522 F.3d 967 (9th Cir. 2008), 06-50710, United States v. Sullivan
|Docket Nº:||06-50710, 06-50714, 07-50087.|
|Citation:||522 F.3d 967|
|Party Name:||UNITED STATES of America, Plaintiff-Appellee, v. Thomas Patrick SULLIVAN, aka Seal B, Defendant-Appellant. United States of America, Plaintiff-Appellee, v. Thomas Edward Rubin, aka Seal A, Defendant-Appellant. United States of America, Plaintiff-Appellee, v. Geoffrey C. Mousseau, Defendant-Appellant.|
|Case Date:||April 11, 2008|
|Court:||United States Courts of Appeals, Court of Appeals for the Ninth Circuit|
Argued and Submitted Jan. 9, 2008.
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Vicki I. Podberesky, Esq., Nasatir, Hirsch, Podberesky & Genego, Santa Monica, CA, for defendants-appellants Thomas Rubin and Thomas Sullivan.
Michael D. Rounds and Cassandra P. Joseph, Watson Rounds, Reno, NV, for defendant-appellant Geoffrey Mousseau.
Ranee A. Katzenstein and Paul G. Stern, United States Attorney's Office, Los Angeles, CA, for the plaintiff-appellee.
Appeal from the United States District Court for the Central District of California; Gary A. Feess, District Judge, Presiding. D.C. No. CR-04-01697-GAF-2, GAF-1, GAF-3.
Before: JEROME FARRIS and MILAN D. SMITH, JR., Circuit Judges, and H. RUSSEL HOLLAND, [*] District Judge.
Thomas Sullivan, Thomas Rubin, and Geoffrey Mousseau appeal their convictions and sentences for mail, wire, and bankruptcy fraud, money laundering, and conspiracy to commit fraud and money laundering. The defendants contend that (1)the evidence is insufficient to support the convictions, and (2)the government created a prejudicial variance between the indictment and proof at trial. Mousseau further contends that his trial should have been severed, and that the prosecutor engaged in misconduct. We have jurisdiction over defendants' timely appeal pursuant to 28 U.S.C. § 1291. We affirm.
Thomas Rubin and Thomas Sullivan were the Chief Executive Officer and Chief Financial Officer, respectively, of Focus Media, Inc., a Santa Monica, California-based advertising agency. Geoffrey Mousseau is an attorney who represented Focus in bankruptcy proceedings and other business matters.
Focus was in the advertising placement business. The agency placed commercial advertisements on television and radio for clients including Sears Roebuck & Co., 20th Century Fox, and Universal City Studios, Inc. Focus' services included booking air time for its clients' commercials, tracking whether the commercials reached their desired audience, and negotiating compensation with stations when advertisements failed to air or reach their promised audience.
After commercials aired, media stations sent an invoice to Focus, and Focus in turn invoiced its advertising clients. Focus billed its clients for the actual cost of the air time and charged a fee for its additional services. Focus' clients were expected to pay within 30 days of receipt of an invoice. Focus in turn paid the media stations 90 days after the commercial broadcast date. This procedure allowed clients to avoid writing hundreds of checks to the individual stations that aired the commercials, and Focus had the benefit of the 60-day "float" on which it could earn interest.
The record reflects that none of the foregoing was documented by agreements between Focus and its clients or Focus and the media. Media stations considered both Focus and Focus' clients to be liable for the cost of air time purchased, but the clients relied upon Focus to pay the stations.
Focus' business thrived for much of the 1990's. But in 1999, Focus lost three of its four major accounts when 20th Century Fox, DreamWorks, and Universal Studios stopped doing business with the agency. Universal Studios cited as reasons for terminating its account, Focus' failure to deliver promised savings and poor record of placing advertisements that reached the company's target audience. In the summer of 1999, Focus' last major client, Sears, expressed concern that Focus was not paying media stations in a timely manner and cut the fee it paid Focus. Sears fired Focus on March 14, 2000.
By the end of 1999, Focus was laying off employees and was insolvent. Focus' cash-flow was limited by its dwindling client base and CEO Rubin's practice of borrowing from Focus. From 1996 to 1999, Focus disbursed $16 million in shareholder loans to Thom Rubin & Associates, Rubin's d/b/a.
In early 2000, Focus failed to pay media stations for advertising time it purchased on behalf of Universal Studios and Sears during the fourth quarter of 1999. Both clients remitted funds to Focus to pay the cost of their advertising in late1999,but Focus transferred just a fraction of this money to the media outlets. Of the approximately $34 million that Sears remitted to Focus to cover its fourth quarter advertising costs, Focus paid $10.5 million to media outlets and retained more than $23 million. Focus failed to pay Warner Brothers' affiliates more than $7 million, NBC more than $400,000, and ABC more than $900,000 owed for Sears' advertisements. Rubin and Sullivan offered several excuses to the media stations for the unpaid invoices, including that Focus was not obligated to pay because the stations had contacted Sears and Universal Studios directly and that Universal Studios never remitted funds to Focus to pay for its advertisements.
In January 2000, Rubin and Sullivan began disbursing Focus' funds to private accounts under their control. In March 2000, Sears filed a civil suit against Focus in California superior court alleging, inter alia, conversion and breach of contract. Sears obtained a preliminary injunction enjoining Focus from spending its funds. Universal Studios obtained a similar preliminary injunction against Focus in May 2000.
Despite these court orders, from March to July 2000, Rubin and Sullivan transferred more than $16 million from Focus' accounts to Thom Rubin & Associates. Focus forgave the $16 million in shareholder loans that the agency had made to Thom Rubin & Associates. Rubin used more than $10 million of these funds to pay his personal taxes. The money also financed a $250,000 credit balance on a corporate American Express credit card in the names of Rubin and Sullivan. Rubin continued to use the corporate card after he quit Focus in July 2000. In 2000, Rubin received more than $18 million in cash from Focus. Focus lost almost $9 million that year.
Still unpaid, NBC, ABC, and Paxson Communications, Inc. filed an involuntary bankruptcy petition against Focus on October 6, 2000, triggering an automatic stay of the California proceedings under 11 U.S.C. § 362.1 Rubin had retained Mousseau to
represent him personally on September 27, 2000, but Mousseau began to work on Focus' bankruptcy case.2Mousseau had experience in business litigation, employment law, and transactional work, but had no bankruptcy experience.
On October 26, 2000, Sears filed a motion to appoint an interim trustee to take possession of Focus' remaining assets and preserve them during the bankruptcy proceedings. The same day, Focus retained the law firm Stutman, Treister & Glatt as bankruptcy counsel. The firm agreed to represent Focus, but insisted that Focus' funds not be used to pay its retainer. (The state court injunctions were still in place.)
On October 26 and 27, Sullivan disbursed approximately $1.2 million from Focus' accounts to himself, Rubin, Mousseau, Rubin's corporate American Express Card, and other third parties. Sullivan transferred $500,000 from Focus to Mousseau's client trust account. Mousseau later used these funds to pay Stutman's retainer. In so doing, Mousseau told Stutman partner Theodore Stolman that the funds came from Rubin, who had earlier deposited them in Mousseau's client trust account. Stutman was not informed of Sullivan's other disbursements.
At 4 p.m. on October 27, 2000, the bankruptcy court granted Sears' motion and appointed an interim trustee. When the trustee sought an accounting of Focus assets that had been sold or transferred within the past year, Mousseau did not report the $500,000 that Sullivan transferred to his client trust account. Rubin and Sullivan did not report the transfers made from Focus' accounts to their private accounts on October 26 and 27.
In December 2000, Stolman learned of Sullivan's October 26 and 27 disbursements and Stutman terminated its representation of Focus. In September 2001, the bankruptcy court granted a partial summary judgment in favor of Focus' creditors. We affirmed this decision in 2004. See In re Focus Media, Inc., 378 F.3d at 931.
On October 26, 2005, Rubin and Sullivan were indicted for conspiracy, mail fraud, wire fraud, and money laundering in connection with the alleged misappropriation of client funds owed to media outlets. Rubin, Sullivan, and Mousseau were indicted for bankruptcy fraud stemming from the disbursement of Focus' funds during the involuntary bankruptcy proceedings.
The government charged Rubin with conspiracy to commit mail and wire fraud in violation of 18 U.S.C. § 371; mail fraud in violation of 18 U.S.C. § 1341; four counts of wire fraud in violation of 18 U.S.C. § 1343; wire fraud involving the deprivation of honest services, in violation of 18 U.S.C. §§ 1343 and 1346; conspiracy to commit bankruptcy fraud in violation of 18 U.S.C. § 371; seventeen counts of bankruptcy fraud in violation of 18 U.S.C. § 152; and two counts of money laundering in violation of 18 U.S.C. § 1957. Sullivan was charged under the same counts and one additional count of money laundering. The government charged Mousseau with seventeen counts of bankruptcy fraud and one count of conspiracy to...
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