United States v. Valdes-Ayala , 900 F.3d 20 ( 2018 )

United States Court of Appeals
For the First Circuit
No. 16-1002
UNITED STATES,
Appellee,
v.
VALENTÍN VALDÉS-AYALA,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Aida M. Delgado-Colón, U.S. District Judge]
Before
Howard, Chief Judge,
Thompson and Barron, Circuit Judges.
Linda A. Backiel for appellant.
Mariana E. Bauzá-Almonte, Assistant United States Attorney,
Chief, Appellate Division, with whom Rosa Emilia Rodríguez-Vélez,
United States Attorney, and Mainon A. Schwartz, Assistant United
States Attorney, were on brief, for appellee.
August 15, 2018
THOMPSON, Circuit Judge. For at least eight years
Defendant Valentín Valdés-Ayala (Valdés) exploited the desperation
of individuals who were behind on their court-ordered child support
payments. He did so by illusorily promising professional legal
assistance in exchange for approximately $1,575 and then filing
incomplete petitions in bankruptcy court to secure a stay on the
Commonwealth of Puerto Rico's collection efforts. Eventually
Valdés's scheme attracted the attention of federal law enforcement
officials which led to his trial and conviction on several fraud-
related offenses. On appeal he makes several claims of trial and
sentencing error. For the reasons discussed herein, we affirm his
convictions and the order of restitution imposed, but vacate his
sentence of incarceration and remand to the district court for
resentencing.
I. BACKGROUND
A. Setting the Scene
To understand how Valdés exploited the bankruptcy and
child support administration systems, it will help to understand
the ways in which these systems have been designed to work. We
use the testimony the jury heard at trial to paint the backdrop
against which Valdés operated his businesses. The jury trial
included testimony from a varied cast of 34 witnesses culminating
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with Valdés, himself, taking the stand.1 So a heads up to the
reader: There's a lot of factual detail to lay out before we can
get to our discussion of Valdés's arguments on appeal.
1. Child Support Collection in Puerto Rico
In Puerto Rico, the Administracion para el Sustento de
Menores ("ASUME") governs child support determinations,
modifications, collections, and distributions. When the
Commonwealth's trial court orders a non-custodial parent to pay
child support, ASUME is responsible for collecting the payment and
sending it on to the custodial parent. ASUME has several
collection tools at its disposal when a non-custodial parent misses
a scheduled payment, including retention of income tax refunds,
withholding of income, suspension of sport or professional
driver's licenses, and referrals to credit agencies. One
additional collection mechanism available to ASUME--the filing of
a contempt motion in the Commonwealth trial court--can result in
up to six months imprisonment for the delinquent parent.
For a parent in arrears wanting to put ASUME's collection
efforts on hold (thereby freezing past-due obligations), filing a
petition for Chapter 13 bankruptcy in the bankruptcy court does
the trick, at least temporarily. The reason: the filing generates
1 Because Valdés challenges the sufficiency of the evidence
to support some of his convictions, we will relay the facts of the
case in the light most compatible with the jury's verdict. See
United States v. Serunjogi, 767 F.3d 132, 139 (1st Cir. 2014).
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an immediate stay. It also kicks out an automatic notification to
ASUME, giving it the status of a creditor needing to file a proof
of claim. But notwithstanding the stay, the parent has a
continuing obligation throughout the bankruptcy proceeding to pay
the ongoing support obligations as they are due (i.e., payments
that become due after filing the bankruptcy petition). If the
parent fails to meet the recurring payment deadlines, then ASUME
can seek dismissal of the bankruptcy petitioner's case. If
dismissed, the entire child support arrears is immediately owed to
ASUME.
2. Chapter 13 Bankruptcy
A Chapter 13 petition may be filed by individuals who
have a regular source of income but need some breathing room to
reorganize and repay their debts. The bankruptcy process generates
a plan for debt reorganization and repayment. Two major benefits
favor filing: (1) the automatic stay, or freeze, on every
creditor's attempt to collect a debt owed by the debtor, and (2)
a discharge, or forgiveness, of some types of debts at the end of
the case, meaning the debtor never has to repay these debts. But
a child support debt is not one that can be forgiven (or, put in
legal lingo, is "nondischargeable") and, in fact, has priority
over the payment of other debts. So the debtor's obligation to
pay past-due child support never disappears. For a non-custodial
parent delinquent in child support payments, the automatic stay is
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oft times the primary benefit of a Chapter 13 filing. And the
power of this benefit is not to be underestimated; if the debtor
is imprisoned for contempt for failure to pay court-ordered child
support, the stay generates a get-out-of-jail-for-free order
during the pendency of the proceeding. It also triggers a hands-
off order of the debtor's earnings, thereby shielding it from
creditor reach.
A Chapter 13 petition can be prepared and filed by an
attorney, by a petition preparer,2 or directly by the debtor, and
it is supposed to include several documents. The three page
petition itself covers general information about the debtor, an
estimated number of creditors, an estimated sum of the debtor's
assets and liabilities, the identity of the actual petition
preparer, and whether the debtor has filed for bankruptcy within
the last 8 years.3 Moreover, a petition preparer (if any) must
file a certification disclosing how much the debtor paid for the
preparer's assistance.
2 A bankruptcy petition preparer is "a person, other than an
attorney for the debtor or an employee of such attorney under the
direct supervision of such attorney, who prepares for compensation
. . . a petition or any other document prepared for filing by a
debtor in a United States bankruptcy court . . . ." 11 U.S.C.
§ 110(a).
3 In addition, there are other separate forms, disclosures,
and certifications which must be completed, depending upon the
type of financial obligation involved.
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Also required at Chapter 13 filing time is a debtor's
certificate of course completion from a credit counseling service.
11 U.S.C. §§ 109(h), 521(b). A nonprofit called Credit Advisors
Foundation ("CAF") administers such a course in Puerto Rico, even
though it does not have a physical presence there. The course,
which can be done online or by phone, mandates the debtor take an
initial quiz, learn about budgeting and options for managing one's
financial affairs, create a budget using the debtor's own financial
situation, and complete a second set of quizzes. At the end of
that process, a budget report and analysis as well as a certificate
of course completion gets emailed to the debtor and the debtor's
attorney (if one is listed in the debtor's account with CAF) for
filing with the bankruptcy petition.
Attorneys can file Chapter 13 petitions and the
accompanying documents electronically, but non-attorneys in Puerto
Rico must file in person at the bankruptcy court located either in
San Juan or Ponce. This includes pro se litigants, petition
preparers, and friends or family members who file a document on
the debtor's behalf. The clerk's office must accept a bankruptcy
filing unless a court order is in place barring the individual
from doing so.
While there are several documents that make up a complete
Chapter 13 package, the automatic stay is nonetheless achieved by
submitting a "skeleton filing," consisting of the petition, the
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certificate of completion for the credit counseling course, and a
few other certifications and declarations. Once docketed, the
debtor has 14 days to turn in the remaining required documents and
schedules. If all of the other paperwork is not filed within that
time period, the bankruptcy trustee can move to dismiss the
petition. The debtor may request additional time to submit the
documents, but if the case reaches 45 days old and all of the
required documents are not filed, then the case is automatically
dismissed. Once dismissed, the protective stay thwarting all
creditors' collection efforts goes away.
As for petition preparers assisting a debtor, there are
strict rules about what the helper may and may not do. 11 U.S.C.
§ 110. The big no-no's: (1) Based only upon information provided
by the debtor can the assister fill in the blanks on the petition;
(2) no recommendation is to be given about the propriety of filing
for bankruptcy or about which code chapter should be utilized, or
about what the consequences of a bankruptcy filing might be; and,
unsurprisingly, (3) the preparer cannot take the required credit
counseling course on the debtor's behalf. The really big yes-yes:
the petition preparer must sign several parts of the petition,
attesting that he or she has adhered to the various and
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comprehensive statutory parameters for acting as a bankruptcy
petition preparer.4
After the petition is filed, the bankruptcy court sends
a summons to the debtor with a time and date for a so-called "341
meeting." Mandated by 11 U.S.C. § 341, the debtor is required to
attend this meeting to discuss the petition. Also in attendance
is the bankruptcy trustee assigned to the case, as well as any
creditors who wish to show.
Getting at holistic system concerns, bankruptcy analysts
employed by the U.S. Trustee's office supervise all case filings
in an effort to ferret out fraud in the system. The job entails
combing through bankruptcy filings, homing in on any red flags
suggesting a case should not move forward with regular case
processing. In petitions prepared and/or filed by Valdés, giant
red flags fluttered high.
3. Enter Valdés
Valdés, as we glean from his testimony, is a self-
described musician, comedian, script writer, and salesman who has,
at one time or another, studied conflict mediation, criminology,
and chaplaincy, and, most relevant here, has had personal
4The curious reader is encouraged to check out In re Briones-
Coroy, 481 B.R. 685, 692-95 (Bankr. D. Colo. 2012), for a history
and unintended consequences of 11 U.S.C. § 110, the statute
regulating the practice of non-attorney bankruptcy petition
preparers.
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experience with Puerto Rico's child support collection system,
incarceration institutions, and the bankruptcy court system. In
2006, he started the Fundacion Lucha Pro Padres Convictos Por
Pension ("the nonprofit") for the purpose "of defending the
principles and dignity of every father convicted for failure to
pay child support and release, defend, paternal feelings and
relations and promote the right to freedom of every convict." In
2009, he was incarcerated for failing to pay his own court-ordered
child support but was released after filing a pro se petition for
bankruptcy. Three years later he founded a for-profit corporation
called Tears in Prison, Inc. for the purpose of preparing
bankruptcy petitions.
According to Valdés, around 20 people per month hired
him to help them either get out of jail or avoid going to jail at
all by preparing bankruptcy petitions in exchange for around $1,575
per petition. He admitted knowing that a bankruptcy petition
preparer was not allowed to charge more than $500, so he knew not
to list his true fee on the petitions. When he received the $1,575
payment, he says he referred the case to one of seventeen attorneys5
throughout Puerto Rico who he told clients would prepare the
5 Valdés doesn't give us any information about these attorneys
and other witnesses at trial only identified two of these attorneys
by name.
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petition.6 To facilitate his bankruptcy petition preparation when
dealing with the imprisoned, Valdés obtained his clients' personal
information from family members, then brought hard copies of the
relevant documents to the jailhouse to get the incarcerated
clients' necessary signatures.
According to Valdés, after getting those signatures, he
would go to the closest Office Max store and tap into an email
account he had set up, which tied his nonprofit, the Fundacion
Lucha Pro Padres Convictos Por Pension, with CAF. The purpose of
the email hook-up was to pay for credit counseling courses for
clients and to receive each client's certificate of completion for
each course. After printing out the certificate, Valdés would
proceed directly to the courthouse to file the petition.7 His
lofty "mission," he testified, was to get non-custodial fathers
out of jail. No one could stop him; he "ha[d] an order -- my
ministry comes from another force. It is a ministry sent to me
based on what I suffered through, I have the gift of God to be the
chosen one."
6 Psychological and job placement assistance were also on his
nonprofit's service menu, but no one ever asked for psychological
intervention.
7 While the credit counseling material was available in
English and Spanish, the bankruptcy petition paperwork was only
available in English and it "wasn't his job" to translate it for
his clients (who, as we'll recount in a moment, mostly spoke and
read only Spanish).
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Twelve of Valdés's clients testified at trial about
their experiences with him; eight of whom also had a family member
tell of their respective contact with him to coordinate the
services he'd advertised on television (yes, he advertised). All
of these clients had been behind on their court-ordered child
support payments and most were in jail at the time they reached
out to Valdés. This evidence revealed a common M.O.; we highlight
three of his clients' experiences as representative of all twelve
clients who testified.
Ever Colon Figueroa ("Colon"), imprisoned for the first
time for failing to meet his child support obligations, became a
Valdés client after hearing about the nonprofit from another
inmate. Colon passed along the prison chatter to family members
and they looked Valdés up. Colon's mother contacted and met with
Valdés on behalf of her son and, based upon his promise to spring
her son from prison, coughed up $1,775 for his services. After
the meeting, Colon says he had a 20-minute visit with a female
lawyer who was there, she said, on Valdés's behalf and he signed
some papers "related to a bankruptcy," but did not take a credit
counseling course. He was released from jail the next day, and
went to the bankruptcy court on the day assigned on his summons.
The attorney Valdés had promised to send was a no-show, so Colon
was reincarcerated. Turning again to Valdés for help, Colon's
mother paid Valdés yet more money, $1,200, to spring her son from
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lock-up. After getting paid, Valdés made a visit to the jailhouse
where he huddled with Colon and two other inmates8 for about a half
an hour. Colon signed more bankruptcy paperwork and completed a
quiz by selecting answers to the multiple choice questions which
Valdés told him to choose. Valdés did not translate the papers
for Colon, who did not speak or read English. Upon Colon's second
release Valdés promised to accompany him to his bankruptcy hearing,
but Valdés never arrived. During his testimony, when asked about
the signature on the first bankruptcy petition Colon said it was
not his. Colon also pointed out that, on the second bankruptcy
petition filed in his name, in the space where the petitioner is
supposed to disclose all prior bankruptcy petitions filed in the
previous eight years, the word "none" incorrectly appears. Other
than the two releases from jail, Colon received no other services
from Valdés or the nonprofit.
Another client, Luis Serrano Aponte ("Serrano"),
contacted Valdés by phone after he saw a TV commercial for the
nonprofit, and the two arranged to meet at a Pizza Hut to discuss
how Valdés could help keep him out of jail. He understood from
their conversation that Valdés was going to lower his child support
payments by starting a Chapter 13 bankruptcy case and that a lawyer
would help him with the case, though none ever did. Serrano
8 The record is not clear whether these inmates were existing
clients or potential clients.
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testified that he did not speak or read English, and while he did
sign some papers, he did not take a credit counseling course or
any quizzes and he did not actually authorize Valdés to start a
bankruptcy case for him. Serrano eventually learned that a
bankruptcy case had been filed in his name when he received a
letter from the court through the mail, but he testified that the
signatures on the bankruptcy petition were not his. Even though
Valdés was paid in full he would not answer Serrano's calls, and
Serrano never spoke with him again.
A third client, Confesor Rohena Vila ("Rohena"), called
Valdés after his girlfriend saw the nonprofit's TV ad (advertising
works!). His experience followed the same, well-worn path as
Valdés's other clients from the initial meeting to the two-time
jailing and release. When Rohena's girlfriend reached Valdés on
the phone following Rohena's second arrest, Valdés admitted he
could have trouble with the court if he filed a third bankruptcy
petition in Rohena's name and so told her there was nothing more
he could do for them.
Eventually, the bankruptcy court noticed some common
patterns with the petitions which listed Valdés as the non-attorney
preparer. The Chapter 13s he filed were of the skeleton variety,
with only one of the required schedules attached; the one for
listing the debtor's "creditors holding unsecured property
claims." Only the "domestic support obligation" category would be
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checked off on this schedule, and only one creditor, ASUME, would
be listed. No assets or other debt would be disclosed in these
petitions.
Alejandro Oliveras Rivera, Assistant U.S. Trustee, who
testified at Valdés's trial, presided over the 341 meetings for
debtors whose petitions listed Valdés as the preparer. Some of
these debtors were no-shows at their scheduled 341 meetings, while
a few showed up with an attorney. Because none of the petitioners
submitted all of the required documents within the allowed time,
Oliveras often filed motions to dismiss. Eventually, Oliveras
sought an injunction from the bankruptcy court to prohibit Valdés
from acting as a petition preparer. Such an order preliminarily
entered on September 14, 2012 and a second order entered December
5, 2012 after the bankruptcy court found that Valdés, despite the
injunction, had continued to prepare and file bankruptcy
petitions.
Prior to the permanent injunction hearing, the
bankruptcy court compiled some data which reflected Valdés's
filing activity. Between March 6, 2012 and July 16, 2012, Valdés
prepared and filed 72 Chapter 13 petitions. By mid-September 2012,
61 of the 72 petitions had been dismissed; 8 more had pending
motions to dismiss. 66 of the 72 did not have the required
paperwork and debt reorganization plan filed, and, in 53 of the 72
cases, the debtor failed to appear at the 341 meeting.
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On January 18, 2013, Valdés was permanently enjoined
from acting as a bankruptcy petition preparer. Thereafter,
bankruptcy counter staff refused to accept any petitions Valdés
attempted to file. But Valdés wouldn't give up his heavenly
mission--at least one staff member saw Valdés escort debtors or
their family members to the counter to file a Chapter 13 petition.
He also filed petitions through an assistant and he, himself,
attempted to make filings at the bankruptcy court located in Ponce
rather than San Juan. But as luck would have it, Valdés showed up
in Ponce on a day when a San Juan staffer was working there and
recognized him.
Also after issuance of the injunction, staff analysts
continued to monitor Chapter 13 filings. According to their
testimony, what they observed was an increase in the number of
monthly pro se filings from 1 to 6-8.9 They believed the injunction
had not deterred Valdés.10
9
A bankruptcy court staff member also testified that the
total number of pro se bankruptcy petitions filed per year
increased after Valdés was enjoined. The data collected by the
court reflected that 99 pro se bankruptcy petitions were filed in
2009; 102 in 2010; 111 in 2011; 226 in 2012; 194 in 2013; and 66
in 2014. While this data reflected the total number of pro se
petitions filed and so may include a few genuine pro se
petitioners, the staff member testified that pro se voluntary
bankruptcy petition litigants were "not common," so he could infer
that the increase was due to Valdés's activities.
10
Post injunction, a Commonwealth family law judge instructed
Valdés to appear before her after a father delinquent in his child
support payments told her that Valdés had prepared and filed a
bankruptcy petition on his behalf. Under oath at this hearing
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4. Court Proceedings
In November 2013, a grand jury indicted Valdés on a
variety of offenses, including bankruptcy fraud; wire fraud;
aggravated identity theft; destruction, alteration, or
falsification of records in federal investigations and bankruptcy;
and contempt of court.11 A jury trial ensued in April 2015. At
the end of the government's case in chief, Valdés, through counsel,
moved for judgment of acquittal (making very broad arguments) and
moved again (in the same summary fashion) at the conclusion of all
of the evidence. The district court denied both motions.
Following deliberations, the jury convicted Valdés on all counts.12
At his November 2015 sentencing hearing, the district
court imposed a 134-month term of incarceration, a $402,077.22
money judgment, and a $513,200 restitution order payable to the
District of Puerto Rico Clerk of Court. Although the details of
Valdés admitted he had prepared a bankruptcy petition on behalf of
the incarcerated father despite the injunction in place against
him, but had not signed the petition as the preparer because of
the injunction.
11
When Valdés was arrested, he proclaimed to the officer that
he had been helping parents who hadn't paid their child support
get out of jail for the past eight years. If Valdés spent half a
century in prison and was released with only ten days to live, he
would continue to help these parents and hoped to provide his
services worldwide.
12
Two counts in the indictment (one for bankruptcy fraud, one
for wire fraud) were dropped before trial because this individual
passed away before trial.
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the sentencing process and hearing are important, we will hold off
on engaging in a substantive discussion of what happened until
they become relevant to our analysis.
II. DISCUSSION
The scene now set, it's time to dive into the several
claims of error Valdés raises on appeal.
 The trial evidence against him for bankruptcy fraud,
wire fraud, and aggravated identity theft was
insufficient.13
 The government effected a constructive amendment or
prejudicial variance of the bankruptcy fraud indictment
by the evidence it chose to present and by its arguments
at the end of the trial.
 The jury instructions for bankruptcy fraud and
aggravated identity theft were either wrong or
deficient.
 His sentencing went wrong in two ways: (1) his guidelines
sentencing range was calculated using the wrong version
of the Guidelines Manual, and (2) the $513,200
restitution order was improperly imposed.
We will take each argument in turn.
13Valdés does not raise any challenges to his convictions for
either destruction, alteration or falsification of records in
bankruptcy or for contempt of court.
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A. Sufficiency of Evidence
1. Bankruptcy Fraud Convictions
After the government rested and again at the close of
trial, Valdés argued--broadly and briefly--that there was
insufficient evidence to convict him of bankruptcy fraud because
his clients filed their bankruptcy petitions "according to law."
Before us, he spins his insufficiency claim in a different
direction. According to Valdés, in order to prove he devised a
scheme to defraud either child support beneficiaries or ASUME, the
government needed to present testimony from beneficiaries affected
by the scheme and also needed to submit records to show loss or
delay in payments to ASUME. Because his argument here differs
from the extremely broad and brief argument he made before the
district court, we would ordinarily find his arguments forfeited
and proceed on plain error review. The government's brief,
however, does not challenge the preservation of this sufficiency
claim, and assumes we will proceed on de novo review. Thus, we
give Valdés the benefit of the doubt and deploy the legal
principles reserved for preserved evidentiary challenges, as his
argument fails even on de novo review.
We view "all [the] evidence, credibility determinations,
and reasonable inferences therefrom in the light most favorable to
the verdict[] in order to determine whether the jury rationally
could have found that the government established each element of
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the charged offense beyond a reasonable doubt." Serunjogi, 767
F.3d at 139 (quoting United States v. Portalla, 496 F.3d 23, 26
(1st Cir. 2007)). Our review does not extend, however, to
"weigh[ing] the evidence or mak[ing] credibility judgments; these
tasks are solely within the jury's province." Id. (quoting United
States v. Hernandez, 218 F.3d 58, 64 (1st Cir. 2000)).
As we stated above, Valdés's evidentiary sufficiency
challenge to his 18 U.S.C. § 157 bankruptcy fraud convictions is
focused on the absence of evidence presented at trial to prove he
devised a scheme to defraud either ASUME or child support
beneficiaries (as specified in his indictment). Valdés points out
that the ASUME administrator's testimony showed that payments
pursuant to a court order for child support were still due on a
continuing basis despite an active bankruptcy case and that the
amount past due to ASUME was nondischargeable. Therefore, he
schemed to deprive no one of anything. Continuing on, Valdés says
the evidence demonstrated that his actual intent was to get fathers
out of jail so that they could find work and pay their child
support obligations. Countering this assertion, the government
responds that its stated trial objective was to prove that Valdés's
fraudulent misuse of the bankruptcy system delayed ASUME's efforts
to collect the child support arrears due recipients, and that "[i]t
was enough to prove that the fraudulent bankruptcy petitions
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intentionally undermined ASUME's ability to collect payments on
behalf of child support beneficiaries."
Our Circuit has yet to interpret § 157 bankruptcy fraud,
so we turn to our sister circuits, many of which have addressed
sufficiency-of-the-evidence challenges to convictions under this
statute. Codified as part of the Bankruptcy Reform Act of 1994,
Pub. L. No. 103-394, § 157 provides up to five years in prison, a
fine, or both, for those who:
[H]aving devised or intending to devise a scheme or
artifice to defraud and for the purpose of executing or
concealing such a scheme or artifice or attempting to do
so --
(1) files a petition under title 11, including a
fraudulent involuntary petition under section 303 of
such title;
(2) files a document in a proceeding under title 11; or
(3) makes a false or fraudulent representation, claim,
or promise concerning or in relation to a proceeding
under title 11, at any time before or after the filing
of the petition, or in relation to a proceeding falsely
asserted to be pending under such title[.]
This type of bankruptcy fraud targets those who use the bankruptcy
system as a way of executing or concealing a scheme originally
devised outside of the bankruptcy context instead of targeting
schemes executed within the bankruptcy system (which are covered
by § 152). United States v. Milwitt, 475 F.3d 1150, 1155 (9th
Cir. 2007).
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Our sister circuits have generally broken out the
elements required to prove bankruptcy fraud pursuant to this
statute as follows: "(1) devising a scheme to defraud, and (2)
filing a document in a bankruptcy proceeding or making [a] false
or fraudulent statement in relation to the bankruptcy proceeding
for the purpose of executing or concealing the fraudulent scheme."
United States v. Free, 839 F.3d 308, 319 (3d Cir. 2016) (quoting
United States v. Knight, 800 F.3d 491, 505 (8th Cir. 2015))
(alteration in original); see also United States v. Kurlemann, 736
F.3d 439, 452 (6th Cir. 2013); United States v. White, 737 F.3d
1121, 1131 (7th Cir. 2013). Some circuits add "specific intent to
defraud" as a third element. See United States v. Spurlin, 664
F.3d 954, 964 (5th Cir. 2011); Milwitt, 475 F.3d at 1156.
"[B]ecause direct evidence of a defendant's fraudulent intent is
typically not available, specific intent to defraud may be
established by circumstantial evidence and by inferences drawn
from examining the scheme itself . . . ." United States v.
Persfull, 660 F.3d 286, 294 (7th Cir. 2011) (quoting United States
v. Howard, 619 F.3d 723, 727 (7th Cir. 2010)). We join our sister
circuits in their approach finding the crime of bankruptcy fraud
pursuant to § 157 has been committed when (1) a defendant has the
specific intent to devise a scheme to defraud and (2) takes one of
the actions enumerated in § 157(1)-(3) "for the purpose of
executing or concealing such a scheme or artifice or attempt[s] to
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do so." 18 U.S.C. § 157. Further, like the Sixth and Seventh
Circuits, we conclude "the government need not prove that any
creditors were actually defrauded in order to establish the
elements of bankruptcy fraud . . . 'because the [f]iling itself is
the forbidden act . . . [so] [s]uccess of the scheme is not an
element of the crime.'" White, 737 F.3d at 1131-32 (quoting United
States v. DeSantis, 237 F.3d 607, 613 (6th Cir. 2001)) (some
alterations in original).
Valdés urges us to see the evidence admitted in his trial
through the same lens as that worn by the Ninth Circuit in Milwitt
when it first interpreted § 157. In that case, the defendant held
himself out as an attorney who could help individuals defend
against unlawful detainer actions filed by their landlords. 475
F.3d at 1152. He was not admitted to any bar to practice law, but
several individuals hired him, believing he was an attorney. Id.He filed papers in court on their behalf without their knowledge
and consent, including bankruptcy petitions, listing his clients
as pro se, but using his own general post office box as the address
on the filings. Id. at 1152-53. He advised his clients that they
could withhold rent from their landlords, refuse to move out after
receiving an eviction notice, and ignore any default judgments
entered against them in court. Id. at 1152, 1153.
In a split decision, the Milwitt majority reversed,
concluding there was insufficient evidence to support the
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defendant's conviction for § 157 bankruptcy fraud. Id. at 1156-
59. The majority found that the government's indictment
specifically charged the defendant with intending to defraud the
landlords, not the tenants. And because, during the trial, the
government's evidence only proved that the defendant had intended
to defraud the tenants who had retained Milwitt to defend them
against the detainer actions, it was insufficient. Valdés attempts
to analogize his case to Milwitt to emphasize a difference he
perceives between the victims he contends are alleged in the
charging indictment here and the victims he says were emphasized
in the government's case at his trial. Valdés argues his case
tracks Milwitt's because, as in Milwitt, the government didn't
present any evidence about a scheme to defraud victims identified
in the indictment, i.e., creditors (landlords/ASUME), rather it
only put on evidence of non-identified debtors (tenants/Valdés's
clients). See id. at 1158. We disagree with Valdés's assertion
that he and Milwitt are in the exact same boat.
Here's what was brought out at trial. Valdés devised a
strategy to charge, on average, $1,575 to individuals in exchange
for either getting the individual out of jail or preventing the
individual from being incarcerated for failure to pay court-
ordered child support. Valdés established both a nonprofit and a
for profit corporation as corporate fronts for advertising and
executing his scheme. He promised his clients legal representation
- 23 -
at the bankruptcy court, but most clients testified that they never
met with an attorney and often could not get in touch with Valdés
again after he got hold of their money and filed the bankruptcy
petitions. The evidence at trial also established that Valdés
filed hundreds of skeleton petitions in execution of his scheme.
The petitions in evidence show Valdés listed only $300 as his
petition-preparing fee when other evidence showed his clients
generally paid $1,575 for his services.
Moreover, the indictment (which we'll discuss in more
detail in Section B) placed Valdés on notice that there were
several categories of victims of his scheme and the government put
on evidence demonstrating how he took advantage of them all.
Between the government's witnesses and Valdés's own trial
testimony admitting to the various components of his scheme, a
rational jury could have concluded Valdés intended to defraud a
variety of groups: (1) his clients, by taking money and not
delivering all of the services promised; (2) ASUME, by filing
skeletal bankruptcy petitions which listed ASUME as the only
creditor for each debtor, knowing the petitions would trigger an
automatic stay on ASUME's efforts to collect; (3) child support
beneficiaries, by weakening ASUME's power to enforce court-ordered
child support; and (4) the bankruptcy court, by taking advantage
of this government resource to quickly fulfill the most important
service Valdés promised: release from jail. A rational jury could
- 24 -
also conclude Valdés had the specific intent to defraud because he
intended all of these actions as well as intended the results by
filing the barest possible petition to get his clients out of jail
using the automatic stay generated by filing a bankruptcy petition.
There is, therefore, ample evidence to support Valdés's
convictions for bankruptcy fraud.
2. Wire Fraud Convictions
Valdés's challenge to the sufficiency of evidence to
support his wire fraud convictions presents the same issue-
preservation situation as with his challenge to his bankruptcy
fraud convictions. Before the district court, Valdés argued
broadly that the jury couldn't convict him of wire fraud, in part
because his use of the internet to complete the credit counseling
course was authorized by his individual clients. Before us, Valdés
placed all of his chips on his bet that we would find insufficient
evidence of bankruptcy fraud, and so only argues that without
sufficient evidence to sustain his convictions for bankruptcy
fraud, there is insufficient evidence to support his convictions
for wire fraud.14 Again, the government presumes de novo review,
14 Minimally, Valdés does say in his summary of arguments
section of his brief that his "conviction must be vacated on the
wire fraud counts for failure to prove the transmission was
material to a fraud" but the argument does not get fleshed out at
all in the argument section. It's well-settled that we waive
arguments that are simply mentioned but not developed in any
meaningful way. See Echevarría v. AstraZeneca Pharmaceutical LP,
- 25 -
and again we give Valdés the benefit of the doubt and proceed to
evaluate the evidence from which a rational jury could conclude he
was guilty of wire fraud.
We can be brief with this discussion. A conviction for
wire fraud pursuant to 18 U.S.C. § 1343 is dependent on three
elements: "[1] [A] 'scheme to defraud,' [2] the accused's 'knowing
and willful participation in the scheme with the intent to
defraud,' and [3] the use of interstate or foreign 'wire
communications' to further that scheme." United States v. DiRosa,
761 F.3d 144, 150–51 (1st Cir. 2014) (quoting United States v.
Denson, 689 F.3d 21, 24 (1st Cir. 2012)). The evidence supporting
the existence of a scheme to defraud and Valdés's knowing
participation in that scheme has been laid out above. The evidence
also readily supports Valdés's use of interstate wire
communications in furtherance of his scheme. Testimony from a
representative of CAF revealed that Valdés's account included a
hotmail email address to which his clients' certificates of
completion for the required credit counseling course would be
emailed.15 The testimony revealed CAF has offices in Omaha,
Nebraska and Scottsdale, Arizona, but not in Puerto Rico.
856 F.3d 119, 139 (1st Cir. 2017); United States v. Zannino, 895
F.2d 1, 17 (1st Cir. 1990)).
15
An email address has long counted as a wire communication.
See United States v. Martin, 228 F.3d 1, 18-19 (1st Cir. 2000).
- 26 -
Moreover, none of the company's credit counselors are located in
Puerto Rico. In addition, a custodian of records for Microsoft
Corporation testified that none of the email services operated by
Microsoft (including hotmail) have servers located in Puerto Rico.
So, if someone in Puerto Rico sent an email to someone else in
Puerto Rico, then the email would have to cross state lines during
its transmission.
There is sufficient evidence from which a rational jury
could conclude Valdés used interstate wire communications to
further his scheme and therefore to support his convictions for
wire fraud. Soldiering on, we next address Valdés's effort to
vacate his convictions for aggravated identity theft on the basis
that there was insufficient evidence to support his two counts of
conviction for this crime.
3. Aggravated Identity Theft Convictions
With these convictions, we agree with the parties'
assumption that Valdés's sufficiency-of-the-evidence challenge is
properly preserved for our de novo review. Valdés's convictions
are linked specifically to two of his clients we mentioned before:
Serrano and Colon. Aggravated identity theft is committed when,
"during and in relation to" the commission of one of several
enumerated felonies (including wire fraud), one "knowingly
transfers, possesses, or uses, without lawful authority, a means
of identification of another person." 18 U.S.C. § 1028A(a)(1),
- 27 -
(c)(5). A "means of identification" includes "any name or number
that may be used, alone or in conjunction with any other
information, to identify a specific individual," including "name,
social security number, date of birth," etc. § 1028(d)(7).
Valdés argues there was insufficient evidence to convict
him of aggravated identity theft because Serrano and Colon gave
him their personal information willingly to use for the agreed-
upon purpose of filing a petition with the bankruptcy court.
According to him, he didn't attempt to impersonate either Serrano
or Colon when he used their personal information, and his use of
their information as their agent was for their benefit. Valdés
also claims the crime of identity theft is limited to situations
in which another person's identity is used for the purpose of
deceiving a third party. Because CAF knew Valdés was an
intermediary for the individuals who were registered as customers
of the credit counseling course, he asserts that he did nothing
wrong.
For its part, the government argues that whether
Valdés's clients willingly gave their personal information to him
to use is irrelevant because his use of their information to obtain
credit counseling certificates was unlawful. The government
asserts our case law requires a defendant to purport to take action
on another's behalf and that this requirement is satisfied here
- 28 -
because Valdés used his client's names and addresses in relation
to the wire fraud crimes.
In United States v. Ozuna-Cabrera, we examined whether
a means of identification obtained with the consent of the
identification's subject could still be used "without lawful
authority" in violation of § 1028A. 663 F.3d 496, 498 (1st Cir.
2011) (defendant had purchased an expired passport and social
security card from the owner and used it in his application for a
new passport). We held that, regardless of the way in which the
means of identification had been obtained--whether by theft or
with permission--if the means of identification is subsequently
used during the commission of one of several enumerated felonies
and in a way that is against the law, then the use is "without
lawful authority" and is in violation of § 1028A. Id. at 499,
501.
A few years later, we examined what it means to use the
means of identification of another. United States v. Berroa, 856
F.3d 141, 155 (1st Cir. 2017). In that case, the defendants had
obtained their medical licenses after falsifying exam result data
and then wrote prescriptions for patients. Id. at 147, 155. We
reversed their convictions for aggravated identity theft because
their use of patients' names and addresses on prescriptions was
not "use without lawful authority of the identification of another
person." Id. at 155-56. We held that to "use" the identification
- 29 -
of another person means to "attempt to pass him or herself off as
another person or purport to take some other action on another
person's behalf." Id. at 156. The defendants had neither passed
themselves off as their patients nor taken any actions on their
patients' behalf.
Reading these two cases together then, "regardless of
how the means of identification [are] actually obtained, if its
subsequent use [i.e. 'attempt[ing] to pass him or herself off as
another person or purport to take some other action on another
person's behalf,' Berroa, 856 F.3d at 156] breaks the law . . . it
is violative of § 1028A(a)(1)." Ozuna-Cabrera, 663 F.3d at 499(emphasis added); see also United States v. Morel, 885 F.3d 17, 23
(1st Cir. 2018) (holding there was sufficient evidence from which
jury could conclude one of the defendants had used the means of
identification of another without lawful authority because
government had proved that she deposited a check from the U.S.
Treasury showing the name and forged endorsement signature of
another person).
Valdés took several actions on behalf of Serrano and
Colon. Serrano testified the signature on the main bankruptcy
petition was his, but he had not understood at the time that Valdés
would be starting a bankruptcy case for him.16 Serrano also
16 Recall Serrano also testified he does not read English.
- 30 -
testified the other six debtor signatures on the exhibits,
declarations, and certifications attached to the petition were not
his, and the signature on CAF's course paperwork was not his. In
addition, Serrano did not recall taking a credit counseling course
or completing any of the quizzes or other components of the course.
Colon testified he does not read or speak English. He testified
he did not take a credit counseling course either of the two times
he was incarcerated for failure to pay child support, but that
when he was in jail for the second time he had filled in answers
to a quiz that was part of a stack of papers Valdés brought to him
in jail, with Valdés telling him which answers to choose.
Viewing the evidence in the light most favorable to the
verdict as we must, and drawing reasonable inferences therefrom,
Serunjogi, 767 F.3d at 139, a rational jury could infer Valdés
forged Serrano's signature on the various declarations,
disclosures, and certifications that are required parts of the
bankruptcy petition as well as on the credit counseling course
paperwork. A rational jury could also infer Valdés completed all
of the requirements of the credit counseling course on behalf of
Colon for the first bankruptcy petition filed and simply instructed
Colon how to answer each of the quiz questions on the second round
of the bankruptcy petition preparation. A jury could therefore
conclude Valdés used Serrano's and Colon's names and social
security numbers to complete the credit counseling courses on their
- 31 -
behalf, a step that was integral to the perpetration of Valdés's
scheme because completing the credit counseling course was a
requirement for filing their bankruptcy petitions. Coupled with
Valdés's affirmed convictions for wire fraud (one of the enumerated
felonies in § 1028A(c)), we hold there is sufficient evidence to
support Valdés's convictions for aggravated identity theft in
violation of § 1028A(a)(1). See Berroa, 856 F.3d at 156; Ozuna-
Cabrera, 663 F.3d at 501.
B. Indictment
Valdés argues (for the first time in this appeal and
echoing themes of his sufficiency challenge) that the bankruptcy
fraud theory the government argued in its closing constituted a
constructive amendment to his indictment because, at trial, the
government emphasized Valdés's perpetration of a scheme to defraud
his clients by promising legal services not rendered instead of a
scheme to defraud child support beneficiaries and ASUME, as alleged
in the indictment. Alternatively, Valdés argues that the shift in
the government's focus represents a prejudicial variance because
the government expanded its basis for conviction. He contends
that all of this resulted in the nullification of his planned
defense that his actions weren't intended to or capable of hurting
- 32 -
the child support recipients or ASUME and deprived him of the
notice of charges to which he was entitled.
The government, for its part, argues that the
prosecution offered sufficient evidence to prove that Valdés's
scheme delayed ASUME's collection efforts (and the child support
beneficiaries' ultimate receipt of the support), so there was
neither a constructive amendment of the indictment nor a
prejudicial variance and Valdés had sufficient notice of the
bankruptcy fraud charge against him.
Valdés concedes our review of his arguments related to
the indictment is for plain error. Plain error review "entails
four showings: (1) that an error occurred (2) which was clear or
obvious and which not only (3) affected the defendant's substantial
rights, but also (4) seriously impaired the fairness, integrity,
or public reputation of judicial proceedings." United States v.
George, 841 F.3d 55, 64 (1st Cir. 2016) (quoting United States v.
Duarte, 246 F.3d 56, 60 (1st Cir. 2001)).
One of the principles embodied in the Sixth Amendment is
a "guarantee of the right of an accused 'to be informed of the
nature and cause of the accusation . . . .'" United States v.
Tomasetta, 429 F.2d 978, 979 (1st Cir. 1970). Our court views the
indictment as a whole to determine whether a defendant has had
adequate notice of the charges against him. Id. (advising that
one of the considerations when determining the adequacy of a charge
- 33 -
in an indictment is "whether the indictment as a whole conveys
sufficient information to properly identify the conduct relied
upon by the grand jury in preferring [sic] the charge"). "Without
sufficient information to identify th[e] conduct which the grand
jury has deemed adequate to support an indictment, an accused is
at a material disadvantage in meeting the charge against him."
Id."[A] constructive amendment occurs when the charging
terms of an indictment are altered, either literally or in effect,
by prosecution or court after the grand jury has last passed upon
them." United States v. Taylor, 848 F.3d 476, 495 (1st Cir.),
cert. denied, 137 S. Ct. 2255 (2017) (quoting United States v.
McIvery, 806 F.3d 645, 652 (1st Cir. 2015)) (alteration in
original). "The rule against constructive amendments exists 'to
preserve the defendant's Fifth Amendment right to indictment by
grand jury, to prevent re-prosecution for the same offense in
violation of the Sixth Amendment, and to protect the defendant's
Sixth Amendment right to be informed of the charges against him.'"
Taylor, 848 F.3d at 495 (quoting United States v. Vizcarrondo–
Casanova, 763 F.3d 89, 99 (1st Cir. 2014)). "As we have previously
said, '[a] primary objective of the rule against constructive
amendment of indictments is to ensure defendants have notice of
the charges they must defend against.'" United States v.
- 34 -
Hernandez, 490 F.3d 81, 84 (1st Cir. 2007) (quoting United States
v. Dubón–Otero, 292 F.3d 1, 5 (1st Cir. 2002)).
"A variance arises when the proof at trial depicts a
scenario that differs materially from the scenario limned in the
indictment." United States v. Bucci, 525 F.3d 116, 131 (1st Cir.
2008) (quoting United States v. Cianci, 378 F.3d 71, 94 (1st Cir.
2004)). However, "when a change le[aves] the substance of the
charge unaffected, the switch d[oes] not usurp the prerogative of
the grand jury." United States v. Godfrey, 787 F.3d 72, 79 (1st
Cir. 2015) (quoting United States v. Dowdell, 595 F.3d 50, 67–68
(1st Cir. 2010)) (alterations in original). "A variance is grounds
for reversal 'if it affected the defendant's substantial rights—
i.e., the rights to have sufficient knowledge of the charge against
him in order to prepare an effective defense and avoid surprise at
trial, and to prevent a second prosecution for the same offense.'"
Godfrey, 787 F.3d at 79 (quoting United States v. Fisher, 3 F.3d
456, 463 (1st Cir. 1993)) (internal quotation marks omitted).
The bankruptcy-fraud-specific section of Valdés's
indictment alleges Valdés intended to defraud ASUME and child
support beneficiaries. The indictment's general allegations,
however, which were all incorporated by reference in the
bankruptcy-fraud-specific section of the indictment, clearly
include an allegation that Valdés defrauded his clients using the
bankruptcy court. There can be no doubt then that Valdés's
- 35 -
indictment placed him on notice that his charges were related to
his bankruptcy court scheme. See Hernandez, 490 F.3d at 84. The
indictment also clearly put Valdés on notice that the government
was focused on a few different victims: ASUME, child support
beneficiaries, his clients, and the bankruptcy court. But
importantly, as we have already said, to establish the elements of
bankruptcy fraud, the government does not need to prove that any
creditors were actually defrauded, just that Valdés committed the
forbidden act in relation to the bankruptcy petition in execution
of, or in furtherance of, his scheme. See White, 737 F.3d at 1131-
32; Free, 839 F.3d at 319; DeSantis, 237 F.3d at 613.
Consistent with the indictment allegations, there was a
lot of testimony at trial from Valdés's clients. But the
government also presented testimony from the ASUME administrator
that the bankruptcy petitions effectively froze all of their
avenues for enforcing court-ordered child support and collecting
the amounts past due. The government's closing argument summarized
all the testimony at trial, including the delay ASUME and child
support beneficiaries experienced as a result of Valdés's scheme.
The evidence at trial did not, therefore, substantively alter the
charges against Valdés in the indictment and it did not show a
materially different sequence of events than that depicted in the
indictment. As a result, there is no hint of either a constructive
- 36 -
amendment or prejudicial variance here, never mind plain error.
See Taylor, 848 F.3d at 495; Godfrey, 787 F.3d at 79. We move on.
C. Jury Instructions
Also for the first time on appeal, Valdés accuses the
trial judge of improperly instructing the jury about both
bankruptcy fraud and aggravated identity theft. The government
submitted proposed jury instructions; Valdés submitted none. With
respect to bankruptcy fraud, the government adapted its proposed
instruction from the Eighth Circuit's and Ninth Circuit's model
jury instructions. The two Circuits use almost identical
instructions defining three elements, but the Ninth Circuit adds
a fourth element which requires the defendant's action to be
material, (meaning the action "had a natural tendency to influence,
or was capable of influencing the acts of an identifiable person,
entity, or group" à la Milwitt, see 475 F.3d at 1156), whereas the
Eighth Circuit only attaches materiality to one of the many
forbidden-act options in the statute. Compare 9th Cir. Manual of
Model Criminal Jury Instructions § 8.11 with 8th Cir. Model Jury
Instructions § 6.18.157. As we'll discuss in a moment, the
district court did not use the government's proposed instruction
verbatim, and did not include materiality as an element. With
respect to aggravated identity theft, the government proposed, and
the district court used, our Circuit's pattern jury instruction
for this offense. The district court added a definition for
- 37 -
"without lawful authority," in part quoting straight from Ozuna-
Cabrera.
Valdés freely admits that trial counsel did not object
to any part of the jury instructions at any point during trial, so
he has forfeited any level of review before us other than for plain
error.17 "When applying the plain error standard in the context
of jury instructions, [this court] look[s] at the instructions as
a whole to ascertain the extent to which they adequately explain
the law without confusing or misleading the jury." United States
v. Bauzó-Santiago, 867 F.3d 13, 23 (1st Cir. 2017) (quoting United
17Federal Rule of Civil Procedure 51 requires the court
to give parties the opportunity to object to its proposed
jury instructions before closing arguments and the
instructions are delivered. Fed. R. Civ. P. 51(b)(2).
For an objection to be timely (except in circumstances
not relevant here), it must be made at this point. Fed.
R. Civ. P. 51(c)(2)(A). Failure to do so means the
objection is forfeited and reviewed for plain error
only, the idea being that the trial judge should be
afforded the opportunity to cure the alleged error and
litigants stopped "from ensuring a new trial in the event
of an adverse verdict by covertly relying on the error."
Rosa-Rivera v. Dorado Health, Inc., 787 F.3d 614, 618 (1st Cir.
2015) (quoting Booker v. Mass. Dep't of Pub. Health, 612 F.3d 34,
41, 43 (1st Cir. 2010)). As we have already said, "[r]eversal
under the plain error standard requires: (1) that an error
occurred; (2) that the error was obvious; (3) that it affected the
defendant's substantial rights; and (4) that it threatens the
fairness, integrity or public reputation of the proceedings."
United States v. Rivera-Ruperto, 852 F.3d 1, 10–11 (1st Cir. 2017)
(quoting United States v. Delgado-Marrero, 744 F.3d 167, 184 (1st
Cir. 2014)).
- 38 -
States v. Candelario-Santana, 834 F.3d 8, 27 (1st Cir. 2016))
(alterations in original) (emphasis omitted).
1. Bankruptcy Fraud
During trial, the district judge instructed the jury
that, in order to convict Valdés on the bankruptcy fraud charges,
they had to find him guilty beyond a reasonable doubt on three
elements: he had "intentionally devised or intended to devise the
scheme or plan to defraud described in the indictment," he "acted
with intent to defraud," and he "filed a petition in a Title 11
bankruptcy proceeding for the purpose of executing or attempting
to execute the scheme." The district judge also provided
definitions for "scheme," "defraud," and "intent to defraud."
Nevertheless, according to Valdés, a few pages of the jury
instructions were left out of the printed version that went into
the deliberation room with the jurors. Indeed, the version of the
jury instructions filed on the docket reflects only one of the
elements of bankruptcy fraud the trial judge recited in open court
(the intent to devise the scheme or plan to defraud element). The
rest seem to be missing. But Valdés doesn't show that the jury
was definitely missing a page while they deliberated; all we know
for sure is the docketed version of the instructions are missing
the page or pages which accurately capture the complete bankruptcy
fraud instruction.
- 39 -
Nonetheless, Valdés tries to make much of this clerical
snafu and argues the jury would have felt compelled to decide he
was guilty of each count of bankruptcy fraud based on the
instructions purportedly sent into the deliberation room only
showing one of the bankruptcy fraud elements. But the instructions
given in open court recited all of the statutory elements for
bankruptcy fraud and the verdict form had all of the same elements
for each count of bankruptcy fraud. So the jury both heard all of
the elements recited in open court and had all of the elements in
front of them as they completed the verdict form. Valdés's
argument is, therefore, a non-starter, especially because he
doesn't even attempt to show us how this clerical error amounts to
plain error.
Valdés also argues that the oral instructions were
"deficient" because the district court did not provide a definition
of "specific intent" as part of the bankruptcy fraud instruction
and omitted materiality as an element. As the government points
out, however, the district court did define the "intent to defraud"
element ("means to act willfully and deliberately with the specific
intent to deceive or cheat for the purposes of either causing some
financial loss to another or bringing about some financial gain to
one self") and this instruction clearly includes an explanation of
specific intent as well. Valdés also tries one more time to get
us to adopt the Milwitt approach we discussed earlier, asserting
- 40 -
error in the oral instruction for not instructing the jury that
the specific intent required was to defraud an identifiable victim
or class of victims of the identified fraudulent scheme. We have
already explained why he is mistaken, so Valdés certainly hasn't
shown us that the district court's omission of this element in the
instruction for bankruptcy fraud was in error.
Valdés also finds fault in the district court's omission
of materiality as an element in the charge for bankruptcy fraud,
but he doesn't tell us why or develop any argument on this point.
As a result, he hasn't shown us--as he must--how the omission of
this element was a clear error. So this contention goes nowhere
fast. In all, Valdés has not exposed any clear or obvious error
in the instructions for bankruptcy fraud. As a whole, the jury
instructions adequately explained the bankruptcy fraud charge
without confusing or misleading the jury. See Bauzó-Santiago, 867
F.3d at 23.
We move on to the instructions for aggravated identity
theft.
2. Aggravated Identity Theft
To find Valdés guilty of aggravated identity theft, the
district judge instructed the jury they had to find the government
had proven, beyond a reasonable doubt, that: (1) Valdés committed
wire fraud; (2) Valdés knowingly possessed and used, without lawful
authority, the names and social security numbers for clients
- 41 -
Serrano and Colon; (3) these names and social security numbers
actually belonged to an individual other than Valdés; and (4)
Valdés knew the names and social security numbers belonged to other
people. The district judge also provided a definition of "without
lawful authority":
The term "without lawful authority" does not require
that the means of identification be stolen or taken
without the owner's permission. Instead, 18 U.S.C.
§ 1028A reasonably proscribes the transfer, possession,
or use of another person's means of identification,
absent the right or permission to act on that person's
behalf in a way that is not contrary to the law. In
other words, regardless of how the means of
identification is actually obtained, if its subsequent
use breaks the law--specifically, during and in relation
to the commission of the crime of wire fraud--it is
violative of 18 U.S.C. § 1028A.
Valdés argues the jury was misinstructed on aggravated
identity theft because the definition of "without lawful
authority" was wrong. He seems to be arguing that because (in his
view) he served as a bona fide agent for his clients, both
obtaining and using their personal identifying information with
their permission, he actually acted with lawful authority, but the
district court's definition of "without lawful authority"
prevented the jury from seeing things his way. We disagree.
Valdés focuses too much on the way in which he obtained the
information and ignores how he subsequently used it.
Contrary to Valdés's interpretation of our discussion of
the § 1028A elements in Ozuna-Cabrera, the district judge's
- 42 -
instruction tracked the elements of the offense as defined in our
Pattern Criminal Jury Instructions for the District Courts of the
First Circuit and then provided our exact interpretation of the
phrase "without lawful authority" from our holding in Ozuna-
Cabrera. See 663 F.3d at 499. As with the instruction for
bankruptcy fraud, the instruction for aggravated identity theft as
a whole adequately explained the law and was neither confusing nor
misleading to the jury. See Bauzó-Santiago, 867 F.3d at 23. We
therefore see no error--obvious or otherwise.
D. Sentencing Issues
As promised, we will now set out the details that are
relevant to the sentencing issues Valdés raises for our
consideration. The Presentence Report ("PSR") prepared by
probation suggested the appropriate guidelines sentencing range
("GSR") pursuant to the November 1, 2014 Guidelines Manual. His
sentencing hearing was first scheduled for August 6, 2015. The
PSR set out the sentencing guidelines calculations for the
bankruptcy fraud convictions (the most serious offense in the
counts grouped together) as follows: A base offense level of 6
pursuant to U.S.S.G. § 2B1.1, with a 14-level enhancement pursuant
to U.S.S.G. § 2B1.1(b)(1)(H) for the amount of loss greater than
$400K, a 2-level enhancement pursuant to U.S.S.G. § 2B1.1(b)(10)
for the offense's use of sophisticated means, a 6-level enhancement
pursuant to U.S.S.G. § 2B1.1(b)(2)(C) for the number of victims
- 43 -
exceeding 250 and/or involving mass marketing, and a 2-level
enhancement pursuant to U.S.S.G. § 2B1.1(b)(9) for the offense
involving a misrepresentation or other fraudulent action during
the course of a bankruptcy proceeding. This resulted in a total
offense level of 30.
The PSR also requested restitution in the amount of
$513,200 to the bankruptcy court, citing both 18 U.S.C. §§ 3663and 3663A. This amount reflected the sum of the penalties as of
June 30, 2015 imposed by two bankruptcy court judges in Chapter 13
proceedings for Valdés's failure to respond to several orders to
show cause why he should not be sanctioned pursuant to 11 U.S.C.
§ 110 for violating the rules within which petition preparers must
operate as well as for violating a bankruptcy court order
prohibiting him from preparing petitions for bankruptcy court
litigants.18 While the initial penalties were imposed at a rate
of $500 per case fraudulently filed, the order was subject to late
fees at the rate of $500 per day that the total fine was not paid.
$500 per day over the course of the two-and-a-half years which
18 11 U.S.C. § 110 sets out detailed rules for bankruptcy
petition preparers as well as the multi-faceted consequences for
breaking these rules that may be imposed by the bankruptcy court.
- 44 -
elapsed between the initial imposition of the fines and the day
the PSR was filed added up to $513,200.
In Valdés's first set of objections to the PSR, he
objected to the 6-level enhancement for the number of victims
because he contends a lower enhancement was warranted because there
was only evidence of 11 victims at trial. His total offense level,
he says, should have been 26 instead of 30. He also objected to
the proposed restitution by vaguely mentioning the imposition of
an additional fine would be excessive. After the first objection
to the PSR was filed Valdés changed attorneys, and his new counsel
filed additional objections two weeks before his actual sentencing
hearing. These objections basically mirror those originally filed
by trial counsel. Regarding restitution, he argued:
[R]estitution should be employed to compensate the so-
called victims and not to enforce penalties or sanctions
or debts. As a consequence, the defendant believes that
it is unfair for him to be forced to pay what is clearly
a debt in another forum and litigated elsewhere for an
amount of $513,200 set as penalties by the Bankruptcy
Court.
At the sentencing hearing, held on November 30, 2015,
the district court grouped the bankruptcy fraud and wire fraud
counts together, tracked the PSR's exact calculations, found the
PSR "adequately applied the guideline computations," and concluded
the resulting guidelines range was from 97 to 121 months. After
adding the 24-month mandatory minimum for the aggravated identity
theft convictions and considering the applicable sentences for the
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destruction, alteration, or falsification of records in bankruptcy
counts and the contempt of court count, the district court imposed
a 134-month term of imprisonment for all of the counts of
conviction. The district court also imposed an order of
restitution in the amount of $513,200 to the Clerk of Court for
the District of Puerto Rico.
1. Guidelines Sentencing Range
Valdés now asserts the district judge used the wrong
version of the United States Sentencing Commission's Guidelines
Manual, resulting in a total offense level that was six points
higher than it should have been. Because the sentencing hearing
occurred after the 2015 Guidelines Manual took effect (on November
1, 2015), he asserts the district judge should have sentenced
Valdés under the amended guidelines. While the district judge
claimed to use the November 1, 2015 Guidelines Manual to calculate
the applicable offense level, it decidedly did not and the
government concedes the error. Unquestionably, the number of
levels added to the base offense level for the amount of loss
pursuant § 2B1.1(b) decreased between the 2014 and 2015 Guidelines
Manuals, and the district judge clearly used the loss table in the
2014 Guidelines Manual.
Valdés says two errors occurred as a result of applying
the wrong Guidelines Manual to the calculation of the GSR: first,
he was assigned two additional levels pursuant to the loss amount
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under § 2B1.1(b)(1) and second, he was assigned four additional
levels pursuant to the number of victims under § 2B1.1(b)(2). He
argues that because the 2015 Guidelines Manual introduced a
substantial financial hardship consideration under § 2B1.1(b)(2),19
the Government hasn't yet borne its burden for this new
consideration. Valdés argues all four prongs of plain error are
met and that we should remand for re-sentencing to correct the
error. For its part, the Government argues there is a reasonable
likelihood of the same sentence being imposed if we remand because
it believes the district court will enhance the base offense level
by the same number of levels even under the revised versions of
the Guidelines Manual.
19 The 2015 Guidelines Manual, § 2B1.1(b)(2) provided:
(2) (Apply the greatest) If the offense—
(A) (i) involved 10 or more victims; (ii) was committed
through massmarketing; or (iii) resulted in substantial
financial hardship to one or more victims, increase by
2 levels;
(B) resulted in substantial financial hardship to five
or more victims, increase by 4 levels; or
(C) resulted in substantial financial hardship to 25 or
more victims, increase by 6 levels.
The 2014 Guidelines Manual, § 2B1.1(b)(2) provided:
(2) (Apply the greatest) If the offense—
(A) (i) involved 10 or more victims; or (ii) was
committed through massmarketing, increase by 2 levels;
(B) involved 50 or more victims, increase by 4 levels;
or
(C) involved 250 or more victims, increase by 6 levels.
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While Valdés did object to the initial PSR's suggestion
of adding 6 levels to the number of victims pursuant to U.S.S.G.
§ 2B1.1(b)(2)(A)(i) and argues again to us that only 2 levels
should be added for 10+ victims, the discussion in his brief
concedes plain error review applies to his sentencing arguments.20
The Guidelines Manual instructs district courts to apply
the version in effect at the time of sentencing unless doing so
would raise ex post facto concerns. United States v. Rodriguez,
630 F.3d 39, 42 (1st Cir. 2010); see also 18 U.S.C.
§ 3553(a)(4)(A); U.S.S.G. § 1B1.11 (policy statement). The trial
court therefore erred when it used the 2014 Guidelines Manual
instead of the 2015 Guidelines Manual which contained amendments
to two of the sections in play for Valdés's sentencing. The error
was obvious because the new Guidelines Manual went into effect on
November 1, 2015, and the sentencing hearing occurred on November
30, 2015. "[G]iven an error that is plain (although admittedly
not called to the district judge's attention), we must ask whether
there is reasonable likelihood of a different result if we remanded
and whether there is also a threat of injustice if we affirm."
Rodriguez, 630 F.3d at 42-43.
20
Please excuse our redundancy, but we put in a quick reminder
that, under the exacting plain error standard, Valdés "must show
an error that was obvious and that not only likely affected the
result in the lower court but also threatens a miscarriage of
justice if not corrected." United States v. Rodriguez, 630 F.3d
39, 41 (1st Cir. 2010).
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Here, the trial judge's clear error affected Valdés's
substantial rights because it affected both the calculation of the
applicable GSR and the ultimate imposition of the sentence of
incarceration. See United States v. Figueroa-Ocasio, 805 F.3d
360, 373 (1st Cir. 2015). The trial judge calculated a total
offense level of 30. When this is combined with a criminal history
category of I, the guidelines range is 97-121 months.
In 2015, the Guidelines Manual changed the loss amount
ranges in § 2B1.1(b) and incorporated a "substantial financial
hardship" consideration to the determination of the number of
victims for the specific offense characteristics under
§ 2B1.1(b)(2). The trial judge added 14 levels pursuant to
§ 2B1.1(b)(1) for a loss amount greater than $400,000 but less
than $1,000,000. Under the amendments to this section effective
November 1, 2015, only 12 levels should have been added for a loss
amount greater than $250,000 but less than $550,000. In addition,
because the substantial financial hardship was a new element in
the calculation of the GSR, the trial judge did not consider it
and we will not consider it in the first instance. Without a
finding of substantial financial hardship, only 2 levels would be
added pursuant to either § 2B1.1(b)(2)(A)(i) or (ii) for 10+
victims or if the offense was committed through mass-marketing.
These two amendments to the Guidelines Manual in 2015
could therefore have resulted in a drop of 6 levels to the total
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offense level. A total offense level of 24 with a criminal history
category of I yields a range of 51-63 months. There was no
indication in the sentencing hearing that the trial judge intended
to impose an above-guidelines sentence, so even if the trial judge
imposed the top of the range, Valdés's total sentence of
incarceration would have been 87 months (when the 24-month
mandatory minimum for aggravated identity theft is added). This
represents a difference of 47 months or almost four years of
incarceration. Because "but for the error, there is a reasonable
likelihood that the sentence would have been shorter," the
sentencing error affected Valdés's substantial rights. Figueroa-
Ocasio, 805 F.3d at 373 (citing United States v. Ortiz, 741 F.3d
288, 293-94 (1st Cir. 2014)).
That leaves the fourth prong of plain error review--
whether the error "seriously affect[s] the fairness, integrity, or
public reputation of judicial proceedings." Figueroa-Ocasio, 805
F.3d at 367-68 (quoting United States v. Borrero-Acevedo, 533 F.3d
11, 15 (1st Cir. 2008)) (alteration in original). The Supreme
Court has recently made this an easy decision for us. In Rosales-
Mireles v. United States, 138 S. Ct. 1897, 1911 (2018), the Court
held that, "[i]n the ordinary case, . . . the failure to correct
a plain [g]uidelines error that affects a defendant's substantial
rights will seriously affect the fairness, integrity, and public
reputation of judicial proceedings." According to the Court's
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discussion in Rosales-Mireles, Valdés has met his burden to
persuade us that the district court's error "seriously affect[ed]
the fairness, integrity or public reputation of judicial
proceedings" by proving a clear error that affected his substantial
rights. See id. at 1909 n.4. Even without the Court's recent
discussion and holding, we have tended to take the approach of
remanding for resentencing when the correction of an obvious error
in guidelines calculations would lead to a lower sentence. See
Figueroa-Ocasio, 805 F.3d at 373-74. We therefore vacate Valdés's
sentence and remand to the district court with instructions to re-
sentence Valdés using § 2B1.1(b) in effect at the time of
sentencing.
2. Restitution
Valdés also argues for the first time before us that the
bankruptcy court is neither a proper recipient of restitution nor
a victim pursuant to either 18 U.S.C. §§ 3663 or 3663A.21 He also
renews his argument that restitution is a duplicative collection
effort for the fines imposed by the bankruptcy court, asserting
that the district court committed clear legal error by ordering
payment of these fines in the form of restitution. In addition,
he vaguely mentions the restitution ordered resulted in an
21 Valdés does not challenge the amount of restitution
imposed.
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excessive fine in violation of both the Eighth Amendment and of
due process principles.22
The government responds that the bankruptcy court was
properly identified as a recipient of restitution because Valdés
has not yet paid the fines levied by the bankruptcy court. And
because the bankruptcy cases underlying the fines imposed by the
bankruptcy court are closed, the only existing avenue for
collecting on the outstanding fines is to enforce the district
court's order of restitution.
While Valdés filed written objections to the PSR
challenging the probation office's restitution recommendation as
an impermissible and duplicative collection effort, he did not
voice any such objections during the sentencing hearing. The
district court imposed restitution at the end of the hearing after
the government reminded the court that restitution had been
proposed in the PSR. Valdés remained completely silent through
this part of the hearing even when the government asserted that
Valdés had no objection to the restitution and when the district
judge asked if there was anything else from the parties prior to
adjourning the hearing.
22To the extent that Valdés suggests a violation of his
constitutional rights, these arguments are waived for failure to
develop them. After mentioning the excessive fines and due process
clauses, he doesn't develop any meaningful argument with respect
to either. See Echevarría, 856 F.3d at 139; Zannino, 895 F.2d at
17.
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Valdés arguably withdrew his objection to the use of
restitution to enforce his unpaid fines in bankruptcy court by
remaining silent during the sentencing hearing instead of pressing
the objection he had included in his written response to the PSR.
See United States v. Alphas, 785 F.3d 775, 784 (1st Cir. 2015)
("In the sentencing context, an appellant may waive an issue when
he initially raises it as an objection to the [PSR] Report but
later explicitly withdraws the objection. . . . Once an issue is
waived, there is nothing for an appellate court to review.").
However, because we review claims of error in the sentencing
process for plain error when a defendant does not lodge an
objection during sentencing, United States v. Vázquez-Larrauri,
778 F.3d 276, 291 (1st Cir. 2015), as well as when we forgive
waiver because "justice so requires," United States v. Torres-
Rosario, 658 F.3d 110, 116 (1st Cir. 2011), we will simply deem
all of Valdés's arguments against the restitution order to be
forfeited. We'll therefore proceed with a plain error analysis.
When the district court ordered restitution, it did not
specify whether the order was made pursuant to the Mandatory
Victims Restitution Act ("MVRA"), 18 U.S.C. § 3663A, or the
discretionary restitution statute authorized by § 3663. The PSR
makes reference to both statutes: one section states the MVRA
applies to Valdés's fraud offenses before summarizing the
Assistant U.S. Trustee's victim impact statement. Another section
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says that the discretionary statute authorizes restitution in this
case.
"Restitution serves as a mechanism for making a victim
whole by restoring the monetary equivalent of losses suffered in
consequence of the defendant's criminal activity." United States
v. Salas-Fernández, 620 F.3d 45, 48 (1st Cir. 2010) (citing United
States v. Innarelli, 524 F.3d 286, 294 (1st Cir. 2008)). The MVRA
mandates restitution to the victim or victims of several different
types of offenses, including "offense[s] against property under
[title 18] . . . including any offense committed by fraud or
deceit." 18 U.S.C. § 3663A(a)(1), (c)(1)(A)(ii). While we don't
know whether the district court intended to impose mandatory or
discretionary restitution, there is no doubt that at least one of
Valdés's offenses of conviction--wire fraud--falls within the
MVRA. See United States v. Stoupis, 530 F.3d 82, 84 n.4 (1st Cir.
2008) ("The MVRA requires courts to order restitution in connection
with certain specific types of crimes, including offenses against
property under title 18[, including] convictions under . . .
§ 1343."); see also United States v. Cutter, 313 F.3d 1, 6 (1st
Cir. 2002) ("For fraud offenses, such as [concealing assets in
bankruptcy proceeding in violation of 18 U.S.C. § 152(a) and one
count of making a false oath in bankruptcy in violation of 18
U.S.C. § 152(2)], the [MVRA] governs restitution."). Even if
Valdés is correct that restitution would not have been proper under
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the discretionary statute, the restitution was proper pursuant to
the MVRA.
Valdés's argument that the bankruptcy court cannot be a
recipient of restitution has no merit. We have said that the
federal government can be a victim for purposes of restitution.
United States v. Mei Juan Zhang, 789 F.3d 214, 217 (1st Cir. 2015)
("We join our sister circuits in holding that the United States
may be a 'victim' for purposes of the MVRA. The district court
did not err in ordering restitution to the IRS."); see also United
States v. Gibbens, 25 F.3d 28, 32 (1st Cir. 1994). The bankruptcy
court is obviously a part of the federal government. Valdés relies
on cases that are inapposite because they are based on situations
in which a bankruptcy trustee has or has not been deemed the proper
recipient of restitution upon a conviction for bankruptcy fraud.
The subject of the restitution order here is the court,23 not the
bankruptcy trustee or the U.S. Trustee.
Valdés's argument that the bankruptcy court is not a
victim for restitution as defined in both the MVRA and in the
23We note that while the government requested restitution for
the bankruptcy court, the judgment lists the clerk of court for
the district court as the recipient of the restitution. Neither
party brings this factual discrepancy to our attention and, even
if they had, this detail makes no difference because the bankruptcy
court is a part of the district court and the district court has
jurisdiction over all cases under title 11. See 28 U.S.C. § 1334.
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discretionary statute fares no better. For purposes of
restitution, "victim" is defined as follows:
[A] person directly and proximately harmed as a result
of the commission of an offense for which restitution
may be ordered including, in the case of an offense that
involves as an element a scheme, conspiracy, or pattern
of criminal activity, any person directly harmed by the
defendant's criminal conduct in the course of the
scheme, conspiracy, or pattern.
18 U.S.C. §§ 3663(a)(2), 3663A(a)(2). The Assistant U.S. Trustee's
victim impact statement, as summarized in the PSR, details the
ways in which the bankruptcy court was directly and proximately
harmed by Valdés's fraudulent use of the bankruptcy system to
perpetrate his scheme. The harm stems from the waste of the
court's already scarce resources to process the skeletal petitions
filed for the sole purpose of taking advantage of the automatic
freeze on ASUME's collection efforts that he knew the petitions
would generate. The harm also resulted from the time and resources
used by the court in its attempts to stop Valdés, including
drafting motions, investigating complaints by his clients, and
gathering data to show how many fraudulent, skeletal petitions had
been filed. Certainly then, on plain error review, it is fair to
treat the restitution order, the amount incidentally mirroring the
bankruptcy court fine, as having been imposed as a rough estimate
of the amount of the losses incurred from the costs imposed on the
bankruptcy court while it dealt with the added administrative
burden resulting from the fraudulent filings rather than simply as
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a penalty. It's also fair to conclude on plain error review that
these added burdens could be losses subject to restitution given
that resources were fraudulently diverted from the regular
administration of the bankruptcy court. Therefore, this case is
distinguishable from Gibbens, relied upon by Valdés, because the
bankruptcy court incurred losses in the ordinary course of managing
its operations and not, as Valdés contends, during a discrete
investigation into his misuse of the bankruptcy system. See 25
F.3d at 33 (government agency may not recoup money lost as a
consequence of a crime via a restitution order pursuant to Victim
and Witness Protection Act when losses incurred by an undercover
investigation provoked the commission of the crime at issue).
Finally, Valdés's claim that affirming the order of
restitution will allow the court to collect twice on his fines is
completely without merit. First, there is no suggestion that the
government has attempted to enforce the collection of the fines
through the bankruptcy court cases. Second, once Valdés pays his
restitution, he may move to reopen any of the bankruptcy cases in
which a fine has been imposed and request that the court enter an
order stating the fines have been satisfied. See 11 U.S.C. § 350("A case may be reopened in the court in which such case was closed
to administer assets, to accord relief to the debtor, or for other
cause."). To that end, the government's contention that, because
the underlying bankruptcy cases are closed, the only way it will
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be able to collect the unpaid fines is through enforcement of the
restitution order is also not accurate. But be that as it may,
the order will not result in double dipping.
Valdés has therefore not shown that the district court
committed any errors, never mind a clear or obvious one, when it
ordered restitution to the clerk of court for the district court.
III. CONCLUSION
To sum everything up, we affirm Valdés's convictions and
the order of restitution but vacate his term of incarceration and
remand for resentencing using the proper version of the Guidelines
Manual.
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