U.S. v. Christopher, 97-1111

Citation142 F.3d 46
Decision Date08 September 1997
Docket NumberNo. 97-1111,97-1111
PartiesUNITED STATES, Appellee, v. Charles S. CHRISTOPHER, a/k/a Chris Christopher, Defendant, Appellant. . Heard
CourtUnited States Courts of Appeals. United States Court of Appeals (1st Circuit)

Terrance G. Reed with whom Christopher A. Hostage and Reed & Hostage P.C., were on brief, for Appellant.

Craig N. Moore, Assistant United States Attorney with whom Seymour Posner, Acting United States Attorney, Charles A. Tamuleviz, Assistant United States Attorney and Lisa Simotas, Attorney, Department of Justice, were on brief, for Appellee.

Before SELYA, Circuit Judge, COFFIN and CAMPBELL, Senior Circuit Judges.

CAMPBELL, Senior Circuit Judge.

Defendant-appellant Charles S. Christopher was convicted after a jury trial in the district court on eleven counts of wire fraud, 18 U.S.C. § 1343, and ten counts of interstate transportation of stolen goods, 18 U.S.C. § 2314. As vice president of Resolute Holding Company ("Resolute"), Christopher orchestrated Resolute's acquisition in 1988 of American Universal Insurance Holding Company ("American") and Diamond Benefits Life Insurance Company ("Diamond"). In acquiring these companies, Christopher used assets of the acquired insurance companies to, among other things, pay part of the agreed purchase price and to clear liens from property put up as collateral in the transaction. In so doing, Christopher violated promises to state insurance regulators that Resolute would not use the acquired companies' assets to pay for their purchase and that pre-existing liens on the collateral would be cleared by the closing. Both companies subsequently went into receivership.

The district court sentenced Christopher to 121 months' imprisonment and ordered restitution of $26.7 million. This appeal followed. Aside from a single error in the calculation of Christopher's restitution, we affirm.

I. Background

Following the judgment of conviction, "we sketch the facts in the light most favorable to the jury verdict, consistent with record support." United States v. Pitrone, 115 F.3d 1, 3 (1st Cir.1997).

A. Resolute's Purchase of American and Diamond

Pursuant to state laws designed to protect policy holders, Resolute had to seek the approval of insurance regulators in Arizona, California, and Rhode Island before acquiring American and Diamond. (American was a Rhode Island corporation, and Diamond was an Arizona corporation subject to jurisdiction of both Arizona and California.) In each application, known as a "Form A," Resolute proposed to infuse the target companies with much-needed capital. That capital was to come from business entities controlled by George W. Reeder, Resolute's majority owner, in the form of promissory notes. Three of the notes are relevant here. The first was payable to American for $50 million and was executed by Hilltop Developers ("Hilltop"). Hilltop's sole shareholder was Reeder. Two Hilltop properties known as "Heritage Ranch" and "Indian Palms" served as collateral for this note.

Hilltop and Reeder executed a second note in the amount of $12 million payable to Diamond. That note was secured by "Indian Springs," another property also owned by Hilltop and Reeder.

The third note, this one for $3 million, was also to be given for the acquisition of Diamond. This money came from Mydar Business Group, Inc. ("Mydar"). While all of Mydar's stock was nominally held by Tom Christopher, the defendant Christopher's brother, the defendant himself held a fifty percent "silent" interest in Mydar. The Mydar note was secured by "Big Springs," a property surrounding defendant Christopher's personal residence.

Diamond was to receive further capital from a cash-for-annuities exchange with the Life Assurance Company of Pennsylvania ("LACOP"). Arranged by Christopher and Resolute, this transaction gave Diamond $29.4 million ($18 million at closing) from LACOP in return for Diamond's assumption of $31 million in LACOP's annuity obligations.

B. Regulatory Approval of the Acquisitions

At the time of the applications, each of the four properties securing the described promissory notes (Heritage Ranch, Indian Palms, Indian Springs, and Big Springs) were encumbered by prior liens. Because of these encumbrances and other concerns, insurance regulators in each state were reluctant to approve the purchase.

Faced with regulatory disapproval, Resolute and Christopher provided a number of assurances to the regulators causing them to acquiesce. Christopher and Resolute assured Arizona that all encumbrances on the collateral would be removed by the time of the closing. Resolute's Arizona Form A represented that "it is expected" that at the closing of the purchase of Diamond the liens on the collateral "will be paid in full."

Similarly, Christopher assured Rhode Island insurance regulators through Resolute's attorneys just ten days before the American transaction closed that the collateral "will be free and clear of all liens at the time the property is transferred to [American]." Christopher's attorney testified that every document representing that Resolute would pay off the liens before closing was prepared with information Christopher provided. Rhode Island issued a Conditional Order on May 27, 1988, approving Resolute's purchase of American. That order provided that, although the transaction closed that day, the change of ownership would not be official until Resolute submitted final title insurance policies for Heritage Ranch and Indian Palms "to be effective as of the closing date which indicate[ ] ... that all ... mortgages, deeds of trust, and the like have been paid in full and discharged."

On June 7, 1988, California approved the Diamond acquisition subject to Resolute's written commitments that (1) "no part of the purchase price for Diamond Benefits would be obtained from its assets," (2) Resolute would raise Diamond's capital and surplus to $3 million, and (3) for purposes of determining that capital, the $12 million and $3 million notes would be given no value.

C. Christopher Clears the Collateral Properties' Pre Existing Liens

When the acquisition of American closed on May 27, 1988, the pre-existing liens on the four collateral properties were still outstanding. Likewise, when the Diamond acquisition closed on June 14, 1988, the liens on that collateral were still outstanding. So much was undisputed at trial.

On July 25, 1988, well after both the Diamond and American acquisitions closed, Christopher and Resolute attorney Jarrell Ormand sent over $3.3 million "from," as Christopher himself put it, "Resolute, [American], and/or Diamond" to First American Title. As Resolute was a holding company with virtually no cash, the bulk of the $3.3 million came from the acquired insurance companies. Christopher's letter directed First American Title to use the money first to satisfy the pre-existing liens and, second, to issue title insurance policies to Diamond and American pertaining to the collateral properties.

Christopher instructed First American Title parenthetically that these policies were to be back-dated to the closing date. Thus, in one instance, Christopher wrote the title insurer that American was to "receive ... a CTLA Mortgagee's Title Insurance Policy (dated as of May 27, 1988) in connection with [the collateral properties]." That letter contained no explanation for the back-dating request.

Four days later, Ormand, Resolute's attorney, also wrote First American Title at Christopher's direction to request that the policies be dated back to the date of closing. He stated simply that for Indian Springs (collateral for Diamond), the "policy ... should be dated as of June 14, 1988," and that for Indian Palms (collateral for Diamond and American), "[i]t should be dated as of May 27, 1988." Christopher then sent Rhode Island regulators what he described as "[o]riginal copies of title insurance policies dated as of May 27, 1988." Ormand also testified that Christopher told him that "we're going to take $18 million out of Diamond Benefits and pay down the liens on [the collateral properties]."

First American Title forwarded Christopher title policies dated, per his requests, to match the closing dates. First American Title's chief title officer testified at trial that his company back-dated the policies at "the request of the insured and we were willing to be accommodating in this instance." He testified he was unaware of Christopher's purpose in requesting the earlier date.

First American Title's representative also testified that in back-dating the policy, the company was not protecting American and Diamond against any additional risk or providing them with any additional assurances. He believed that First American Title actually reduced its risk by dating the titles as of the closing since the terms of the policy guaranteed the title only as of the period beginning with the execution of the promissory notes and ending with the date on the policies. In any case, while the back-dating might suggest that the insurance companies had obtained a first position on the collateral by the actual date of the closing, that was not the case, as Christopher knew.

D. Financing the Acquisitions: The Insurance Companies "Loans" and the Purchase of Desert Aire

Notwithstanding Christopher's representations to regulators that the collateral liens would be paid off by time of the closing, and that assets of the acquired companies would not be used for the purchase, Christopher caused actions to be taken that, the jury could find, violated both representations. After the closing, the insurance companies "loaned" cash to Hilltop and Mydar, the owners of the collateral, which they used to remove the liens on the collateral. Cash belonging to Diamond was also used to pay Diamond's purchaser. Hilltop and Mydar noted on their books the crediting of "intercorporate credits" in favor of Diamond and American. In due course, both insurance companies went into...

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