United States v. Lequire

• Citation: 672 F.3d 724,12 Cal. Daily Op. Serv. 2636,2012 Daily Journal D.A.R. 2947
• Decision Date: 05 March 2012
• Docket Number: No. 11–10066.,11–10066.
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Dwayne LEQUIRE, Defendant–Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

12 Cal. Daily Op. Serv. 2636

2012 Daily Journal D.A.R. 2947

672 F.3d 724

UNITED STATES of America, Plaintiff–Appellee,

v.Dwayne LEQUIRE, Defendant–Appellant.

No. 11–10066.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 16, 2012.Filed March 5, 2012.

Barry J. Pollack, Miller & Chevalier Chartered, Washington D.C., for the defendant-appellant.

Gary M. Restaino, United States Attorney Office, District of Arizona, for the plaintiff-appellee.

Appeal from the United States District Court for the District of Arizona, David C. Bury, District Judge, Presiding. D.C. No. 4:08–cr–00212–DCB–BPV–4.Before: A. WALLACE TASHIMA and BARRY G. SILVERMAN, Circuit Judges, and LYNN S. ADELMAN, District Judge.^*

OPINION

SILVERMAN, Circuit Judge:

One cannot be guilty of embezzlement if the alleged victim did not own the funds that were supposedly embezzled. In this case, an insurance agency had a contract with an insurance company that allowed the agency to commingle collected insurance premiums with its other funds in its general operating account. The contract also obligated the agency to remit the total amount of premiums due the company each month, whether or not the agency had collected the premiums. Furthermore, if the agency were delinquent in the amount it was to remit to the company, interest would accrue monthly on the unpaid balance. The government contends that the premiums collected by the agency were the property of the insurance company and held “in trust” by the agency; it alleges that when the funds were not remitted but used for other purposes, they were embezzled by the agency's treasurer, defendant Dwayne Lequire.

We hold today that under long-standing Arizona law, the contract between the agency and the company, which permitted agency commingling, required monthly agency payments whether premiums were collected or not, and created a right to interest on late payments, created a creditor-debtor relationship, not a trust. The agency had contractual and fiduciary duties to the company, but was not a trustee. Because the funds in question were not held “in trust” by the agency as a matter of law, an essential element of embezzlement was lacking. We reverse the denial of the defendant's motion for judgment of acquittal.

I. Background

Lequire was charged with ten counts of embezzlement of insurance premiums, in violation of 18 U.S.C. § 1033(b)(1), and one count of conspiracy to commit embezzlement.

Patriot Insurance Agency, owned by former Congressman Rick Renzi and his wife Roberta and regulated by the Arizona Department of Insurance, brokers property and liability insurance through insurance underwriters at group rates to non-profit organizations. During the relevant time period, defendant Lequire was Patriot's treasurer.

After he was elected to Congress in 2002, Renzi placed Patriot in his wife's name but stayed involved with the company. Testimony established that Renzi was in charge; he instructed Patriot's staff whom to pay and when to pay them.

In 2005, Renzi, with Lequire's help, formed Spirit Mountain Insurance Company. Spirit was formed as a “risk retention group,” a way for similarly situated entities, like the non-profit groups for whom Patriot brokered policies, to self-insure against risk. Though licensed in the District of Columbia, Spirit was able to operate nationally. Lequire was Spirit's treasurer as well.

Spirit contracted with Risk Services, LLC to serve as captive manager for Spirit. As captive manager, Risk Services was responsible for handling Spirit's regulatory filings, accounting and financial reporting, and various legal and administrative services. Risk Services was also the conduit between Spirit and the D.C. Department of Insurance, Securities and Banking (DISB). Risk Services was independent from Spirit and Patriot, though it had one overlapping director. Neither Lequire, Renzi, nor Renzi's wife had a role in Risk Services.

Patriot and Spirit entered into a Program Administrator Agreement, an agency agreement signed by Roberta Renzi for Spirit and Lequire for Patriot. As Spirit's program administrator in Arizona, Patriot performed policy-related services for Spirit including underwriting, paying claims, and charging and collecting premiums. Pursuant to the Agreement, Patriot collected insurance premium payments from policyholders insured by Spirit and made monthly payments to Spirit.

For purposes of this appeal, the pertinent provisions of the Agreement between Patriot and Spirit are as follows:

Section 7

Receipt of Funds: Accounts

A. [Patriot] shall hold all funds received by it in connection with the Agreement as a fiduciary of [Spirit]. [Patriot] shall, under no circumstances, make any personal or corporate use of such funds not authorized by this Agreement. [Patriot] may deposit said funds into its general operating account (the “Agency Account”) which may include premiums due to other carriers and commissions due to [Patriot].

B. [Patriot] shall be responsible for collecting and paying to [Spirit] all premiums due on the business written pursuant to this Agreement. Failure to collect shall not operate as a defense against full payment by [Patriot] to [Spirit] of all amounts due and owing to [Spirit] for all liability assumed by [Spirit]....

C. 1. [Patriot] shall, on a monthly basis, transfer all amounts due to [Spirit]....

3. No later than fifteen (15) days after the close of each calendar month, [Patriot] shall prepare and submit to [Spirit] a report ... listing gross premiums written for all policies issued in the previous accounting month, less return premiums and cancellations, reconciliations to previous monthly reports and [Patriot] commissions (hereinafter referred to as the “Account Current”)[.]

...

5. In the event that amounts transferred from the Company [sic—probably Agency] Account to [Spirit's] home office account are not sufficient to pay the total net premium due [Spirit] as shown on [Patriot's] Account Current, upon written notice from [Spirit] stating the additional amount due, [Patriot] shall promptly remit all further premium due and owing, irrespective of whether [Patriot] has collected it, within two (2) days following written notice from Spirit. If payment is not made within two (2) days of written notice, interest on amounts owing will accrue at a rate of 1.5% per month; and

6. [Spirit] shall have a first lien upon commissions and/or service fees due under this Agreement for any indebtedness of [Patriot] to [Spirit], including premiums, and the right of [Patriot] or any other person to receive commissions shall at all times be subordinate to the right of [Spirit] to offset commissions against any indebtedness of [Patriot] to [Spirit]....

At Renzi's direction, Patriot promptly deposited premium checks received from its clients into Patriot's general operating account. Through July 2006, Patriot stamped premium checks it received “For Deposit Only, Patriot Insurance Agency, Inc. Trust Account,” but there was no trust account. After July 2006, Patriot stopped using the rubber stamp, and continued to deposit the premium checks into its general operating account.

Patriot routinely failed to pay the premiums over to Spirit on a timely basis. Instead, Lequire, over a two-year period, transferred the premium funds to Renzi's personal account and Renzi used those funds to pay for personal expenditures. In all, Lequire transferred over $750,000 to Renzi at a time when Patriot had less in its bank accounts than it owed Spirit.

The entire time that Patriot was delinquent in its payments to Spirit, Lequire submitted accurate reports to Risk Services showing Patriot's delinquency. Risk Services then reported the delinquent payments to DISB. Even though Patriot was unabashedly delinquent in timely paying Spirit, neither Spirit, Risk Services, nor DISB ever invoked the 1.5% penalty interest clause.

A number of witnesses, several with no firsthand knowledge of the Agreement, testified regarding their personal beliefs as to the nature of Spirit and Patriot's relationship. Officials at Risk Services and DISB testified that they believed Spirit had a fiduciary relationship with Patriot and an official at DISB testified that she would not have approved a program administrator agreement without a fiduciary clause. Others opined that, although there is no Arizona statute requiring Patriot to be Spirit's fiduciary, the practice in Arizona amongst brokers is to be “trustworthy and responsible” and to treat premium funds as not their own.

After the jury found Lequire guilty of the conspiracy charge and eight of the ten embezzlement counts, Lequire moved for a judgment of acquittal pursuant to Rule 29(c) of the Federal Rules of Criminal Procedure. Lequire argued that as a matter of law and fact there was no trust relationship between Patriot and Spirit as required for a § 1033(b)(1) violation under embezzlement. The argument was that if the money was not actually held “in trust,” it was not Spirit's money, and therefore could not be embezzled from Spirit. The district court denied the motion, ruling that there was sufficient evidence to support the jury's finding that a fiduciary relationship of trust existed between Patriot and Spirit.

II. Analysis

A. Jurisdiction and Standard of Review

This court has jurisdiction pursuant to 28 U.S.C. § 1291. We review a district court's denial of a Rule 29 motion de novo. United States v. Goyal, 629 F.3d 912, 914 (9th Cir.2010). Similarly, we review sufficiency of the evidence challenges de novo. United States v. Sarkisian, 197 F.3d 966, 984 (9th Cir.1999). We decide “whether after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” United States v. Nevils, 598 F.3d 1158, 1163–64 (9th Cir.2010) (quotation marks omitted).

B. Discussion

The crime of embezzlement of insurance premiums in...