USA. v. Shipsey
| Decision Date | 09 September 1999 |
| Docket Number | No. 98-10199,98-10199 |
| Citation | 190 F.3d 1081 |
| Parties | (9th Cir. 1999) UNITED STATES OF AMERICA, Plaintiff-Appellee, v. GEORGE MICHAEL SHIPSEY, Defendant-Appellant |
| Court | U.S. Court of Appeals — Ninth Circuit |
Dennis P. Riordan, San Francisco, California, for the defendant-appellant.
Lawrence J. Leigh, Assistant United States Attorney, San Francisco, California, for the plaintiff-appellee.
Appeal from the United States District Court for the Northern District of California; D. Lowell Jensen, District Judge, Presiding. D.C. No. CR-93-00624-DLJ.
Before: Mary M. Schroeder, Betty B. Fletcher, and Robert Boochever, Circuit Judges.
Defendant George Michael Shipsey appeals his jury trial convictions and the sentence imposed for seven counts of theft from a pension plan subject to the Employee Retirement Income Security Act of 1974 ("ERISA"), 18 U.S.C. S 664, and two counts of money laundering, 18 U.S.C. S 1957. The convictions arose from an alleged scheme to divert funds from a construction project, on which he was the general contractor, to fund the construction of his own residence. The scheme entailed submitting to the loan servicing institution false claims of amounts owed to subcontractors from the project financing provided by four pension funds.
The dispositive issue in this appeal is whether the district court committed plain error when it instructed the jury that it could convict Shipsey of theft if it found any wrongful taking from the pension funds, when the indictment charged only theft by false pretenses. We conclude the district court did so err and reverse both the theft convictions and the money laundering convictions, which rested upon the use of theft proceeds.
The government presented evidence at trial that between 1988 and 1990, Shipsey was a general contractor for a condominium project in Santa Rosa, California called Stone field at Fountaingrove ("Stonefield"). At the same time, Shipsey was constructing for himself a 19,000 square foot mansion on Obertz Lane in Novato, California ("Obertz"). Shipsey employed many of the same subcontractors to work at both Obertz and Stonefield.
On August 23, 1988, Shipsey signed a loan agreement with First California Mortgage Company ("First Cal") to finance Stonefield's construction. Pursuant to a previously executed agreement for the sale of the loan, First Cal transferred its interest in the loan agreement to four trade union pension funds which invested $19.4 million in Stonefield on behalf of their beneficiaries. McMorgan & Company ("McMorgan") acted as the investment manager for these funds. The pension funds were all covered by ERISA and Shipsey was aware that pension funds would lend the money for the project.
The lenders did not disburse the construction loan to Shipsey in a lump sum. Shipsey would periodically prepare requests for disbursements of the loan as his subcontractors and suppliers accumulated costs on the project. First Cal would then review the draw requests to determine whether to advance the requested money. With the consent of McMorgan, First Cal would issue an advance in the form of a two party check issued to Shipsey and the appropriate subcontractor. First Cal would then seek reimbursement from the pension funds, usually supplying the draw requests as supporting documentation. If McMorgan approved of the request, funds would be transferred out of the pension funds' bank accounts to First Cal.
Despite the number of controls designed to prevent the diversion of funds, the government presented evidence that Shipsey was able to obtain over $700,000 from the pension funds that he diverted for his personal use, largely for the construction of Obertz. Shipsey allegedly accomplished the diversion of funds by making draw requests from the pension funds that disguised work done at Obertz as work done on Stonefield or that overstated the cost of work performed at Stonefield. The loan agreement required advances to be immediately used to pay bills and charges incurred in Stonefield's construction, forbidding their use for other purposes until the bills and charges were paid in full. Had Shipsey told the pension funds that he was using some of the draw money for Obertz, they would not have authorized the disbursements. In many of Shipsey's draw requests, he certified that the work and materials described in the request were for Stonefield and that the funds requested would be used to pay for the work and materials. The certifications also attested that the statements in the request were made for the sole purpose of inducing First Cal to make the advance.
Shipsey was charged in a twenty-four count indictment with violations of 18 U.S.C. SS 1341 (mail fraud), 1343 (wire fraud), 664 (theft from an employee benefit plan), and 1957 (engaging in monetary transactions in property derived from specific unlawful activity).
Paragraphs five through seven of the indictment described the fraudulent scheme of which Shipsey was accused. They alleged, in pertinent part:
5. From on or about August 1, 1988 and continuing to on or about August 10, 1990, the defendant George Michael Shipsey did knowingly devise and intend to devise a scheme and artifice to defraud and to obtain money and property by means of false and fraudulent pretenses, representations, promises, and omissions of material facts and attempt to do so from First California Mortgage and the Pension Funds.
6. Defendant's scheme to defraud was, in outline, as follows: (a) defendant engaged certain subcontractors to do construction work at both Stonefield and Obertz; (b) in some cases George Michael Shipsey instructed the subcontractors to bill Stonefield for work done on Obertz; (c) in some cases, at defendant's request, the subcontractors made and delivered by mail and other means contracts and invoices to George Michael Shipsey relating to Stonefield for work that was actually done at Obertz; (d) George Michael Shipsey represented in false draw requests, false subcontractor invoices and other false documents sent to First California Mortgage that work was performed at Stonefield when in fact the work was performed at Obertz; (e) George Michael Shipsey also over billed and double billed for work performed at Stonefield, and (f) as a consequence of the false representations provided by George Michael Shipsey, First California Mortgage Company and McMorgan & Company authorized the release of money from the Pension Fund accounts as well as the issuance of checks payable to Michael Shipsey and Associates and various subcontractors.
7. It was further part of the scheme and artifice to defraud that defendant in his draw request submissions made the following false and fraudulent pretenses, representations and promises to First California Mortgage Company, McMorgan and Company, and the Pension Funds well knowing at the time that said pretenses, representations and promises were false when made; to wit: (a) that the invoices submitted by the subcontractors listed below were for labor and materials relating only to Stonefield, and (b) that the invoices submitted by the subcontractors reflected the correct amounts claimed by the subcontractors for labor and materials provided at Stonefield . . . .
(emphasis added).
The theft counts realleged and incorporated by reference the above paragraphs and further broadly alleged that "George Michael Shipsey, defendant herein, did embezzle, steal and unlawfully and willfully abstract and convert to his own use and the use of another . . . [property belonging to a pension fund subject to ERISA]."
The money laundering counts alleged that Shipsey "knowingly engaged in . . . a monetary transaction, in criminally derived property . . . that is, proceeds obtained by theft and fraud . . . ."
Shipsey's trial began on May 20, 1997. Shipsey subsequently moved for a judgment of acquittal and the district court dismissed two of the four money laundering counts. The district court instructed the jury on the theft counts as follows:
Now counts fourteen through twenty charge the defendant with theft of funds connected with an employee benefit plan in violation of [18 U.S.C. S 664]. In order for the defendant to be found guilty of that charge, the government must prove each of the following elements beyond a reasonable doubt:
First, the defendant willfully stole or converted property to his own use or the use of another; and
Second, the property belonged to an employee benefit plan subject [ERISA].
Now, an act is done willfully if it is done with an intend [sic] to defraud or for a purpose inconsistent with the purposes of the plan. In determining whether defendant acted willfully in causing a disbursement of moneys by a plan or connected fund, you may consider whether or not the defendant had a good faith belief that the disbursement was authorized.
Now, to steal is to acquire or possess property as a result of some wrongful or dishonest act or taking. Stealing requires that a person willfully obtain or retain possession of property which belongs to another with the intent to deprive the owner of the benefit of ownership or possession.
Conversion is the willful and unlawful taking and retaining of the property of another with the intent to deprive the owner of its use or benefit either temporarily or permanently . . . .
(emphasis added).
On June 12, 1997, the jury found Shipsey guilty of the seven theft counts and the two undismissed money laundering counts. The jury could not reach a verdict on the mail and wire fraud counts, so the court declared a mistrial on those counts.
After the verdict, Shipsey moved for a new trial. Among other contentions, he argued that the district court erred in instructing the jury that it could convict Shipsey of theft under a theory other than fraud, the theory...
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