     13-3040-cr
     United States v. Lobacz

                                    UNITED STATES COURT OF APPEALS
                                        FOR THE SECOND CIRCUIT

                                           SUMMARY ORDER

     RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
     SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
     BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
     WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
     MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
     NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY
     OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

 1           At a stated term of the United States Court of Appeals for the Second Circuit, held at the
 2   Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
 3   26th day of March, two thousand fifteen.
 4
 5   PRESENT:         RALPH K. WINTER,
 6                    DEBRA ANN LIVINGSTON,
 7                    DENNY CHIN,
 8
 9                           Circuit Judges.
10   ____________________________________________________
11
12   UNITED STATES OF AMERICA,
13
14                    Appellee,
15
16                             v.                                        No. 13-3040-cr
17
18   FRANK LOBACZ,
19
20               Defendant-Appellant.
21   ____________________________________________________
22
23   FOR APPELLEE:                         MICHAEL P. CANTY (Jo Ann M. Navickas, on the brief),
24                                         Assistant United States Attorneys, for Loretta E. Lynch,
25                                         United States Attorney for the Eastern District of New
26                                         York, Brooklyn, NY.
27
28   FOR APPELLANT:                JOHN F. KALEY, Doar Rieck Kaley & Mack, New York,
29                                 NY.
30   _____________________________________________________
31
 1          Appeal from the United States District Court for the Eastern District of New York

 2   (Hurley, J.).

 3          UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,

 4   ADJUDGED, AND DECREED that the judgment of the District Court is AFFIRMED.

 5          Defendant-Appellant Frank Lobacz (“Lobacz”) appeals his conviction on charges of

 6   health care fraud conspiracy, in violation of 18 U.S.C. § 1349; health care fraud, in violation of

 7   18 U.S.C. § 1347; filing a false Annual Return/Report of Employee Benefit Plan for 2002 (the

 8   “Form 5500”), in violation of 26 U.S.C. § 7206(1); and three counts of filing fraudulent federal

 9   income tax returns for the years 2000, 2001, and 2002, respectively, in violation of 26 U.S.C.

10   § 7201. Lobacz also appeals his sentence on procedural grounds. We assume the parties’

11   familiarity with the underlying facts, the procedural history, and the issues presented for review.

12          Lobacz’s primary argument on appeal is that his trial counsel’s decision not to move to

13   sever the health care fraud counts from the tax evasion counts constituted per se ineffective

14   assistance of counsel. “When faced with a claim for ineffective assistance of counsel on direct

15   appeal, we may: (1) decline to hear the claim, permitting the appellant to raise the issue as part of

16   a subsequent petition for writ of habeas corpus . . . ; (2) remand the claim to the district court for

17   necessary factfinding; or (3) decide the claim on the record before us.” United States v. Morris,

18   350 F.3d 32, 39 (2d Cir. 2003). “[I]neffective-assistance claims ordinarily will be litigated in the

19   first instance in the district court, the forum best suited to developing the facts necessary to

20   determining the adequacy of representation during an entire trial.” Massaro v. United States, 538

21   U.S. 500, 505 (2003). This Court’s general policy favors determination of ineffective-assistance

22   claims in the context of a habeas corpus proceeding rather than a remand or on appeal, and

23   Lobacz has offered no compelling reason for us to deviate from our usual practice in this case.

24   See United States v. Doe, 365 F.3d 150, 154-55 (2d Cir. 2004) (explaining that habeas corpus
                                                       2
 1   proceedings, as opposed to remand, are generally a superior way to address ineffectiveness

 2   claims). We thus dismiss Lobacz’s ineffective-assistance claim without prejudice to the filing, in

 3   due course, of a petition for relief under 28 U.S.C. § 2255.

 4          Lobacz also argues on appeal that the evidence at trial was insufficient to establish the

 5   mens rea element of the Form 5500 offense: that his failure to report his pension fund

 6   withdrawals on the Form 5500 was knowing and willful. “A defendant challenging a conviction

 7   based on a claim of insufficiency of the evidence bears a heavy burden. The evidence presented

 8   at trial should be viewed in the light most favorable to the government.” United States v. Bruno,

 9   383 F.3d 65, 82 (2d Cir. 2004) (alterations omitted). “We defer to the jury’s determination of the

10   weight of the evidence and the credibility of the witnesses . . . . Accordingly, we will not disturb

11   a conviction on grounds of legal insufficiency of the evidence at trial if any rational trier of fact

12   could have found the essential elements of the crime beyond a reasonable doubt . . . .” Id.

13          In this case, the government entered into evidence the Plan Document covering the

14   pension plan in question, which clearly indicates that using fund assets for one’s own interest,

15   deriving personal benefits from one’s position as trustee of the fund, and borrowing money from

16   the fund, all constitute prohibited transactions. Lobacz, who signed the Plan Document, had a

17   fiduciary responsibility to review it and be familiar with it in his capacity as plan administrator

18   and trustee. Based on this evidence, and drawing all reasonable inferences in favor of the

19   government, the jury was entitled to conclude that Lobacz knew his sizable withdrawals from the

20   pension fund were “prohibited transactions” that, as the Plan Document also provided, were

21   required to be disclosed for tax purposes. See Gov’t App. at 115 (“[A]ny transaction that is

22   otherwise prohibited by this Section may be engaged in if . . . such transaction is reported as such

23   to the IRS and the transaction is reversed.”). And Lobacz signed the IRS Form 5500 for 2002—

24   which was obviously, on its face, missing any reference to his $645,000 withdrawals—swearing,
                                                      3
 1   under penalty of perjury, that he had reviewed it and that its representations were true. As the

 2   government points out, the jury was not required to credit Lobacz’s protestations that, despite

 3   being a sophisticated investor, he was ignorant of the meaning of “nonexempt transaction.” The

 4   jury was instead entitled to conclude that Lobacz knowingly and willfully failed to report the

 5   prohibited transactions in which he engaged. Lobacz’s sufficiency claim is thus without merit.

 6           Finally, Lobacz challenges his sentence, arguing primarily that the district court erred

 7   procedurally by applying a two-level enhancement for failure to report income from criminal

 8   activity. When reviewing a sentence for reasonableness, we apply a deferential, abuse-of-

 9   discretion standard. United States v. Cramer, 777 F.3d 597, 600 (2d Cir. 2015). A district court

10   commits procedural error where, inter alia, it fails to calculate or improperly calculates the

11   Sentencing Guidelines range. United States v. Robinson, 702 F.3d 22, 38 (2d Cir. 2012).

12   “However, where we identify procedural error in a sentence, but the record indicates clearly that

13   the district court would have imposed the same sentence in any event, the error may be deemed

14   harmless, avoiding the need to vacate the sentence and to remand the case for resentencing.”1

15   Cramer, 777 F.3d at 601 (brackets and internal quotation mark omitted).

16           The enhancement that Lobacz challenges is provided for in § 2T1.1(b)(1) of the United

17   States Sentencing Guidelines: “If the defendant failed to report or to correctly identify the source

18   of income exceeding $10,000 in any year from criminal activity, increase by 2 levels.” “Criminal

19   activity” is defined by the Application Notes to mean “any conduct constituting a criminal

20   offense under federal, state, local, or foreign law.” Id. § 2T1.1 cmt. 4. The district court imposed


     1
        This principle suffices to dispose of Lobacz’s claim that the district court erred by including his improper
     withdrawals from the pension fund in its calculation of the “tax loss” caused by his actions. With or without the
     pension fund amounts, Lobacz’s “tax loss” total would have fallen in the same $2.5 million to $7 million range,
     yielding precisely the same base offense level, regardless. U.S.S.G. § 2T4.1 (Tax Table). The district court noted as
     much at sentencing. The record thus clearly indicates that the district court “would have imposed the same sentence
     in any event,” and that any error in calculating the amount of tax loss was harmless. Cramer, 777 F.3d at 601.

                                                              4
 1   the enhancement because Lobacz “didn’t report the option income. Moreover, he didn’t report

 2   the withdrawals from the pension fund, which is a taxable event. So . . . under the failure to

 3   report portion of [§ 2T1.1(b)(1)], . . . the two-level enhancement is appropriate.” Gov’t App. at

 4   208-09.

 5          The district court erred in relying on Lobacz’s option income to impose the enhancement,

 6   because Lobacz’s income from option trading was not “income . . . from criminal activity.”

 7   Lobacz’s option trading was perfectly legal – he only crossed over into unlawful territory when

 8   he failed to report the income from that trading on his tax returns. Nonetheless, the district

 9   court’s error in considering Lobacz’s option income was harmless, because the district court had

10   a second, proper ground for imposing the enhancement: that Lobacz failed to report the source of

11   income he improperly withdrew from the pension plan. 18 U.S.C. § 664 makes it a felony to

12   “embezzle[], steal[], or unlawfully and willfully abstract[] or convert[] to [one’s] own use . . .

13   any of the moneys . . . of any employee . . . pension benefit plan, or of any fund connected

14   therewith.” The evidence adduced at trial proved to a preponderance that Lobacz, at the very

15   least, unlawfully and willfully converted to his own use the moneys of an employee pension

16   plan. See United States v. Norris, 281 F.3d 357, 359 (2d Cir. 2002) (“[T]he applicable standard

17   of proof for enhancements is preponderance of the evidence.”). Thus, the district court properly

18   imposed the § 2T1.1(b)(1) enhancement for failure to report income from criminal activity,

19   because Lobacz “failed to report . . . the source of income exceeding $10,000 in any year from

20   criminal activity” – namely, his conversion of the funds of an employee benefit plan to his

21   personal use. Lobacz’s challenge to his sentence therefore fails.

22




                                                      5
1          We have considered all of the remaining arguments raised by Defendant-Appellant and

2   find them to be without merit. For the reasons stated above, we AFFIRM the District Court’s

3   July 29, 2013 judgment.

4

5                                                          FOR THE COURT:
6                                                          Catherine O’Hagan Wolfe, Clerk




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