PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA,
Plaintiff-Appellant,

v.                                                                  No. 98-4633

ANDREW R. ADLER,
Defendant-Appellee.

Appeal from the United States District Court
for the District of South Carolina, at Columbia.
Joseph F. Anderson, Jr., District Judge.
(CR-98-106-JFA)

Argued: May 7, 1999

Decided: August 2, 1999

Before MURNAGHAN and LUTTIG, Circuit Judges,
and WILLIAMS, Senior United States District Judge
for the Eastern District of Virginia,
sitting by designation.

_________________________________________________________________

Affirmed by published opinion. Judge Luttig wrote the opinion, in
which Senior Judge Williams joined. Judge Murnaghan wrote a sepa-
rate concurring opinion.

_________________________________________________________________

COUNSEL

ARGUED: Dean Arthur Eichelberger, Assistant United States Attor-
ney, Columbia, South Carolina, for Appellant. Parks Nolan Small,
Federal Public Defender, Columbia, South Carolina, for Appellee.
ON BRIEF: J. Rene Josey, United States Attorney, Columbia, South
Carolina, for Appellant.

_________________________________________________________________

OPINION

LUTTIG, Circuit Judge:

The United States appeals from the district court's entry of a judg-
ment of acquittal following defendant Andrew R. Adler's conviction
for federal wire fraud against Printgear, Inc., a supplier for Adler's
former company. Because, insofar as is relevant in this case, depriva-
tion of a property right is the sine qua non of a wire fraud offense and
Adler did not deprive Printgear of anything in which Printgear had a
property right, we affirm.

I.

Defendant Adler was co-owner with Jeffrey N. Kennedy of Adler
Industries, a Georgia corporation that was in the business of custom-
printing t-shirts. In 1996, Adler Industries contracted with the House
of Blues, an Atlanta restaurant, to provide the restaurant with over
400,000 t-shirts emblazoned with the House of Blues logo for sale
during the summer Olympic Games. Adler Industries then contracted
with Printgear, a South Carolina corporation with which it had previ-
ously done business, for the necessary blank t-shirts. Printgear agreed
to provide the shirts on credit, with payment due August 15, 1996,
about two weeks after the Olympics were to end. Although the credit
was unsecured, Printgear obtained personal guarantees from Messrs.
Adler and Kennedy.

The Olympic bombing thwarted the House of Blues' plans to sell
a large volume of t-shirts, however, as it led the police to rope off the
section of Atlanta where House of Blues was located. Because of this
and other problems, House of Blues found itself forced to cut its
promised orders from Adler by over half. Adler Industries and House
of Blues ultimately settled Adler's claim for breach of contract, with
Adler receiving $831,750 from House of Blues on August 26. At the
time Adler Industries received this payment, it was insolvent, due to

                     2
a $454,657.74 debt to Printgear and debts to several other unsecured
creditors. After paying some of these unsecured creditors (but not
Printgear), Adler Industries had $530,000 remaining in the bank.
Messrs. Adler and Kennedy concluded that if they paid Printgear,
they would have no money left either for themselves or to run the
business. So, on August 27, they caused Adler Industries to pay each
of them a "bonus" of $265,000. Two days later, they left the country,
ultimately depositing the funds in Costa Rica.

Beginning on August 15, which was both the due date on Adler
Industries' debt to Printgear and about the date when Printgear
learned of House of Blues' breach, Alvin Strasburger, one of Print-
gear's owners, began regularly contacting Adler Industries with
demands for payment and threats of legal action. Adler originally
claimed that it would pay Printgear as soon as it received the House
of Blues settlement, but, as noted, no such payment to Printgear
occurred. At a September 16 meeting in Atlanta arranged by Messrs.
Adler and Kennedy after they had returned to the United States, they
informed Strasburger and Mary Minus, another owner of Printgear,
that Adler Industries had paid other creditors with the House of Blues
settlement money. Adler and Kennedy added, however-- falsely --
that Adler Industries was still in business and doing well, and they
promised that future earnings would enable it to pay Printgear.

During this meeting, Strasburger demanded that Mr. Adler account
for his company's spending of the House of Blues settlement money.
The next day, September 17, Mr. Adler sent Printgear by facsimile an
intentionally false list of payments from the settlement. Among other
things, the list did not disclose the payments to Adler and Kennedy.
Eventually, when Adler Industries failed to pay Printgear, Printgear
sued the company, Mr. Adler, and Mr. Kennedy in Georgia, obtaining
default judgments for the full amount due under the contract.

A grand jury thereafter indicted Adler and Kennedy on one count
of inducing interstate travel in furtherance of a fraudulent scheme, in
violation of 18 U.S.C. § 2314, and one count of wire fraud, in viola-
tion of 18 U.S.C. § 1343. The wire fraud count alleged that the Sep-
tember 17 facsimile was in furtherance of a scheme to defraud
Printgear. Kennedy pleaded guilty to count one (section 2314) and
agreed to testify against Adler in exchange for having count two

                    3
against himself dismissed. With regard to Adler, the district court dis-
missed count one, and then, following a trial and conviction on count
two, granted Adler's motion, pursuant to Fed. R. Crim. P. 29(c), for
a judgment of acquittal on that count. The government now appeals
the grant of this motion.

II.

The resolution of this case turns on whether defendant Adler
deprived Printgear of any property in which it held an interest as a
matter of right, for, as relevant here, the sine qua non of a conviction
under the federal wire fraud statute is the deprivation of another's
money or property through fraudulent means. On the facts of this
case, there are only two kinds of property of which Printgear could
have been deprived --- its chose in action on Adler Industries' debt
or the particular money itself that Adler Industries received from the
House of Blues settlement. Although Printgear clearly had a property
interest in the chose in action, it was not deprived of that property;
in fact, Printgear exercised its right to sue on that interest and secured
a default judgment in a court of law. The only issue before us, there-
fore, is whether Printgear possessed a property right in the particular
settlement proceeds received from House of Blues.

The federal wire fraud statute provides criminal sanctions for any-
one who,

          having devised or intending to devise any scheme or artifice
          to defraud, or for obtaining money or property by means of
          false or fraudulent pretenses, representations, or promises,
          transmits or causes to be transmitted by means of wire . . .
          in interstate . . . commerce, any writings . .. for the purpose
          of executing such scheme or artifice . . . .

18 U.S.C. § 1343. With one exception not relevant here, this statute,
and the parallel mail fraud statute,1 18 U.S.C. § 1341, are limited to
"protecting property rights," McNally v. United States, 483 U.S. 350,
_________________________________________________________________
1 See Carpenter v. United States, 484 U.S. 19, 25 n.6 (1987) ("The mail
and wire fraud statutes share the same language in relevant part, and
accordingly we apply the same analysis to both sets of offenses here.").

                     4
357 (1987), and thus reach (and only reach) "any scheme to deprive
another of money or property by means of false or fraudulent pre-
tenses, representations, or promises," Carpenter v. United States, 484
U.S. 19, 27 (1987).2 The Supreme Court has admonished that these
statutes should "be interpreted broadly insofar as property rights are
concerned." McNally, 483 U.S. at 356. It has thus held that the "prop-
erty" of which a victim is deprived need not be tangible property,
Carpenter, 484 U.S. at 25, and that the victim of fraud need not suffer
financial loss; rather, he need only be deprived of some right over that
property, such as the right to exclusive use, id . at 26-27. See McNally,
483 U.S. at 359. In the context of the bank fraud statute, 18 U.S.C.
§ 1344, which is for purposes here analogous to the mail and wire
fraud statutes, we have applied the common sense notion that prop-
erty is anything in which one has a "right that could be assigned,
traded, bought, and otherwise disposed of." United States v. Mancuso,
42 F.3d 836, 845 (4th Cir. 1994).3

Here, as noted, the only property of which Printgear was arguably
defrauded is the settlement money that Adler Industries received from
House of Blues. Although all property rights are, like any other legal
right, intangible, the underlying property in this case -- the money --
is not. See United States v. Granberry , 908 F.2d 278, 280 (8th Cir.
1990) ("Money is money, and `money' is specifically mentioned in
the statutory words."). Thus the question is not, as it was in
Carpenter, whether one can, for purposes of section 1343, have a pro-
tected property right in the object of the charged fraudulent scheme.
Here the object is the settlement money, and no one disputes that
_________________________________________________________________
2 The exception is 18 U.S.C. § 1346, which provides that "the term
`scheme or artifice to defraud' includes a scheme or artifice to deprive
another of the intangible right of honest services." Section 1346, enacted
in 1988, superseded the holding in McNally that section 1341 did not
reach "schemes to defraud citizens of their intangible rights to honest and
impartial government," McNally, 483 U.S. at 355. As the government has
acknowledged throughout, this is not an "honest services" case.
3 In both Mancuso, 42 F.3dat 845, and United States v. Orr, 932 F.2d
330, 332 (4th Cir. 1991), we treated section 1344 as analogous to section
1341 and 1343 for purposes of determining whether the defendant had
deprived his victim of something that constituted property of the victim.

                    5
ownership of money is protected under section 1343; the sole ques-
tion is whether Printgear had any property right in that money.4

The government offers three arguments for why Printgear did have
a property right in the money that Adler Industries received from
House of Blues. The first argument, based on an alleged agreement
between Adler Industries and Printgear, and the second, based on
Georgia law, are arguments that Printgear actually had an ownership
interest in the money. The third argument, which is less clear, appears
to be that, because of Printgear's separate property right in the chose
in action on Adler Industries' debt, Printgear, even though unsecured,
also had some sort of property right in the settlement money as a
source of payment for that debt. We address these arguments in turn,
and find none persuasive.5
_________________________________________________________________
4 This distinction between the property and a right to that property also
renders irrelevant the government's argument that Mr. Adler, by divert-
ing the funds, violated section 1343 because those funds were "some-
thing of value," McNally, 483 U.S. at 358 (quoting Hammerschmidt v.
United States, 265 U.S. 182, 188 (1924)), to Printgear. The question
whether something is a "thing of value" and thus protected under the
wire fraud statute from being fraudulently obtained is distinct from the
question of who has a property right to that"thing." See United States v.
Hickok, 77 F.3d 992, 1003 (7th Cir. 1996) (explaining that defendant
"used a variety of devices to obtain `things of value' that properly
belonged to" the victim) (emphasis added)). There is no dispute in this
case over whether money is a "thing of value"; the question is whether
that thing "properly belonged to" Printgear. Thus, whatever the scope of
the term "thing of value," see generally McNally, 483 U.S. at 358 n.8;
United States v. Loney, 959 F.2d 1332, 1335-36 (5th Cir. 1992), it has
no special bearing in this case.
5 Although the government states the general issue as "whether the pro-
ceeds of the House of Blues settlement represented`something of value'
to Printgear," Appellant's Br. at 14, and, as we explain, makes three
arguments that Printgear did have a property right in that settlement, the
final argument of these three may include (or actually be) the claim that
Mr. Adler deprived Printgear not of its right to the settlement money per
se, but rather, by diverting that money, deprived Printgear of its separate
property right in the chose in action for payment of Adler Industries'
debt to Printgear. Compare id. at 16 ("Printgear had an independent
interest in the funds as the object of a collection suit."), with id. at 17

                   6
First, the government, although admitting that Printgear was an
unsecured creditor, nevertheless argues that Printgear acquired a
property right in the House of Blues settlement money because defen-
dant Adler orally promised Printgear that Adler Industries would pay
Printgear out of that money. Assuming arguendo that such an agree-
ment by an insolvent corporation to allocate certain funds to a single
unsecured creditor would be valid under the bankruptcy laws and, if
valid, could suffice to create a property right for that creditor in those
funds for purposes of section 1343, see Miller v. United States, 997
F.2d 1010, 1017 (2d Cir. 1993) ("[A] contract right can constitute
§ 1341 property."), we reject the government's argument because
there was no such agreement.

Mr. Adler did undoubtedly tell Printgear that Adler Industries
would be able to pay Printgear after it received the settlement from
House of Blues. But such a claim by Mr. Adler is a far cry from a
promise to Printgear of that particular money, and the record reveals
that no such promise was ever made. An employee of Printgear testi-
fied that during a telephone conversation with Mr. Adler, Adler told
him "[t]hat as soon as The House of Blues paid him, then he would
be able to pay us our money."6 Similarly, Strasburger testified merely
_________________________________________________________________
("The deliberate destruction of the value of the account receivable . . .
should be prosecutable under the wire fraud statute.") (emphases added).
To the extent that this is the government's argument, we reject it also,
because Mr. Adler did not deprive Printgear of its chose in action. As we
have explained, Printgear did avail itself of this legal right, suing not
only Adler Industries but also Messrs. Adler and Kennedy, who had per-
sonally guaranteed the debt, on that right.

That Printgear retained its right in the chose in action distinguishes this
case from United States v. Ely, 142 F.3d 1113 (9th Cir. 1998), on which
the government heavily relies. In Ely, a bank fraud case, the parties
(according to the indictment) changed their legal arrangement in such a
manner that the victim of the fraud was actually deprived of its original
right to demand payment on a debt. Not surprisingly, therefore, the court
in Ely reinstated an indictment alleging that a debtor violated section
1344 by fraudulently convincing a bank not to demand payment of inter-
est due but instead to provide the debtor further credit to enable it to pay
that interest. Id. at 1119.
6 Even if this conversation did amount to a promise by Mr. Adler to
allocate these funds to Printgear, we would not hold it to create a contract

                     7
that Mr. Adler told him "that as soon as he collected we would be
paid." As Strasburger acknowledged, Adler Industries had simply
given Printgear "a contract to pay" -- one that Printgear could, and
did, convert into "a judgment" against Adler Industries when it
breached that contract. But a creditor-debtor contract, such as the one
here, is not (at least is not necessarily) a contract that the debt will be
paid out of any particular monies.

The government next argues that, under the Georgia law that gov-
erned Adler Industries and its officers, Adler Industries' directors
(including Mr. Adler) had a fiduciary duty, once the company became
insolvent, "to manage the remaining assets for the benefits of its cred-
itors." Hickman v. Hyzer, 401 S.E.2d 738, 740 (Ga. 1991) (internal
quotation marks omitted) (quoting Ware v. Rankin, 104 S.E.2d 555
(Ga. Ct. App. 1958)). This duty, the government contends, created for
those creditors a property right in the company's remaining assets and
thus created a property right for Printgear, as one of numerous unse-
cured creditors of Adler Industries, in the assets that Adler Industries
received from House of Blues.

Although the government correctly states the duty that Hickman
imposes on directors of insolvent corporations, it does not follow
from the existence of this duty that the creditors have a property right
in the corporation's assets. Rather, as the court in Hickman itself
clearly explained, a violation of the duty merely creates a right "to an
action against the directors to recover sums improperly paid out by
the corporation." Id. That is, it creates a right to sue the directors per-
sonally, not a right to any particular funds. Further, the liability of the
directors is to the corporation, not to the corporation's creditors (even
though the purpose of the liability is to enable the corporation to pay
its creditors), as reflected in the statute on which Hickman, 401
S.E.2d at 740, relied. See Ga. St. § 14-2-832(a) (making director who
"votes for or assents to" an unlawful distribution from the corporation
to a shareholder "personally liable to the corporation for the amount
_________________________________________________________________
for such an allocation, because there is no indication that this employee
with whom Adler spoke, who was not an officer of Printgear, had author-
ity to make contracts for Printgear, or that Adler thought she did. The
record actually shows that she lacked such authority. J.A. at 423-24.

                     8
of the distribution"). This statute is fully consistent with the fact that
the corporation's money is its own, and neither Hickman nor the stat-
ute offers us any reason to believe that the mere existence of a fidu-
ciary duty upon a corporation's directors creates a property right in
the corporate assets for that corporation's unsecured creditors, much
less that the directors' duty could create a property right for a particu-
lar creditor in particular assets.7

The government's third argument is that a property right in the set-
tlement money arose because Mr. Adler, by diverting these funds,
"prevent[ed] collection of lawful debts." The actual argument for a
property right, although not entirely clear, appears to be that Print-
gear's admitted property right in the chose in action on the unsecured
debt created an additional property right in any funds needed to sat-
isfy that debt. We reject this argument because it blurs the distinction
between two distinct types of property, one of which (a right to sue
for payment of a debt) an unsecured creditor undoubtedly does own,
and the other of which (the debtor's money) the unsecured creditor,
equally undoubtedly, does not own.

We made clear in Mancuso that a claim on a debt is distinct from
a claim to particular funds to satisfy that debt and that the mere exis-
tence of the former does not give rise to the latter. In that case, the
defendant had agreed with a bank, as a condition for receiving a loan
for his company, that in all future work contracts obtained by his
company with financing from the bank, the bank's loan would be "se-
cured by a lien on the particular job contract for which financing was
provided." 42 F.3d at 839. In addition, the defendant agreed that all
checks due on those work contracts would be jointly payable to the
bank and the defendant's company and would be mailed directly to
_________________________________________________________________
7 To the extent that the government is claiming that the mere breach by
Mr. Adler of a fiduciary duty to which he was subject as a director of
Adler Industries could amount to a violation of the wire fraud statute, the
government is attempting to rely on 18 U.S.C. § 1346, which it may not
do for the first time on appeal. We take no position on whether that sec-
tion allows a conviction of a defendant who was not a governmental offi-
cial. See generally United States v. Frost, 125 F.3d 346, 365-66 (6th Cir.
1997) (discussing scope of section 1346), cert . denied, 119 S. Ct. 40
(1998).

                     9
the bank. Id. The defendant thereupon told his customers to make the
checks out to his company only and to mail them directly to him. On
appeal, he argued that the bank "did not have any property interest in
the diverted funds," because the bank's arrangement with his com-
pany was "no more than a standard commercial arrangement." Id. at
845. We rejected this argument, finding it "impossible to accept
defendants' assertion that the bank had no interest in the checks that
HRP and HEI cut and sent directly to Precision. After the assignments
of rights, Precision's interest in the proceeds of the contracts was
extinguished, and FFSLAR held an interest in those funds." Id.
(emphasis added). In other words, the bank had a property right to
particular funds to satisfy a debt because it had explicitly contracted
for that right.

The relationship between Printgear and Adler Industries stands in
marked contrast to that between the bank and the defendant's com-
pany in Mancuso. Unlike in Mancuso, Printgear did nothing to secure
payment from particular funds and did nothing at all to ensure pay-
ment other than to obtain personal guarantees from Adler and Ken-
nedy, as the following colloquy at trial between Minus and defense
counsel highlights:

          Q: Now, did you have any discussions with your partners
          about other ways [besides the personal guarantees] you
          could secure payment to Printgear of Printgear's payment?

          A: No.

          Q: Okay. You didn't talk to The House of Blues about get-
          ting Printgear's name put on the check?

          A: No.

          Q: That would have been a very logical way to kind of
          guarantee payment, wouldn't it?

          A: I didn't think I needed it.

J.A. at 45. Printgear lacks the very thing that provided the bank in
Mancuso a property right in the proceeds from the contracts of the

                     10
defendant's company with its customers -- a contractual right to the
particular monies in question.

Thus, even though Adler and Kennedy, by diverting substantial
sums of that settlement to themselves, undoubtedly made it harder for
Printgear to obtain payment following a judgment on the chose in
action, they did not deprive Printgear of anything that Printgear actu-
ally owned, because Printgear did not have a property right in the par-
ticular settlement proceeds from House of Blues. See United States v.
Carman, 577 F.2d 556, 564-65 (9th Cir. 1978) ("[M]oney placed out
of the reach of creditors is not the equivalent of money `stolen, con-
verted or taken by fraud' within the meaning of" 18 U.S.C. § 2314,
because creditors are not the owners of this money.).8 Printgear could
have "assigned, traded, bought, and otherwise disposed of," Mancuso,
42 F.3d at 845, its chose in action on Adler Industries' debt, but it had
no such right to do the same with the House of Blues settlement
money. The former was Printgear's property; the latter was not.

Accordingly, we conclude that Mr. Adler did not deprive Printgear
of anything in which it had a property right and thus that, however
unsavory his conduct and whatever other laws he may have violated,
he did not violate section 1343. This conclusion, we suspect, will
hardly come as a surprise to the government. As government counsel
candidly acknowledged at argument, the facts of this case placed it,
at best, on the very "periphery" of the federal wire fraud statute.

The judgment of acquittal is hereby affirmed.

AFFIRMED
_________________________________________________________________
8 We relied heavily on Carman , whose facts are essentially identical to
those in this case, in United States v. Burbank, 848 F.2d 453, 456 (4th
Cir. 1988). The government's effort to distinguish these two cases on the
ground that they involved tangible property is unpersuasive because it
ignores the distinction, discussed above, between the nature of the prop-
erty and of the right in that property. The property in this case, money,
is tangible and is the same sort of property at issue in Carman and
Burbank. The question is, just as it was in Carman, whether the creditor
has "the attributes of an owner" of the money, 577 F.2d at 565.

                     11
MURNAGHAN, Circuit Judge, concurring:

I concur. I write only to emphasize that Adler and Kennedy have
not escaped the arms of the law. While Printgear's failure to obtain
a security interest in the funds paid to Adler Industries by the House
of Blues precludes criminal liability here, Printgear is now a judgment
creditor and may well receive payment from Adler Industries. The
majority's holding thus returns cases like the instant case to where
they belong: the civil and bankruptcy arenas where the assets of unsa-
vory businessmen can be divided to satisfy debts owed to trusting
creditors like Printgear.

                    12
