
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 93-1661                              UNITED STATES OF AMERICA,                                 Plaintiff, Appellee,                                          v.                                 STEPHEN E. WILLIAMS,                                Defendant, Appellant.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                     [Hon. William G. Young, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                               Torruella, Circuit Judge,                                          _____________                            Bownes, Senior Circuit Judge,                                    ____________________                               and Cyr, Circuit Judge.                                        _____________                                 ____________________            William J. Genego for appellant.            _________________            Roberta  T. Brown, Assistant United States Attorney,  with whom A.            _________________                                               __        John  Pappalardo, United  States  Attorney,  and  Michael  K.  Loucks,        ________________                                  ___________________        Assistant United States Attorney, were on brief for appellee.                                 ____________________                                   December 3, 1993                                 ____________________                    CYR,  Circuit Judge.   Pursuant  to  a plea  agreement,                    CYR,  Circuit Judge.                          _____________          appellant Stephen Williams pled guilty to fourteen counts of mail          fraud,  whereupon other charges  were dismissed and  Williams was          sentenced to  seven months'  imprisonment.   On appeal,  Williams          challenges,  among other things,  the district court's  denial of          his request for an evidentiary hearing and its determination that          certain criminal acts alleged in the dismissed counts constituted          "relevant conduct"  under the counts  of conviction.   Finding no          error, we affirm.                                            I                                          I                                        FACTS                                        FACTS                                        _____                    In 1980,  Williams and codefendant Bruce  Kotek founded          S.E.R.V.E.S.S.,  Inc. (SERVESS),  a Massachusetts  not-for-profit                                                             ______________          corporation  which operated homes  for the handicapped.   SERVESS          entered  into at-cost contracts  with the Commonwealth  of Massa-                        _______          chusetts (Commonwealth) for the placement of mentally handicapped          persons in SERVESS group homes.  These contracts entitled SERVESS          to reimbursement for its expenses but  prohibited it from realiz-          ing  a profit.   In 1984, while  serving on the  SERVESS board of          directors,  Williams and  Kotek  established Community  Services,          Inc.  (CSI), a for-profit  corporation which would  contract with                         __________          companies like SERVESS to operate their group homes in return for          a  management fee.   In July 1984,  Williams and  Kotek, in their          capacity as SERVESS directors:  (1) voted to enter into a manage-          ment contract with CSI; (2) promoted a  SERVESS employee, William          Polis,  to serve  as SERVESS's  new executive  director; and  (3)          resigned from  the SERVESS Board  effective August 31, 1984.   On          September 1, 1984, the  day after the Williams and Kotek resigna-          tions became effective,  the SERVESS-CSI management contract  was          executed by Polis on behalf of SERVESS.   In 1985, during Polis's          tenure, at the  instance of  Williams and  Kotek SERVESS  entered          into  several long-term leases  of property owned  by real estate          trusts  controlled by  the third  codefendant,  Robert Alexander.          Although only  Alexander received  income from  these properties,          Kotek,  Williams and  Alexander were  all residual  beneficiaries          under the real estate trusts.                    In January  1986,  Williams and  Kotek founded  another          not-for-profit corporation called D.A.R.S.O., Inc. (DARSO), which          ______________          operated day-care centers for mentally handicapped persons.  Like          SERVESS,  DARSO  contracted  directly with  the  Commonwealth for          reimbursement of its at-cost expenses, and leased several parcels          of real property from  the same real  estate trusts.  DARSO  also          purchased furniture  from a  company  in which  Williams held  an          interest.   Williams  served  as  a director  of  DARSO from  its          inception.                    Massachusetts  law  requires  that  any  not-for-profit          corporation  submitting  expense  reimbursement requests  to  the          Commonwealth disclose  whether the  expense was  incurred with  a          "related person," defined as "[a] person or organization which is          associated or affiliated with or  has control of or is controlled                                            ___ _______ __          by the  [not-for-profit corporation] or  is related to  the [not-                                          3          for-profit  corporation] or  any director,  stockholder, trustee,          partner or  administrator of the [not-for-profit  corporation] by          common ownership or  control or in a manner  specified in [I.R.C.            267(b), (c).]"  See 114.5 Mass. Reg. 3.02 (emphasis added).                            ___                    In  November 1990, Williams,  Kotek, Alexander, and the          various  corporate entities were indicted for RICO violations, 18          U.S.C.    1962(c),  RICO  conspiracy, 18  U.S.C.     1962(d), and          multiple counts  of mail fraud,  18 U.S.C.   1341,  in connection          with the alleged SERVESS and DARSO schemes to defraud the Common-          wealth.    The indictment  was  based  on Williams's  failure  to          disclose:   (1)  that  he and  Kotek, through  executive director          Polis,  "controlled" SERVESS at the  time CSI and SERVESS entered                   __________          into  their management contract;  and (2) that  both corporations          leased  property from real estate trusts whose beneficiaries were          "related parties."  The  government charged that the  SERVESS and          DARSO  reimbursement  requests  exceeded their  costs,  and  that          Williams  and Kotek  defrauded the  Commonwealth  by using  these          "hidden profits"  to improve,  and  acquire equity  in, the  real          estate leased to SERVESS and DARSO by the real estate trusts.                    At sentencing,  the government  characterized the  dis-          missed  SERVESS  counts  as  "relevant  conduct"  under  U.S.S.G.            1B1.3 and introduced a transcript  of the grand jury  testimony          of  William Polis,  to the effect  that he was  acting under Wil-          liams's  "control"  when  he signed  the  SERVESS-CSI  management                                          4          contract in  September 1984.1   Williams argued that  the SERVESS          scheme was too remote in time and context to constitute "relevant          conduct" under  the DARSO  counts, and  requested an  evidentiary          hearing  for the purpose  of cross-examining  Polis on  his grand          jury testimony concerning the  issue of "control."  The  district          court denied the request for an evidentiary hearing and found the          loss occasioned by  the SERVESS counts to be  "relevant conduct."          Williams appeals the resulting seven-month prison sentence.2                                        ____________________               1The  gross loss  occasioned the  Commonwealth  by the  mail          fraud directly  related to  the SERVESS  counts was  estimated at          between $500,000 and $1 million, while  the DARSO counts involved          estimated loss  of $50,000  to $100,000.   See U.S.S.G.    2F1.1.                                                     ___          The district court  imposed an 8-level enhancement, based  on the          $500,000 to $1 million loss  occasioned by the SERVESS scheme, as          "relevant  conduct," see  id.    1B1.3, in  connection with  Wil-                               ___  ___          liams's sentencing  on the DARSO  scheme counts to which  he pled          guilty.               2The pre-November 1989  Sentencing Guideline calculation was          as follows:               Base offense level (  2F1.1)                 6               + Loss between $500,000 and $1 million      +8               + More than minimal planning                +2               + Abuse of trust position                   +2               - Acceptance of responsibility              -2               Adjusted offense level                      16               Adjusted offense level                      16               GSR (Criminal History Category I)           21-27 mos.               Downward departure for Substantial                 Assistance                                -14 mos.               Sentence                                     7 mos.               Sentence                                     7 mos.                                          5                                          II                                          II                                      DISCUSSION                                      DISCUSSION                                      __________                    The  crux  of  Williams's grievance  is  that  his plea          agreement with the government, which  led to the dismissal of the          SERVESS counts, resulted  in no lower sentence  since the Common-          wealth loss relating to the SERVESS counts was  considered "rele-          vant conduct"  for purposes  of sentencing  on the DARSO  counts.          Our cases, see, e.g., United States v. Wright, 873 F.2d 437, 440-                     ___  ____  _____________    ______          42 (1st Cir. 1989),  long since have recognized the  appropriate-          ness  of just  such  "relevant  conduct"  adjustments  as  these.          Moreover, unlike "relevant conduct"  adjustments that may  appear          to erode the intended benefit  of a defendant's plea bargain, see                                                                        ___          United States v. Fox, 889  F.2d 357, 362-63 (1st Cir. 1989);  see          _____________    ___                                          ___          also Kinder  v. United  States, 112 S.  Ct. 2290,  2292-93 (1992)          ____ ______     ______________          (White, J., dissenting  from a denial of  certiorari) (collecting          cases and noting  circuit split), in  this case Williams  plainly          was  on notice  that the  government would  request the  court to          treat  the SERVESS-related loss  as "relevant conduct"  under the          DARSO counts.3 Finally,  while the government reserved  its right                                        ____________________               3The plea agreement provides:                    Williams  agrees that  the United  States may                    argue that  the loss suffered . .  . from all                    of the fifteen charged schemes to defraud set                    forth in  predicate acts one  through fifteen                    of  Count One  of the  indictment [i.e.,  the                                                       ____                    SERVESS-related conduct]  may be  included by                    the  court  in its  calculation  of  the loss                    suffered  by  the Commonwealth  of  Massachu-                    setts.   The Government  agrees that Mr. Wil-                    liams  may argue that the Court should not do                                          6          to  recommend a "relevant conduct" adjustment, the plea agreement          afforded Williams  significant benefit.   The  government agreed,          inter  alia,  to move  to  dismiss all  RICO  and RICO-conspiracy          _____  ____          counts, and to  recommend a sentence at the low-end of the appli-          cable guideline sentencing range.   The government also left  the          door open  to a  downward departure  for substantial  assistance.          Ultimately,  of course,  the district  court  granted a  downward          departure for  substantial assistance, see  supra note 2,  on the                                                 ___  _____          government's recommendation.  See U.S.S.G.   5K1.1.                                         ___                    Thus, our  review discloses  that both  the letter  and          spirit of the plea agreement was observed, resulting  in substan-          tial benefit to Williams.   The fact that the district  court, in          scrupulous  observance  of  the  Sentencing  Guidelines  and  our          caselaw,  did not  grant  appellant  all he  had  hoped does  not          warrant appellate relief.            1.   "Relevant Conduct"          1.   "Relevant Conduct"                ________________                    Absent a mistake  of law, we review  "relevant conduct"          findings for clear  error.  United States v. Wood,  924 F.2d 399,                                      _____________    ____          403 (1st  Cir. 1991).    Only after  the government  has met  its          burden  of establishing, by  a preponderance of  the evidence, "a          sufficient nexus between the [extraneous] conduct and the offense          __________ _____          of conviction," may  the sentencing court,  in its sound  discre-          tion, make  a "relevant  conduct" adjustment.   United  States v.                                                          ______________                                        ____________________                    so.                                          7          Sklar, 920 F.2d 107, 110  (1st Cir. 1990) (emphasis added).   The          _____          district court supportably found the required nexus in this case.                    The principal  argument advanced by Williams  on appeal          is that the conduct allegedly  involved in the SERVESS scheme was          too dissimilar  to be  considered "relevant"  to  the conduct  of          conviction involved in the DARSO counts.4  This supposed dissimi-          larity springs  from the  fact that  Williams's alleged  criminal          liability under the dismissed SERVESS  counts was predicated on a          determination  that  Williams controlled  Polis,  thereby causing          SERVESS  to violate its obligation to disclose "related parties,"          whereas criminal liability  for the DARSO scheme  rested directly          on the conduct of Williams and his codefendants.                    The  SERVESS and DARSO  schemes shared a  great deal in          common:   (1) the  same victim, i.e.,  the Commonwealth;  (2) the                                          ____          same method of  operation, i.e., SERVESS's improper  requests for                                     ____          Commonwealth  reimbursement of the  management fees paid  CSI, or          the  rental fees paid  for the real  estate trusts; (3)  the same          three principals, i.e., Williams and Kotek as influential "insid-                            ____          ers," Alexander  as the  "outsider" recipient;  and (4)  the same          underlying substantive  offense, i.e., the  fraudulent failure to                                           ____          identify the  defendant's "related  party"  status in  accordance                                        ____________________               4Appellant's  other  arguments  warrant  little  discussion.          First, he  questions the temporal proximity between the DARSO and          SERVESS schemes.   But  this argument ignores  the nature  of the          underlying  crime.  Assuming  arguendo that the  SERVESS contract                                        ________          with CSI was executed before  DARSO came into existence, the mail          fraud,  based  on  the  continuing non-disclosure  of  Williams's                                             ______________          "related party" status,  continued well beyond that date.  Appel-          lant's second contention    that any control exercised over Polis          was "intermittent"    is likewise inapposite.                                            8          with 114.5 Mass. Reg. 3.02.   Thus, the district court reasonably          could conclude that the DARSO  and SERVESS schemes, while not one          and the same, were nonetheless sufficiently comparable in charac-          ter, cast and  plot, to warrant similar billing  under U.S.S.G.            1B1.3.          2.   Sufficiency of the Evidence          2.   Sufficiency of the Evidence               ___________________________                    The second argument Williams makes is that the evidence          was insufficient  to link him to the  SERVESS scheme.  The eight-          level  adjustment under U.S.S.G.   1B1.3 was based exclusively on          the  government's  contention  that  Williams controlled  Polis's          approval of the CSI management contract, and the long-term leases          with the  real estate  trusts, on  behalf of  SERVESS.  The  only          "control"  evidence introduced  at sentencing  was Polis's  grand          jury testimony, which  Williams correctly characterizes as  hear-          say.  Williams insists that the grand jury testimony was rendered          even  less  reliable because  the  prosecutor posed  a  series of          hostile or leading questions to  Polis on the issue of "control."          Moreover, Williams argues, Polis  testified that following  their          resignations  from the  SERVESS  Board  in  August  1984  neither          Williams nor Kotek had the power to remove Polis as the executive          director of SERVESS, and  that Polis named a new board  of direc-          tors, increased his  own salary, and  leased other properties  in          which Williams had no ownership interest.                    Given the deferential "clear error" standard of review,          United States v. Zuleta-Alvarez, 922 F.2d 33, 36 (1st Cir. 1990),          _____________    ______________          cert. denied, 111  S. Ct. 2039 (1991), and the  modest burden and          _____ ______                                          9          quality of proof  incumbent on the government  at sentencing, id.                                                                        ___          at 37  (citing United States  v. Mocciola,  891 F.2d 13,  17 (1st                         _____________     ________          Cir.  1989)), Williams's claim founders  on the plain language in          U.S.S.G.   6A1.3(a):                     In resolving any  reasonable dispute concern-                    ing  a  factor  important to  the  sentencing                    determination, the  court may  consider rele-                    vant information without regard to its admis-                    sibility under the  rules of evidence applic-                    able at trial, provided  that the information                    has  sufficient  indicia  of  reliability  to                    support its probable accuracy.                    Under U.S.S.G.    6A1.3(a), we  repeatedly have  upheld          reliance on  prior hearsay  testimony never  subjected to  cross-          examination,  so long  as there  were  other adequate  indicia of          reliability.   See, e.g.,  Wright, 873  F.2d at  441.  Here,  the                         ___  ____   ______          Polis testimony was given under oath, subject to the penalties of          perjury,  in a  formal  grand jury  proceeding  that resulted  in          Williams's indictment on the DARSO counts, as well as the SERVESS          counts which were dismissed pursuant  to the plea agreement.  The          district court was provided with  the complete transcript of  the          Polis grand jury  testimony, wherein Polis admitted,  inter alia,                                                                _____ ____          that Williams was still "calling  the shots" during the first two          years Polis served as President  of SERVESS.5  The Polis testimo-                                        ____________________               5Polis testified as follows:                    Q:   But, Mr.  Polis,  [why did  you sign]  a                    document  [the  SERVESS-CSI  management  con-                    tract] you had never seen before, a  document                    in which you  played no role in  the negotia-                    tion  of on your first day  on the job, which                    obligated your entity to five years relation-                    ship  with [CSI].   What  is  the reason  you                    signed it?                    A:   I didn't really feel I had the choice.                                          10          ny  was the  only direct  evidence before  the district  court on          Williams's influence upon Polis.  So far as the record discloses,          the Polis testimony was also  the only direct evidence before the          grand jury on the issue of Williams's "control," and would appear          to have  been critical to  the "probable cause"  determination on          which Williams's indictment on the  SERVESS counts was based.  In                                        ____________________                    Q:   And what  was     what was  it that  was                    taking away your ability to have a choice?                    A:   Stephen Williams and Bruce Kotek.                    Q:   How?                    A:   The fact that they had the contracts and                    the control.                                        * * *                    Q:   Mr. Polis, in the sort of natural scheme                    of  human relationships,  two people  who are                    running  an entity  don't voluntarily  relin-                    quish all control over it to somebody else on                    the faint hope that person will turn  control                    right back to them  in a consulting agreement                    or leave control with them by letting them do                    what they  want to  do in  terms of  who they                    execute leases with and the like.                         Is  it your testimony  that there was no                    conversation  . .  . in  which you  indicated                    that you  would continue to  do their bidding                    as director of SERVESS?                    A:   There  was a  discussion about  they had                    gone to the state, they had gone to an attor-                    ney, they  were coming  up with an  agreement                    and  that they wanted it signed and that they                    would  become  the  management  entity and  I                    would run the programs.                    Q:   Well  didn't somebody  ever  say at  any                    point  in time you're going to continue to do                    as we tell you to do, Bill.  We're making you                    executive-director  but  we  still  call  the                                                 _____  ____  ___                    shots here.                    _____                    A:   That's obviously how they felt.                    Q:   And that  for a while,  that's obviously                    what happened Mr. Polis?                    A:   Yes.                    Q:   True?                    A:   True.          (emphasis added).                                          11          these circumstances, we  think there can be  little question that          the  Polis  grand  jury testimony  was  sufficiently  reliable to          permit reliance by  the sentencing court.  Compare, e.g., Zuleta-                                                     _______  ____  _______          Alvarez,  922 F.2d at  37 (upholding consideration  of grand jury          _______          testimony where sentencing  judge presided over trial  and formed          independent  assessment of  reliability),  with United  States v.                                                     ____ ______________          Harris, 982 F.2d  317 (8th Cir. 1992) (upholding  refusal to rely          ______          on  grand jury  testimony  where  sentencing  judge  doubted  its          veracity).                     The sentencing  judge was  highly conversant  both with          the facts of the case and Williams's association  and involvement          with his  codefendants in the SERVESS  scheme.  By  the time Wil-          liams was  sentenced, the judge not  only had the benefit  of the          presentence investigation report and Williams's written response,          but the understanding gained from more than two years of pretrial          proceedings.   Indeed,  a few  weeks earlier  the same  judge had          sentenced  Alexander  and Kotek  on  the  SERVESS and  the  DARSO                                                            ___          counts.   Cf. Zuleta-Alvarez,  922 F.2d at  37 (holding  that en-                    ___ ______________          hanced deference was due findings  of fact where sentencing judge          had presided at trial).                    The  district  court  supportably  found  that  Polis's          actions on behalf of SERVESS  in entering into the CSI management          contract were controlled by Williams.           3.   Evidentiary Hearing          3.   Evidentiary Hearing               ___________________                    Finally,  Williams  argues  that  the district  court's          refusal  to allow an  evidentiary hearing,  at which  Polis could                                          12          have been cross-examined, constituted an abuse of discretion.  We          have yet to hold that it is an abuse of discretion to deny cross-          examination  in the  sentencing context.   See  United  States v.                                                     ___  ______________          Regan, 989 F.2d 44, 47 (1st Cir. 1993).          _____                    Williams  has not demonstrated  an abuse  of discretion          here.  See  Garcia, 954  F.2d at  19.  Even  though, as  Williams                 ___  ______          alleges,  the Polis grand jury testimony on "control" was central          to  the "relevant  conduct" adjustment  relating  to the  SERVESS          counts,  we cannot  say that  the district  court, which  had the          benefit of the grand jury transcript and its own long-term famil-          iarity  with these proceedings,  was presented with  a compelling          basis  for conducting an evidentiary  hearing to revisit the same          ground.   Williams  was accorded  an opportunity  to contest,  in          writing, the  government's evidence of "control."  Yet he neither          proffered rebuttal evidence  nor alleged or identified  any false          grand jury testimony by Polis,  but simply disputed the import of          Polis's testimony  by denying  "control" without  suggesting what          additional  or different information might be gleaned from cross-          examining  Polis.  Williams's  sheer earnestness in  pursuing the          request was not enough.   In these circumstances, and absent some          more  concrete  proffer, the  district  court did  not  abuse its          discretion in denying an evidentiary hearing.                      Affirmed.                    Affirmed.                    ________                                          13
