August 18, 1993   UNITED STATES COURT OF APPEALS
                    FOR THE FIRST CIRCUIT
                                         

No. 92-1959

                        UNITED STATES,

                          Appellee,

                              v.

                       RICHARD L. ROWE,

                    Defendant, Appellant.

                                         

                         ERRATA SHEET

   The  opinion of  this  Court issued  on  July 22,  1993,  is
amended as follows:

   On  page  2, footnote  1, lines  4-5,  replace "29  U.S.C.  
1131;" with "29 U.S.C.    1023, 1024, and 1131;".

July 30, 1993
                UNITED STATES COURT OF APPEALS
                    FOR THE FIRST CIRCUIT
                                 

No. 92-1959

                       UNITED STATES, 
                          Appellee,

                              v.

                       RICHARD L. ROWE,
                    Defendant, Appellant.

                                    

                         ERRATA SHEET

   The  opinion of  this  Court issued  on  July 22,  1993,  is
amended as follows:

   On page 4, line 7 from the bottom:  strike "Fed. R.  Civ. P.
52(a)."

   On page 4, last line:  change "q" in "quideline" to "g" 

                UNITED STATES COURT OF APPEALS
                    FOR THE FIRST CIRCUIT
                                         

No. 92-1959

                        UNITED STATES,

                          Appellee,

                              v.

                       RICHARD L. ROWE,

                    Defendant, Appellant.

                                         

         APPEAL FROM THE UNITED STATES DISTRICT COURT

              FOR THE DISTRICT OF MASSACHUSETTS

         [Hon. William G. Young, U.S. District Judge]
                                                    

                                         

                            Before

                    Boudin, Circuit Judge, 
                                         
               Campbell, Senior Circuit Judge,
                                             
                  and Stahl, Circuit Judge.
                                          

                                         

Susan E. Silver with whom Jack F. St.  Clair and Joseph, St. Clair
                                                                  
&amp; Cava were on brief for appellant.
  
Victor  A. Wild,  Assistant United  States Attorney,  with whom A.
                                                                  
John Pappalardo was on brief for appellee.
           

                                         

                        July 22, 1993
                                         

     BOUDIN, Circuit  Judge.   Pursuant to a  plea agreement,
                           

Richard  Rowe  pled  guilty  to  numerous   criminal  charges

stemming  from  his role  in  a  fraudulent health  insurance

scheme whose victims  were a number  of small businesses  and

their employees.1   Rowe developed and  administered a multi-

employer  health insurance  plan  which offered  below-market

rates  for  coverage comparable  to  that  provided by  other

insurance  companies,  and which  was falsely  represented as

being a tax-exempt ERISA plan "approved" by the United States

Department  of Labor.  Rowe and others involved in the scheme

mismanaged  the operation and converted plan assets and, as a

result, many  subscribers to the  plan were left  with unpaid

medical bills.  

     Rowe  was sentenced  to  an aggregate  six-year term  of

imprisonment,  to  three  years  of supervised  release,  and

ordered  to  pay up  to $1,903,386  in  restitution.   He now

appeals,  challenging the following  sentencing calculations:

a  two-level increase  in his  base offense level  for victim

vulnerability,  U.S.S.G.    3A1.1; a  two-level  increase for

obstruction  of justice,  U.S.S.G.    3C1.1; and  a one-level

                    

     1Rowe  pled  guilty  to  all counts  against  him  which
included  conspiracy, 18 U.S.C.   371;  mail fraud, 18 U.S.C.
    1341;  ERISA  theft,  18  U.S.C.     664;    ERISA  false
statements, 18 U.S.C.    1027; failure to  file certain ERISA
statements,  29  U.S.C.       1023,  1024,  1131;  and  ERISA
kickback, 18 U.S.C.    1954.   ERISA is the  acronym for  the
Employment Retirement Income Security  Act of 1974, 29 U.S.C.
  1001 et seq.
             

                             -2-

upward departure for  causing the  loss of  confidence in  an

important institution,  U.S.S.G.    2F1.1,  application  note

10(e).  We set aside the enhancement for victim vulnerability

and otherwise affirm.

     Victim Vulnerability.  Section  3A1.1 of the  Sentencing
                         

Guidelines  directs  the  sentencing   court  to  increase  a

defendant's base offense level by two levels:

     If the defendant knew or  should have known that  a
     victim of  the offense was unusually vulnerable due
     to  age, physical  or mental  condition, or  that a
     victim  was  otherwise particularly  susceptible to
     the criminal conduct . . . .

The commentary  to the  guideline states that  the adjustment

applies  "where  an unusually  vulnerable  victim  is made  a

target of criminal  activity by the  defendant."  U.S.S.G.   

3A1.1, application  note 1.  The  commentary further explains

that  an  adjustment for  victim  vulnerability  is warranted

where,  for  example,  a  defendant  fraudulently markets  an

ineffective cancer  cure or targets a  handicapped person for

robbery, but not where a fraud is aimed at the general public

and "one of the victims happened to be senile."  Id.
                                                   

     The government made two  arguments in the district court

in support of  the enhancement.   First, it  said that  small

businesses such  as those  solicited  by Rowe  are unable  to

obtain  affordable  health  insurance  for  their  employees,

making them  particularly susceptible to  offers of  low-cost

health   insurance.    Second,  the  government  argued  that

                             -3-

individual  employees  were  rendered  vulnerable  once  they

developed medical problems because they then faced the choice

of either  continuing their payments to  Rowe's plan, despite

its nonpayment or delayed payment of their medical bills,  or

else possibly  losing their health insurance.   Rowe contends

that the district court erred in accepting these arguments as

a  basis for imposing an enhancement under section 3A1.1.  He

says  that  the  district  court  should  have  required  the

government  to  produce  evidence  that  the   employers  and

employees were in fact unusually vulnerable instead of taking
                      

the government's assertions at face value.  We agree.

     In our  view, it may  be fair to  assume as a  matter of

reasonable inference that a number of the small businesses to

whom the insurance was sold were motivated by need as well as

by  the prospect  of savings.   It is  even more  likely that

those subscribers who were already ill when the plan faltered

would be inclined to remain longer with  the plan for lack of

alternatives.   The district  court in sentencing  matters is

not restricted  to formal  evidence, and the  court's factual

inferences,  as well  as  direct findings,  are normally  set

aside  only if "clearly erroneous."   See 9  Wright &amp; Miller,
                                         

Federal Practice and Procedure   2573, at 689,   2587 (1971 &amp;
                              

1993 Supp.).

     Nevertheless, we think as  a matter of interpretation of

the guideline, cf.  United States v.  Sabatino, 943 F.2d  94,
                                              

                             -4-

102 (1st Cir. 1991),  that the enhancement does not  apply in

this  case.  In construing this guideline, the circuit courts

have been rather  quick to reverse enhancements  based on the

victims'  class membership,  without a showing  of individual

circumstances; and, in addition,  the case law has emphasized

the  need for  "unusual[]"  vulnerability and  "particular[]"

susceptibility.   U.S.S.G.    3A1.1.2   In Wilson, the  court
                                                 

reversed the enhancement  for one who fraudulently  solicited

for "relief" funds in a town stricken by a tornado, saying:

     [I]f we  were to adopt  the government's  position,
     virtually  every  defendant  convicted of  a  crime
     involving fraudulent solicitation would  be subject
     to  an upward adjustment under    3A1.1.  Those who
     engage  in this  criminal  activity usually  target
     their solicitations at those they think most likely
     to  respond to the requests  for money.   We do not
     think,  however,  that  the  Sentencing  Commission
     intended  on  that  account  to  impose  an  upward
     adjustment on virtually all defendants convicted of
     fraudulent solicitation.

913 F.2d at 138.

     We  think  that  even  if  we  accept  the  government's

assumption that  small businesses are often  limited in their

sources  for securing  insurance, this  does not  itself show

that  measure of  "unusual"  or  "peculiar" vulnerability  or

susceptibility  of victims  needed to  invoke the  guideline.

                    

     2See, e.g., Sabatino, 943 F.2d at 103; United States  v.
                                                         
Paige, 923 F.2d 112,  113-114 (8th Cir. 1991); United  States
                                                             
v. Creech, 913  F.2d 780,  781-82 (10th Cir.  1990);   United
                                                             
States v. Wilson, 913 F.2d 136, 138 (4th Cir. 1990).  Compare
                                                             
United  States  v. Pavao,  948 F.2d  74,  78 (1st  Cir. 1991)
                        
(enhancement upheld  where district court  heard evidence  of
drug user's actual vulnerability to crime).

                             -5-

Apart  from directing his offers to the group "most likely to

respond,"  Wilson, 913 F.2d at  138, there is  nothing in the
                 

record  to suggest  that  Rowe focused  special attention  on

precariously  placed  victims--conduct  evincing  the  "extra

measure of criminal  depravity which   3A1.1  intends to more

severely punish."   United States  v. Moree,  897 F.2d  1329,
                                           

1335 (5th Cir. 1990).

     We  do   not  say  that  under   the  guideline  special

vulnerability may never be  derived from class membership; as

the  commentary  states, "market[ing]  an  ineffective cancer

cure"  would  qualify for  enhancement.    U.S.S.G.    3A1.1,

application  note 1.   But  where there  is only  an ordinary

measure of  increased likeliness to respond  in the solicited

group, and no evidence that the defendant selected individual

victims  based  on  special  susceptibility,   we  think  the

enhancement does not  apply.  It is hard to articulate a more

precise standard where so much turns on degree.  The emerging

case law will pick out the pattern.

     As  for  the  individual employees  who  later developed

medical conditions, we  agree with the government that  it is

probably safe to assume that  these individuals had more than

the usual incentive to continue paying their premiums.  There

may  well  be  among  this group  some  who  were  especially

stricken  and unusually  vulnerable, just  as there  may have

been  some  small   businesses  truly  desperate   to  obtain

                             -6-

insurance.   Although  individuals who  became ill  after the

insurance was  sold were  hardly a special  target of  Rowe's

initial  solicitations,  it  may  be  that  their  subsequent

inability to  switch plans contributed in some  manner to his

profits.

     But in this case the thrust of the wrongdoing with which

Rowe was charged was the initial fraudulent solicitations and

the  mismanagement or looting of the plan's assets.  The near

certainty that some of the subscribers would be more enmeshed

than others appears to  have been a collateral aspect  of the

wrongdoing.   Indeed, the  situation is rather  close to  the

case in which a fraud is aimed at the general public and some

of the victims are senile or otherwise unusually susceptible.

Yet  in  that  instance the  guideline  commentary  expressly

precludes an enhancement, U.S.S.G. 3A1.1, application note 1,

presumably  because there  is  no special  targeting of  such

victims and the  added impact  is incidental.   We think  the

same result follows in this case.3

     Obstruction of Justice.  Rowe's guilty plea  encompassed
                           

related charges that  were brought in Atlanta and  Boston and

that were later consolidated.   After Rowe's arrest in Boston

                    

     3At  oral  argument before  this  court,  the government
implied that  Rowe's company told individual subscribers with
medical  problems  that  they  had  no  choice,  given  their
existing conditions, other than to stay with its plan despite
late payment of their  claims.  However, no evidence  to this
effect was presented to the district court.

                             -7-

on  January  23,  1990,  he  was  released  on  bond  on  the

condition,  among others,  that  he appear  for all  judicial

proceedings as required.   Two days later  Rowe was arraigned

in the Atlanta case in the Northern District of Georgia.

     Shortly thereafter Rowe fled  the country, and a warrant

for  his  arrest was  issued  on April  13, 1990.    Rowe was

arrested  in Denmark by Danish  authorities on June 16, 1990,

and returned the next  month to Atlanta where he  remained in

federal  custody without  bail.   While Rowe  was out  of the

country, the district court  in Georgia heard motions  in the

case in Rowe's absence.  Rowe's action in fleeing the country

resulted  in  a  two-level  enhancement  for  obstruction  of

justice, U.S.S.G.   3C1.1, which Rowe now appeals.

     The government argues that Rowe has waived any objection

to  the enhancement  for obstruction  of justice  because his

written  objection  to the  enhancement  as  proposed in  the

presentence  report  was  not  repeated  at  the   sentencing

hearing.   At the outset  of the hearing,  the district judge

asked  Rowe's  counsel  whether  he  had  any  "additions  or

corrections"  to  make  to   the  presentence  report,  which

incorporated  an  enhancement  for  obstruction  of  justice.

Rowe's  lawyer  replied that  the  only  correction concerned

Rowe's assets and liabilities, and the discussion then turned

to the defendant's assets and to other issues.

                             -8-

     Notably, the government,  when asked the same  question,

said  that it had no  additions or corrections  to make, even

though  it  had  filed  its own  written  objections  to  the

presentence report.   When  the district court  then inquired

into one of  those objections, the prosecutor  told the judge

that  he had "understood the Court to be asking whether there

were any  additional matters the government  wanted to submit
                    

to  the Court  as opposed  to argue  to the  Court."   Rowe's

lawyer  might  have reached  the  same  conclusion since  the

matter  of Rowe's assets was  a newly-raised issue.   We need

not   pursue   the  matter   because   the  enhancement   was

appropriate.  

     Rowe argues  that the  obstruction enhancement  does not

apply to  flights from  arrest that  do not  endanger others.

U.S.S.G.   3C1.1, application  note 4(d), and   3C1.2.   This

is  a generally correct statement of the law but an erroneous

description  of  the reason  for  Rowe's  enhancement.   Rowe

received  the  enhancement  for  his failure  to  appear  for

judicial proceedings.  This was made clear in the presentence

report.    The commentary  to  the  obstruction guideline  in

effect at the time  of Rowe's sentencing provides for  a two-

point  increase  for  a  defendant's  "willfully  failing  to

appear, as  ordered,  for a  judicial  proceeding."  U.S.S.G.

 3C1.1, application note 3(e) (1990).

                             -9-

     Although  this commentary  was not  in effect  when Rowe

fled to  Denmark, no ex post facto problem is presented.  The
                                  

1989  version of  the  guidelines were  in  effect when  Rowe

disappeared in early  1990.  The  courts have uniformly  held

that   flight  from   judicial  proceedings   constitutes  an

obstruction  of  justice  under   the  1989  version  of  the

Guidelines.   United States  v. Monroe,  990 F.2d 1370,  1375
                                      

(D.C.  Cir.  1993)  (canvassing  cases);   United  States  v.
                                                         

McCarthy, 961 F.2d 972, 979-80 (1st Cir. 1992).
        

     Rowe's  only  response  to  the  actual  basis  for  the

enhancement is  that he was unaware  of probation proceedings

to obtain his passport.  It was during these proceedings that

authorities learned  of Rowe's absence from the  country.  In

his response  to the presentence report,  Rowe explained that

he had  already left for  Denmark when  the probation  office

began its efforts to secure his passport.  However, as Rowe's

counsel conceded at oral  argument in this court, one  of the

conditions  of  Rowe's  release was  that  he  turn  over his

passport.    The obvious  purpose of  the requirement  was to

prevent  Rowe  from  avoiding   prosecution  by  leaving  the

country.  We find  no error in the district  court's decision

to enhance Rowe's sentence for obstruction of justice.  

     Loss of Confidence in an Important Institution.  We also
                                                   

affirm  the district  court's decision  to depart  upward one

level for loss  of confidence in  an important institution.  

                             -10-

The commentary to  the fraud  guideline says  that an  upward

departure may be warranted if the amount of the loss involved

does  not  fully  capture  the harm  or  seriousness  of  the

conduct, and then gives several examples of when a  departure

may be appropriate.   U.S.S.G.   2F1.1,  application note 10.

One of the  examples is where "the  offense caused a loss  of

confidence in  an important  institution."   Id., application
                                                

note 10(e).

     In  its  presentence  memorandum, the  government  cited

articles and congressional  testimony describing the  growing

threat to the health insurance industry, and in particular to

multi-employer arrangements  for small businesses,  caused by

fraudulent  operators posing  as legitimate  insurers.   Rowe

argues  that  there was  no  evidence  that his  own  conduct

occasioned a loss of  confidence in the health industry.   In

our view no such evidence was required.

     We  think  it  obvious  that  the  many  businesses  and

employees defrauded by Rowe must have had their confidence in

health insurers shaken as  a result of their experience.   It

cannot be seriously  doubted that they and others  made aware

of the scheme are now likely to be more wary of insurers, and

especially of legitimate but relatively  unknown insurers who

cater to small businesses.   The district court did  not need

to hear evidence to reach this conclusion.  See United States
                                                             

v.  Fousek, 912 F.2d 979,  981 (8th Cir.  1990) (evidence not
          

                             -11-

necessary to show  that bankruptcy trustee's embezzlement  of

funds caused  a  loss of  confidence  in the  institution  of

bankruptcy trustees).

     We  conclude that  the vulnerability  enhancement cannot

stand but  that the  other challenges  to the  sentence fail.

The  sentence is  vacated and  the case  is remanded  for re-
                                                    

sentencing consistent with this opinion.

     It is so ordered.
                     

                             -12-
