146 F.3d 502 (7th Cir. 1998), 96-3918, United States v. Bonanno

Docket Nº:96-3918, 96-4016.
Citation:146 F.3d 502
Party Name:UNITED STATES of America, Plaintiff-Appellee, v. Frank J. BONANNO and Lawrence J. Goldstein, Defendants-Appellants.
Case Date:June 12, 1998
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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146 F.3d 502 (7th Cir. 1998)

UNITED STATES of America, Plaintiff-Appellee,


Frank J. BONANNO and Lawrence J. Goldstein, Defendants-Appellants.

Nos. 96-3918, 96-4016.

United States Court of Appeals, Seventh Circuit

June 12, 1998

Argued Sept. 3, 1997.

Rehearing Denied July 9, 1998.

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[Copyrighted Material Omitted]

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Robert W. Kent, Jr., Debra Riggs Bonamici (argued), Office of the United States Attorney, Criminal Division, Chicago, IL, for Plaintiff-Appellee.

Christopher Jeska (argued), Chicago, IL, for Defendant-Appellant Bonanno.

Robert A. Handelsman (argued), Chicago, IL, for Defendant-Appellant Goldstein.

Before CUMMINGS, COFFEY and EVANS, Circuit Judges.

COFFEY, Circuit Judge.

In this appeal, two convicted defendants challenge various aspects of their sentencing. The two defendants, Frank Bonanno and Lawrence Goldstein, were charged and convicted before a jury for their roles in a conspiracy to sell bogus auto insurance policies to innocent consumers in the State of Illinois.

Bonanno and Goldstein were each sentenced to thirty months' incarceration and claim that the district court made several errors in sentencing. Initially, they argue that the trial judge erred in the manner in which he calculated the amount of loss that the defendants intended to cause by their scheme. Secondly, they allege that they are entitled to resentencing because the sentencing judge failed to specify the number of drug tests to which the defendants must submit, and instead improperly left that determination to the probation officer. Next, they argue that there are fatal discrepancies between the trial judge's oral pronouncements and his written orders. And, lastly, defendant Bonanno claims that the judge erred when he determined that Bonanno failed to accept responsibility for his conduct.

We remand this case to the district judge for the limited purpose of having him specify the number of drug tests to which the defendants must submit. We affirm on all other counts.

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In early 1993, defendant-appellant Lawrence Goldstein and his acquaintance Harry Gio 1 devised an auto insurance fraud. It involved three shell companies: a phony insurance company named American United Casualty Company, Inc. ("American United Casualty," or, "the insurance company"), a payment company named American United Payment Services, Inc. ("the payment company"), and a phony auto insurance agency named Auto Insurance Headquarters Agency, Inc. ("Auto Insurance Headquarters," or, "the agency"). On March 22 and March 23, 1993, Gio, with Goldstein's knowledge and consent, arranged to incorporate the insurance company and the payment company with the Office of the Illinois Secretary of State. As part of an effort to conceal their operational control of these companies, Gio and Goldstein listed Vincenzo Catalano as the sole incorporator and registered agent on the articles of incorporation. Catalano, who was capable of signing his name but other than that could neither read the English language nor write the same, agreed to sign the papers after he was told that if he did so Gio would help him get a driver's license. He had no relationship with either company.

The third company, the auto insurance agency, did not become operational for another few months, becoming incorporated on May 7, 1993. The conspirators did not use Vincenzo Catalano's name on the "Auto Insurance Headquarters" articles of incorporation, as they had with the other two companies: Goldstein listed himself as the agency's sole incorporator and registered agent. Goldstein also set himself up as the president and sole shareholder of the company because, unlike Gio, Goldstein had an insurance producer's license--Gio could not obtain such a license because of a prior felony conviction.

Prior to the agency's incorporation, at the end of March, 1993, Goldstein and Gio undertook all the necessary things for setting up and leasing office space for the three companies. Goldstein signed the lease in his capacity as president of Auto Insurance Headquarters, and the two partners leased office furniture, opened checking accounts (in Goldstein's name), and had stationery and insurance forms prepared. They even arranged for the production and broadcast of two television commercials, in which Auto Insurance Headquarters presented itself as a low-cost automobile insurance agency.

Beginning in April, 1993, helped by several office employees, they commenced selling auto insurance policies. The policies were literally not worth the paper they were printed on, as they had nothing to back them up. This did not interfere with the conspirators' zeal to sell them, however: when customers called to inquire about buying automobile insurance, the conspirators quoted rates and accepted orders without even bothering to investigate the driver's record for moving traffic violations. If the customer agreed to purchase a policy, Gio and Goldstein would send one of their "runners" to the customer's house so that the customer could sign the contract for the policy. The "runner" would also collect the initial payment (subsequent payments were sent through the mail or personally delivered by the customer). Gio and Goldstein would then mail the customer a declaration sheet that contained the terms of the policy, with the policy purportedly issued by American United Casualty. The declaration sheets bore the signature of a supposed employee of American United Casualty named "Hal Breizman." Problem was, "Hal Breizman" did not exist. The "Hal Breizman" signatures were created by means of a stamp kept in the Auto Insurance Headquarters office. 2

One of the runners employed by Gio and Goldstein was Frank Bonanno, who, along with Goldstein, is an appellant in this case. Bonanno claims, and the jury agreed with him, that at the time he was hired in April 1993 he believed the business to be legitimate. But he did admit to an F.B.I. investigator

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(shortly after his arrest, which occurred around March 6, 1996) that at some point during his involvement with the business he found out that it was a fraud but continued to work there anyway. The specific date that he became aware that the business was a sham was a matter of dispute at trial, with different witnesses positing different dates. Bonanno, who did not testify, claimed in a pretrial statement and at sentencing that he discovered things were not on the level in late June or early July 1993. Gio, who did testify, presented another scenario. Gio testified that Bonanno "had full knowledge of what was going on the entire time--even before he signed on (in April 1993)" (emphasis added). Gio seemingly contradicted himself later in his testimony, however, by testifying that Bonanno did not discover the true nature of the business until he had been working there for a while and "realized that we were not placing the policies [with any insurance companies]," whereupon Gio told him that the business was a fraud.

Another witness, the F.B.I. investigator, offered a third scenario. The F.B.I. investigator, who spoke to Bonanno shortly after Bonanno was arrested, testified that Bonanno told him that he found out the business was a fraud "soon after" he commenced working there. And lastly, during trial, Bonanno's counsel proposed two more possibilities: first, that Bonanno was ignorant of the fraudulent nature of the business until Gio asked him to lie to Gio's probation officer (Bonanno first spoke to Gio's probation officer on July 26, 1993, so Gio's request presumably was shortly before this); then, later in the trial, Bonanno's counsel argued that Bonanno found out only "a couple of weeks before the place shut down" (this would have been about mid-August 1993, seeing as the Illinois Department of Insurance ("IDOI") shut the place down on August 27, 1993).

Regardless of the specific date when Bonanno found out about the company's true nature, it is undisputed that Bonanno rocketed to the top of the agency soon after starting there. From his start as a runner in late April, he was promoted to sales in early May. By the end of May, he had advanced up the ladder to the office of president of the company, achieving this lofty position after Goldstein left the company. Goldstein's departure came about after he told Gio, in early May 1993, that he wanted out because what they were doing was illegal. Gio arranged for Bonanno to purchase the agency from Goldstein. Bonanno was not completely unfamiliar with the insurance industry, as at one time he had an insurance producer's license. He had allowed this license to lapse, though, and, because a license was required when he took over as president, he enrolled in and completed an insurance refresher course. On May 25, 1993 Bonanno's producer's license was reinstated, and at that time he signed a contract for the purchase of the agency, backdating the contract to April 1993. From then on, Bonanno was the nominal owner and president of the agency (true control of the agency remained in Gio's hands). Even though Goldstein was officially out of the company, he did not completely sever ties with the fraudulent scheme: he continued to profit from its operation by leasing pagers to the agency, and he also referred customers to the agency, including at least one customer in August 1993.

As president, Bonanno helped Gio perpetuate the scheme by giving misinformation to Gio's probation officer, on two different occasions. The first was on July 26, 1993, when Gio's probation officer telephoned Bonanno, because he (Bonanno) was ostensibly Gio's employer. In this conversation, Bonanno misled the officer as he deliberately understated Gio's duties and responsibilities with the company. The second time was when Bonanno...

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