United States v. Sharma , 190 F.3d 220 ( 1999 )

Opinions of the United
1999 Decisions States Court of Appeals
for the Third Circuit
8-30-1999
U.S. v. Sharma
Precedential or Non-Precedential:
Docket 98-7408, 98-7454, 98-7409, 98-7410
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Filed August 30, 1999
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 98-7408, 98-7409, 98-7410, and 98-7454
UNITED STATES OF AMERICA
v.
CHANDRA D. SHARMA,
Appellant
(D.C. Criminal No. 96-cr-00321-1)
UNITED STATES OF AMERICA
v.
SUBODH C. SHARMA,
Appellant
(D.C. Criminal No. 96-cr-00321-2)
UNITED STATES OF AMERICA
v.
SUSHIL C. SHARMA,
Appellant
(D.C. Criminal No. 96-cr-00321-03)
UNITED STATES OF AMERICA
v.
VINOD C. VASISTH,
Appellant
(D.C. Criminal No. 96-cr-00321-04)
Appeal from the United States District Court
For the Middle District of Pennsylvania
D.C. Nos.: 1:CR-96-321-001, 1:CR-96-321-002,
1:CR-96-321-003 & 1:CR-96-321-004
District Judge: Honorable Sylvia H. Rambo
Argued July 12, 1999
Before: GREENBERG, ALITO, and ROSENN,
Circuit Judges.
(Filed August 30, 1999)
Theodore B. Smith, III (Argued)
Sally A. Lied
Office of United States Attorney
Federal Building
P.O. Box 11754
228 Walnut Street
Harrisburg, PA 17108
Counsel for Appellee
Jerry A. Philpott
227 High Street
P.O. Box 116
Duncannon, PA 17020
Counsel for Appellant
Chandra D. Sharma
Michael M. Mustokoff (Argued)
Teresa N. Cavenagh
Duane, Morris & Heckscher
4200 One Liberty Place
Philadelphia, PA 19103-7396
Counsel for Appellant
Subodh C. Sharma
2
Daniel I. Siegel (Argued)
Thomas A. Thornton
Office of Federal Public Defender
100 Chestnut Street, Suite 306
Harrisburg, PA 17101
Counsel for Appellant
Sushil C. Sharma
Michael M. Mustokoff (Argued)
Teresa N. Cavenagh
Duane, Morris & Heckscher
4200 One Liberty Place
Philadelphia, PA 19103-7396
Counsel for Appellant
Vinod C. Vasisth
OPINION OF THE COURT
ROSENN, Circuit Judge.
In this appeal from a criminal conviction of, inter alia,
conspiracy and bank fraud, the major issue is whether
under the Sentencing Guidelines interest owed on a
defaulted loan obtained by fraud may be included by the
court in calculating the amount of the victim's loss. A jury
found that the defendants, a father and his three adult
sons, had given material and false statements that
misrepresented their financial resources to two banks in
order to obtain loans and lines of credit. They defaulted on
loans from the State Bank of India ("SBI") valued at
$1,890,702.74, of which $670,718.85 was principal and
$1,219,983.89 was interest. The district court included
both the principal and the interest in its calculation of the
amount of SBI's loss, an integral figure in the
determination of the defendants' sentences. Raising an
issue of first impression in this circuit, the defendants
contend that under the interest amendment in 1992 to the
Sentencing Guidelines Application Notes, interest on the
defaulted loan should not have been included in calculating
the victim's loss. The district court disagreed and also
rejected the defendants' other claims. We affirm.
3
I.
To obtain loans and lines of credit, defendant Chandra D.
Sharma ("Chandra") and his sons, defendants Subodh C.
Sharma ("Subodh"), Sushil C. Sharma ("Sushil"), and Vinod
C. Vasisth ("Vinod"), made false representations to
Commerce Bank in Harrisburg, Pennsylvania and SBI in
New York City. They grossly misrepresented the value and
profitability of their assets through the submission of false
financial statements. They gave the banks a false picture of
their ability to contribute a substantial sum of their own
money to finance the projects for which they sought loans,
and of the profitability of their businesses, which could
purportedly and adequately collateralize the loans.
In 1985, the defendants began planning to build a sixty-
bed nursing home in the Harrisburg area to be known as
the Victory Garden Nursing Home ("Victory Garden").
Subodh signed a Certificate of Need application prepared by
an accountant. After two conferences with the Health
Resources Planning and Development, Inc., both of which
were attended by Sushil and Subodh, and the latter by
Chandra, the Pennsylvania Department of Health granted
the Certificate of Need.
In December 1985, Subodh, Sushil, and Vinod met with
the architect, Kamal Chaudhury. As a result of that
meeting, Subodh and Chaudhury negotiated two contracts.
In the first contract, Victory Garden promised to pay
Building Technologies, Chaudhury's firm, $5,500 for
preliminary work and $56,000 for architecture and
construction. At Subodh's insistence, Chaudhury signed a
side agreement in which Building Technologies agreed to
have Eaglemark, the defendants' company, provide on-site
construction managers for a fee of $19,500. When applying
for a construction loan with SBI, the defendants submitted
the primary contract but omitted the Eaglemark side
agreement from the supporting documentation to the bank.
In December 1985, Subodh signed an agreement to
purchase fifty acres of land in Duncannon, Pennsylvania
for $75,000. The land was to be used as the nursing home
site. In July 1986, Commerce Bank loaned the defendants
$60,000 for the purchase of the land. Chandra took title to
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the land solely in his name, but the mortgage on the
property was in Subodh and Vinod's name.
In June 1986, Chandra, Subodh, and Vinod agreed to
purchase the Sloan Manufacturing and Engineering
Company ("Sloan" or "Sloan Manufacturing") for $189,766.
Vinod and Subodh signed a promissory note for the
purchase price. The principals of Sloan agreed to accept the
promissory note for the purchase on the basis of the
obligor's financial statement. However, it contained a forged
signature of Sushil's accountants. Subodh and Vinod
collateralized the note with Eaglemark's assets and
guaranty; they subsequently defaulted on their note.
Several months later, the four defendants agreed to
purchase D.B. Industries ("Industries") from Dojcin
Bulatovic for $175,000. The defendants paid $7,500 down
and agreed to pay the remaining $167,500 over fifteen
years with interest at ten percent, evidenced by a
promissory note confessing judgment and signed by
Subodh. Seeking a commercial loan for Industries, Subodh
approached Commerce Bank and submitted a falsified sales
agreement between Industries and Eaglemark. Most
significantly, the falsified agreement stated that the
purchase price was $264,000, rather than $175,000. In
addition, the agreement stated that the defendants had,
with the exception of a $50,000 promissory note given to
Bulatovic, purchased Industries with cash. Commerce Bank
made the $100,000 loan on the conditions that Industries
pay off the purported $50,000 promissory note to Bulatovic,
Subodh pay off a second loan on his residence, and
Subodh's residence be used as collateral. After Industries
defaulted on the loan in July 1991, Sushil, seeking to
modify the loan agreement, presented a statement reporting
his personal net worth at $1,677,089 and a purported copy
of his 1990 tax return that overstated his adjusted gross
income.
In January 1987, Subodh, on behalf of all the
defendants, sought a $15,000 line of credit from Commerce
Bank for Perfect Care, another business owned by the
defendants. In connection with the credit application, each
of the defendants submitted false personal financial
statements that failed to list recently-incurred liabilities. In
5
addition, the defendants inflated the profitability and assets
of their companies, V-Care and Perfect Care. In April 1987,
Commerce Bank extended the $15,000 line of credit for
Perfect Care to use as short-term working capital. However,
the defendants used the money for other purposes.
In June 1987, the defendants obtained a loan from SBI
for sixty-five percent of the construction costs with a
maximum of $1,200,000 to finance the building of Victory
Garden. When applying for the loan, the defendants
submitted several false documents. Sushil submitted two
financial statements for V-Care that were signed but not
prepared by a certified public accountant. These statements
magnified the company's financial assets. Personal financial
statements submitted by each defendant failed to list
recently-incurred liabilities. The construction agreement
between Victory Garden and G.B. Construction was
"doctored" to reflect a contract price of $1,600,000, rather
than the agreed-to $1,200,000. A letter from Sushil
provided a false explanation for a $2,000 discrepancy
between the original sales price and the sales price recited
in the deed submitted to the bank for the land on which
the defendants planned to build and mortgage the nursing
home.
Sushil furnished a summary of project costs that
overstated by at least $340,000 the amount of money the
defendants had expended on the construction. The
summary falsely represented that a New York certified
public accountant had traced disbursements of $589,299 to
original construction records exclusive of owners' salaries
and administrative expenses. Based on the summary, SBI
loaned the defendants $383,044 (65% of $589,299), which
they transferred to their individual accounts on the day
following their execution of the construction loan agreement
with SBI. The defendants then drew checks against their
respective bank accounts to create the illusion that they
were personally contributing 35% to the project as required
by their agreement with the bank. Sushil also submitted to
the bank a letter from Chaudhury that overstated the
progress with the construction of the nursing home.
As collateral, the defendants gave SBI a deed forfifteen
acres of the fifty-acre tract on which the nursing home was
6
to be built. The defendants represented that this land was
worth $75,000, the purchase price of the entirefifty-acre
tract. The remaining thirty-five acres were transferred to
Chandra, who conveyed the property to his wife Heena
Sharma. Upon discovering these facts, the bank sued in a
state court, which found the conveyance fraudulent, and
voided it. SBI ultimately obtained the title to thirty-five-acre
parcel.
During the construction of Victory Garden, the
defendants sought additional money from SBI. Again, they
overstated the extent of their investment in the nursing
home construction. In February 1988, Vinod filed a
Corporate Guaranty of Payment of the construction loan by
V-Care, Inc. Subodh did the same one year later. However,
V-Care was nonexistent; it ceased to operate in August
1987.
In June 1988, SBI extended a line of credit of up to
$258,000 to Sloan Manufacturing. Sloan and a second
mortgage on the nursing home secured the credit line. In
April 1989, SBI increased the nursing home construction
loan from $1,200,000 to $1,850,000. The defendants
defaulted on the construction loan and line of credit.
Including the interest due and unpaid at the time of the
defaults, SBI lost $1,890,702.
Vinod prepared a cost report for Victory Garden to the
Pennsylvania Department of Public Welfare ("DPW") for
Medicaid cost reimbursement. The report falsely stated that
Victory Garden had paid Sushil $79,700 in interest. That
claim inflated the nursing home's Medicaid reimbursement.
In fact, Victory Garden had not made any interest
payments to Sushil, and Sushil claimed none on his income
tax returns. As a result of this false statement, the DPW
overpaid Victory Garden $63,734.
A grand jury in the United States District Court for the
Middle District of Pennsylvania indicted the defendants in
December 1996. The indictment charged each defendant
with conspiracy to: commit bank fraud, make false
statements, submit a false tax return, engage in money
laundering, and commit wire fraud (count one). The
indictment also charged each defendant with bank fraud
7
(counts two and four), making false statements in
connection with loan applications (counts three andfive),
and wire fraud (count six). Furthermore, the indictment
charged Sushil and Vinod with making a false statement to
a federally-funded state health care program (count seven).
The district court denied the defendants' motion to sever
count seven from the other counts charged in the indictment.1
After a three-week trial in September 1997, the trial court
granted Chandra's motion for judgment of acquittal on
count six. The jury convicted all defendants of counts one
through five, Sushil of count six, and Sushil and Vinod of
count seven. The jury acquitted Subodh and Vinod of count
six.
The district court sentenced both Chandra and Subodh
to thirty-three-month aggregate prison terms and Sushil
and Vinod to aggregate prison terms of thirty-six months.
The court ordered each defendant to pay $63,734 in
restitution. All of the defendants timely appealed to this
court.
II.
A.
The principal issue before us is whether the district court
properly included the loan interest that the defendants
failed to pay SBI as part of SBI's actual loss. The resolution
of this issue affects the length of the defendants' sentences.
If interest were excluded from the calculation of loss, the
defendants' total offense level would be eighteen rather
than twenty, the total offense level the district court
computed for each defendant. See U.S.S.G. S 2F1.1. The
defendants contend that the district court erroneously
included the unpaid interest on SBI's loans in the court's
calculation of the amount of SBI's loss. The defendants
emphasize that Application Note 8 to U.S.S.G. S 2F1.1
excludes interest from the calculation of loss and assert
_________________________________________________________________
1. The district court had subject-matter jurisdiction of this action
pursuant to 18 U.S.C. S 3231. We have appellate jurisdiction pursuant
to 18 U.S.C. S 3742(a)(2) and 28 U.S.C. S 1291.
8
that the trial court erred in including interest in the
calculation of loss and disregarded the plain language of
Application Note 8.2
The district court determined that the exclusion of
interest in the calculation of loss is only appropriate when
the interest represents the victim's opportunity cost.3 The
court concluded that when interest is contractually due on
a loan, the interest should be included as part of the
victim's loss. This court has plenary review over the district
court's interpretation of "loss" in U.S.S.G.S 2F1.1. See
United States v. Maurello, 76 F.3d 1304, 1308 (3d Cir.
1996).
For losses of at least $1,500,000 and under $2,500,000,
the Sentencing Guidelines mandate a twelve-point increase
in the base offense level. U.S.S.G. S 2F1.1. The pertinent
portion of Application Note 8 provides that "loss is the value
of the money, property, or services unlawfully taken; it does
not, for example, include interest the victim could have
earned on such funds had the offense not occurred."
U.S.S.G. S 2F1.1, Application Note 8. Note 8(b) explicates:
In fraudulent loan application cases and contract
procurement cases, the loss is the actual loss to the
victim (or if the loss has not yet come about, the
expected loss). For example, if a defendant fraudulently
obtains a loan by misrepresenting the value of his
assets, the loss is the amount of the loan not repaid at
the time the offense is discovered, reduced by the
amount the lending institution has recovered (or can
expect to recover) from any assets pledged to secure
the loan.
U.S.S.G. S 2F1.1, Application Note 8(b). Because it does not
violate the constitution or a federal statute and is not
inconsistent with the sentencing guideline, Application Note
_________________________________________________________________
2. Application Note 8 was formerly enumerated Application Note 7.
Throughout this opinion, we refer to the application note by its current
designation.
3. We define opportunity cost as interest that a bank could have earned
had it not made the loan in question. See City of Los Angeles v.
Department of Transp., 165 F.3d 972, 974 n.1 (D.C. Cir. 1999).
9
8 is authoritative. See Stinson v. United States , 508 U.S. 36,
38 (1993); United States v. Knobloch, 131 F.3d 366, 372 (3d
Cir. 1997) ("Courts are required to follow the Application
Notes to the Federal Sentencing Guidelines in imposing
sentences for federal offenses.").
This court construed the meaning of "loss" in U.S.S.G.
S 2F1.1 in United States v. Kopp, 951 F.2d 521 (3d Cir.
1991). We stated that "the fraud guideline defines `loss'
primarily as the amount of money the victim has actually
ended up losing at the time of sentencing." Id. at 531.
Explaining that Application Note 8(b) "plainly states that
where, as here, the defendant fraudulently misstates his
assets, the `loss' is the victim's actual loss--unpaid
principal and interest less the amount the lender has
recovered (or can expect to recover) from the loan
collateral," we also concluded that interest on a loan
procured after the submission of a fraudulent application
should be included in the calculation of loss. Id. at 535.4
However, the Sentencing Commission subsequently
amended Application Note 8 to state that the loss"does not
. . . include interest the victim could have earned on such
funds had the offense not occurred." See United States
Sentencing Commission Guidelines Manual, App. C, Vol. 1
(1997) at 279. The Sentencing Commission explained:"This
amendment clarifies that interest is not included in the
determination of loss." Id. This circuit has not reviewed the
viability and perimeters of Kopp in light of the amendment
to the application note, which became effective on
November 1, 1992.
Several circuits that have held, despite the amendment to
Application Note 8, that bargained-for interest due on a
loan should be included in the calculation of loss. See
United States v. Nolan, 136 F.3d 265, 273 (2d Cir.), cert.
denied, 118 S. Ct. 2307 (1998); United States v. Gilberg, 75
_________________________________________________________________
4. In their reply brief, the defendants contend that the Kopp court
misread or misquoted Application Note 8(b). Our review of the Kopp
opinion confirms that this court accurately quoted the application note.
Allegations that this court misread Application Note 8(b) amount to
nothing more than a disagreement with our interpretation of the
application note.
10
F.3d 15, 19 (1st Cir. 1996); United States v. Allender, 62
F.3d 909, 917 (7th Cir. 1995); United States v. Henderson,
19 F.3d 917, 928-29 (5th Cir. 1994); United States v.
Lowder, 5 F.3d 467, 471 (10th Cir. 1993); cf. United States
v. Allen, 88 F.3d 765, 771 (9th Cir. 1996) (implying interest
can be included in calculation of loss). But see United
States v. Hoyle, 33 F.3d 415, 419 (4th Cir. 1994) (holding
interest not includable in loss calculation and considering
interest to be excludable time-value of lenders' money lost).
Application Note 8, as amended, which states that the
valuation of loss does not "include the interest the victim
could have earned," concerns fraud cases, in which interest
typically reflects only opportunity cost. The plain language
of the application note suggests that the Sentencing
Commission intended to distinguish bargained-for interest
from opportunity-cost interest. The application note
excludes from the calculation of loss "interest the victim
could have earned." U.S.S.G. S 2F1.1, Application Note 8
(emphasis added). Opportunity-cost interest is interest the
victim could have earned. In contrast, bargained-for
interest is an integral part of the borrower's obligation to
the lender. Such interest is an important, enforceable
aspect of the contractual agreement and reasonably
included in the calculation of the bank's loan. If the
Sentencing Commission had intended to exclude bargained-
for interest from the loss calculation, it could have used
appropriate language when drafting the note. Allender, 62
F.3d at 917.
There is a definitive distinction between interest a debtor
is contractually required to pay the victim (i.e., bargained-
for interest) and interest a victim could have earned had it
invested the money that had been lost as a result of the
defendant's misconduct (i.e., opportunity-cost interest). See
id. (holding interest on loan is not opportunity cost and
includable in calculation of loss); United States v.
Goodchild, 25 F.3d 55, 65-66 (1st Cir. 1994) (same);
Lowder, 5 F.3d at 467 (same). The former is a specifically
defined obligation; the latter is speculative. See Allender, 62
F.3d at 917. A creditor has a reasonable expectation to
receive the interest on the loan. See Henderson, 19 F.3d at
928. After the loan agreement is signed, both the principal
11
and the obligatory interest become the creditor's property.
See Allender, 62 F.3d at 917. Interest-bearing loans,
especially mortgage and equipment loans, are an important
part of a large secondary loan market in this country. We
read Application Note 8 as requiring the exclusion of
opportunity-cost interest, but not bargained-for interest,
from the valuation of the victim's actual loss.
In addition to arguing that Application Note 8's interest
provision requires the exclusion of the interest owed on the
loans to SBI, the defendants assert that Application Note
8(b)'s definition of loss similarly mandates the exclusion of
interest owed. This subsection note measures the loss as
"the amount of the loan not repaid at the time the offense
is discovered, reduced by the amount the lending
institution has recovered (or can expect to recover) from
any assets pledged to secure the loan." U.S.S.G.S 2F1.1,
Application Note 8(b). The defendants maintain that the
phrase "amount of the loan" clearly refers to the loan's
principal, but not interest. We disagree. At most,"amount
of the loan" is ambiguous with respect to whether interest
should be included in the calculation of the victim's loss.
The debt incurred by a loan, of course, consists of both
principal and interest. Although the amount of a loan can
refer to only the amount of the principal, in banking and
commercial practice the "amount of the loan" is usually
construed to include interest due on the loan as well.5
Accordingly, we hold that in determining the amount of the
actual loss sustained by the victim in a criminally
fraudulent loan the sentencing court may include the
contractually bargained-for interest. Thus, the district court
did not err when it perceptively included the unpaid
interest owed in its calculation of SBI's actual loss.
_________________________________________________________________
5. The defendants also claim that Application Note's employment of the
verb "repaid" further proves that the Sentencing Commission intended to
include only the loan principal in the calculation of the victim's actual
loss. This argument is unconvincing. When one repays a loan, one must
pay both principal and interest.
12
B.
The defendants claim that the district court erred by not
giving them credit for, and thereby not reducing the
calculation loss by, the value of assets pledged to SBI that
SBI recovered or can be expected to recover. They contend
that they should have received a credit for (1) $455,540.76
in Victory Garden's accounts receivable due from the DPW,
in which SBI had a security interest; (2) the assets of
Industries, which guaranteed the loan to SBI, valued at
$119,879.00; and (3) twenty-five percent of the value of
properties in Jaipur, India, in which Chandra, who
personally guaranteed the loan, had a twenty-five percent
interest. Further, the defendants claim that the district
court erroneously gave them a $40,000 credit rather than
an $80,000 credit for a thirty-five-acre tract of land
adjacent to Victory Garden that SBI's appraiser valued at
$80,000.
The district court declined to deduct the $455,540.76
Victory Garden claimed that DPW owed because the court
found the alleged debt to be insufficiently documented. The
court refused to accept the defendants' submittedfigure
due to their history of falsifying documents. The court
refused to credit the defendants $119,879.00 for the value
of Industries and $138,827 for the value of Chandra's
purported property interest in homes in India because it
found the evidence of the defendants' ownership of the
assets to be unclear. The court only credited $40,000 for
the thirty-five-acre parcel of land because the defendants
never pledged it as security for the loan. We have plenary
review over the district court's refusal to give the
defendants the claimed credits, see Maurello, 76 F.3d at
1308, but we review the court's factual findings for clear
error, see, e.g., United States v. Holman, 168 F.3d 655, 660
(3d Cir. 1999).
Our review of the record reveals that Chief Judge Rambo,
the trial judge, committed no error in denying, after careful
consideration, all three of the credits that the defendants
sought. Her decision to deny the credit for money the DPW
purportedly owed Victory Garden is essentially a credibility
determination to which the court is entitled deference. This
court should not disturb the district court's factual finding
13
on appeal except for clear error. Moreover, the DPW's
preliminary audit showed that Victory Garden owed the
DPW $311,786.07, rather than the DPW owing Victory
Garden money. At a minimum, this cast tremendous doubt
on the defendants' claims that the DPW owed Victory
Garden $455,540.76, a claim that the DPW strenuously
denies it owes at all. Furthermore, the collection of this
debt by Victory Garden is also clouded by the sale of the
assets in a bankruptcy proceeding in New York. Likewise,
the judge's decision not to credit the defendants for the
value of Industries' assets is supported by the evidence.
There were questions whether the defendants paid
Bulatovic, who previously owned Industries, in full. Lastly,
because extended members of the defendants' family were
challenging Chandra's alleged ownership of the properties
in Jaipur, India, the court's conclusion not to credit the
value of the Jaipur properties in the calculation of loss had
evidentiary and prudential support.
The defendants, however, were entitled to a credit for the
value of the thirty-five-acre parcel of land located adjacent
to Victory Garden. SBI's appraiser valued the land at
$80,000. However, SBI only credited the defendants
$40,000 toward the loan's principal, and the court likewise
credited the defendants for $40,000. The district court's
decision to credit $40,000 rather than $80,000 is not
supported by the evidence. SBI's own appraiser valued the
thirty-five acre parcel at $80,000. Because SBI ultimately
obtained the parcel of land by suit after the defendants'
default and gave the defendants a partial credit for its
value, the defendants are entitled to a credit for the full
value of the land less SBI's expenses in the litigation to
acquire title. Thus, the court's decision to credit only
$40,000 is erroneous. Nevertheless, the additional credit to
which the defendants are entitled for this land would not
affect any defendant's total offense level under the
Sentencing Guidelines. Thus, the error is harmless.
C.
The defendants argue that Sushil's wire fraud conviction
should be reversed because the trial court failed to instruct
the jury that materiality is an element of the offense. Since
14
the trial of this case, the Supreme Court recently held that
materiality of falsehood is an element of wire fraud. Neder
v. United States, ___ U.S. ___, ___, 119 S. Ct. 1827, 1841
(1999). The Court also held that the failure to instruct the
jury that materiality is an element of wire fraud is subject
to harmless error review. Id. at 1833-34. Because Sushil's
trial counsel requested an instruction that materiality is an
element of wire fraud, he preserved the issue for appeal.
Accordingly, although the district court did not have the
benefit of the Neder decision at the time of the trial, we
must determine whether the omission of a materiality
instruction was harmless error.
At trial, the Government alleged that Sushil committed
wire fraud when in 1991 he sought modifications in the
terms of a loan on which the defendants were in default.
Sushil faxed Commerce Bank a copy of an income tax form
that he purported to have submitted to the IRS. In the tax
form submitted to the IRS, Sushil reported an adjusted
gross income of $20,408. The purported copy faxed to
Commerce Bank recorded an adjusted gross income of
$102,754. At closing argument, defense counsel claimed
that the difference in the income tax forms did not affect
the bank's decision to restructure the loan because (1) the
two forms stated the same income, (2) the form sent to
Commerce Bank was accurate, and (3) the difference
between the two forms, deductions for business losses that
were taken on the form sent to the IRS but not on the form
faxed to Commerce Bank, reflected a difference of opinion
about which reasonable accountants could differ.
We conclude that the difference in the forms was material
beyond a reasonable doubt because the adjusted gross
income reported in the two forms differed overwhelmingly.
The adjusted gross income reported to Commerce Bank was
five times larger than the adjusted gross income reported to
the IRS. No reasonable fact finder could conclude that this
five-fold difference was immaterial. Sushil realized the
magnitude of the difference; were it not so, he presumably
would not have submitted to the Bank the form showing
the substantially greater income. Therefore, we hold that
the absence of a materiality charge on the wire fraud count,
of which only Sushil was convicted, was harmless error.
15
D.
The defendants assert that the district court erred by not
severing the Medicaid fraud count (count seven) from the
remainder of the indictment. They claim there is no
commonality between the Medicaid fraud charge and the
other charges.
We review the district court's denial of the severance
motion for an abuse of discretion. United States v. Gorecki,
813 F.2d 40, 42 (3d Cir. 1987). Count one of the indictment
charged Sushil and Vinod with conspiracy to commit bank
fraud and wire fraud and to make false statements in
connection with loan applications and Medicaid
reimbursement. "As long as the government has charged
conspiracy in good faith, an allegation of conspiracy is a
sufficient reason for trying the conspiracy and all
substantive offenses together." United States v. Smith, 789
F.2d 196, 206 (3d Cir. 1986). The defendants do not allege
that the Government charged conspiracy in bad faith.
Critically important, moreover, is that no defendant moved
before or at trial to sever the conspiracy count into two
counts for being multiplicitous. For these reasons, the
denial of the motion to sever count seven of the indictment
did not amount to an abuse of discretion by the trial court.
E.
We conclude that the defendants' remaining claims are
meritless. The district court did not err in denying the Batson6
claim because the Government had a race-neutral
explanation for striking an African-American venireperson,
and Chief Judge Rambo's finding that the explanation
adequately refuted allegations of discriminatory intent has
support in the record. Moreover, the defendants failed to
make a timely challenge prior to the dismissal of the venire.
They made their challenge after the petit jury had been
sworn and the rest of the panel dismissed. The defendants'
claim that the court abused its discretion by giving a willful
blindness instruction must be rejected because a
reasonable juror could have inferred from the evidence that
_________________________________________________________________
6. Batson v. Kentucky, 476 U.S. 79 (1986).
16
one defendant may not have known precisely what
fraudulent act another defendant was committing. The
instruction ensured that a juror who believed that a
defendant turned a blind eye toward his co-defendant's
conduct would not vote to acquit the willfully blind
defendant.
III.
The district court committed no error warranting reversal
of any defendant's conviction or sentence. Accordingly, the
judgment of the district court will be affirmed.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
17