U.S. v. Harris
| Citation | 79 F.3d 223 |
| Decision Date | 28 February 1996 |
| Docket Number | No. 117,D,117 |
| Parties | UNITED STATES of America, Appellee, v. Roy William HARRIS, also known as "Will Harris," Defendant-Appellant. ocket 94-1707. |
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
David L. Lewis, New York City (Allison Miller, Lewis & Fiore, New York City, of counsel), for Defendant-Appellant.
Howard M. Shapiro, Special Assistant United States Attorney, New York City, (Mary Jo White, United States Attorney for the Southern District of New York, Eleni P. Kalisch, Special Assistant United States Attorney, Reid M. Figel, Nancy J. Northup, Assistant United States Attorneys, of counsel), for Appellee.
Before: MINER, MAHONEY and CABRANES, Circuit Judges.
On September 9, 1992, a 24-count superseding indictment was filed charging defendant-appellant Roy William Harris with conspiracy to commit wire and bank fraud in violation of 18 U.S.C. § 371, wire fraud in violation of 18 U.S.C. § 1343, bank fraud in violation of 18 U.S.C. § 1344, money laundering in violation of 18 U.S.C. § 1956(a)(2), conducting a continuing financial crimes enterprise ("CFCE") in violation of 18 U.S.C. § 225, and making a false statement on a loan application in violation of 18 U.S.C. § 1014. The government also sought the forfeiture of Harris' assets pursuant to 18 U.S.C. § 982. Prior to trial, Harris moved to dismiss certain counts of the indictment and to sever Count 23, which charged him with making a false statement on a loan application. The district court granted Harris' motion to sever Count 23, but denied his motion to dismiss those counts charging him with wire fraud, bank fraud, and engaging in a continuing financial crimes enterprise. United States v. Harris, 805 F.Supp. 166 (S.D.N.Y.1992). On December 14, 1992, a jury found Harris guilty on all counts tried. On the same day, Harris and the government entered into a stipulation settling the forfeiture count.
On March 26, 1993, Harris filed motions for a judgment of acquittal, pursuant to Fed.R.Crim.P. 29, and for a new trial, pursuant to Fed.R.Crim.P. 33, raising many of the same claims he now raises on appeal. On July 30, 1993, the district court denied Harris' motions in their entirety. United States v. Harris, No. S1 92 Cr. 455 (CSH), 1993 WL 300052 (S.D.N.Y. July 30, 1993). On December 22, 1994, the district court sentenced Harris to a 188-month term of imprisonment, a five-year term of supervised release, and a special assessment of $1100. The district court also ordered Harris to pay $200 million in restitution.
On this appeal, Harris contends that the district court erred in: (1) failing to instruct the jury, in relation to the CFCE violation, that it must find that his conduct occurred after the CFCE statute was enacted; (2) rejecting his claim that he was wrongly convicted for money laundering under 18 U.S.C. § 1956(a)(2); (3) rejecting his contention that his bank fraud convictions were multiplicitous and thus violated the Fifth Amendment; (4) imposing a $200 million restitution order in favor of the lending banks; (5) rejecting his argument that he was wrongly convicted for a CFCE violation because the statute was not meant to apply to his conduct; (6) denying his motion for a new trial because new evidence was discovered that would have led to his acquittal; and (7) declining to depart downward from the United States Sentencing Guidelines on the basis that he had a gambling disorder. For the following reasons, we affirm in part, vacate in part, and remand for further proceedings consistent with this opinion.
Harris was the president, chief executive officer, and majority shareholder of Arochem Vincent J. Dispenza was the Arochem Companies' chief financial officer. Dean Seniff, the Companies' comptroller, and Greg Holtzhauer, the Companies' accounting manager, also were involved in financial matters. Other Arochem Companies officers included Gene Sebastian, the Companies' executive vice president, and Joe Sheperd, the Companies' vice president of operations.
Corporation ("Arochem") and Arochem International, Inc. ("International") (together, the "Arochem Companies" or "Companies"). International operated a petroleum and petrochemical refinery complex in Puerto Rico, while Arochem, which maintained its principal offices in Connecticut, traded in petroleum and petroleum products and provided management services to International. These management services included supervising the inventory and trading activities of International and marketing petrochemicals and petroleum products
In January of 1990, a consortium of banks led by Chase Manhattan Bank, N.A. (the "banks") entered into a revolving credit agreement (the "agreement") with the Arochem Companies. The agreement expired in January of 1991, and was extended on six separate occasions through November 30, 1991. Under the terms of the agreement, the Companies were permitted to borrow up to $245 million as needed for their business operations. The loans covered by the agreement were to be secured by the Companies' inventory of petroleum and petroleum products and by the Companies' receivables and cash. The agreement included financial covenants that required the Companies to maintain minimum levels of working capital, net worth, and debt ratios, and precluded them from holding a net unhedged position of more than one million barrels of oil. If the Companies violated any of these covenants, the banks could either charge a "penalty" for the violation or demand immediate repayment of the loans. Finally, the agreement required the Arochem Companies to provide the banks with periodic reports known as "borrowing base reports," which listed all of the Companies' assets and trading positions.
In the fall of 1989, the Arochem Companies began to suffer financial difficulties that continued through the beginning of 1990. At a meeting of the Companies' officers in March or April of 1990, Seniff informed Harris, Dispenza, Sebastian, and Sheperd that the Arochem Companies had a year-to-date deficit of approximately $60 to $65 million. In addition, Seniff and Dispenza informed the other officers that they would be falsifying the Companies' financial statements by overvaluing the Companies' crude oil inventory.
Also discussed at this meeting was the upcoming Ernst & Young year-end audit of the Companies' books. It was understood by the Companies' officers that unless the Companies earned "$40 or so million dollars" by the end of the fiscal year, May 31, 1990, the Companies would not pass the audit. Dispenza claims that Harris then directed Sheperd and him to become more "creative" in assisting in the preparation of the financial statements.
In late April or early May of 1990, Harris, Dispenza, and Seniff devised a strategy for the approaching audit. It was determined that, in order to conceal the Companies' $60 to $65 million loss, Dispenza would falsify and exaggerate the value of the Companies' assets. As part of the scheme to disguise the Companies' losses, according to Dispenza, Harris provided Dispenza with an inventory contract for the purchase of two cargoes of crude oil from a company called Trieast Marketing ("Trieast"). Dispenza claims that Harris informed him that International would not take possession of the oil, but that the contract should be used for the year-end audit. Accordingly, Seniff and Dispenza created false documents, such as false warehouse receipts and warranty titles, in an effort to make it appear that the Trieast contract had been performed. This allowed the Companies to use the Trieast contract to exaggerate the value of their inventory and profits.
Even after this "creative" accounting, Seniff informed Dispenza and Harris that the Companies still showed a $25 million loss and that the only way to conceal the loss was In its 1990 year-end financials, the Arochem Companies showed retained earnings of $13 million and a profit of $3.3 million. These numbers overrepresented the Companies' financial health by approximately $60 million. In September of 1990, Ernst & Young concluded its audit and provided the Arochem Companies with an unqualified opinion of financial condition based on the incorrect information supplied by the Companies. The audit then was provided by the Companies to the banks.
through "outright fraud." Not to be deterred, Seniff, with Dispenza and Harris' knowledge, removed from the Companies' accounts payable register several pages that revealed that the Companies owed $25 million in payables. During the course of its audit, Ernst & Young sought evidence of payment for oil inventory valued at $25 million, and Dispenza asked Harris what should be done. According to Dispenza, Harris replied, "[D]o whatever you can." Dispenza and Seniff responded by altering documents to indicate that the $25 million in oil purchases had been paid before the end of the prior fiscal year. As a result, the Companies' year-end income was increased by $25 million
From September of 1990 through November of 1990, the Companies' financial troubles continued. The Companies' officers continued to misrepresent the Arochem Companies' financial health to the banks by altering their borrowing base reports and financial statements. In November of 1990, Seniff informed the Companies' officers that the Arochem Companies had sustained losses of over $103 million during the June 1990 to November 1990 period. As a result, the altered financial statements overstated the Companies' earnings at that time by approximately $106 million.
By March of 1991, it again became apparent to the Companies' officers that the Companies were going to have difficulty passing the 1991 year-end audit because of the Companies' $60 to $65 million deficit. 1 During this time, Dispenza claims that he began to receive from Harris by e-mail fraudulent contract documents,...
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