of statements from non-conspirators, potential prejudicial spillover, and the presence of inflammatory evidence. The district court had issued a Pinkerton charge, and factors relating to spillover and inflammatory evidence did not indicate significant prejudice, as the number of defendants was limited and most were involved in major frauds against the DOE and HUD. The risk of prejudice typically escalates with more defendants and conspiracies, but that was not the case here.
The case under review resembles Berger more than Kotteakos regarding the variance between charge and proof. In Berger, the Supreme Court deemed the variance non-fatal with only two counterfeiting conspiracies and five total participants, while Kotteakos involved eight conspiracies with a larger group, resulting in found prejudice. The current case features two major schemes with considerable overlap among six indicted individuals and four defendants, suggesting a low likelihood of prejudicial spillover. The most damaging evidence pertains to the Department of Education (DOE) fraud, in which all appellants participated, making it admissible even if considered separately.
The evidence against the appellants, particularly Stern, Elbaum, and Goldstein, was robust, indicating their involvement in the DOE fraud. Berger's role was less prominent but still significant. He argues for reversing his convictions based on alleged insufficient evidence of his conspiracy involvement and a constructive amendment of the wire fraud charge. However, the review of evidence must favor the government, and the trial evidence indicated Berger's knowing participation in the DOE fraud. He was identified as a TYY "mentor," linked to fraudulent claims and financial transactions with TYY, and involved in creating deceptive representations during agency visits. Although he claims his actions could equally suggest innocence, the overall evidence supports that he knowingly participated in the fraud, albeit perhaps in a lesser capacity than other defendants.
Berger's involvement in the Department of Energy (DOE) fraud negates the need to establish a connection between his Housing and Urban Development (HUD) fraud and a larger conspiracy. While the government's evidence regarding this linkage is weaker, it is deemed sufficient for a jury to determine that Berger's HUD fraud was connected to the conspiracy, particularly due to the similar actions of other conspirators in Section 8 fraud and Berger's use of an account under Cheindel Bernat's name to receive proceeds and conceal income from the IRS.
Regarding the wire fraud charge in Count 7, Berger argues that the government's evidence at trial resulted in a constructive amendment of the charge. The indictment inaccurately stated that Berger fraudulently caused funds to be wired to the New Square Housing Authority based on false income information. The trial proved that the inflated Section 8 subsidies Berger received were from the Spring Valley Housing Authority, and his fraud concerning the New Square Housing Authority involved concealing his ownership of a house, rather than misrepresenting his income.
To establish constructive amendment, Berger must demonstrate that the trial evidence significantly altered an essential element of the charge, creating uncertainty about whether he was convicted of the grand jury’s intended offense. However, no constructive amendment occurred since the indictment allowed for flexibility in proof, and Berger was sufficiently informed of the charges against him. The indictment referenced paragraphs 82 and 83, which detailed both fraudulent activities. The government communicated its intent to prove both frauds, and the district court confirmed this during pre-trial motions. The error in the "to wit" clause did not result in Berger being tried for uncharged crimes.
Berger contends that the indictment did not contain a valid allegation of a wire transfer involving the Spring Valley Housing Authority, despite a potential conviction for wire fraud related to that entity. The court disagrees, affirming that the indictment included all essential elements of wire fraud, as established in United States v. Zagari. Any deficiencies in detailing victims or specifics were addressed elsewhere in the indictment, and all transactions proven at trial were included in the indictment.
Goldstein argues for the reversal of his convictions, claiming he withdrew from the conspiracy in 1991, making the subsequent charges time-barred by the five-year statute of limitations under 18 U.S.C. 3282. The court finds that Goldstein's resignation letter does not constitute adequate withdrawal from the conspiracy, as mere resignation does not suffice to establish withdrawal under the law. Legal precedents emphasize that withdrawal requires affirmative actions, such as reporting to authorities or communicating abandonment to co-conspirators. The burden of proving adequate withdrawal lies with the defendant, and the court reinforces that resignation alone does not equate to withdrawal, especially if the defendant continues to engage in conspiracy-related activities or benefits from it. The court aligns with the Third Circuit's principles regarding withdrawal from conspiracy, stipulating that complete severance of ties may indicate withdrawal but continued involvement or benefits negates it.
The jury properly considered Goldstein's withdrawal defense, rejecting it based on substantial evidence. Goldstein's resignation from TYY in 1991 was insufficient to demonstrate a complete withdrawal from the conspiracy, as his resignation letter furthered the conspiracy by undermining the basis for Pell Grant fraud and was sent to ACCET. Additionally, Goldstein did not inform ACCET, where he served as a Trustee, that TYY was non-existent, indicating he had not renounced the conspiracy's objectives. His lies to law enforcement in 1996, including false claims about his role and the school's operations, reinforced his connection to the conspiracy and obscured it from investigators within the indictment's relevant five-year window.
Regarding the Batson claim, the district court correctly rejected the appellants' assertion of discriminatory jury selection when the prosecutor struck a Jewish prospective juror, a rabbi. The prosecutor argued that the juror's expertise in Jewish education could unduly influence jury deliberations. While the district court found the rationale less convincing than concerns about the rabbi's fairness, it accepted the government’s non-discriminatory justification. Although the Supreme Court has not definitively addressed peremptory challenges based on religion, the appellants argued for the extension of Batson to such cases. However, the court did not need to resolve this issue, as the prosecutor's reasoning was deemed adequate regardless.
The government is required to provide an explanation for striking a juror that is not based on the juror's membership in a protected class, as established in Hernandez v. New York. In this case, the prosecutor struck a Rabbi not due to his religious background but because of his specific knowledge of Jewish educational institutions pertinent to the case, leading the district court to conclude there was no discriminatory intent.
At sentencing, the district court applied a two-level enhancement under U.S.S.G. 2F1.1(b)(4)(A) for misrepresentation of affiliation with an educational institution, asserting that the appellants misrepresented their connection to a fictitious educational organization, TYY. The court found this application of the guideline appropriate, interpreting it according to standard statutory construction principles, which dictate that words should be given their common meaning unless explicitly stated otherwise.
The appellants argued that the enhancement should only apply when exploiting private individuals' trust, not government agencies. However, the court determined that the guidelines' language does not limit the application to such scenarios, emphasizing that the nature of the misrepresentation is what matters, rather than the identity of the victim. The enhancement aims to address broader social harm caused by fraud against taxpayers.
In conclusion, the court affirmed that: 1) the appellants were rightfully convicted of conspiracy; 2) Berger's convictions were valid due to clear evidence of his involvement; 3) Goldstein did not legally demonstrate withdrawal from the conspiracy; 4) the district court appropriately rejected the Batson claim; and 5) the sentence enhancement for misrepresentation was justified. All judgments against the appellants were affirmed.
