United States v. John Anthony Williams

Citations: 441 F.3d 716; 2006 U.S. App. LEXIS 6906; 2006 WL 700776Docket: 05-30071

Court: Court of Appeals for the Ninth Circuit; March 21, 2006; Federal Appellate Court

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John Anthony Williams appeals his conviction for mail and wire fraud and money laundering, arguing that the government's use of an 'intangible rights' theory was improper since it allegedly does not apply to private individuals. He contends that the lack of a special verdict obscures whether the jury found 'direct' fraud or 'intangible rights' fraud. The court holds that the 'intangible rights' theory applies to private-sector fraud when the defendant has a fiduciary duty to the victim, affirming the government's charge under both theories.

Williams raises additional challenges: 

1. He claims that 18 U.S.C. 1346 is unconstitutionally vague as applied to him, arguing he could not have reasonably known it applied to private individuals.
2. He argues that Count 12, which charges him with foreign transportation of stolen money, fails because he did not personally transport the funds to Belize.
3. He asserts a violation of the Ex Post Facto Clause and due process related to his sentencing under United States v. Booker, which was decided after the jury's verdict.
4. He contests the district court's determination of facts supporting a 'vulnerable victim' sentencing enhancement.

The court responds by stating: 

1. The statute is not vague as a reasonable person would recognize the criminality of using a power of attorney to steal from a client.
2. Count 12 is valid since causing the transportation of stolen money suffices for the charge.
3. Previous rulings have settled his Booker-related arguments against him.
4. The district court did not err in determining that the victim was vulnerable due to age and circumstances.

The court affirms Williams's conviction and sentence in all respects. The background outlines Williams's profession as a financial planner and his interactions with 87-year-old victim Loyd Stubbs, who had limited education and recently lost his brother, a key financial partner.

Defendant advised Stubbs to consolidate his financial holdings, amounting to approximately $198,000, into a single account, which was subsequently transferred to Waddell & Reed. In 1999, Stubbs purchased $437,960.21 in annuities through Defendant. At Defendant's instruction, Stubbs signed a durable power of attorney naming Defendant as his agent. On that same day, without Stubbs' knowledge, Defendant opened a private mailbox in Stubbs' name and, using the power of attorney, established a joint bank account in both their names. Defendant then presented Stubbs with surrender forms for three annuities, liquidated them, and deposited the funds into the joint account, from which he later misappropriated $35,000 for personal expenses.

In August 1999, Defendant wrote two checks from the joint account to 'Cash' for $300,000 and $70,000, depositing that cash into his personal account. He additionally opened a bank account in Belize and created a shell corporation there, wire-transferring Stubbs' funds from his personal account to Belize and Baton Rouge. Defendant and his wife relocated to Belize, purchasing a condominium with Stubbs' money, and in 2000, he wire-transferred $80,000 back to his personal account in Oregon. 

Subsequently, a grand jury indicted Defendant on multiple charges, including four counts of wire fraud, three counts of mail fraud, and two counts each of money laundering. After a three-day trial, a jury convicted him on all counts except one money laundering charge. The district court sentenced him to 51 months in prison, three years of supervised release, and ordered $450,223.82 in restitution, identifying Stubbs as a 'vulnerable victim' which warranted a sentencing enhancement. Defendant is appealing the conviction, particularly regarding the 'intangible rights' theory found in 18 U.S.C. 1346, which can apply in private commercial contexts.

Section 1343 outlines the criminalization of schemes to defraud or obtain money or property through false pretenses using wire, radio, or television communications, punishable by fines or imprisonment for up to 20 years. The statute incorporates a 'direct' fraud theory focused on tangible property. Additionally, the superseding indictment referenced 18 U.S.C. 1346, which introduces an 'intangible rights' theory of fraud, addressing schemes that deprive individuals of their right to honest services. The Defendant was charged under both theories, and the jury found him guilty on all counts without specifying the basis for their verdict. The Defendant contends that the 'intangible rights' theory does not apply to private individuals and argues that without a special verdict indicating guilt under the 'direct' fraud theory, his convictions should be overturned based on the precedent set in Yates v. United States. Yates established that if a jury's verdict could be based on multiple grounds, one of which is inadequate, the conviction must be set aside, as it is unclear which ground the jury relied upon. Subsequent cases, such as Griffin v. United States, noted that Yates was unique in applying this rule to a case where one ground of conviction was not constitutionally deficient but legally insufficient due to a statute of limitations issue.

Griffin did not give the Court a chance to reassess the ruling in Yates, meaning Yates remains the prevailing legal standard. According to established case law, if a jury's general verdict may be based on an invalid legal theory, the conviction is unsustainable since jurors cannot be expected to disregard legally impermissible options. The focus now is on whether 18 U.S.C. § 1346 provides a valid basis for fraud charges, which is reviewed de novo by the court.

The "intangible rights" theory surrounding federal mail and wire fraud statutes has been contentious. Prior to 1987, the Ninth Circuit recognized two forms of fraudulent schemes under §§ 1341 and 1343: those aimed at tangible property and those targeting intangible rights. The Supreme Court's decision in McNally v. United States in 1987 restricted these statutes to protecting property rights, excluding the intangible right to good government. The defendant contends that § 1346 applies solely to public corruption, a viewpoint the court rejects.

Examining the statutory text reveals no support for a public-corruption-only interpretation, as § 1346 broadly addresses "the intangible right of honest services" without limitation. Furthermore, Congress's enactment of § 1346 was intended to reinstate the legal framework prior to McNally, which included the application of the intangible rights theory to both public officials and private individuals. Pre-McNally rulings illustrated that private citizens could also be prosecuted under these statutes for schemes that deprived others of rights such as privacy and loyalty.

Other circuits have affirmed the relevance of the intangible rights theory in cases involving private defendants. For instance, the Second Circuit upheld convictions for private lawyers who engaged in illegal payments to influence claims adjusters, defining fraudulent schemes involving private actors as those that misrepresent their loyalties to employers or other parties, thus violating their duty of loyalty through material misrepresentations or omissions.

The Sixth Circuit, in United States v. Frost, established that private individuals, such as university professors, can be charged with mail fraud for breaching a fiduciary duty, thereby depriving the affected party of the right to honest services. This ruling diverged from the earlier precedent set by United States v. Gray, which restricted the 'intangible rights' theory to public officials, a limitation that was rejected by Frost. Other circuit courts have also affirmed that the honest services theory applies to private individuals, provided there is a fiduciary relationship and evidence of economic harm resulting from the fraudulent actions. The statute, 1346, does not explicitly limit the definition of 'another,' which has led to discussions on its scope, but it is acknowledged that the theory is valid when a fiduciary relationship exists. The court emphasizes that while the intangible rights theory is often related to public corruption, similar principles apply in private employer-employee situations, where deprivation of honest services can constitute fraud. The ruling indicates that a breach of fiduciary duty must be accompanied by a scheme intended to defraud to qualify under 1341.

The Second Circuit affirmed the legal validity of charges against Defendant under 18 U.S.C. §§ 1341, 1343 (mail and wire fraud) and § 1346 (intangible right of honest services), highlighting that the principle established in pre-McNally honest-services cases applies to fiduciaries like Defendant, who owed a duty of loyalty to Stubbs. Defendant was hired as a financial advisor and estate planner, entrusted with significant financial responsibilities, including a power of attorney. Evidence showed that Defendant exploited this role to create a joint bank account with Stubbs and misappropriated approximately $400,000, transferring funds to his own accounts without Stubbs' knowledge.

The court ruled that both legal theories of prosecution were valid, allowing for a general verdict without error. It noted that a guilty verdict stands if sufficient evidence supports any of the charged acts. The court also rejected Defendant's argument that § 1346 is unconstitutionally vague, asserting that a person of average intelligence would understand that his actions constituted fraud. Defendant exploited Stubbs' trust to steal funds, thus engaging in conduct clearly prohibited by the statute. The court affirmed the convictions for mail and wire fraud.

Count 12 of the superseding indictment accused John Anthony Williams of violating 18 U.S.C. § 2314 by knowingly causing $80,000 to be transported from Belize to Oregon, with the knowledge that the funds were stolen. Williams contended that the indictment was flawed because it charged him with causing the transportation rather than the actual transport of the funds as required by the statute. However, the statute explicitly includes causing stolen funds to be transported, thus Count 12 properly stated a claim.

Additionally, Williams argued that sentencing under the principles established in *Booker*, which occurred after his conviction but before sentencing, violated the Ex Post Facto and Due Process Clauses. This argument was dismissed based on precedent from *Dupas*.

The district court enhanced Williams' sentence due to the victim, Stubbs, being classified as a 'vulnerable victim' under the advisory Sentencing Guidelines. The court determined that Stubbs, who was 87 years old, financially inexperienced, and had faced recent personal loss, met the criteria for vulnerability. The finding of vulnerability was reviewed for clear error and upheld, leading to the affirmation of Williams' sentence.