U.S. v. Shipsey

• Citation: 363 F.3d 962
• Decision Date: 09 April 2004
• Docket Number: No. 02-10651.,02-10651.
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. George Michael SHIPSEY, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

363 F.3d 962

UNITED STATES of America, Plaintiff-Appellee, v. George Michael SHIPSEY, Defendant-Appellant.

No. 02-10651.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 8, 2004.

Filed April 9, 2004.

As Amended May 12, 2004.

COPYRIGHT MATERIAL OMITTED

Dennis P. Riordan, Riordan & Horgan, San Francisco, CA, for the defendant-appellant.

Lawrence J. Leigh, Assistant United States Attorney, San Francisco, CA, for the plaintiff-appellee.

Appeal from the United States District Court for the Northern District of California; D. Lowell Jensen, United States District Judge, Presiding. D.C. No. CR-93-00624-DLJ.

Before: HALL and GRABER, Circuit Judges, and WEINER, Senior District Judge.^*

WEINER, Senior District Judge:

I.

George Michael Shipsey appeals his conviction on charges of mail fraud (18 U.S.C. § 1341), wire fraud (18 U.S.C. § 1343), and theft from an employee pension fund (18 U.S.C. § 664), arising from the diversion of construction loan proceeds. Previously, another panel of this court had vacated his first conviction on these charges, United States v. Shipsey, 190 F.3d 1081 (9th Cir. 1999) ("Shipsey I"), and remanded for a new trial. The district court had jurisdiction pursuant to 28 U.S.C. § 1331; this court has jurisdiction pursuant to 28 U.S.C. § 1291. We affirm the convictions.

II.

Shipsey was originally indicted on December 31, 1993. Counts 1 through 9 charged mail fraud; counts 10 through 13 charged wire fraud; counts 14 through 20 charged theft from an employee pension plan; and counts 21 through 24 charged money laundering (18 U.S.C. § 1957). His first trial commenced on May 20, 1997. Counts 21 and 22 were dismissed by the district court at the end of the government's case-in-chief. The jury deadlocked on counts 1 through 13; it found Shipsey guilty on counts 14 through 20 and 23 through 24. The district court declared a mistrial on the deadlocked counts and Shipsey was sentenced to 37 months' imprisonment. He remained free on bond pending appeal.

On remand, following the decision in Shipsey I, the district court dismissed counts 1 through 13 of the original indictment without prejudice, due to a Speedy Trial Act violation. A superseding indictment recharged the first eight of the nine dismissed mail fraud counts, all of the wire fraud counts (superseding counts 9 through 12), and the other counts that had not been previously dismissed with prejudice (superseding theft counts 13 through 19; superseding money laundering counts 20 through 21). On February 14, 2001, the district court granted in part and denied in part Shipsey's motion to dismiss; it dismissed superseding theft counts 17, 18 and 19 and superseding money laundering counts 20 and 21, for failure to state an offense.¹ It denied the motion as to the remaining counts, rejecting Shipsey's argument that the superseding counts were barred by the statute of limitations.

Shipsey's retrial resulted in a conviction on all of the undismissed superseding counts (1 through 16). He was sentenced to 30 months' imprisonment on each count, to run concurrently. He remains free on bond pending appeal.

III.

Shipsey is a land developer and building contractor. He was one of three general partners in Michael Shipsey and Associates ("the partnership").² In 1988, the partnership began developing a project called Stonefield at Fountaingrove in Santa Rosa, California ("Stonefield"). Shipsey was hired by the partnership to be general contractor on the project. He received a fee for his services of 5% of the total construction cost. At the same time, Shipsey was building his own palatial residence on Obertz Lane in Novato, California ("Obertz"). Basically, the crimes charged in this case arose from Shipsey's using money loaned to the partnership to build Stonefield to pay unpaid debts to subcontractors for the construction of the Obertz mansion.

Shipsey sought financing for Stonefield from McMorgan & Co. McMorgan acted as investment manager for several union pension funds, including four at issue here those of the Carpenters, Operating Engineers, Plasterers, and Sheet Metal Workers unions (collectively "the Pension Funds"). Shipsey met with McMorgan's vice-president, Michael Fry. Through Fry, the government established Shipsey's knowledge that the lenders on the project would be union pension trust funds. Fry committed the Pension Funds to a $19 million loan to fund the Stonefield project.

Rather than drawing loan proceeds directly from the Pension Funds, the partnership signed its loan agreement with First Cal, a company associated with McMorgan. First Cal then sold the note to the Pension Funds, pursuant to a previously executed agreement. The construction loan agreement that Shipsey signed specifically provided that First Cal would sell the indebtedness to ERISA governed pension funds. First Cal serviced the loans. It made disbursements to the partnership out of its own funds, via a line of credit it maintained at American Security Bank. First Cal was then reimbursed from the Pension Funds, subject to McMorgan's approval.

To obtain draws on the loan, Shipsey was required to submit draw requests as it received bills from subcontractors and suppliers. Another company employed by First Cal, Project Control, prepared reports on the progress of the project and reviewed the draw requests. First Cal and McMorgan also had to review and approve the draw requests. Once McMorgan gave the final okay, First Cal issued loan proceeds in the form of two-party checks, made payable to both the partnership and the subcontractor or supplier. First Cal then submitted its requests for reimbursement to McMorgan, which authorized wire payment transfers from the pension funds to First Cal's account at American Security Bank.

Trial evidence demonstrated that portions of the loan advances were diverted from the Stonefield project to pay bills incurred by Shipsey in building the Obertz residence. Several subcontractors on the Stonefield project also worked at Obertz. Shipsey directed his office staff to include Obertz invoices in the Stonefield draw requests. In addition, Shipsey made agreements with subcontractors who were owed money on Obertz to increase the prices invoiced on Stonefield work — and paid from the loan proceeds — thereby folding the Obertz debts into the cost of building Stonefield. Within months of the start of construction at Stonefield, First Cal expressed concerns over cost overruns. By April 1989, it determined that the amount of the remaining loan funds would be insufficient to complete construction. In December 1989, it declared the loan in default. Nonetheless, it continued funding draw requests until at least March 1990. By July 1990, all funding and construction ceased and the pension funds began foreclosure.

IV.

Shipsey first argues the district court erred by rejecting his proposed jury instruction on good faith as a defense to the fraud charges.³ His instruction would have charged the jury that: (1) the government had the duty to prove the intent element of the mail fraud, wire fraud and theft from an employee benefit plan charges beyond a reasonable doubt; (2) good faith was a complete defense to these charges because good faith is inconsistent with an intent to defraud; and (3) the government had to disprove good faith in order to establish intent. Rather than give the defendant's proffered instructions, the district court charged the jury on good faith as part of its charge on the element of intent to commit each offense. Regarding mail fraud, it charged in pertinent part that

an attempt to defraud is an attempt to deceive or cheat. In determining whether or not the defendant acted with an intent to defraud, you may consider whether or not the defendant had a good-faith belief in the truthfulness of representations made by him or a good-faith belief that the disbursements were authorized.

The district court gave an almost identical charge for the wire fraud counts. As regards the theft from pension plan charges, the court charged:

In determining whether or not defendant acted with an intent to defraud in causing a disbursement of monies by an employee benefit plan, you may consider whether or not the defendant had a good-faith belief in the truthfulness of the representations made by him or a good-faith belief that the disbursements were authorized.

Shipsey takes issue with the trial court's failure to specifically instruct that the government had the burden to disprove good faith, and that a finding Shipsey did act under a good faith belief would preclude a finding of specific intent. This argument is unsupportable for several reasons. First, the district court's charge clearly included the requirement that the government had the burden to prove each element, including the element of intent, beyond a reasonable doubt. Second, the court correctly instructed the jury on the definition of intent, i.e., an intent to deceive or cheat. Third, the court did, in fact, charge that a good faith belief in the truthfulness of representations made could be considered in determining intent.

Our case law is well settled that a criminal defendant has "no right" to any good faith instruction when the jury has been adequately instructed with regard to the intent required to be found guilty of the crime charged, notwithstanding the normal rules governing "theory of defense" requests. See, e.g., United States v. Frega, 179 F.3d 793, 804 (9th Cir.1999) (where district court provided adequate instruction on specific intent element of mail fraud, instruction that "good faith was a complete defense" was not required); United States v. Dees, 34 F.3d 838, 842 (9th Cir.1994) (specific good faith instruction is unnecessary where the court has already adequately instructed the jury as to specific intent). We have held:

Notwithstanding the normal rules governing "theory of defense" requests, the Ninth Circuit has held that "the failure...