U.S. v. Aramony

• Citation: 88 F.3d 1369
• Decision Date: 17 July 1996
• Docket Number: Nos. 95-5532,95-5553 and 95-5554,s. 95-5532
• Parties: -5738 UNITED STATES of America, Plaintiff-Appellee, v. William ARAMONY, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Stephen J. PAULACHAK, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Thomas J. MERLO, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

Page 1369

88 F.3d 1369

78 A.F.T.R.2d 96-5738

UNITED STATES of America, Plaintiff-Appellee, v. William ARAMONY, Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee, v. Stephen J. PAULACHAK, Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee, v. Thomas J. MERLO, Defendant-Appellant.

Nos. 95-5532, 95-5553 and 95-5554.

United States Court of Appeals, Fourth Circuit.

Argued March 7, 1996.

Decided July 17, 1996.

ARGUED: Alan M. Dershowitz, Cambridge, Massachusetts, for Appellant Aramony; Thomas Anthony Guidoboni, Michaels, Wishner & Bonner, P.C., Washington, D.C., for Appellant Paulachak; Richard Dennis Heideman, The Heideman Law Group, P.C., Washington, D.C., for Appellant Merlo. Randy I. Bellows, Assistant United States Attorney, Alexandria, Virginia, for Appellee.

ON BRIEF: William B. Moffitt, Moffitt, Zwerling & Kemler, P.C., Alexandria, Virginia; John D. Cline, Williams & Connolly, Washington, D.C., for Appellant Aramony; Walter J. Bonner, Michaels, Wishner & Bonner, P.C., Washington, D.C., for Appellant Paulachak; Michelle P. Moriarity, Noel J. Nudelman, Wayne D. Hettenbach, The Heideman Law Group, P.C., Washington, D.C., for Appellant Merlo. Helen F. Fahey, United States Attorney, Gordon D. Kromberg, Assistant United States Attorney, David G. Barger, Assistant United States Attorney, Alexandria, Virginia, for Appellee.

Before WIDENER, HAMILTON, and LUTTIG, Circuit Judges.

No. 95-5532, affirmed in part, vacated in part, and remanded; No. 95-5553, affirmed; No. 95-5554, affirmed in part, vacated in part, and remanded by published opinion. Judge HAMILTON wrote the opinion, in which Judge WIDENER and Judge LUTTIG joined.

OPINION

HAMILTON, Circuit Judge:

After a jury trial, the appellants, William Aramony, Thomas Merlo, and Stephen Paulachak, were convicted of numerous violations of federal laws for participating in a scheme to defraud the United Way of America (UWA). More specifically, Aramony was convicted of conspiracy to defraud the United States by impeding the lawful functions of the IRS, see 18 U.S.C. § 371; six counts of mail fraud, see 18 U.S.C. § 1341; two counts of wire fraud, see 18 U.S.C. § 1343; nine counts of engaging in the interstate transportation of fraudulently acquired property, see 18 U.S.C. § 2314; two counts of engaging in monetary transactions in the proceeds of specified unlawful activity, see 18 U.S.C. § 1957; three counts of filing false tax returns, see I.R.C. § 7206(1); and two counts of aiding the filing of false tax returns, see I.R.C. § 7206(2). Merlo was convicted of conspiracy to defraud the United States by impeding the lawful functions of the IRS, one count of mail fraud, one count of wire fraud, four counts of interstate transportation of fraudulently acquired property, three counts of engaging in monetary transactions in property derived from specified unlawful activity, three counts of filing false tax returns, and four counts of aiding in the filing of false tax returns. Paulachak was convicted of conspiracy to defraud the United States by impeding the lawful functions of the IRS, one count of wire fraud, and six counts of filing false tax returns. ¹ The district court sentenced Aramony to eighty-four months' imprisonment, Merlo to fifty-five months' imprisonment, and Paulachak to thirty months' imprisonment. Additionally, pursuant to 18 U.S.C. §§ 853 & 982, the district court ordered Aramony and Merlo to forfeit $552,188.97 because of their convictions under 18 U.S.C. § 1957. On appeal, the appellants challenge their convictions and sentences on numerous fronts. For the reasons stated herein, we affirm all of the appellants' convictions except the convictions of Aramony and Merlo for engaging in monetary transactions in the proceeds of specified unlawful activity. The district court's instructions on these counts did not require the jury to make a finding on an essential element for this offense. Because we are precluded from applying harmless-error analysis to this error under the circumstances of this case, these convictions must be vacated. Consequently, the forfeiture order must be vacated, and the cases of Aramony and Merlo must be remanded for resentencing. As to Paulachak's sentence, we affirm.

I

UWA is a nonprofit organization that acts as a service organization for local United Way organizations located throughout the United States. Aramony became the chief executive officer of UWA in 1970, and he held that position until he was fired in March 1992. Merlo, a certified public accountant and close friend of Aramony, began performing accounting services for UWA on a consulting basis in the 1970s. In July 1989, Merlo became UWA's interim chief financial officer, and approximately six months later, he took the job on a permanent basis. Paulachak began working for UWA in the 1970s. In 1988, he left UWA to become the president of Partnership Umbrella, Inc. (PUI). ²

From the mid-1980s to the early 1990s, the appellants improperly used UWA money for personal gain. The nature of the scheme was primarily to use UWA money to assist Aramony in furthering his relationships with various women. However, UWA money was also used to pay a variety of Aramony's other personal expenses. For example, when Aramony visited New York, he often used the chauffeuring service of Charles Harrison. From 1988 to 1990, Aramony incurred over $100,000 in bills due to his use of Harrison's service. Although Aramony used the service for UWA business, he also used it for personal business. Nonetheless, Aramony always had UWA pay Harrison's bills and listed all these bills as business expenses. Aramony's personal use of Harrison's service and his causing UWA to pay Harrison's bills formed the basis for his convictions on four counts of engaging in the interstate transportation of fraudulently acquired property.

Although the government's arsenal of information of Aramony's wrongdoing was extensive, the government's case at trial basically focused on Aramony's use of UWA funds to further his relationships with various women, especially Lori Villasor and Anita Terranova. From December 1986 to July 1990, Aramony had a personal relationship with Lori Villasor. From late 1988 to mid-1990, Aramony travelled to Gainesville, Florida, Villasor's hometown, at least once a month to visit Villasor, and he had UWA pay for these trips. On some of his trips to Gainesville, Aramony used UWA money to pay for rental cars. The billing of Aramony's flights to Gainesville to UWA and the billing of his rental cars in Gainesville to UWA formed the basis of two of Aramony's convictions for mail fraud.

Aramony also used UWA money to help pay for taking Villasor with him on UWA business trips and vacations. In December 1988, Aramony took Villasor to London and Paris for her birthday. In December 1989, he took her on a two-week trip to London and Cairo. And in April 1990, Aramony used UWA money to fly Villasor to London, England to be with him while he and Paulachak attended a board meeting of Charities Fund Transfer (CFT), like PUI a "spin-off" corporation established with the approval of the UWA Board of Directors. Merlo gave Laura Shifflet, one of Aramony's assistants, his UWA corporate credit card number so that she could use it to charge Villasor's airline tickets. In addition, Paulachak arranged for $50,000 of CFT's money to be transferred to his Diner's Club card, and part of this money ($4,529.94) was used to pay the chauffeuring bill that Villasor incurred while in London. These events formed the basis for Aramony's convictions of three counts of mail fraud, two counts of wire fraud, and one count of engaging in the interstate transportation of fraudulently acquired property. The $50,000 wire transfer of CFT's money to Paulachak's Diner's Club card formed the basis for his conviction of one count of wire fraud.

The government also introduced evidence that Aramony used Merlo to provide Villasor with money. From 1988 to 1991, Merlo received over $300,000 in consulting fees from PUI despite doing no work for the money. Merlo, in turn, paid Villasor a total of $89,000 over this period. One manner of getting Villasor this money was to have Merlo pay her a monthly salary despite Villasor doing, at the most, only a day or two of work. One transaction involving a $25,000 bonus from UWA to Merlo, $5,000 of which was a reimbursement to Merlo for a previous wire transfer to Villasor, formed the basis of one of Aramony's and Merlo's convictions for engaging in the interstate transportation of fraudulently acquired property.

Terranova lived in Florida and had a long history with Aramony. As with Villasor, Aramony often traveled to Florida at UWA expense to visit her. Importantly, Aramony bought a condominium in Florida to meet Terranova. The money for this apartment came from a donation that Mutual of America (MOA)--an insurance company that did business with UWA--made to UWA. In 1987, MOA decided to donate the interest from a $1 million fund to the William Aramony Initiatives in Voluntarism Fund (WAIF), a restricted fund at UWA, intending that the money be used "to support the expansion of the nation's voluntary sector." (Trial Transcript at 1934). On December 10, 1987, the UWA Board passed a resolution that gave Aramony wide discretion to use the money that MOA contributed to WAIF. Under this authority, Aramony caused the MOA money to be transferred from WAIF to Voluntary Initiatives America (VIA), a Florida 501(c)(3) corporation.

VIA was formed in April 1990, with Aramony as its chairman, his son as its president, and Merlo as its secretary/treasurer. On the same day that VIA was formed, Merlo caused a UWA check drawn upon the MOA donation to be issued for $125,576.92 to VIA. Several days later Aramony used the money from this check to buy the condominium in Florida for him and Terranova. UWA funds, namely, $10,000, were used to furnish this condominium. In June 1991, the...