44 F.3d 1150 (2nd Cir. 1995), 121, United States v. Holmes

Docket Nº:121, 122, Dockets 93-1873, 93-1893.
Citation:44 F.3d 1150
Party Name:UNITED STATES of America, Appellee, v. Cloyd J. HOLMES and Salvatore Frasca, Defendants-Appellants.
Case Date:January 23, 1995
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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44 F.3d 1150 (2nd Cir. 1995)

UNITED STATES of America, Appellee,


Cloyd J. HOLMES and Salvatore Frasca, Defendants-Appellants.

Nos. 121, 122, Dockets 93-1873, 93-1893.

United States Court of Appeals, Second Circuit

January 23, 1995

Argued Oct. 13, 1994.

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Patricia E. Notopoulos, Asst. U.S. Atty. for the E.D. of N.Y. (Zachary W. Carter, U.S. Atty.; Peter A. Norling, Asst. U.S. Atty., of counsel), for appellee.

Paul Greenfield, New York City for defendants Holmes and Frasca.

Before: OAKES, KEARSE, and PRATT, Circuit Judges.

PRATT, Circuit Judge:

Defendants appeal their convictions on charges relating to their embezzlement of welfare funds from Local 377 of United Services Employees Union. On appeal they raise numerous issues, including claims that (1) they were charged and convicted of several crimes that arose out of a single pattern of conduct; (2) the district court's charge to the jury on structuring financial transactions was defective under Ratzlaf v. United States, --- U.S. ----, 114 S.Ct. 655, 126 L.Ed.2d 615 (1994); (3) the district court refused to hear the full defense case; (4) they received ineffective assistance of counsel; and (5) the government improperly used an informant to obtain inculpatory statements from defendant

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Holmes. Finding no merit in most of defendants' claims, we affirm in part, reverse and remand in part.


From 1983 through 1992 defendant Cloyd Holmes, who was president of the United Services Employees Union Local 377 and a trustee of the union's welfare fund, and defendant Salvatore Frasca, who was secretary-treasurer of the union and administrator of the fund, embezzled several hundred thousand dollars from the union's benefit program. They embezzled the money through two fraudulent schemes for processing false and inflated medical claims.

The first scheme involved false claims for medical benefits. Defendants prepared and processed fictitious claims in the names of union members, but without the members' knowledge or consent. Then, when the checks were issued to pay benefits on the claims, they intercepted the checks, and defendant Holmes deposited them in his personal bank accounts. In the second scheme, defendants inflated the amounts of their personal and families' medical bills, and caused the inflated bills to be processed and paid by checks issued from the fund.

In October 1991 John Mazzella, a special agent of the Office of Labor Racketeering of the Department of Labor, and the Suffolk County District Attorney's Office began a joint investigation of defendants' activities. They had been alerted by Frasca's estranged wife to the defendants' embezzlement schemes. When the investigators discovered that the Suffolk County District Attorney's Office lacked jurisdiction, they turned the investigation over to the United States Attorney. Agent Mazzella continued on the investigation, and eventually interviewed Joyce Robidoux, a former union employee who processed medical claims for the fund. Robidoux provided information about the defendants' activities. Robidoux agreed to act as an informant for the government and to tape-record telephone conversations with Holmes.

In a sixteen-count indictment, Holmes was charged on fifteen counts and convicted on all of them: conspiring to embezzle union funds in violation of 18 U.S.C. Secs. 371 and 664 (Count One); embezzlement of union funds in violation of 18 U.S.C. Sec. 664 (Counts Two, Seven, and Eight); money laundering by concealing embezzled funds in violation of 18 U.S.C. Sec. 1956(a)(1)(B)(i) (Count Four); money laundering by structuring financial transactions in violation of 18 U.S.C. Sec. 1956(a)(1)(B)(ii) (Count Five); witness tampering in violation of 18 U.S.C. Sec. 1512(b)(1) (Count Nine); filing false Internal Revenue Service documents in violation of 18 U.S.C. Sec. 1027 (Count Three); and other violations of the Internal Revenue Code, under 18 U.S.C. Sec. 371 and 26 U.S.C. Sec. 7206(1) (Counts Ten through Sixteen).

Frasca was charged in five of the sixteen counts, and convicted on four of them: filing false Internal Revenue Service documents in violation of 18 U.S.C. Sec. 1027 (Count Three); conspiring to defraud the Internal Revenue Service in violation of 18 U.S.C. Sec. 371 (Count Ten); conspiring to embezzle union funds (Count 1); and embezzlement of union funds (Count 6).

The district judge sentenced Holmes to 97 months and Frasca to 57 months of imprisonment. Both were also sentenced to three years of supervised release and ordered jointly to pay $931,722 for restitution.


I. Multiplicity.

Defendants claim that the indictment was multiplicitous. Specifically, they claim that the government has improperly multiplied the charges against them by accusing them in separate counts of embezzlement and money laundering by structuring and concealing financial transactions--all based upon a single scheme for embezzling the union funds. Relying principally on United States v. Gaddis, 424 U.S. 544, 96 S.Ct. 1023, 47 L.Ed.2d 222 (1976), defendants argue that their embezzlements and subsequent laundering of the proceeds through structuring their bank deposits to avoid the IRS's reporting requirements, were all part of a single scheme that constituted a continuous, single offense.

A multiplicitous indictment, of course, is one that charges in separate counts

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two or more crimes, when in fact and law, only one crime has been committed. United States v. Nakashian, 820 F.2d 549, 551 (2d Cir.), cert. denied, 484 U.S. 963, 108 S.Ct. 451, 98 L.Ed.2d 392 (1987). The test for determining if a defendant has improperly been convicted under different statutes for a single transaction is whether congress intended to authorize separate punishments for the conduct in question. See Whalen v. United States, 445 U.S. 684, 688-89, 100 S.Ct. 1432, 1435-36, 63 L.Ed.2d 715 (1980); Heflin v. United States, 358 U.S. 415, 419-20, 79 S.Ct. 451, 453-54, 3 L.Ed.2d 407 (1959).

To the extent that defendants seek to link the embezzlements with the money laundering charges, their reliance on Gaddis is misplaced. In Gaddis the defendants were convicted of robbery; the court held that they could not also be convicted of receiving or possessing the robbery proceeds. The two offenses of robbery and possessing the proceeds of that robbery were viewed as part of one continuous transaction. Although a person who robs someone and takes their money has, through one sequence of events, violated two separate criminal statutes, Gaddis treated the offenses as a single punishable offense.

In contrast here, there is no inherent connection between the crime of embezzlement and the crimes of money laundering by structuring and concealing financial transactions; they are separate offenses and not part of one continuous offense. One may embezzle union funds without laundering the money or structuring financial transactions with it; one may also structure cash transactions or launder money without having acquired the funds through embezzlement.

Holmes contends, essentially, that even though embezzlement is a crime defined in a separate statute from money laundering and structuring, congress did not intend to impose multiple punishments, because the embezzled funds were also the subject of the laundering and structuring charges. We disagree. Congress has clearly signaled its intent to treat the money laundering and structuring as an offense separate from the underlying criminal conduct that generated the laundered or structured funds. It also intended to impose separate punishments for these offenses. Senate Report 99-433 signals a congressional intent to enact a "new federal crime of money laundering at section 1956 of Title 18." S.REP. NO...

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